09/27/2015 – Market Update
Caution, Leg Down in Bear Market
The equity market started another leg down last week, as the biotech sector lost its multi-year market leadership and had its largest weekly drop in 7 years. Gold could launch a short-term rally once it breaks to the upside from an 1-year falling wedge pattern. Our Broad Market Instability Index is surging above the panic threshold. The current leg down of the market could send the S&P 500 index to 1840, the German DAX to 9000, and the Shanghai Composite index to 2600. The broad stock market is projected to be in a short-term bearish time-window until 10/8/2015.
Table of Contents
- Broad Market in Short-Term Bearish Time-Window
- Sector Performance Ranking with Home Construction Sector Leading
- S&P 500 Index in Primary Corrective Wave A
- German DAX Index: Elliott Wave
- India Bombay Stock Exchange Index in Bump-and-Run Reversal Top Pattern
- Shanghai Composite Index: Intermediate-Term Picture
- Major Global Markets Performance Ranking
- US Dollar in Bump-and-Run Reversal Top Pattern
- US Treasury Bond Forming Head-and-Shoulders Pattern
- Gold in 1-Year Falling Wedge Pattern
- Silver in 8-Month Bearish Downtrend Channel
- Crude Oil in 1-Year Falling Wedge Pattern
- Asset Class Performance Ranking with Gold Leading
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)
The LWX Indicator in Next Four Weeks (Forecast)
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 98 on 9/25/2015 (up from 18 the previous week) which is above the panic threshold level of 41 and indicates a bearish 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 bearish time-window until 10/8/2015. (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 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: 10/8/2015
Broad Market Instability Index (BIX): 98, above the panic threshold (bearish)
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 5.20% below the EMA89. Outperforming sectors are Home Construction (1.59%), Utilities (-0.74%), and Consumer Goods (-1.36%). Underperforming sectors are Precious Metals (-13.54%), Biotech (-12.41%), and Oil Equipment (-12.19%), .
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 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 this bear market, and it will contain an intermediate (1)–(2)–(3)–(4)–(5) sub-wave structure. Currently it is in intermediate wave (5) which is the last down leg of primary wave [A].
The S&P 500 index also formed a 4-week right triangle pattern. Prices broke below the lower boundary of the triangle last week. Based on this triangle breakdown, the downside price target for intermediate wave (5) is projected at 1840.
Corrective primary wave [A] is the first down leg of this bear market, and it will contain an intermediate (1)–(2)–(3)–(4)–(5) sub-wave structure. Currently it is in intermediate wave (5) which is the last down leg of primary wave [A].
The S&P 500 index also formed a 4-week right triangle pattern. Prices broke below the lower boundary of the triangle last week. Based on this triangle breakdown, the downside price target for intermediate wave (5) is projected at 1840.
German DAX Index: Elliott Wave
In the following weekly chart, the German DAX index is in corrective primary wave [A] for a bear market like the SPX. Primary wave [A] has an intermediate (1)–(2)–(3)–(4)–(5) five-wave sequence. Now it is in intermediate wave (5) which is the last down leg of primary wave [A]. Intermediate wave (5) could fall to 9000.
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.
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.
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 the Indian 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 in 1-Year Falling Wedge
The weekly chart shows that the gold index has formed a 2-year bearish downtrend channel. Inside the channel, it also formed an 1-year falling wedge. Currently it is testing the upper boundary of the wedge. If prices break the upper boundary of the wedge, gold could have a powerful rally to 1240.
Silver in 8-Month Bearish Downtrend Channel
The silver index is in a bearish 8-month downtrend channel.
Crude Oil Forming One-Year Falling Wedge Pattern
Crude oil formed an one-year falling wedge. It could become bullish once prices break above the upper boundary of the wedge.
Asset Class Performance Ranking with Gold Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently Gold is outperforming and crude oil is underperforming.
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