08/17/2014 – Market Update
U.S. 30-Year Treasury Bond at 52-Week High
The 30-year U.S. treasury bond index rallied up to a 52-week high within a 7-month bullish uptrend channel. The S&P 500 index rebounded with intermediate wave B which is the middle part of an intermediate A-B-C corrective phase. The biotech, semiconductors, and precious metals sectors are ranked at the top of the sector performance for last week. Our major global market performance ranking has the Hong Kong stock market at the top and the German stock market at the bottom for last week. The broad stock market is projected to be in a short-term bullish time-window until 8/26/2014.
Table of Contents
- Broad Market in a Short-Term Bullish Time-Window
- Sector Performance Ranking with Biotech Sector Leading
- S&P 500 Index in Primary Corrective Wave 4
- German DAX Index: Elliott Wave
- India Bombay Stock Exchange Index in Bump Phase
- Shanghai Composite Index: Long-Term Picture
- Major Global Markets Performance Ranking
- US Dollar in 9-Month Trading Range
- US Treasury Bond Forming 7-Month Uptrend Channel
- Gold Forming 7-Month Symmetrical Triangle Pattern
- Silver in 9-Month Horizontal Trading Range
- Gold/Silver Stocks Forming 7-Month Ascending Triangle Pattern
- GDX Gold Miners ETF Forming 7-Month Ascending Triangle Pattern
- Crude Oil in 2-Month Bearish Downtrend Channel
- Asset Class Performance Ranking with the U.S. Treasury Bond Leading
Broad Stock Market 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 Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 16 on 8/15/2014 (down from 52 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 8/26/2014 (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:
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 1.39% above the EMA89. Outperforming sectors are Biotech (8.88%), Semiconductors (6.00%), and Precious Metals (4.11%). Underperforming sectors are Wireless Communication (-5.96%), Home Construction (-4.22%), and Banks (-1.24%).
Since the downward breakout from the 4-month rising wedge (Ending Diagonal) in late July, the S&P 500 index has been in 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. The decline in late July and early August is intermediate wave (A) which is the first downward leg of primary corrective wave [4]. Currently the S&P 500 index rebounds with wave (B). Please note that this (A)–(B)–(C) correction could become a flat correction when wave (B) goes near or beyond the starting level of wave (A).
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], and intermediate wave (B). 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.
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.
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.
In July, 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.
The table below is the percentage change of major global stock market indexes against the 89-day exponential moving average (EMA89). Currently Hong Kong market is outperforming. The German market is underperforming.
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.
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. Currently it is at a 52-week high.
The gold index is forming a 7-month symmetrical triangle pattern. It is neutral before a breakout from the triangle. 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.
The silver index currently 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 trading range.
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.
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.
Crude oil is forming a 2-month downtrend channel. It is bearish before prices break above the upper boundary of the channel.
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 crude oil is underperforming.
