Home > News > 03/08/2015 – Market Update

03/08/2015 – Market Update

 

Stock Market in Short-Term Correction

 

The stock market fell after strong US jobs data sparked Fed rate hike expectations. The S&P 500 index is developing the second minor wave which is a short-term corrective wave. The 30-year U.S. treasury bond and gold are also falling while the U.S. dollar resumes its uptrend. Our Broad Market Instability Index moved above the panic threshold. The broad stock market is projected to be in a short-term bearish time-window until 3/19/2015.


Table of Contents



Broad Market in Short-Term Bearish Time-Window


The Leading-Wave Index (LWX) 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 3-6-2015

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 3-6-2015

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 56 on 3/6/2015 (up from 18 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. Based on the forecast of LWX, the broad stock market will be in a short-term bearish time-window until 3/19/2015 (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: 3/19/2015
Broad Market Instability Index (BIX): 56, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

W5000 3-6-2015

 

Sector Performance Ranking with Wireless Communication 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 1.43% above the EMA89. Outperforming sectors are Wireless Communication (5.95%), Internet (5.94%), and Consumer Services (5.17%). Underperforming sectors are Precious Metals (-10.55%), Oil Equipment (-6.03%), and Utilities (-5.93%).

Sector 3-6-2015

 

S&P 500 Index in Primary Impulse Wave 5


Currently the S&P 500 index is in primary impulse wave [5]. Ideally primary wave [5] contains an intermediate (1)(2)(3)(4)(5) sub-wave structure. This fifth primary wave will be the final upward leg of the entail bull market started from 2009, and this final leg can last several months which began from mid October of 2014 and will end sometime in 2015.

From early December to late January, the SPX 500 index was in a flat correction with intermediate corrective wave (2) having minor wave abc sub-wave sequence. Now the S&P 500 index is in intermediate wave (3). Wave (3) should contain 12345 minor sub-wave sequence. It is currently in minor wave 2. Minor wave 2 is a short-term corrective wave, and potentially it may retreat 30-60% of minor wave 1.

SPX Elliott Wave 3-6-2015

 

German DAX Index: Elliott Wave


In the following weekly chart, the German DAX index has been in primary impulse wave [5] since mid October. Primary wave [5] contains an intermediate (1)(2)(3)(4)(5) five-wave sequence. It is in upward wave (3).

The index also developed an 1-year broadening wedge pattern. Since wave (2) did not reach the lower boundary of the wedge, it formed a partial decline which has a bullish indication for a potential upward breakout of the wedge. In January prices broke above the upper boundary of the wedge. This breakout is a very bull sign for intermediate wave (3). The upside price target is projected at 11880 based on the wedge breakout, and it could be a price target for wave (3).

DAX 3-6-2015 (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 2014, the Bombay index has been in the Bump phase with a sharp trendline as excessive speculation drives prices up steeply. The index maintained above the 2nd Parallel Line. The uptrend continues as long as prices stay above the Bump Trendline.

BSE 3-6-2015 (Weekly)

 

Shanghai Composite Index: Long-Term Picture


Last year the Chinese stock market phased out its years-long bear market after it completed a 5-year “Ending Diagonal” pattern. A new bull market started, and the Shanghai Stock Exchange Composite Index is in primary wave [1] which is the first upward leg of a potential multi-year bull market. Recently the Chinese stock market had an explosive advance and the Shanghai Stock Exchange Composite Index reached and past our third upside price target 3150 based on an upward breakout of the 5-year falling wedge pattern according to Bulkowski’s measure rule.

Primary wave [1] contains an intermediate (1)(2)(3)(4)(5) five-wave sequence. Now the Shanghai index is in intermediate wave (4) for a correction with a potential 30%-60% retracement of wave (3).

SSEC 3-6-2015 (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 German market is outperforming. The Brazilian market is underperforming.

Global Markets 3-6-2015

 

US Dollar in Bump Phase


In the following weekly chart, the U.S. dollar is forming a Bump-and-Run Reversal Top pattern. Prices have advanced above the 1st parallel line with a deep slope. After several weeks of consolidation, the dollar resumed uptrend last week. Now prices are testing the second parallel line.

USD 3-6-2015 (Weekly)

 

US Treasury Bond in Bump Phase


The following chart is a daily chart of the 30-year U.S. treasury bond index in a development of a Bump and Run Reversal Top pattern. The index has advanced sharply along a steep trendline since mid September of last year as excessive speculation drives prices up. Last month prices broke below the 3rd parallel line. This breakdown is a bearish reversal for the treasury bond. The downside target is the 1st parallel line.

USB 3-6-2015

 

Gold Bearish Breakdown Ascending Broadening Wedge


The following chart shows that the gold index formed a 17-week ascending broadening wedge pattern. Last week prices broke below the lower boundary of the wedge. The downside price target is projected at the previous low near 1140.

GOLD 3-6-2015

 

Silver Bearish Breakdown Ascending Broadening Wedge


The silver index has also formed a 17-week ascending broadening wedge pattern. Last week prices broke below the lower boundary of the wedge. The downside price target is projected at the previous low near 15.

Silver 3-6-2015

 

Crude Oil in 6-Month Bump and Run Reversal Bottom Pattern


Crude oil is forming a 6-month Bump and Run Reversal Bottom pattern. Since late October its decline has accelerated, and reached a bump low with five times the lead-in height. Once prices cross over, the fifth parallel line becomes a buy line, according to Bulkowski on Bump-and-Run Reversal Bottoms. Recently it had a bullish reversal, and now prices are testing the fourth parallel line.

Oil 3-6-2015

 

Asset Class Performance Ranking with U.S. Dollor Leading


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

Asset 3-6-2015
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