Home > News > 07/05/2015 – Market Update

07/05/2015 – Market Update

 

Broad Market Instability Rising

 

The Chines stock market sharply declined three weeks in a row and it has plunged 28% from its multi-year high. The Shanghai Stock Exchange Composite index approaches 3600 which is expected to be the first level of defense against free-fall. The S&P 500 index and German DAX have been under the shadow of the Greece debt crisis. Our Broad Market Instability indicator has surged above the panic threshold. The broad stock market is projected to be in a short-term bearish time-window until 7/15/2015.


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 7-2-2015

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 7-2-2015

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 93 on 7/2/2015 (up from 46 the previous week) which is above the panic threshold level of 41 and indicates a bearish market. The Wilshire 5000 index is below its 89-day exponential moving average, and the momentum is in the negative territory. Based on the forecast of LWX, the broad stock market is in a short-term bearish time-window until 7/15/2015 (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: 7/15/2015
Broad Market Instability Index (BIX): 93, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

W5000 7-2-2015

 

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 -0.70% below the EMA89. Outperforming sectors are Home Construction (3.55%), Biotech (3.06%), and Banks (2.67%). Underperforming sectors are Precious Metals (-9.73%), Oil Equipment (-5.37%), and Energy (-5.28%).

Sector 7-2-2015

 

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 primary fifth wave is the last up leg of the entail bull market started from 2009, and we gradually approach the end of the up leg before the next market collapse. Any further upside push will make a major top of the market.

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. Since late June, this flat correction has extended with a new a-b-c corrective subwaves. It implies that corrective intermediate wave (4) has not finished yet.

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

SPX 7-2-2015

 

German DAX Index: Elliott Wave

In the following weekly chart, the German DAX index has been in impulse primary wave [5] since mid October of last year. Primary wave [5] has an intermediate (1)(2)(3)(4)(5) five-wave sequence. Now it is still in intermediate corrective wave (4).

DAX 7-2-2015 (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 this year 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 7-2-2015 (Weekly)

 

Shanghai Composite Index: Intermediate-Term Picture


After it broke to the downside of the intermediate fifth-wave ending diagonal, the Shanghai Stock Exchange Composite index plunged 28% from its multi-year high. Both upward intermediate wave (5) and upward primary wave [1] have ended.

Currently the Shanghai index is in primary wave [2] which is a major correction. Primary wave [2] will have an intermediate (A)(B)(C) corrective-wave sequence. Now it is in the first downward wave with wave (A) of this intermediate (A)(B)(C) correction.

Last Friday, intermediate wave (A) almost reached our price target of 3600 which was estimated from a typical 50% retracement of primary wave [1]. Now downward intermediate wave (A) is near the end, and upward intermediate wave (B) will be the next for a bounce.

SSEC 7-2-2015 (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 Japanese market is outperforming. The Chinese market is underperforming.

Global Markets 7-2-2015

 

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. This year prices have advanced above the second parallel line with a deep slope. Now prices have broken below both the second parallel line and the bump trendline with a bearish reversal.

USD 7-2-2015 (Weekly)

 

US Treasury Bearish Below 9-Month Ascending Broadening Wedge


After it broke blow the lower boundary of its 9-month ascending broadening wedge, the 30-year U.S. treasury bond index has been in a bearish downtrend with a potential downside price target at 136. Now the index is also forming a 3-month falling wadge pattern with a bullish bias. But this bullish bias can be realized only when prices break above the upper boundary of the falling wadge.

USB 7-2-2015

 

Gold Forming 5-Month Triangle Pattern


The gold index is forming a 5-month triangle pattern. Next move depends on the direction of a breakout from the triangle.

GOLD 7-2-2015

 

Silver Forming 5-Month Descending Triangle Pattern


The silver index is forming a 5-month descending triangle pattern. Next move depends on the direction of a breakout from the triangle.

Silver 7-2-2015

 

Crude Oil Broke Below 2-Month Horizontal Channel


Last week crude oil broke below the lower boundary of the 2-month horizontal channel. The downside price target is projected at 56.

Oil 7-2-2015

 

Asset Class Performance Ranking with Agriculture Leading


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

Asset 7-2-2015
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