Home > News > 08/31/2015 – Market Update

08/31/2015 – Market Update

 

Watch Out for Volatile Market Swings

 

Oversold crude oil develops an one-year falling wedge pattern building up a bullish bias for technical speculation to break to the upside. The S&P 500 index and the German DAX try to bounce for a bear market rally. A bearish head-and-shoulders top pattern of the Shanghai Composite index suggests a downside risk to the 2600 level. The broad stock market is projected to be in a short-term bearish time-window until 9/2/2015.


Table of Contents


 

New Bear Market


The historic data from last 20 years indicate there is 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 (yellow zones). 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 has started stealthily. Also, a huge rising wedge started from 2009 was broken by recent declined price action sharply to downside. The multi-year bull market ends and a new bear market starts.

SPX 8-28-2015 Monthly MACD + Rising Wedge

 


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 8-28-2015

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 8-28-2015

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 16 on 8/28/2015 (down from 271 the previous week) which is below the panic threshold level of 41 and indicates a bullish market. The Wilshire 5000 index is below 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 bearish time-window until 9/2/2015. (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: 9/2/2015
Broad Market Instability Index (BIX): 16, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

W5000 8-28-2015

 

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 4.10% below the EMA89. Outperforming sectors are Wireless Communication (3.94%), Home Construction (2.09%), and Internet (0.70%). Underperforming sectors are Precious Metals (-18.11%), Energy (-9.98%), and Materials (-9.15%), .

Sector 8-28-2015

 

S&P 500 Index in Primary Corrective Wave A


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. This primary fifth wave is the final up leg of the entail bull market started from 2009. Also, primary wave [5] has developed a bearish 8-month Ending Diagonal.

A sharp decline is a typical behavior once prices break below the lower boundary of the ending diagonal. Currently primary wave [5] ended, and primary corrective wave [A] started for a new bear market.

Primary corrective wave [A] shall have an intermediate (1)(2)(3)(4)(5) sub-wave structure. Now intermediate (1), the first down wave, is ending. And it is in transitioning to Intermediate (2) which is a bouncing wave of the downtrend.

SPX 8-28-2015

 

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 had an intermediate (1)(2)(3)(4)(5) five-wave sequence. After prices recently went down below wave (4), primary wave [5] ended, and primary corrective wave [A] started for a new bear market.

Primary corrective wave [A] shall have an intermediate (1)(2)(3)(4)(5) sub-wave structure. Now intermediate (1), the first down wave, is ending. And it is in transitioning to Intermediate (2) which is a bouncing wave of the downtrend.

DAX 8-28-2015 (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 8-28-2015 (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. In additional, the Shanghai index formed a bearish 8-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 to give a warning for a bearish downside breakout from the lower boundary of the wedge. After it finally breakdown from the wedge, last week prices reached the downside price target 2900 which is the lowest valley of the wedge pattern.

Now it looks like that the Shanghai Composite index also had a downside break from a 9-month Head-and-Shoulders top pattern. Based on this breakdown, another downside price target is projected at 2600 (see the second chart below).

SSEC 8-28-2015 A

SSEC 8-28-2015 B

 

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 8-28-2015

 

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 8-28-2015 (Weekly)

 

US Treasury Forming Head-and-Shoulders Pattern


The 30-year U.S. treasury bond index possibly forms a 8-month head-and-shoulders top pattern. Currently it looks like that it is forming a right shoulder.

USB 8-28-2015

 

Gold Bounced off the Low of 2-Year Bearish Downtrend Channel


The weekly chart shows that the gold index has formed a 2-year bearish downtrend channel. Although it had a big bounce recently, it will be still bearish until prices break above the upper boundary of the channel.

GOLD 8-28-2015 (Weekly)

 

Silver Forming 8-Month Bearish Downtrend Channel


The silver index is forming a bearish 8-month downtrend channel. Recently it bounced off the lower boundary of the channel.

Silver 8-28-2015

 

Crude Oil Forming One-Year Falling Wedge Pattern


Crude oil formed an one-year falling wedge. It could become bullish once upward breaking from the wedge happens.

Oil 8-28-2015

 

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 8-28-2015
  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s