04/22/2012 – Market Update
A Potential Upward Swing
The broad stock market is forming an ascending broadening formation. A potential 3-week bullish time-window should start on 4/23/2012.
Table of Contents
- Status of Key Market Parameters
- Broad Stock Market is in Ascending Broadening Formation
- Broad Market Instability Index is below the Panic Threshold
- Gold is Emerging to the “Run” Phase
- Silver is Forming a Big Falling Wedge
- US Dollar is Still in Ascending Triangle Pattern
- 30-Year US Treasury Bond is Still in a Trading Range
- Asset Class Performance Ranking with Equity Market Leading
- Sector Performance Ranking with Biotech Sector Leading
- BRIC Stock Market Performance Ranking with Brazilian Market Lagging
Current Status of the LWX (Leading Wave Index)
The LWX Indicator in Last Four Weeks (Past)
The LWX Indicator in Next Four Weeks (Forecast)
Broad Stock Market is in Ascending Broadening Formation
The Dow Jones Wilshire 5000 index, as an average or a benchmark of the total equity market, is forming a 2-month “Ascending Broadening Formation” (see here) that is a widening pattern confined by an upper rising resistance line and a lower support line. Within this formation, price movement typically becomes volatile as swings get bigger and bigger. Currently the Wilshire 5000 index is above the 89-day moving average and it is in the choppy zone of the broadening pattern with negative readings of both the trend and momentum. The Leading Wave Index (LWX) indicator, color coded in the price bars of the following daily chart of the Wilshire 5000 index, closed in neutral on Friday (see the 2nd table above). Based on the forecast from the LWX (see the 3rd table above), the broad stock market should be in a bullish time-window between 4/23/2012 and 5/10/2012.
Broad Market Instability Index is below the Panic Threshold
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 25 on Friday. This BIX reading is below the panic threshold of 44 and it indicates the broad market is neutral. The BIX is plotted in the following chart as compared with the Wilshire 5000 index.
Gold is Emerging into the “Run” Phase
The gold index has been in an intermediate-term “Bump-and-Run Reversal Top” pattern (see here). Currently it is below the “Lead-in Trendline” and it is in the “Run” phase. The typical characteristics of the “Run” phase is a downhill run for price movement. The downside price target could be around 1500 for support from the first target line.
Silver is Forming a Big Falling Wedge
Since last April, the silver index has been in a “Falling Wedge” formation (see here) for almost a year. Although the falling wedge typically has a bullish bias, this bullish bias cannot be realized until an upper boundary breakout.
US Dollar is Still in an Ascending Triangle
The US dollar index is forming a 17-month “Ascending Triangle” pattern (see here). It could have a downward swing inside the ascending triangle.
U.S. Treasury Bond is in a Trading Range
The 30-Year US Treasury Bond index is forming a horizontal channel pattern (trading range) between the upper boundary at 146 and the lower boundary at 135. Currently prices are in the middle of the trading range.
Asset Class Performance Ranking with Equity Market Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently the U.S. equity market and the U.S. Treasury Bond are outperforming. Food and gold are underperforming.
Sector Performance Ranking with Biotech Sector Leading
The following table is the percentage change of sectors and major market indexes against the 89-day exponential moving average (EMA89). The Dow Jones Wilshire 5000 index, as an average or a benchmark of the total market, is 2.41% above the EMA89. Outperforming sectors are Biotech (6.90%), Consumer Services (4.95%), and Banks (4.68%). Underperforming sectors are Precious Metals (-11.01%), Energy (-2.91%), and Semiconductors (-0.88%). The NASDAQ 100 (3.71%) is outperforming the market, and the Russell 2000 Small-cap (0.91%) is underperforming.
BRIC Stock Market Performance Ranking with the Brazilian Market Lagging
The table below is the percentage change of the BRIC stock market indexes against the 89-day exponential moving average (EMA89). All BRIC markets are underperforming, especially with the Brazilian market lagging.
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