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12/16/2012 – Market Update

December 16, 2012 Leave a comment Go to comments
Look for Continuation Advance

The broad stock market is still in a transition from the “Basement” phase to the “First Floor” phase of the speculated “Three Peaks and a Domed House” pattern. The current sideways move inside the 3-week upward-sloping channel could be a bullish continuation pattern of the powerful advance launched since mid-November. Also the BRIC emerging markets are impressively outperforming again.


Table of Contents


Broad Stock Market in a Short-Term Neutral Time-Window

The LWX Indicator in Last Four Weeks (Actual)
Last 4 wks LWX 12-14-2012

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 12-14-2012

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 3 (down from 6 the previous week) which is below the panic threshold level of 44 and indicates the market is bullish. Based on the forecast of the Leading Wave Index (LWX), the broad market should be in a short-term neutral time-window until 12/31/2012 (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: downward
Date of Next Cycle Low: 12/31/2012
Broad Market Instability Index (BIX): 3, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

DWC 12-14-2012



The S&P 500 Index in a Transition from the “Basement” Phase to the “First Floor” Phase

The S&P 500 formed a three-peak pattern inside the trading range from September to October. It could be the beginning of a “Three Peaks and a Domed House” formation. In speaking of “the Three Peaks and a Domed House” pattern, my version modified from George Lindsay’s basic model uses a macro or “phase-counting” approach which is different from Lindsay’s original micro approach (which uses “wave-counting” from 1 to 28) in that it divides the “Three Peaks and the Domed House” pattern into five major phases as follows: 1) Three Peaks, 2) Basement, 3) First Floor, 4) Roof, and 5) Plunge.

3PDM

The downwave of the S&P 500 index between 10/18/2012 and 11/15/2012 was a “Separating Decline” for a transition from the “Three Peaks” phase to the “Basement” phase. Typically the Basement phase is known as “the bear trap” with an integration of all bearish views from both headline news and majority of popular technical indicators. After the “Basement” phase gets well established, it starts to build up a “Domed House”. A swift advance should be seen as a front wall of the “First Floor” phase. The swift advance on the SPX launched in mid-November is projected to reach the level of 1460 to re-test previous high. In the midway of this advance, the market has been in a pause mode with a 3-week upward-sloping channel which could be a bullish continuation pattern.

SPX 12-14-2012



Chinese Stock Market in a 4-Month Descending Broadening Triangle Pattern

The recent impressive rebound of the Chinese stock market significantly changed the chart pattern. Now it is forming a 4-month Descending Broadening Triangle pattern. If prices break through the horizontal resistance at 2150, the upside price target could be projected at 2270. However, Descending Broadening Triangle patterns generally are not reliable chart patterns which have a high failure rate with very often partial rising after a breakout.

SSEC 12-14-2012



Gold is in the “Run” Phase of a Bump-and-Run Reversal Top Pattern

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?” in August of 2011. Currently the gold price is below the “Lead-in Trendline” and it is in the “Run” phase. It is testing the target line again. We will see if it can find a support from the target line here.

GOLD 12-14-2012 a



Gold in a 6-Month Bullish Uptrend Channel

The gold index is possibly forming a 6-month uptrend channel. Now it is re-testing the lower boundary of the uptrend channel.

GOLD 12-14-2012 b



Silver in a 6-Month Bullish Uptrend Channel

The silver index is possibly forming a 6-month uptrend channel. Silver may re-test the lower boundary of the uptrend channel.

Silver 12-14-2012



Gold/Silver Mining Stocks in a 6-Month Bullish Uptrend Channel

Gold/silver mining stocks moved down to test the lower boundary of the 6-month uptrend channel.

XAU 12-14-2012

HUI 12-14-2012



Crude Oil in a 3-Month Downtrend Channel

Crude oil had a partial rise after its breakout from a 3-month falling wedge. Now it is in a 3-month downtrend channel.

Oil 12-14-2012



US Dollar in 15-Month Uptrend Channel

The US dollar index still maintains a 15-month uptrend channel, as long as it stays above the lower support line of the channel.

USD 12-14-2012



U.S. Treasury Bond is in a Long-Term Bullish Uptrend

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. We will keep monitoring the bond price against the steep-upward-sloping trendline (the pike line).

USB 12-14-2012



Asset Class Performance Ranking with Equity Leading

The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently equity is outperforming. Crude oil and the U.S. dollar are underperforming.

Asset 12-14-2012



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 0.59% above the EMA89. Outperforming sectors are Biotech (4.46%), Internet (3.94%), and Banks (3.09%). Underperforming sectors are Precious Metals (-7.45%), Technology (-3.24%), and Utilities (-1.84%). The S&P 400 Midcap is outperforming and the NASDAQ 100 is underperforming.

Sector 12-14-2012



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. Currently the Indian market is leading.

BRIC 12-14-2012
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