Home > News > 06/15/2014 – Market Update

06/15/2014 – Market Update

Commodity-Related Sectors Continue Outperforming

The positive-to-negative change of the relationship between stocks and bond yields has drawn our attention to the shift from a deflationary environment to an inflationary environment. Commodity-related sectors continue to outperform the general market. This week again we have semiconductors, oil equipment, and energy sectors ranked at the top. Crude oil, XAU gold/silver mining stock index, and GDX gold miners ETF have had bullish breakouts. Gold and silver are very close to a bullish breakout point as well. The broad stock market is projected to be in a short-term bearish time-window until 6/27/2014.


Table of Contents


Broad Market is about to be 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 LWX Indicator in Last Four Weeks (Actual)
Last 4 wks LWX 6-13-2014

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 6-13-2014

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 4 on 6/13/2014 (up from 1 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 stay in a short-term bearish time-window until 6/27/2014 (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: downward
Date of Next Cycle Low: 6/27/2014
Broad Market Instability Index (BIX): 4, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

W5000 6-13-2014


Sector Performance Ranking with Semiconductor 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 3.11% above the EMA89. Outperforming sectors are Semiconductors (10.99%), Oil Equipment (7.70%), and Energy (6.88%). Underperforming sectors are Precious Metals (-0.13%), Internet (1.18%), and Home Construction (1.27%).

Sector 6-13-2014



S&P 500 Index in Intermediate Impulse Wave 5

The S&P 500 index currently is in primary wave [3], intermediate wave (5), and minor wave 1. The length of wave (5) will be approximately the length of wave (1), which is about 300 point for the S&P 500 index. Since corrective wave (4) from January to April was a running flat as a strong market indication, wave (5) may have an extension beyond 300 points. Upward intermediate wave (5) is the final leg of long-term bullish primary wave [3]. The end of wave (5) will be the beginning of primary corrective wave [4]. This year is the midterm year of the four-year presidential cycle, and the U.S. congressional election is just about four months away. The stock market is historically vulnerable to a correction before the midterm election. This midterm stock correction would be coincident with our primary corrective wave [4] likely in this summer and fall. Then primary wave [5] would start and last well into the next year to form a major long-term top.

SPX Elliott Wave 6-13-2014 (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 corrective pattern. The advance during last several weeks started intermediate upward impulse wave (5). Now it is in minor wave 1 of wave (5).

DAX 6-13-2014 (Weekly)



India Bombay Stock Exchange Index in Bump Phase

In the weekly chart of the India Bombay Stock Exchange 30 Sensex index, there is a possible development of a Bump and Run Reversal Top pattern. According to Thomas Bulkowski, the Bump-and-Run Reversal Top pattern consists of three main phases:

1) A lead-in phase in which a lead-in trend line connecting the lows has a slope angle of about 30 degrees. Prices move in an orderly manner and the range of price oscillation defines the lead-in height between the lead-in trend line and the first parallel line.

2) A bump phase where, after prices cross above the first parallel line, excessive speculation kicks in and the bump phase starts with fast rising prices following a sharp trend line slope with 45 degrees or more until prices reach a bump height with at least twice the lead-in height. Once the second parallel line gets crossed over, it serves as a sell line.

3) A run phase in which prices break support from the lead-in trend line in a downhill run.

Since March of this year, the Bombay index has been in the Bump phase with a sharp trendline as excessive speculation drives prices up steeply. Now it is testing the second parallel line. As long as prices stay above the sharp bump trendline, the bump phase will continue.

BSE 6-13-2014 (Weekly)



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 1.5-year 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 one and half years. Now it still stays above 2000. Hopefully it is in a bottom process. A breakout to the upside of either the falling wedge or the descending triangle would be explosive.

SSEC 6-13-2014 (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 Australian market is underperforming.

Global Markets 6-13-2014



US Dollar Forming 8-Month Trading Range

The U.S. dollar is forming a 8-month trading range between 79.2 and 81.4. Last month it bounced off the lower boundary of the trading range. The upper boundary of the trading range should be the next price target.

USD 6-13-2014



US Treasury Bond in 4-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 4-month bullish uptrend channel.

TLT 6-13-2014



Gold in a 3-Month Falling Wedge Pattern

The gold index has formed a 3-month falling wedge pattern which is building up a bullish bias. Once prices break above the upper boundary of the wedge, gold would advance explosively. The upside target is projected at 1380.

GOLD 6-13-2014



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.

Also silver formed an 1-year descending triangle pattern inside the falling wedge. It provides us another technical gauge to check moves of silver. The horizontal line of the triangle near 19 has formed a nice support.

Please note that silver is very close to a breakout point at the upper boundary of the falling wedge. A potential upward breakout could be explosive. The initial target is projected at 24.

Silver 6-13-2014



Gold/Silver Mining Stocks Bullish Breakout from 3-Month Falling Wedge Pattern

Gold/silver mining stocks formed a 3-month falling wedge pattern. Last week prices broke above the upper boundary of the wedge. The upside price target is projected at 102.

XAU 6-13-2014



GDX Gold Miners ETF Falling Bullish Breakout from 3-Month Falling Wedge Pattern

The GDX Market Vectors Gold Miners ETF formed a 3-month falling wedge pattern. Last week prices broke above the upper boundary of the wedge. The upper side price target is projected at 26.75.

GDX 6-13-2014



Crude Oil Bullish Breakout from 4-Month Ascending Triangle Pattern

Crude oil formed a 4-month ascending triangle pattern. Last week prices broke explosively above the upper horizontal boundary of the triangle. The upside price target is projected at 110.

Oil 6-13-2014



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 6-13-2014
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