06/11/2012 – Market Update
Short-Term Bullish Time-Window May Extend
The broad stock market may extend a rebound as the treasury bond and the U.S. dollar take a pause. The weakening Chinese stock market slows down the price advance on gold, silver and their mining stocks. The current short-term bullish time-window for the broad stock market is estimated to last until 6/21/2012.
Table of Contents
- The Broad Stock Market is in a Short-Term Bullish Time Window
- S&P 500 Index is in a Descending Broadening Wedge Pattern
- Chinese Stock Market is Weakening
- Gold is in a Descending Triangle Pattern
- Silver is in Descending Triangle Pattern too
- Gold/Silver Mining Stocks are near Their Price Targets
- Crude Oil Looks for a Possible Bullish Reversal
- US Dollar Short-Term Price Target was Reached
- US Treasury Bond is above the Warning Line
- Asset Class Performance Ranking with U.S. Treasury Bond Leading
- Sector Performance Ranking with Telecommunication Sector Leading
- BRIC Stock Market Performance Ranking with Indian Market Leading
The 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)
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, dropped to 39 (down from 196 the previous week) which is below the panic threshold level of 44, and indicates that the market is currently bullish. Based on the Leading Wave Index (LWX), the broad stock market is in a short-term bullish time-window (see the first table above), and this bullish time-window may extend from 6/11/2012 to 6/21/2012 (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: 6/21/2012
Broad Market Instability Index (BIX): 39, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)
S&P 500 Index is in a Descending Broadening Wedge Pattern
The S&P 500 index is still in a Descending Broadening Wedge formation (see here) confined by two down-slopping diverging trend lines. The main characteristics of this pattern is that price movement becomes more and more volatile with a series of up-and-down high-waves. Please note there is a Falling Wedge pattern (between two orange lines) formed inside the broadening wedge for the SPX. A falling wedge typically has a bullish bias. The SPX has broken through the upper boundary of the falling wedge. Although it may pull back to re-test the upper trendline of the falling wedge, the upside price target is projected at 1380 at the upper boundary of the broadening wedge.
Chinese Stock Market is Weakening
The Shanghai Composite Index is in progress of forming a possible Complex Head-and-Shoulders Bottom pattern. Although the Chinese stock market has outperformed the US market since the early of May, but it very recently had a negative market reaction on China’s announcement of a mini-stimulus plan to fight its economic slump. Last week, the performance of the Chinese market fell back behind the U.S. market, and its weakness influenced gold and silver to have a sharp pull back.
Gold is in a Descending Triangle Pattern
The gold 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 from the either side of the triangle. A technical rebound from the horizontal support line of the triangle could have an upswing towards the previous intermediate-term trendline. The upside price target is projected at 1675 near the trendline (the gray dotted line). However, it may have a difficult to reach the target due to the influence from the weakening Chinese market.
Silver is in a Descending Triangle Pattern too
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. A bullish reversal from the support of the horizontal line could set up the next upside price target at the upper boundary of the triangle around 32. It is the same like gold, silver may also have a difficult to reach the target due to the influence of the weakening Chinese market.
Gold/Silver Mining Stocks are near Their Price Targets
Both XAU and HUI have been in their technical rebound since mid-May. The upside price targets for this counter-trend move are projected at the resistance from the horizontal lines of the previous descending triangle patterns, i.e., 175 for XAU and 480 for HUI.
Crude Oil Looks for a Possible Bullish Reversal
The crude oil suspended its decline last week and formed a new downtrend channel. It may start a technical rebound.
US Dollar Short-Term Price Target was Reached
The US dollar index pulled back after it reached the price target of 82.48 projected by the breakout of a four-month descending triangle. It could be in a retracement process.
U.S. Treasury Bond is above the Warning Line
As discussed last week (see here), a long-term picture shows that the 30-Year US Treasury Bond has broken the warning line and has entered into the bump phase of a possible “Bump-and-Run” formation (see here). Fast rising prices on the bond could significantly influence stock, commodity, and currency markets. We will continue monitoring the bond price against the steep-upward-sloping trendline (the pike line).
Asset Class Performance Ranking with U.S. Treasury Bond 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. Treasury Bond is outperforming. Crude oil is underperforming.
Sector Performance Ranking with Telecommunication 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 1.340% below the EMA89. Outperforming sectors are Telecommunication (5.25%), Utilities (3.17%), and Biotech (2.29%). Underperforming sectors are Energy (-6.01%), Basic Materials (-5.14%), and Banks (-4.88%). The NASDAQ 100 (-0.80%) is outperforming the market, and the S&P 400 Mid-Cap (-2.36%) is underperforming.
BRIC Stock Market Performance Ranking with the Indian Market Leading
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. The Indian market is outperforming and all other BRIC markets are underperforming.
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I love your work specially because i feel it has no bullish nor bearish mood.It is plain technical work, no heart involved, just brains analysing the facts of the figures.Congratulations !!