Home > News > 08/10/2014 – Market Update

08/10/2014 – Market Update

U.S. Treasury Bond Prices Leading

The 30-year U.S. treasury bond index remains in a 7-month bullish uptrend channel while the U.S. dollar is in a 9-month neutral horizontal trading range. The gold index and the precious metals sector continue to build up bullish patterns for the next breakout. The first downward leg of the primary correction on both the S&P 500 index and the German DAX nears its end, and a rebound is expected before the second downward leg of the correction. Our major global market performance ranking has the Chinese stock market at the top and the Russian stock market at the bottom for last week. The broad stock market is projected to be in a short-term bearish time-window until 8/11/2014 and to be in a short-term neutral time-window until 8/15/2014.


Table of Contents


Broad Stock Market Turning in a Short-Term Neutral 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 8-8-2014

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 8-8-2014

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 52 on 8/8/2014 (down from 145 the previous week) which is above the panic threshold level of 41 and indicates a bearish 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 8/11/2014 and would be in a short-term neutral time-window until 8/15/2014 (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: 8/11/2014
Broad Market Instability Index (BIX): 52, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

W5000 8-8-2014


Sector Performance Ranking with Biotech 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 0.19% above the EMA89. Outperforming sectors are Biotech (4.52%), Precious Metals (4.38%), and Semiconductors (2.84%). Underperforming sectors are Home Construction (-5.69%), Wireless Communication (-4.93%), and Banks (-1.79%).

Sector 8-8-2014



S&P 500 Index in Primary Corrective Wave 4

After the recent downward breakout from the 4-month rising wedge (Ending Diagonal), the S&P 500 index has turned into primary wave [4] which is typically a major corrective (but not crash) wave. The downside price target for primary wave [4] is projected at 1820.

This primary wave [4] is expected to have an intermediate (A)(B)(C) corrective wave structure. Since it rolled over from its all-time high, the S&P 500 index has been in intermediate wave (A) which is the first downward leg of primary corrective wave [4]. Wave (A) nears end now, and upward wave (B) should be next.

SPX Elliott Wave 8-8-2014 (Daily)

Elliott Waves 8-8-2014



German DAX Index: Elliott Wave

The German DAX index has a similar Elliott Wave structure to the S&P 500 index. It has broken below the lower boundary of the rising wedge (Ending Diagonal). Now it is in primary wave [4], intermediate wave (A). From our “Major Global Markets Performance Ranking” section, you can find that the Germany stock market last week is ranked as a worst performer again just next to the Russian stock market.

DAX 8-8-2014 (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. It is bullish as long as prices keep up above the second parallel line.

BSE 8-8-2014 (Weekly)



Shanghai Composite Index: Long-Term Picture

After crashed from its all time high in 2007, the Shanghai Stock Exchange Composite Index has been in a long time sliding through a primary corrective [A]-[B]-[C] wave structure for years. Its primary wave [C] is in a formation of a 5-year falling wedge which is also characterized as a “Ending Diagonal”. Once this ending diagonal ends, the bear market with primary corrective [A]-[B]-[C] waves could end too.

Just two week ago, prices finally broke above the upper boundary of the falling wedge. This breakout is a long-term bullish reversal signal for the Chinese stock market, and triggered an explosive advance. The upside price target for the medium-term is projected at 2400.

Now it is forming an 1-year horizontal trading range between 2000 and 2250. In the short-term, prices may oscillate inside the trading range before the next breakout from the upper boundary at 2250.

SSEC 8-8-2014 (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 Chinese market is outperforming. The Russian market is underperforming.

Global Markets 8-8-2014



US Dollar in 9-Month Trading Range

The U.S. dollar has formed a 9-month trading range between 79.2 and 81.5. It is neutral before a breakout from the trading range. Now it is testing the upper boundary of the trading range.

USD 8-8-2014



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 8-8-2014



Gold Forming 7-Month Symmetrical Triangle Pattern

The gold index is forming a 7-month symmetrical triangle pattern. It is neutral before a breakout from the triangle. Also there is a 4-week falling wedge formed inside the triangle. Last week the index had a bullish breakout from the falling wedge. It is most likely that prices may further break through the upper boundary of the symmetrical triangle to the upside. We maintain our upside price target 1400 for the medium-term.

GOLD 8-8-2014



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. Currently the silver index is forming a 9-month horizontal trading range between 19 and 22. In the short-term, prices may oscillate inside the trading range before the next breakout from the upper boundary at 22.

Silver 8-8-2014



Gold/Silver Mining Stocks Forming 7-Month Ascending Triangle Pattern

Gold/silver mining stocks are forming a 7-month ascending triangle pattern. Once prices break above the upper horizontal boundary, the upside price target could be projected at 125.

XAU 8-8-2014



GDX Gold Miners ETF Forming 7-Month Ascending Triangle Pattern

The GDX Market Vectors Gold Miners ETF is also forming a 7-month ascending triangle pattern. Once prices break above the upper horizontal boundary, the upside price target could be projected at 33.5.

GDX 8-8-2014



Crude Oil in 2-Month Falling Wedge Pattern

Crude oil is forming a 2-month falling wedge pattern. It is neutral before a breakout from the wedge.

Oil 8-8-2014



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 argriculture is underperforming.

Asset 8-8-2014
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