Elliott Wave X Suggests Extending Sideways Market

The upward wave, which pushed the S&P 500 index up to a new record high early last week, is characterized as Elliott Wave X, a wave linking two corrective patterns. Right after wave X, another new A-B-C corrective pattern is expected. It would extend the current intermediate-term corrective wave into complex sideways corrections. Currently we have a mixture of a bullish sign from the Leading Wave Index (LWX) and a bearish sign from the negative momentum. The short-term bullish time-window for the broad stock market is projected to end by 4/15/2014.

Table of Contents

• Broad Stock Market is Still Choppy
• Sector Performance Ranking with Oil Equipment Sector Leading
• S&P 500 Index in a Complex Correction
• 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 Forming 5-Month Trading Range
• US Treasury Bond in 2-Month Trading Range
• Gold Forming 3-Month Ascending Broadening Wedge Pattern
• Silver Continues in 3-Year Falling Wedge Pattern
• Gold/Silver Stocks Forming 3-Month Ascending Broadening Wedge Pattern
• GDX Gold Miners ETF Forming 3-Month Ascending Broadening Wedge Pattern
• Crude Oil Forming 5-Week Symmetrical Triangle Pattern
• DBA Agriculture ETF Forming 5-week Descending Triangle Pattern
• Asset Class Performance Ranking with Agriculture Leading

Broad Stock Market is Still Choppy

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 20 on 4/4/2014 (down from 29 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. The broad stock market is still choppy. Based on the forecast of the Leading-Wave Index (LWX), the broad stock market should be in a short-term bullish time-window until 4/15/2014. We have a mixture of a bullish sign from the LWX and a bearish sign from the negative momentum. 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 1.88% above the EMA89. Outperforming sectors are Oil Equipment (5.12%), Semiconductors (5.11%), and Utilities (4.87%). Underperforming sectors are Internet (-5.48%), Biotech (-4.61%), and Precious Metals (0.12%).

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) was in a 3-month Expanded Flat correction with the expanded moves of wave A and wave B. However, the move of wave C was trapped in a narrow symmetrical triangle. As I discussed in my previous weekly report, this triangle pattern is a sign that intermediate wave (4) would become a complex correction.

Last week prices broke to the upside of the triangle, and the 3-month-long A-B-C corrective pattern ended. The upward wave pushed the S&P 500 index to a new record high. This up-wave is characterized as minor wave X which is just a wave links two corrective patterns. Right after wave X, another new A-B-C corrective pattern is expected. Then this whole complex intermediate wave (4) will become an extending sideways correction to last about five to six months. More information about Elliott Wave Complex Corrections can be found here.

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 X.

Currently it is forming a horizontal trading range between 9000 and 9750. Wave C was truncated at the lower boundary of the trading range. Now wave X just reached the upper boundary of the trading range. The DAX could be in an extending sideways correction.

The following weekly chart shows that the India Bombay Stock Exchange 30 Sensex Index has been in a 26-month bullish uptrend channel. The performance of the Bombay index has been ranked on the top among the major global stock markets for last five weeks. Currently the index is near the upper boundary of the channel.

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 another technical gauge to check moves of the index. Currently it is near the horizontal boundary of the triangle at the level of 2000. Defending the level of 2000 is very important for the next move of the Shanghai index. 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 market is underperforming.

The U.S. dollar is forming a 5-month trading range between 79.3 and 81.5. The upper boundary at 81.5 of the trading range could be the next price target.

The following chart is a daily chart of the 30-year U.S. treasury bond. It is forming a 2-month horizontal trading range between 131.5 and 134. It is neutral inside the trading range. There is no price target projected at this moment.

The gold index is forming a 3-month ascending broadening wedge pattern. A new price target will be projected after prices break out of the wedge.

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 check moves of silver. Currently it is pulling back from the upper boundary of the triangle. It may look for a support around 19 near the horizontal boundary of the wedge.

Gold/silver mining stocks are forming a 3-month ascending broadening wedge pattern. A new price target will be projected after prices break out of the wedge.

The GDX Market Vectors Gold Miners ETF is forming a 3-month ascending broadening wedge pattern. A new price target will be projected after prices break out of the wedge.

Crude oil is forming a 5-week symmetrical triangle pattern. No price target is projected before a breakout from the triangle.

The following chart shows that the PowerShares DBA Agriculture ETF is forming a 5-week descending triangle. No price target is projected before a breakout from the triangle.

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 US dollar is underperforming.