Archive for September 2, 2013

09/02/2013 – Market Update

September 2, 2013 Leave a comment

Market Short-Term Upswing Likely

The S&P 500 index has been in an intermediate-term corrective wave 4 since early of last month. This corrective wave should consist of short-term A-B-C waves. Currently short-term wave A (downward wave) nears end and short-term wave B (upward wave) likely starts as the volatility, measured by the Broad Market Instability (BIX), calms down from the panic threshold. A short-term bullish time-window is expected to turn on and it may last until 9/20/2013.

Table of Contents

Broad Market Could Turn into Short-Term Bullish Time-Window

The LWX Indicator in Last Four Weeks (Actual)
Last 4 wks LWX 8-30-2013

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 8-30-2013

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 16 on 8/30/2013 (down from 18 the previous week) which is below the panic threshold level of 43 and indicates a bullish market. Based on the forecast of the Leading-Wave Index (LWX), the broad market is going to turn into a short-term bullish time-window that could last until 9/20/2013 (see the second table above). The daily chart below has the Wilshire 5000 index with both the BIX and the Momentum indicators. The current market status is summarized as follows:

Short-Term Cycle: Trough
Date of Next Cycle High: 9/20/2013
Broad Market Instability Index (BIX): 16, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

W5000 8-30-2013

Short-Term Picture: S&P 500 Index in a 4-Month Uptrend Channel

The S&P 500 index has formed a 4-month bullish uptrend channel. A pullback or a downwave towards the lower boundary of the channel around 1610 is expected.

SPX  8-30-2013

Long-Term Picture: Elliott Wave Count on S&P 500 Index

The following chart is a weekly chart of the S&P 500 index, with my Elliott Wave count, in a four-year time span. The stock market crash of 2008 had a massive washout and reset the market in early March 2009 as “ground zero” for the beginning of wave count.

There are three degrees of waves: Primary, Intermediate, and Minor waves in this weekly chart. It shows that the SPX currently is in primary wave [3], intermediate wave (4), and minor wave A.

A long-term price target for primary wave [3] is projected at 1770 by using 0.618 extension of wave [1]. However, there would be a corrective wave, i.e., intermediate wave (4), before the price target of 1770.

Please note that Intermediate wave (4) is an intermediate-term corrective wave and it should consist of short-term minor waves A-B-C. Now short-term minor wave A (downwave) may near end, and minor wave B (upwave) could start soon.

SPX Elliott Wave 8-30-2013 (Weekly)

Market Ratio and Competitive Strength

The market ratio is very helpful to compare strengths between two markets. The table below tracks weekly performances for several pairs of markets, i.e., the euro vs. the US dollar, the Greek market vs. the Chinese market, the long-term rate vs. the short-term rate, the S&P 500 index vs. gold, small caps vs. large caps, and the US market vs. the world market.

For each pair of markets listed in the table, the market ratio is calculated by dividing one market by another. Then the competitive strength is further evaluated from a percentage change of the ratio against its 89-day exponential moving average. The results divide the markets into two groups: outperforming markets and underperforming markets, for this week as follows:

Market Ratios 8-30-2013

Each week I talk about one pair of markets in the table above. This week let’s have a look at the euro vs. the U.S. dollar.

Euro vs. U.S. Dollar: The chart below is a weekly chart for the ratio of the euro to the U.S. dollar in last seven years. The ratio has been in a symmetrical triangle pattern for six years. The central line of the triangle is at 1.7. Currently the ratio swings up towards 1.70 to make Euro stronger than the US dollar.

Euro vs US Dollar 8-30-2013

Gold Forming 11-Month Descending Broadening Wedge Pattern

The gold index is forming an 11-month Descending Broadening Wedge pattern on the daily chart. Last week price touched the upper boundary of the wedge and began falling again. Gold should become neutral before breaks above the upper boundary of the wedge.

GOLD 8-30-2013

Long-Term Picture: Silver in a 2.5-Year Falling Wedge Pattern

The silver index has formed a 2.5-year falling wedge pattern. Silver will remain bearish with range-bounded swings before a breakout from the wedge.

Silver 8-30-2013 (Weekly)

Gold/Silver Mining Stocks Forming 4-Month Inverted Roof Pattern

Gold/silver mining stocks are forming a 4-month inverted roof pattern. They could become bullish once prices break above the horizontal resistance line of the inverted roof.

XAU HUI 8-30-2013

Crude Oil in 8-Week Trading Range

Crude oil has been in consolidation and it has formed a 8-week trading range between 103 and 109. Last week an attempt to break above the upper horizontal resistance of the trading range failed. Prices should be in sideways before a breakout from the trading range.

Oil 8-30-2013

US Dollar in 5-Month Broadening Symmetrical Triangle Pattern

The U.S. dollar formed a 5-month Broadening Symmetrical Triangle pattern. In August, the 2-month-long downward wave failed to touch the lower boundary of the triangle, and it formed a Partial Decline inside the Broadening Triangle. According to Bulkowski, a partial decline usually appears at the end of a broadening pattern, and there will be an increased chance for an upward breakout.

USD 8-30-2013

US Treasury Bond Forming a bump-and-run reversal bottom pattern

The 30-year U.S. treasury bond is forming a Bump-and-Run Reversal Bottom Pattern. Now it is in the Bearish bump phase.

USB 8-30-2013

Asset Class Performance Ranking with Crude Oil Leading

The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently Crude Oil is outperforming, and U.S. treasury bond is underperforming.

Asset 8-30-2013

Sector Performance Ranking with Internet Sector Leading

The following table is the percentage change of sectors and major market indexes against the 89-day exponential moving average (EMA89). The Wilshire 5000 index, as an average or a benchmark of the total market, is 0% above the EMA89. Outperforming sectors are Internet (4.86%), Biotech (4.68%), and Healthcare (1.03%). Underperforming sectors are Home Construction (-11.78%), Real Estate (-6.65%), and Telecommunication (-3.58%). The Nasdaq 100 is outperforming and the Dow Jones Industrial is underperforming.

Sector 8-30-2013

BRIC Stock Market Performance Ranking with the Russian 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. Currently the Russian market is lagging.

BRIC 8-30-2013
%d bloggers like this: