Analysis from daily, weekly and monthly charts of the S&P 500 index gives early warning signs of a potential new bear market. Our Broad Market Instability index surged up above 200 last week alerting for higher risk in stock markets in general. The recent bounce of the Shanghai stock index has met a resistance at the 89-day exponential moving average near 4100 and failed to advance further. The broad stock market is projected to be in a short-term bearish time-window until 8/7/2015.

During last 20 years, there was about 90% of chance for the S&P 500 index in a bear market when its monthly MACD histogram stayed in negative territory. The monthly chart of the S&P 500 index below shows a correspondence with negative MACD histograms for last two major bear markets (marked in light red). So far this year, the monthly MACD histogram has been in negative territory again. This is a big warning sign that a new bear market could have started stealthily.

As shown in the following weekly chart, the S&P 500 index has formed a huge rising wedge since 2009. Two boundary lines of the wedge are converging to a very narrow range. Once prices break below the lower boundary of the wedge, it will be very easy for the S&P 500 index quickly to have an initial 10% drop. As it is so close to the lower boundary, such a breakdown could happen anytime now.

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 Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 222 on 7/24/2015 (up from 49 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 again, 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 8/7/2015 (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:

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 0.93% below the EMA89. Outperforming sectors are Internet (7.14%), Banks (4.12%), and Consumer Services (2.54%). Underperforming sectors are Precious Metals (-26.77%), Energy (-9.99%), and Materials (-9.98%).

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.

Primary wave [5] has been confined in a rising wedge for over 7 months. This rising wedge is also characterized as a Ending Diagonal. After corrective intermediate wave (4), upward intermediate wave (5) attempted to reach the upper boundary of the ending diagonal but failed. This could imply that prices will soon to test the lower boundary of the ending diagonal. If prices breach the previous low in early this month, it will confirm ending primary wave [5].

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

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 upward intermediate wave (5). It will end wave (5) once prices go down beyond wave (4).

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.

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. Two weeks ago, upward intermediate wave (B) started for a bounce. But the bounce has met a resistance at the 89-day exponential moving average near 4100 and failed to advance further. Downward wave (C) could start soon to resume the downtrend.

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 about 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.

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 Russian market is underperforming.

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.

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.

The gold index broke below the lower boundary of a 6-month descending triangle pattern. The downside price target is projected at 1069 based on the triangle breakdown.

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

Crude oil is bearish below the 2-month horizontal channel. It has had a 70% retracement of its previous up leg.

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