Home > News > 05/26/2014 – Market Update

05/26/2014 – Market Update

Sideways Market is Getting Bored

The sideways correction for the broad stock market has been near five-month long. There is a sign that this sideways market may get into its late part. Both the S&P 500 index and the German DAX are near a bullish breakout to the upside from their trading ranges. The quality of the potential breakout will determine if intermediate corrective wave (4) ends or continues. The broad stock market is projected to be in a short-term bullish time-window until 6/6/2014.


Table of Contents


Broad Market Gets into a Short-Term Bullish 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 LWX Indicator in Last Four Weeks (Actual)
Last 4 wks LWX 5-23-2014

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 5-23-2014

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 9 on 5/23/2014 (down from 41 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 would be in a short-term bullish time-window until 6/6/2014 (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 Cycle: upward
Date of Next Cycle High: 6/6/2014
Broad Market Instability Index (BIX): 9, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

W5000 5-23-2014



Sector Performance Ranking with Wireless Communication Sector Leading

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 2.12% above the EMA89. Outperforming sectors are Wireless Communication (7.15%), Oil Equipment (5.16%), and Energy (4.17%). Underperforming sectors are Internet (-1.89%), Precious Metals (-1.72%), and Banks (-1.09%).

Sector 5-23-2014



S&P 500 Index Nears the Late part of Complex Correction

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 expanded into a complex correction combining multiple A-B-C corrective patterns. The total length of this complex correction now is getting to about five months.

The A’-B’-C’ corrective pattern after wave X is a running flat that indicates a strong market. Also the S&P 500 index is forming a 3-month inverted roof pattern. Now prices approach the upper resistance line of the pattern. A breakout above the resistance would be a sign for ending corrective wave (4) and starting intermediate upward impulse wave (5). However, any short-lived breakout could become another wave X to link a new A-B-C corrective pattern.

SPX Elliott Wave 5-23-2014 (Daily)



German DAX Index: Elliott Wave

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 (5), and minor wave 1.

Intermediate corrective wave (4) has been in a formation of a horizontal trading range between 9000 and 9750 with an A-B-C-D-E corrective pattern. Last week prices broke above the upper horizontal boundary of the trading range. This is a bullish sign for ending corrective wave (4) and starting intermediate upward impulse wave (5). However, any short-lived breakout could become another wave X to link a new A-B-C corrective pattern.

DAX 5-23-2014 (Weekly)



India Bombay Stock Exchange Index Bullish Breakout from 9-Month Rising Wedge

The following daily chart shows that the India Bombay Stock Exchange 30 Sensex Index is forming a 9-month rising wedge pattern. Recently index broke above the upper boundary of the wedge and it had a fast advance. Based on the rising-wedge breakout, the upside price target is projected at 26000.

BSE 5-23-2014 (Daily)



Shanghai Composite Index: Long-Term Picture

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.

SSEC 5-23-2014 (Weekly)



Major Global Market Performance Ranking

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 Chinese market is underperforming.

Global Markets 5-23-2014



US Dollar Forming 7-Month Trading Range

The U.S. dollar is forming a 7-month trading range between 79.2 and 81.4. Recently it bounced off the lower boundary of the trading range. The upper boundary of the trading range should be the next price target.

USD 5-23-2014



US Treasury Bond in 3-Month Bullish Uptrend Channel

The following chart is a daily chart of the 20-year U.S. treasury bond TLT ETF. It is in a 3-month bullish uptrend channel.

TLT 5-23-2014



Gold Forming 2-Month Descending Triangle Pattern

The gold index is forming a 2-month 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.

GOLD 5-23-2014



Silver Continues in 3-Year Falling Wedge Pattern

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.

Silver 5-23-2014



Gold/Silver Mining Stocks 4-Month Head-and-Shoulders Neckline Breached

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

XAU 5-23-2014



GDX Gold Miners ETF 4-Month Head-and-Shoulders Neckline Breached

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

GDX 5-23-2014



Crude Oil Forming 4-Month Ascending Triangle Pattern

Crude oil is forming a 4-month ascending triangle pattern. Currently it is in an upward wave towards the upside boundary of the triangle. No price target is projected before a breakout.

Oil 5-23-2014



Asset Class Performance Ranking with Crude Oil Leading

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 gold is underperforming.

Asset 5-23-2014
  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s