Oversold Markets Look to Rebound
Although global stock markets had a volatile week, our Broad Market Instability Index actually turned much lower below the panic threshold, which is a bullish divergence for stocks. Stock markets may rebound off oversold levels for a bear market rally. It becomes attractive that crude oil is building up a bullish bias on an 1-year falling wedge chart pattern. The broad stock market is projected to be in a short-term bullish time-window until 9/25/2015.
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Broad Market in Short-Term Bullish 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)
The LWX Indicator in Next Four Weeks (Forecast)
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 4 on 9/4/2015 (down from 16 the previous week) which is below the panic threshold level of 41 and indicates a bullish market. The Wilshire 5000 index is still below its 89-day exponential moving average, and the momentum is negative. Based on the forecast of LWX, the broad stock market is in a short-term bullish time-window until
9/25/2015. (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: upward
Date of Next Cycle High: 9/25/2015
Broad Market Instability Index (BIX): 4, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)
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 6.51% below the EMA89. Outperforming sectors are Home Construction (2.34%), Wireless Communication (0.59%), and Internet (-2.82%). Underperforming sectors are Precious Metals (-22.06%), Materials (-11.77%), and Energy (-11.06%), .
S&P 500 Index in Primary Corrective Wave A
After it completed the 8-month ending diagonal, the S&P 500 index has rolled into a new bear market which will have a primary corrective [A]–[B]–[C] wave sequence for the long term.
Corrective primary wave [A] is the first down leg of the new bear market, and it will contain an intermediate (1)–(2)–(3)–(4)–(5) sub-wave structure. Currently it is at the end of intermediate (3), and in a transition to intermediate (4) which is a bounce of the downtrend.
The second chat below shows the current position in a big picture.
German DAX Index: Elliott Wave
In the following weekly chart, the German DAX index is in corrective primary wave [A] for a new bear market like the SPX. Primary wave [A] has an intermediate (1)–(2)–(3)–(4)–(5) five-wave sequence. Now intermediate (3) is ending. And it is in transitioning to intermediate (4) which is a bounce in the downtrend.
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 after prices break blow the 2nd parallel line. The downside price target is projected at 21000 near the Lead-in Trendline.
Shanghai Composite Index: Intermediate-Term Picture
Since the middle of June, the Shanghai index has been in primary wave [2] which is a major correction. Primary wave [2] has an intermediate (A)–(B)–(C) corrective-wave sequence. It has completed intermediate wave (A) and wave (B). Now it is in intermediate wave (C).
The Shanghai Composite index also had a downside break from a 9-month Head-and-Shoulders top pattern. Based on this breakdown, the downside price target is projected at 2600. Before it reaches to this target, prices may turn up to re-test the neckline.
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 Canadian market is outperforming. The Chinese market is underperforming.
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.
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.
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.
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.
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.
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.
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