Home > News > 07/12/2014 – Market Update

07/12/2014 – Market Update

The Broad Stock Market in a Short-Term Corrective Wave

The S&P 500 index is in a short-term corrective wave inside a 3-month Ending Diagonal. Gold continues developing a potential bullish reversal pattern. The precious metals sector is ranked as a top performer this week. The 30-year U.S. treasury bond resumed its uptrend. The broad stock market is projected to be in a short-term bearish time-window until 7/23/2014.


Table of Contents


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 LWX Indicator in Last Four Weeks (Actual)
Last 4 wks LWX 7-11-2014

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 7-11-2014

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 15 on 7/11/2014 (up from 3 the previous week) which is below the panic threshold level of 41 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 7/23/2014 (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: 7/23/2014
Broad Market Instability Index (BIX): 15, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

W5000 7-11-2014


Sector Performance Ranking with Precious Metals 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 2.92% above the EMA89. Outperforming sectors are Precious Metals (10.61%), Semiconductors (9.13%), and Oil Equipment (7.19%). Underperforming sectors are Banks (0.42%), Home Construction (0.93%), and Industrials (1.34%).

Sector 7-11-2014



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, the S&P 500 index is in primary wave [3]. The upside price target of wave [3] is projected at 2063 by using 1.000 extension of wave [1] between the low of 667 on 3/6/2009 and the high of 1365 on 4/29/2011.

For the medium-term, the S&P 500 index is in intermediate wave (5) which is the final leg of primary wave [3]. The upside price target of wave (5) is projected at 2060 by using 1.000 extension of wave (1) between the low of 1099 on 10/3/2011 and the high of 1419 on 4/2/2012. Please note that a 3-month rising wedge has been developed together with intermediate wave (5). This rising wedge is also characterized as an Ending Diagonal which implies a dramatic reversal once intermediate impulse wave (5) ends and primary corrective wave [4] begins.

For the short-term, minor wave 3 has ended after it reached the price target 1979. Now the S&P 500 index is in minor wave 4 which is a short-term corrective wave. A possible support level for minor wave 4 is around 1950 which is near the lower boundary of the 3-month rising wedge.

SPX Elliott Wave 7-11-2014 (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 4. A rising wedge has been developed with wave (5).

DAX 7-11-2014 (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. Recently it has been fighting with the second parallel line. Last week it fell below the second parallel line. It is bearish if prices can not maintain above the second parallel line.

BSE 7-11-2014 (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 7-11-2014 (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 Russia market is outperforming. The UK market is underperforming.

Global Markets 7-11-2014



US Dollar Forming 8-Month Trading Range

The U.S. dollar is forming a 8-month trading range between 79.2 and 81.4. It is neutral before a breakout from the trading range. The upper boundary of the trading range should be the next price target.

USD 7-11-2014



US Treasury Bond Forming 6-Month Uptrend Channel

The following chart is a daily chart of the 30-year U.S. treasury bond index. Last week the uptrend was resumed. Now the index is forming a 6-month bullish uptrend channel.

USB 7-11-2014



Gold Bullish Breakout from 3-Month Descending Broadening Right Angle Pattern

The gold index has formed a 3-month descending broadening right-angle pattern. This pattern typically reflects the growing nervousness of investors but also their indecisiveness. However, it is potentially a bullish reversal pattern. Last week prices broke above 1330 resistance level, i.e., the horizontal upper boundary of the right angle. The upside price target is projected at 1380.

GOLD 7-11-2014



Silver Stays above 3-Year Falling Wedge

The silver index recently had a bullish breakout from its 3-year falling wedge pattern. The initial upside price target is projected at 24.

Silver 7-11-2014



Gold/Silver Mining Stocks Reached Upside Price Target

Gold/silver mining stocks recently had a bullish breakout from a 3-month falling wedge pattern. The upside price target was projected at 102. This price target was reached last week.

XAU 7-11-2014



GDX Gold Miners ETF Reached Upside Price Target

The GDX Market Vectors Gold Miners ETF recently had a bullish breakout from a 3-month falling wedge pattern. The upside price target was projected at 26.75. This price target was reached last week.

GDX 7-11-2014



Crude Oil in 5-Month Bullish Uptrend Channel

Crude oil is forming a 5-month bullish uptrend channel. Now it is in a consolidation inside the channel.

Oil 7-11-2014



Asset Class Performance Ranking with Equity Leading

The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently equity is outperforming and agriculture is underperforming.

Asset 7-11-2014
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