Home > News > 07/27/2014 – Market Update

07/27/2014 – Market Update

SPX and DAX in Late Part of Intermediate Fifth Wave

The S&P 500 index and the German DAX approach the late part of the intermediate impulse fifth wave which is the final leg of the 34-month-long primary third wave before a major correction. Their recent 3-month ending diagonal patterns imply a bearish reversal ahead for the medium-term. At the opposite side, the Chinese stock market has a fresh long-term bullish reversal signal with a major bullish breakout from its 5-year falling wedge pattern. Gold, silver, and their mining stocks are developing bullish patterns for the next breakout. The U.S. treasury bond remains in a 7-month bullish uptrend channel while the U.S. dollar is in a 9-month neutral horizontal trading range. The broad stock market is projected to be in a short-term bullish time-window until 8/7/2014.


Table of Contents


Broad Stock Market Going to be in 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 7-25-2014

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 7-25-2014

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 22 on 7/25/2014 (down from 25 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 bullish time-window until 8/7/2014 (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: 8/7/2014
Broad Market Instability Index (BIX): 22, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

W5000 7-25-2014


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 2.62% above the EMA89. Outperforming sectors are Precious Metals (6.83%), Oil Equipment (6.69%), and Semiconductors(6.42%). Underperforming sectors are Home Construction (-4.00%), Wireless Communication (-1.57%), and Utilities (0.55%).

Sector 7-25-2014



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. 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) and primary impulse wave [3] end.

For the short-term, the S&P 500 index starts minor wave 5 which is a short-term impulse wave. It should be the last upward wave right before the end of intermediate wave (5) and primary wave [3].

SPX Elliott Wave 7-25-2014 (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 (ending diagonal) has been developed with wave (5).

DAX 7-25-2014 (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 fought with the second parallel line. Now it moves above the second parallel line. It is bullish as long as prices keep up above the second parallel line.

BSE 7-25-2014 (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. 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. After a long time sliding, prices finally broke above the upper boundary of the falling wedge last week. This breakout is a long-term bullish reversal signal for the Chinese stock market.

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. last week prices sharply broke above the upper boundary of the descending triangle. Based on this breakout, the upside price target for the medium-term is projected at 2400.

SSEC 7-25-2014 (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 Brazilian market is outperforming. The Russian market is underperforming.

Global Markets 7-25-2014



US Dollar Forming 9-Month Trading Range

The U.S. dollar is forming a 9-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 7-25-2014



US Treasury Bond Forming 7-Month Uptrend Channel

The following chart is a daily chart of the 30-year U.S. treasury bond index. The index is forming a 7-month bullish uptrend channel.

USB 7-25-2014



Gold Forming 4-Month Broadening Bottom Pattern

The gold index is forming a 4-month broadening wedge pattern which should be a bottom pattern. The recent pullback has formed a possible Partial Decline which usually has a bullish indication for an upward breakout. Once prices break above the upper boundary, the upside price target is projected at 1400.

GOLD 7-25-2014



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 for the medium-term is projected at 24.

Silver 7-25-2014



Gold/Silver Mining Stocks Forming 6-Month Ascending Triangle Pattern

Gold/silver mining stocks are forming a 6-month ascending triangle pattern. Once prices break above the upper horizontal boundary, the upside price target could be projected at 125.

XAU 7-25-2014



GDX Gold Miners ETF Forming 6-Month Ascending Triangle Pattern

The GDX Market Vectors Gold Miners ETF is also forming a 6-month ascending triangle pattern. Once prices break above the upper horizontal boundary, the upside price target could be projected at 33.5.

GDX 7-25-2014



Crude Oil in 6-Month Bullish Uptrend Channel

Crude oil is forming a 6-month bullish uptrend channel. Last week prices bounced off the lower boundary of the channel.

Oil 7-25-2014



Asset Class Performance Ranking with the U.S. Treasury Bond Leading

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

Asset 7-25-2014
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