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11/29/2015 – Market Update

November 30, 2015 Leave a comment Go to comments

 

Seasonal Outperformance in Small Caps

 

The general market moved in a very narrow range during this last holiday-shortened week except the strong U.S. dollar and small cap stocks. Recent waking up and outperforming of small-cap stocks indicate that the January Effect has started. The internet, semiconductors, and home construction sectors are leading the market slightly higher. The broad stock market is projected to be in a short-term bullish time-window until 12/7/2015.


Table of Contents


January Effect


It is the time to check the “January Effect” that small-cap stocks tend to outperform big caps in January. The following chart is a typical way to gauge the “January Effect” by using the ratio of the Russell 2000 index of smaller companies divided by the Russell 1000 index of largest companies. When the ratio is rising, smaller companies are outperforming big blue chips.

Since late October, the ratio has turned around towards the upside. It indicates that small stocks began to wake up and the “January Effect” started. Small stocks likely take off in December as long as the ratio is above the 13-day exponential moving average (EMA13).

RUT-RUI 11-27-2015

 


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)
Last 4 wks LWX 11-27-2015

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 11-27-2015

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 1 on 11/27/2015 (down from 29 the previous week) which is below the panic threshold level of 43 and indicates a bullish market. The Wilshire 5000 index is above its 89-day exponential moving average, and the momentum is positive. Based on the forecast of LWX, the broad stock market will be in a short-term bullish time-window until 12/7/2015. (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: upward
Date of Next Cycle Hight: 12/7/2015
Broad Market Instability Index (BIX): 1, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

W5000 11-27-2015

 

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 1.65% above the EMA89. Outperforming sectors are Internet (6.74%), Semiconductors (5.39%), and Home Construction (5.02%). Underperforming sectors are Precious Metals (-10.46%), Oil Equipment (-6.33%), and Wireless Communication (-5.59%), .

Sector 11-27-2015

 

S&P 500 Index in Primary 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 in a relative long-term time-frame.

Primary wave [A] is the first down leg of this bear market, and it should contain an intermediate (1)(2)(3)(4)(5) sub-wave structure. The primary wave is still in the [A] wave with intermediate upward wave (2).

However, intermediate wave (2) will become invalidated and will degrade to downward intermediate wave (1) if it advances above the August high. We will evaluate it depending the market move next week.

SPX 11-27-2015

 

German DAX Index: Elliott Wave

In the following weekly chart, the German DAX index is in a primary corrective [A][B][C] wave sequence. Downward primary wave [A] should have an intermediate (1)(2)(3)(4)(5) five-wave sequence. Now it is in intermediate wave (2) of primary wave [A].

DAX 11-27-2015 (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 after prices break blow the 2nd parallel line. The downside price target is projected at 21000 near the Lead-in Trendline.

BSE 11-27-2015 (Weekly)

 

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 is in a 1-year Head-and-Shoulders top pattern. Right now it is forming a right shoulder. Once prices break below the neckline, the Shanghai index could fall much lower.

SSEC 11-27-2015

 

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 the German market is outperforming. The Brazilian market is underperforming.

Global Markets 11-27-2015

 

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. The slope of the bump trendline has been adjusted based on the price movement. Now the US dollar is very bullish and is above the second parallel line again. It will be a sell signal when prices break below the second parallel line.

USD 11-27-2015 (Weekly)

 

US Treasury in 8-Month Symmetrical Triangle


The 30-year U.S. treasury bond index is forming an 8-month symmetrical triangle pattern. Prices swing back and forth between two converging boundary lines. The direction of price movement will depend on the next breakout from the triangle.

USB 11-27-2015

 

Gold is 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. Prices are testing the lower boundaries of both patterns.

GOLD 11-27-2015 (Weekly)

 

Silver in 5-month Broadening Triangle Pattern


The silver index is forming a 5-month broadening triangle pattern. Now prices are testing the lower boundary of the triangle.

Silver 11-27-2015

 

Crude Oil Forming 14-Month Falling Wedge Pattern


Crude oil formed an 14-month falling wedge. It could become bullish once prices break above the upper boundary of the wedge. Recently it bounced off the upper boundary of the wedge.

Oil 11-27-2015

 

Asset Class Performance Ranking with US Dollar 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 dollar is outperforming and crude oil is underperforming.

Asset 11-27-2015
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