Broad Stock Market in an Expanded Flat

The chart patterns for the S&P 500 index, German DAX index, gold/silver, crude oil, U.S. treasury, and U.S. dollar are either in consolidations or expanded flat corrections. A short-term bearish time-window is projected to last until 3/21/2014. This week’s powerful bullish chart comes from the India Bombay Stock Exchange Index with a major bullish breakout from its 6-year ascending triangle pattern at a record high. It makes the Indian stock market significantly outstanding from other emerging markets in a downward spiral like China, Brazil, and Russia. DBA Agriculture ETF is fast approaching the upside price target after a major bullish breakout from a 3-year falling wedge pattern.

Table of Contents

• Broad Market is about to Turn into Short-Term Bearish Time-Window
• Sector Performance Ranking with Internet Sector Leading
• Long-Term Picture of the S&P 500 Index
• Short-Term Picture of the S&P 500 Index
• German DAX Index: Elliott Wave
• India Bombay Stock Exchange Index Major Bullish Breakout
• Shanghai Composite Index: Long-Term Picture
• Major Global Markets Performance Ranking
• US Dollar Bearish Downward Breakout from 3-Month Ascending Triangle
• US Treasury Bond Forming 7-Week Trading Range
• Gold in Short-Term Consolidation
• Silver Retreated from Long-term Resistance
• Gold/Silver Stocks in Consolidation
• GDX Gold Miners ETF in Consolidation
• Crude Oil in Consolidation
• DBA Agriculture ETF Fast Approaching Price Target
• Asset Class Performance Ranking with Agriculture Leading

Broad Market is about to Turn into Short-Term Bearish Time-Window

The LWX (Leading Wave Index) is Nu Yu’s proprietary leading indicator for US equity market. LWX>+1 indicates bullish (green); LWX< -1 indicates bearish (red); The LWX between +1 and -1 indicates neutral (yellow).

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 10 on 3/7/2014 (up from 6 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. Based on the forecast of the Leading-Wave Index (LWX), the broad stock market should be in a short-term bearish time-window until 3/21/2014 (see the second table above). The momentum is dropping towards the zero line, and it most like will become negative next week. 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:

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 4.71% above the EMA89. Outperforming sectors are Internet (9.23%), Home Construction (7.31%), and Pharmaceuticals (7.05%). Underperforming sectors are Telecommunication (-1.14%), Consumer Goods (2.43%), and Energy (2.45%).

The following chart is a weekly chart of the S&P 500 index, with Elliott Wave count, in a five-year time span. There are three degrees of waves: Primary, Intermediate, and Minor waves in this weekly chart. The SPX currently is in primary wave [3], intermediate wave (4), and minor wave B.

A long-term price target for primary wave [3], projected at 1796 by using 0.618 extension of wave [1], has been reached. Primary wave [3] currently is in an extension and it could extend to the next price target at 2063 based on 1.0 extension of wave [1].

Please note that primary wave [3] indicates a long-term bullish uptrend while intermediate wave (4) presents an intermediate-term correction.

As shown in a daily chart below, since the beginning of this year, the S&P 500 index has been in an intermediate correction with intermediate wave (4) following a fifth wave extension (Ending Diagonal) developed in late 2013.

Wave (4) would have an A-B-C wave corrective sequence in the minor wave degree. Since wave B has expanded beyond 1850 which is the beginning level of wave A, Wave (4) is no longer a simple correction and it is becoming an Irregular Flat (or Expanded Flat) correction.

This whole expanded A-B-C correction process will possibly last more than three months. Overdue wave C could start anytime now, and it will potentially end much lower than 1740 which is the ending level of wave A.

A full range decline for wave C is projected down to 1650 because the correction ideally should end at the level of the low of wave ii of the fifth wave extension. This projection is slightly different from my previous one which was based on a simple A-B-C correction assumption.

The German DAX index has had a very high correlation with the S&P 500 index for last 20 years. Currently it has a similar Elliott Wave structure to the S&P 500 index, and it is in primary wave [3], intermediate wave (4), and minor wave C.

Wave C would end around 8750 near the lower boundary of the intermediate uptrend channel.

The following chart is a monthly chart of the India Bombay Stock Exchange 30 Sensex Index for last ten years. The index just made a new record high last week. Especially, it broke about its 6-year ascending triangle pattern, and flashed a very bullish for the Indian stock market. The performance of the Bombay index is ranked on the top among the major global stock markets this week. This outstanding performance demonstrates that India has decoupled from the downward spiral of China, Brazil, and Russia.

The following weekly chart of the Shanghai Stock Exchange Composite Index shows a 5-year falling wedge pattern. After a long time sliding, it is close to a point to challenge the upper boundary of the falling wedge. Falling wedges typically build up a bullish bias as it is mature. This bullish bias can be realized only when prices break through the upper boundary of the wedge to the upside.

The table below is the percentage change of major global stock market indexes against the 89-day exponential moving average (EMA89). Currently Indian market is outperforming. The Russian, Brazilian, and Chinese markets are under water.

The U.S. dollar broke below the lower boundary of a 3-month ascending triangle pattern. This downward breakout made the dollar bearish. A downside price target is projected at 79.20.

The following chart is a daily chart of the 20-year U.S. treasury bond ETF. It is forming a 7-week horizontal trading range between 105.5 and 109 with a potential short-term “M” or double-top formation. There is no price target at this moment.

The gold index had a very nice advance this year especially after it broken above the upper boundary of the 7-month Descending Triangle pattern. An upside price target is projected at 1420. A pullback may happen before 3/19/2014. This potential pullback is more like a consolidation and the 89-day exponential moving average (EMA89) should be a support. Gold is led by the Japanese yen. Currently the yen is weakening. Watch the yen closely if you care about gold.

The silver index has formed a 3-year falling wedge pattern. Last week it retreated from the upper boundary of the falling wedge. It should be neutral before a breakout from the wedge.

Gold/silver mining stocks had a bullish breakout forming a 7-month descending triangle pattern like gold did recently. An upside price target is projected at 114 for the XAU. Now it is in a short-term consolidation.

The GDX Market Vectors Gold Miners ETF had a powerful upward breakout from its 10-month falling wedge pattern recently. The bullish breakout of the falling wedge sets a $29 price target for GDX. Now it is in a consolidation and the 89-day moving average (EMA89) should be a support.

Crude oil is forming a 4-month ascending broadening triangle pattern. If it can not break above the upper boundary of the triangle, a consolidation could happen between the upper boundary of the triangle and the horizontal support line at 100.

The following chart shows that the PowerShares DBA Agriculture ETF has a bullish breakout from a 3-year falling wedge pattern. An upside price target is projected at 29. Last Friday DBA closed at 28.38, and it is very close to the target.

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