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04/28/2012 – Market Update
April 28, 2012
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Upward Swing could Continue
The ascending broadening wedge pattern suggests that the broad stock market is going to build up a top. The upward swing started last week could lead to a new multi-year high beyond 1420 for the S&P 500 index, while the U.S. dollar is projected to a downside price target around 77 after it broke down from its 4-month symmetrical triangle pattern.
Table of Contents
- Broad Stock Market is in a Short-Term Bullish Time Window
- S&P 500 Index is in an Ascending Broadening Triangle Pattern
- Gold is Emerging to the “Run” Phase
- Silver has Formed a Descending Triangle Pattern
- Crude Oil is in a Symmetrical Triangle Pattern
- US Dollar Broke down from 4-Month Symmetrical 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
Broad Stock Market is in a Short-Term Bullish Time Window
The LWX Indicator in Last Four Weeks (Past)
The LWX Indicator in Next Four Weeks (Forecast)
Since Monday, 4/23/2012, the broad stock market has been in a bullish time-window. The Leading Wave Index (LWX) indicator closed in neutral on Friday (see the first table above). Based on the forecast from the LWX, the broad stock market should be in this bullish time-window until 5/10/2012 (see the second table above). The daily chart of the Wilshire 5000 index below has the price bars color coded with the LWX indicator. The current market status is summarized as follows:
Short-Term Cycle: in upswing phase
Next Reversal Date: 5/10/2012
Broad Market Instability Index (BIX): below the panic threshold (bullish)
Momentum Indicator: positive (bullish)
S&P 500 Index is in an Ascending Broadening Wedge Pattern
Since the beginning of February, the S&P 500 index has traced out an Ascending Broadening Wedge pattern (see here) with two trend lines slopping higher and spreading out over time. Ascending broadening wedges typically appear at the late part of a uptrend or at market tops, and price movement is contained and alternates between the two trend lines. As alternate swings
get bigger and bigger, price movement becomes volatile usually with increasing true ranges. A mature broadening wedge needs at least three major swing touches to each trend line. Neither bulls nor bears can declare a trend before a breakout or a breakdown from the wedge.
get bigger and bigger, price movement becomes volatile usually with increasing true ranges. A mature broadening wedge needs at least three major swing touches to each trend line. Neither bulls nor bears can declare a trend before a breakout or a breakdown from the wedge.
The current broadening wedge on the S&P 500 index is in the middle stage of pattern development, and it owes the third major swing touch at the upper trend line. The upward swing started last Tuesday, 4/24/2014, could lead to the third touch at the upper trend line with prices hitting multi-year high beyond 1420.
Last week I heard bearish concerns about a head-and-shoulders top in the making. If it seems like a head-and-shoulders pattern forms inside the ascending broadening wedge, then the ascending broadening wedge pattern should dominate price movement. Although it is too early to determine a head-and-shoulders top before the neckline is penetrated, I would keep an eye on its development.
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 target line.
Silver has Formed a Descending Triangle Pattern
Since April of last year, the silver index has formed a Descending Triangle pattern (see here) with a falling resistance line and a horizontal support line. The descending triangle generally appears in downtrends. Price movement is choppy between the two boundary lines before a breakout or a breakdown from the triangle.
Crude Oil is in a Symmetrical Triangle Pattern
The crude oil is in a symmetrical triangle pattern. It could be a continuation pattern of its previous uptrend since last October.
US Dollar Broke down from 4-Month Symmetrical Triangle Pattern
The US dollar index broke down from its 4-month Symmetrical Triangle pattern last week. A downside price target is projected at 77.
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 upper half 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 is outperforming. The U.S. dollar is 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 4.01% above the EMA89. Outperforming sectors are Biotech (8.26%), Consumer Services (6.39%), and Real Estate (6.12%). Underperforming sectors are Precious Metals (-8.94%), Energy (-0.35%), and Semiconductors (1.24%). The NASDAQ 100 (5.74%) is outperforming the market, and the Russell 2000 Small-cap (3.42%) 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), also in comparison to the US market. All BRIC markets are underperforming, especially with the Brazilian market lagging.
