08/27/2012 – Market Update
The market remains strong although it should be in a short-term downswing inside the 3-month uptrend channel. 9/10/2012 is the projected reversal day to change from a downswing to an upswing.
- The Broad Market Stays Strong than Expected
- The 500 Index is in a 13-Week Uptrend Channel
- Chinese Stock Market is Forming a 5-Month Falling Wedge
- Gold is in the “Run” Phase of a Bump-and-Run Reversal Top Pattern
- Gold Bullish Breakout from 12-Week Trading Range
- Silver Price is Testing Upper Resistance
- Gold/Silver Mining Stocks Reached Short-Term Price Target
- Crude Oil is Forming an 8-Week Uptrend Channel
- US Dollar Broke Down the 2.5-Month Uptrend Channel
- US Treasury Bond is in a Long-Term Bullish Uptrend
- Asset Class Performance Ranking with the Equity Market Leading
- Sector Performance Ranking with Biotech Sector Leading
- BRIC Stock Market Performance Ranking with the Chinese Market Lagging
The broad stock market stays still strong than expected. The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 5 (same from 5 the previous week) which is below the panic threshold level of 45 and indicates that the market is currently bullish. Based on the forecast of the Leading Wave Index (LWX), the broad stock market should be in a short-term bearish time-window until 9/10/2012 (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:
The S&P 500 index is in a 13-week Bullish uptrend channel. Last week, the index briefly reached 1420, the price target projected from the 15-week descending broadening triangle.
The Chinese stock market still struggles at its multi-year low level. Now the Shanghai Composite Index is forming a 5-month Falling Wedge pattern. If prices are able to break to the upside of the wedge, the Chinese market could become bullish. Otherwise, it remains bearish to make lower lows along the falling wedge.
The gold index has been in an intermediate-term Bump-and-Run Reversal Top pattern since I identified this pattern on gold in my article “How Low Can Gold Go on a Correction?” last August. Currently the gold price 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. If the gold price breaks through the support of the first target line, the down price target is projected to 1440 at the second target line.
Last week the gold index broke to the upside from the 12-week trading range between 1550 and 1630. It is a bullish sign for gold. Now gold is going to test the upper boundary of the 12-month Descending Triangle pattern. If prices are able to further break through the upper boundary of the triangle, gold could become intermediate-term bullish.
Silver is going to test the upper boundary of the 12-month Descending Triangle pattern. If prices are able to further break through the upper boundary of the triangle, silver could become intermediate-term bullish.
After the bullish breakout from both the 10-week Descending Triangle and the 6-month Descending Broadening Wedge, gold mining stocks had a good advance. Last week their price targets were reached, 170 for XAU and 450 for HUI.
Crude oil is forming an 8-week rising wedge.
The US dollar index is still in a consolidation. It broke down from the 2.5-month uptrend channel last week. It may test the lower boundary of the 10-month uptrend channel.
As I discussed on 6/4/2012 about “Is this a Sea-Change Signal from U.S. Treasury Bond Breakout?”, a long-term picture shows that the 30-Year US Treasury Bond had a bullish breakout from the warning line and entered into the bump phase of a possible “Bump-and-Run” formation. In the bump phase, sharp price movement could drive prices reach a bump height with at least twice the height of the lead-in uptrend channel. That means the 30-year U.S. treasury bond could reach to 172 in next several months. Fed’s extension of Operation Twist should support the current bullish trend of treasury bonds. We will continue monitoring the bond price against the steep-upward-sloping trendline (the pike line).
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. stock market and gold are outperforming. the U.S. dollar is underperforming.
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 3.06% above the EMA89. Outperforming sectors are Biotech (8.24%), Telecommunication (4.60%), and Technology (4.55%). Underperforming sectors are Semiconductors (-0.56%), Utilities (-0.14%), and Basic Materials (1.29%). The NASDAQ 100 (5.38%) is outperforming the market, and the Dow Jones Industrial Average (2.20%) is underperforming.
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. Currently the Chinese market is lagging.
