Expanded Flat Correction in Progress

As the Russian and Brazilian stock markets tumble to their 52-week lows, the broad stock market continues its intermediate-term Expanded Flat correction. A short-term bearish time-window for the broad stock market is projected to last until 3/24/2014. Gold resumed its advance after a three-week pause and approaches our upside price target. Silver is possibly near a major bullish breakout. The precious metals sector is outperforming other sectors.

Table of Contents

• Broad Market is in a Short-Term Downward Wave
• Sector Performance Ranking with Precious Metals 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 in 26-Month Bullish Uptrend Channel
• 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 8-Week Trading Range
• Gold Resumed Advance after 3-Week Pause
• Silver Nears a Major Bullish Breakout
• Gold/Silver Stocks Resumed Advance after 3-Week Pause
• GDX Gold Miners ETF Resumed Advance after 3-Week Pause
• Crude Oil in 4-Month Ascending Triangle
• DBA Agriculture ETF in Price Target Range
• Asset Class Performance Ranking with Agriculture Leading

Broad Market is in a Short-Term Downward Wave

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 18 on 3/14/2014 (up from 10 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 3/24/2014 (see the second table above). The momentum has become negative. 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 2.32% above the EMA89. Outperforming sectors are Precious Metals (7.15%), Utilities (4.47%), and Internet (4.40%). Underperforming sectors are Telecommunication (-2.05%), Oil Equipment (0.17%), and Energy (0.50%).

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 C.

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 Expanded Flat (or Irregular Flat) correction. This whole expanded A-B-C correction process will possibly last more than three months.

Wave C just started last week. It will potentially end much lower than 1740 which is the ending level of wave A. Please note that wave C may comprise five subwaves, i.e., three down waves and two rebound waves. 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.

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 previous weekly market report sent an alert for the major bullish breakout at a new record high of the India Bombay Stock Exchange 30 Sensex Index. The following weekly chart shows that the Bombay Stock Index has been in in a 26-month bullish uptrend channel. The performance of the Bombay index is again ranked on the top among the major global stock markets this week. It makes the Indian stock market significantly outstanding from other emerging markets in a downward spiral like Russia, Brazil, and China.

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

Also the Shanghai index has formed another 14-month descending triangle pattern inside the falling wedge. It provides us one more technical gauge to monitor moves of the index. Currently it is testing the horizontal boundary of the triangle at the level of 2000. The index is neutral before it has a breakout from the triangle pattern.

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, Hong Kong, Chinese, German, and UK 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. Now it is close to there.

The following chart is a daily chart of the 20-year U.S. treasury bond ETF. It is forming a 8-week horizontal trading range between 105.5 and 109. It is neutral inside the trading range. 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. Last week gold resumed its advance after a 3-week pause.

The silver index has formed a 3-year falling wedge pattern. After a long time sliding, it should be close to a point to challenge the upper boundary of the falling wedge. Once it breaks above the the upper boundary of the wedge, silver could become bullish in the intermediate-term. It should be neutral before a breakout from the wedge.

Also silver formed a 8-month descending triangle pattern inside the falling wedge. It provides us another technical gauge to monitor moves of silver. Currently it is testing the upper boundary of the triangle. Watch out its moves around 22.

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. Last week the XAU resumed its advance after a 3-week pause.

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. Last week the GDX resumed its advance after a 3-week pause.

Crude oil is forming a 4-month ascending broadening triangle pattern. It has retreated dramatically from the upper boundary of the triangle. There is no price target projected at this moment.

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 was projected at 29. Last week DBA was very close to the price target. Now there is no new price target projected.

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.