Home > News > 06/07/2015 – Market Update

06/07/2015 – Market Update

 

Weakness in Both Stocks and Bonds

 

The U.S. stock market, U.S. treasury bond and U.S. dollar are likely bearish in the coming week. The Indian stock market is breaching a critical support, and the Chinese stock market is building up a dangerous ending diagonal pattern. The broad stock market is projected to be in a short-term bearish time-window until 6/15/2015.


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 6-5-2015

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 6-5-2015

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 29 on 6/5/2015 (unchanged from 29 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 is in a short-term bearish time-window until 6/15/2015 (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: 6/15/2015
Broad Market Instability Index (BIX): 29, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

W5000 6-5-2015

 

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 0.46% above the EMA89. Outperforming sectors are Wireless Communication (5.36%), Banks (4.97%), and Biotech (3.32%). Underperforming sectors are Precious Metals (-6.56%), Utilities (-4.85%), and Real Estate (-4.79%).

Sector 6-5-2015

 

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 last up leg of the entail bull market started from 2009, and this last leg can last several months which began from mid October of 2014 and will end sometime in 2015.

Primary wave [5] has been confined in a rising wedge for over 6 months. This rising wedge is also characterized as a Ending Diagonal. Since the beginning of March, it has been in corrective intermediate wave (4) with a flat correction combining two a-b-c corrective wave sequences. Now it is in sub-wave c of the second abc corrective wave process. Currently prices are testing the lower boundary of the rising wedge. If the lower boundary is breached, 2060 could be a support for wave c to end. Intermediate wave (5) will be the next.

For more information about the ending diagonal, visit: “Ending Diagonal: A Pattern That Sends Shivers Down Investors’ Spines” at Elliott Wave International.

SPX 6-5-2015

 

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] has an intermediate (1)(2)(3)(4)(5) five-wave sequence. Now it is in intermediate corrective wave (4).

DAX 6-5-2015 (Weekly)

 

India Bombay Stock Exchange Index in Bump-and-Run Reversal Top Pattern


In the weekly chart, the India Bombay Stock Exchange 30 Sensex index is forming a Bump-and-Run Reversal Top pattern. Since March of 2014, the Bombay index has been in the Bump phase with a sharp trendline as excessive speculation drives prices up steeply. Prices reached a bump height with three times the lead-in height. But recently the index broke below the bump trendline, and it signaled a bearish reversal. The downside risk is very high for the index once prices break blow the 2nd parallel line.

BSE 6-5-2015 (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 has started since last summer. The Shanghai Stock Exchange Composite Index has been in primary wave [1] which is the first up leg of a potential multi-year bull market. Primary wave [1] has an intermediate (1)(2)(3)(4)(5) five-wave sequence.

Since the beginning of this year, the index has been in intermediate wave (5). Now this intermediate wave becomes a fifth-wave extension within a rising wedge or an ending diagonal. Intermediate wave (5) is the last up leg of primary wave [1]. Corrective primary wave [2], potentially a crash more than 20% is the next.

A fifth wave extension or an ending diagonal implies dramatic reversal ahead. For more information about the ending diagonal, visit: “Ending Diagonal: A Pattern That Sends Shivers Down Investors’ Spines” at Elliott Wave International.

SSEC 6-5-2015 (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 Russian market is underperforming.

Global Markets 6-5-2015

 

US Dollar in Bump-and-Run Reversal Top Pattern


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. The uptrend continues as long as prices stay above the Bump Trendline. Now prices have broken below both the second parallel line and the bump trendline. The dollar has a bearish reversal.

USD 6-5-2015 (Weekly)

 

US Treasury Bearish Breakdown 9-Month Ascending Broadening Wedge


The 30-year U.S. treasury bond index is forming a 9-month ascending broadening wedge. The last upward swing was unable to reach the upper boundary of the wedge, and formed a partial rising which is a bearish signal to break to the downside of the wedge. Now prices has breached the the lower boundary of the wedge. The downside price target is projected at 136. Lower bond prices imply higher bond yields, and will be a bearish indication for those interest-rate-sensitive sectors.

USB 6-5-2015

 

Gold Bearish Breakdown from 3-Month Ascending Triangle


The gold index broke below the lower boundary of its 3-month ascending triangle. The downside price target is projected at 1141.

GOLD 6-5-2015

 

Silver Forming 3-Month Uptrend Channel Pattern


The silver index is forming a 3-month uptrend channel. Prices typically swing between two boundaries of the channel. Now prices are testing the lower boundary of the channel.

Silver 6-5-2015

 

Crude Oil Forming Measured Move Up Pattern


Crude oil is forming a measured move up pattern after it developed the first up leg. Now it is in consolidation. Once prices break above 61, the second up leg will start.

Oil 6-5-2015

 

Asset Class Performance Ranking with US Dollar Leading


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

Asset 6-5-2015
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