Broad Stock Market Upswing Continues

The broad stock market continues upswing, and it is expected to be in a short-term bullish time-window until 9/19/2013.

Table of Contents

• Broad Market in Short-Term Bullish Time-Window
• Short-Term Picture of the S&P 500 Index
• Long-Term Picture of the S&P 500 Index
• Market Ratio and Competitive Strength
• Gold Forming 11-Month Descending Broadening Wedge
• Long-Term Picture: Silver in a 2.5-Year Falling Wedge Pattern
• Gold/Silver Stocks Forming 4-Month Inverted Roof Pattern
• Crude Oil Forming 3-Week Symmetrical Triangle
• US Dollar Forming 2-Month Trading Range
• US Treasury Bond Forming a Bump-and-Run Reversal Bottom Pattern
• Asset Class Performance Ranking with Crude Oil Leading
• Sector Performance Ranking with Biotech Sector Leading
• BRIC Stock Market Performance Ranking with the Chinese Market Leading

Broad Market in Short-Term Bullish Time-Window

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 8 on 9/13/2013 (down from 11 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 should be in a short-term bullish time-window until 9/19/2013 (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 Picture: S&P 500 Index Forming a 4-Month Rising Wedge Pattern

The S&P 500 index is forming a 4-month rising wedge pattern. The current upswing could be limited by the upper boundary of the wedge.

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 B.

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.

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:

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.

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

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.

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.

Crude oil is forming a 3-week symmetrical triangle pattern. It is neutral before a breakout from the triangle.

The U.S. dollar is forming a 2-month horizontal trading range between 81 and 82.75. Price could be choppy in the trading range.

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

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.

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 3.09% above the EMA89. Outperforming sectors are Biotech (9.64%), Internet (9.38%), and Oil Equipment (4.71%). Underperforming sectors are Precious Metals (-5.58%), Home Construction (-4.15%), and Real Estate (-3.14%).

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 leading.