Archive for July 12, 2015

07/12/2015 – Market Update

July 12, 2015 Leave a comment


Markets Bouncing


The Chinese stock market had a very volatile week and reversed with the Shanghai Stock Exchange Composite index bouncing back from just over 3400 to about 3900. There is a limited time-window and a big challenge for this bounce. The S&P 500 index and German DAX are in a transition from a corrective wave to an upward wave. The broad stock market is projected to be in a short-term neutral time-window until 7/15/2015, and to turn into a bullish time-window right after.

Table of Contents

Broad Market in Short-Term Nuetral 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 7-10-2015

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 7-10-2015

After it surged to 318 last Tuesday, the Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 74 on 7/10/2015 (down from 93 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 positive territory. The short-term time-window has degraded from bearish to neutral. Based on the forecast of LWX, the broad stock market is in a short-term neutral time-window until 7/15/2015 in a transition to the next bullish time-window (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: valley
Date of Next Cycle Low: 7/15/2015
Broad Market Instability Index (BIX): 74, above the panic threshold (bearish)
Momentum Indicator: positive (bullish)

W5000 7-10-2015


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 -0.55% below the EMA89. Outperforming sectors are Home Construction (5.22%), Biotech (2.54%), and health Care (2.52%). Underperforming sectors are Precious Metals (-12.69%), Semiconductors (-6.72%), and Energy (-6.17%).

Sector 7-10-2015


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 7 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 three a-b-c corrective wave sequences. Now it is near the end of the third a-b-c corrective waves for intermediate wave (4). There is an upward intermediate wave (5) waiting to develop.

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

SPX 7-10-2015


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 in a transition from corrective intermediate wave (4) to upward intermediate wave (5).

DAX 7-10-2015 (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 7-10-2015 (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 32% 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] has an intermediate (A)(B)(C) corrective-wave sequence. Last week, downward intermediate wave (A) ended after it reached our downside price target of 3600 and overshot to 3400.

Upward intermediate wave (B) has started for a powerful bounce. A short-term bullish time-window for this bounce has about two more weeks to go. The upside price target for wave (B) is projected at 4300 based on a typical 50% retracement of wave (A). Please keep in mind that a retracement range of 38%-62% also is possible for a price range between 4100 and 4500.

In additional, the Shanghai index formed a bearish 7-month ascending broadening wedge pattern. In nature, wave (B) attempts to reach the top boundary of the wedge if it can. But the huge distance from the current level to the top needs a tremendous of money to push, in this case it needs over 4 trillion dollars based on the total Chinese market capital size. If wave (B) fails to reach the upper boundary of the wedge, a partial rising could be formed for indicating a high possibility that downward wave (C) will break below the lower boundary of the wedge.

SSEC 7-10-2015


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 Chinese market is underperforming.

Global Markets 7-10-2015


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 7-10-2015 (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. The index is also forming a bearish 3-month downtrend channel.

USB 7-10-2015


Gold Forming 6-Month Descending Triangle Pattern

The gold index is forming a 6-month descending triangle pattern. Next move depends on the direction of a breakout from the triangle.

GOLD 7-10-2015


Silver Forming 6-Month Bearish Downtrend Channel

The silver index is forming a bearish 6-month downtrend channel.

Silver 7-10-2015


Crude Oil Bearish Below 2-Month Horizontal Channel

One week ago crude oil broke below the lower boundary of the 2-month horizontal channel. The downside price target is projected at 53.

Oil 7-10-2015


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 7-10-2015
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