Home > News > 06/22/2014 – Market Update

06/22/2014 – Market Update

Gold and Silver Start Shining Again

Gold and silver had explosive upward breakouts last week following the bullish breakouts of crude oil, XAU gold/silver mining stock index and GDX gold miners ETF. Commodity-related sectors continue to outperform the general market. Semiconductors, oil equipment, and energy sectors ranked as top performers again this week. The inflationary environment is coming back, and it could cause many changes in the financial markets. 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 6-20-2014

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 6-20-2014

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 4 on 6/20/2014 (unchanged from 4 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: 7/11/2014
Broad Market Instability Index (BIX): 4, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

W5000 6-20-2014


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 4.18% above the EMA89. Outperforming sectors are Semiconductors (10.56%), Oil Equipment (10.41%), and Energy (8.82%). Underperforming sectors are Wireless Communication (1.09%), Internet (1.88%), and Home Construction (2.07%).

Sector 6-20-2014



S&P 500 Index in Intermediate Impulse Wave 5

The current status of the S&P 500 index in the long-term, medium-term, and short term is as follows:

For the long-term, it is in primary wave [3]. Based on the length of primary wave [1] between the low of 667 on 3/6/2009 and the high of 1365 on 4/29/2011, the upside price target of wave [3] is projected at 2063 by using 1.000 extension of wave [1].

For the medium-term, the S&P 500 index is in intermediate wave (5) which is the final leg of primary wave [3]. Based on the length of intermediate wave (1) between the low of 1099 on 10/3/2011 and the high of 1419 on 4/2/2012, the upside price target of wave (5) is projected at 2060 by using 1.000 extension of wave (1). It looks like that a rising wedge pattern (ending diagonal) is developing with wave (5).

For the short-term, the S&P 500 index is in minior wave 3 which is the middle part of intermediate wave (5). Based on the length of minor wave 1 between the low of 1815 on 4/11/2014 and the high of 1897 on 5/13/2014, the upside price target of wave 3 is projected at 1979 by using 1.000 extension of wave 1.

SPX Elliott Wave 6-20-2014 (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 3.

DAX 6-20-2014 (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. Last two weeks it tested the second parallel line but was unable to stay above the second parallel line. This is the first bearish sign that the index may be forming a reversal top.

BSE 6-20-2014 (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 6-20-2014 (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 6-20-2014



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 6-20-2014



US Treasury Bond in 5-Month Rising Wedge Pattern

The following chart is a daily chart of the 30-year U.S. treasury bond index. It is in a 5-month rising wedge pattern. It is going to test the lower boundary of the wedge. No price target is projected before a breakout from the wedge.

USB 6-20-2014



Gold Bullish Breakout from 3-Month Falling Wedge Pattern

The gold index formed a 3-month falling wedge pattern which was building up a bullish bias. Last week prices broke above the upper boundary of the wedge, and gold advanced explosively as we expected. The upside price target is projected at 1380.

GOLD 6-20-2014



Silver Bullish Breakout from 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. Last week it broke above the the upper boundary of the wedge, and prices advanced explosively as we expected. Now Silver should become bullish in the intermediate-term, and the initial upside price target is projected at 24.

Silver 6-20-2014



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

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

XAU 6-20-2014



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. One week ago prices broke above the upper boundary of the wedge. The upper side price target is projected at 26.75.

GDX 6-20-2014



Crude Oil Bullish Breakout from 4-Month Ascending Triangle Pattern

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

Oil 6-20-2014



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 the U.S. dollar is underperforming.

Asset 6-20-2014
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