Home > News > 04/05/2015 – Market Update

04/05/2015 – Market Update

 

Weakening Market

 

The U.S. stock market weakened after recent disappointing economic data. The mixed signals from our indicators point to a choppy market. The support level of 2040 will be critical for the S&P 500 index, because a breach of 2040 could change the market to a more conservative scenario. The broad stock market is projected to be in a short-term bearish time-window until 4/17/2015.


Table of Contents



Broad Market is Getting into 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 4-2-2015

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 4-2-2015

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 9 on 4/2/2015 (down from 10 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. Based on the forecast of LWX, the broad stock market will be in a short-term bearish time-window until 4/17/2015 (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: 4/17/2015
Broad Market Instability Index (BIX): 9, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

W5000 4-2-2015

 

Sector Performance Ranking with Home Construction 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 1.08% above the EMA89. Outperforming sectors are Home Construction (9.89%), Consumer Services (3.74%), and Wireless Communication (3.21%). Underperforming sectors are Precious Metals (-6.52%), Energy (-2.13%), and Oil Equipment (-1.97%).

Sector 4-2-2015

 

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.

Scenario 1
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 3. Minor wave 3 is a short-term upward wave, and its upside price target is projected at 2200 based on the estimation from a 0.618 extension of minor wave 1. However, this scenario would not be valid anymore if prices break below 2040.

SPX 4-2-2015 A

Scenario 2
The SPX 500 index is still in in a correction with minor wave 2 which started from the beginning of March. Minor wave 2 is in an (a)-(b)-(c) sequence. If prices break below the support level of 2040, wave (c) could go down to 2020.

SPX 4-2-2015 B

 

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 serves as a price target for wave (3). This price target was reached recently, and intermediate wave (3) is near the end. Intermediate wave (4), a corrective wave, should be the next.

DAX 4-2-2015 (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. Now we have a bearish signal that prices broke below the Bump Trendline.

BSE 4-2-2015 (Weekly)

 

Shanghai Composite Index: Intermediate-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. Since last summer the Chinese stock market has had an explosive advance.

Primary wave [1] contains an intermediate (1)(2)(3)(4)(5) five-wave sequence. Now the Shanghai index is in intermediate wave (5) which is the final upward leg of primary wave [1].

SSEC 4-2-2015 (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 Chinese market is outperforming. The Indian market is underperforming.

Global Markets 4-2-2015

 

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 since late last year. Now prices are above the second parallel line. The uptrend continues as long as prices stay above the Bump Trendline.

USD 4-2-2015 (Weekly)

 

US Treasury Forming 8-Month Ascending Broadening Wedge


The 30-year U.S. treasury bond index is forming an 8-month ascending broadening wedge. It is important to see if the current upward swing is able to reach the upper boundary of the wedge because a partial rising could be a bearish sign to break to the downside.

USB 4-2-2015

 

Gold Forming 11-Week Descending Broadening Wedge


The following chart shows that the gold index is forming an 11-week descending broadening wedge. Now prices are testing the upper boundary of the wedge. If prices break above the upper boundary, the upside price target could be 1325 near the previous high.

GOLD 4-2-2015

 

Silver Forming 11-Week Descending Broadening Wedge


The silver index is also forming an 11-week descending broadening wedge. Now prices are testing the upper boundary of the wedge. If prices break above the upper boundary, the upside price target could be 18.3 near the previous high.

Silver 4-2-2015

 

Crude Oil in 9-Month Bump and Run Reversal Bottom Pattern


Crude oil is forming a 9-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. Now prices are going to test the 3rd parallel line.

Oil 4-2-2015

 

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 4-2-2015
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