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08/02/2015 – Market Update


Stock Markets at a Critical Juncture


The broad stock market reaches the final stage of the bull market while the S&P 500 index is confined in a bearish ending diagonal. Once this ending diagonal breaks down, a primary corrective wave will start for a new bear market. The Chinese stock resumed its downtrend towards a new downside price target after the recent bounce failed with a bearish partial rise inside a 7-month ascending triangle pattern. The broad stock market is projected to be in a short-term neutral time-window until 8/7/2015.

Table of Contents

Broad Market in Short-Term Neutral 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 7-31-2015

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 7-31-2015

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 53 on 7/31/2015 (down from 222 the previous week) which is above the panic threshold level of 41 and indicates a bearish market. The Wilshire 5000 index is above its 89-day exponential moving average again, and the momentum is in the positive territory. Based on the forecast of LWX, the broad stock market is in a short-term neutral 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:

Short-Term Cycle: downward
Date of Next Cycle Low: 8/7/2015
Broad Market Instability Index (BIX): 53, above the panic threshold (bearish)
Momentum Indicator: positive (bullish)

W5000 7-31-2015


Sector Performance Ranking with Internet 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 0.33% above the EMA89. Outperforming sectors are Internet (6.55%), Home Construction (6.02%), and Biotech (3.93%). Underperforming sectors are Precious Metals (-26.94%), Energy (-9.33%), and Oil Equipment (-8.73%).

Sector 7-31-2015


S&P 500 Index in Primary Impulse Wave 5

Since last October, the S&P 500 index has been in primary impulse wave [5] which contains an intermediate (1)(2)(3)(4)(5) sub-wave structure. Especially, primary wave [5] has been confined in a rising wedge for over 7 months. This rising wedge is also characterized as a Ending Diagonal.

This primary fifth wave is the final up leg of the entail bull market started from 2009, and we are approaching the end of this final up leg right before the next market collapse. Also the primary fifth wave with an ending diagonal implies dramatic reversal ahead. Once prices break below the lower boundary of the ending diagonal, primary wave [5] will end, and primary corrective wave [A] will be the next, for a new bear market to begin.

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

SPX 7-31-2015


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

DAX 7-31-2015 (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 7-31-2015 (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. Intermediate wave (B) as a bounce has ended. Now it is in downward wave (C) until 8/11/2015.

In additional, the Shanghai index formed a bearish 7-month ascending broadening wedge pattern. Due to the resistance at the 89-day exponential moving average near 4100, wave (B) failed to reach the upper boundary of the wedge, and a partial rise was formed for indicating a high possibility that downward wave (C) will break below the lower boundary of the wedge. The downside price target is projected at 3200.

SSEC 7-31-2015


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 Japanese market is outperforming. The Chinese market is underperforming.

Global Markets 7-31-2015


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 been below both the second parallel line and the bump trendline with a bearish reversal.

USD 7-31-2015 (Weekly)


US Treasury Bearish Below 9-Month Ascending Broadening Wedge

The 30-year U.S. treasury bond index has been blow the lower boundary of its 9-month ascending broadening wedge, and it has been in a bearish downtrend with a potential downside price target at 136. The index is also forming a 3-month descending right triangle pattern.

USB 7-31-2015


Gold Bearish Breaking below 6-Month Descending Triangle

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. Now it is near the target, and it could rebound at any time.

GOLD 7-31-2015


Silver Forming 7-Month Bearish Downtrend Channel

The silver index is forming a bearish 7-month downtrend channel.

Silver 7-31-2015


Crude Oil Bearish Below 2-Month Horizontal Channel

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

Oil 7-31-2015


Asset Class Performance Ranking with US Treasury Bond 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 treasury bond is outperforming and crude oil is underperforming.

Asset 7-31-2015
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