Broad Stock Market in a Bearish Time-Window

Although the broad stock market has no significant change from the previous week, the Broad Market Instability is rising above the panic threshold level. The S&P 500 index did not reach the upper boundary of the 2-month broadening triangle last week. A Partial Rising pattern is still possible as a bearish sign. The broad stock market is projected to be in a short-term bearish time-window until 5/22/2014.

Table of Contents

• Broad Market in a Short-Term Bearish Time-Window
• Sector Performance Ranking with Real Estate Sector Leading
• S&P 500 Index in a Complex Correction
• German DAX Index: Elliott Wave
• India Bombay Stock Exchange Index in 9-Month Rising Wedge
• Shanghai Composite Index: Long-Term Picture
• Major Global Markets Performance Ranking
• US Dollar Forming 6-Month Trading Range
• US Treasury Bond above 3-Month Forming Ascending Broadening Wedge
• Gold Forming 8-Week Descending Triangle Pattern
• Silver Continues in 3-Year Falling Wedge Pattern
• Gold/Silver Stocks Forming 4-Month Head-and-Shoulders Pattern
• GDX Gold Miners ETF Forming 4-Month Head-and-Shoulders Pattern
• Crude Oil Forming 3-Month Ascending Triangle
• DBA Agriculture ETF Forming 2-Month Uptrend Channel
• Asset Class Performance Ranking with Agriculture Leading

Broad Market in a 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 70 on 5/9/2014 (up from 26 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. Based on the forecast of the Leading-Wave Index (LWX), the broad stock market would be in a short-term bearish time-window until 5/22/2014 (see the second table above). 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 1.15% above the EMA89. Outperforming sectors are Real Estate (5.06%), Energy (5.01%), and Oil Equipment (4.59%). Underperforming sectors are Internet (-7.97%), Banks (-2.37%), and Home Construction (-2.33%).

As shown in a daily chart below, the S&P 500 index has been in intermediate corrective wave (4) since the beginning of this year. This corrective wave expands into a complex correction combining possible multiple A-B-C corrective patterns, and it could last about five to six months. More information about Elliott Wave Complex Corrections can be found here.

Currently the S&P 500 index is in a 2.5-month broadening triangle (megaphone) pattern. The horizontal center line of the triangle is at the level of 1860. Now the index is in the middle between the center line and the upper boundary of the triangle. If wave B of the new A-B-C corrective pattern fails to reach the upper boundary of the broadening triangle for making a new high of the S&P 500 index, a partial rising can be formed and it will imply an immediate downward breakout at the lower boundary of the triangle with wave C.

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 B.

Intermediate corrective wave (4) is in a formation of a horizontal trading range between 9000 and 9750 combining possible multiple A-B-C corrective patterns. Prior Wave C was truncated at the lower boundary of the trading range, and wave X was truncated at the upper boundary of the trading range. Now the DAX is in wave B of the new A-B-C pattern after wave X.

The following daily chart shows that the India Bombay Stock Exchange 30 Sensex Index is forming a 9-month rising wedge pattern. Right now it is testing the upper boundary of the wedge again. It is neutral inside the wedge.

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 measure moves of the index. The index has defended the level of 2000 very well for last 14-months. Now it is testing that level again.

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 Japanese market is underperforming.

The U.S. dollar is forming a 6-month trading range between 79.2 and 81.4. Last week it bounced off the lower boundary of the trading range again. The upper boundary of the trading range should be the next price target.

The following chart is a daily chart of the 30-year U.S. treasury bond. It formed a 3-month ascending broadening wedge pattern, and prices had a bullish breakout from the wedge one week ago. An upside price target is projected at 136.5 based on the bullish breakout from the broadening wedge.

The gold index is forming a 8-week descending triangle pattern. Now it is very near an apex of the triangle. The next move of gold depends on the direction of a breakout from the triangle. It is neutral before a breakout from the triangle.

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 triangle.

Gold/silver mining stocks has formed a 4-month head-and-shoulders pattern. Now it is testing the neckline. A downward breakout target is projected at the previous low around 80.

The GDX Market Vectors Gold Miners ETF has formed a 4-month head-and-shoulders pattern. Now it is testing the neckline. A downward breakout target is projected at 21.

Crude oil is forming a 3-month ascending triangle pattern. Currently it is near the lower boundary of the triangle. No price target is projected before a breakout.

The following chart shows that the PowerShares DBA Agriculture ETF is forming a 2-month uptrend channel. The ETF now is pulling back from the upper boundary of the channel. The lower boundary of the channel should be a support.

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.