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12/06/2015 – Market Update

December 7, 2015 Leave a comment Go to comments

 

Bearish Sings in Bullish Season

 

As the general stock market changed direction back and forth rapidly last week, our Broad Market Instability Index (BIX) surged above the panic threshold level and signaled a risky market ahead. A symmetrical triangle pattern of the 30-year US treasury bond indicates that the bond price is very near a breakout point. If the Fed raises the interest rates this month, the bond price will break to the downside. Gold and silver strongly bounced off their support while the US dollar had a sell signal last week. The risk level becomes high for stocks, treasury bonds, and US dollar although we are is a typical bullish season. The broad stock market is projected to be in a short-term neutral time-window until 12/11/2015 followed by a bearish time-window afterwards. However, if a selloff is triggered anytime during the coming week, the short-term time-window is expected to turn immediately from neutral to bearish.


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 12-4-2015

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 12-4-2015

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 64 on 12/4/2015 (up from 1 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is above its 89-day exponential moving average, and the momentum is negative. Based on the forecast of LWX, the broad stock market will be in a short-term neutral time-window until 12/11/2015 followed by a bearish time-window. (see the second table above).

Alert! It is a very bearish sign that the Broad Market Instability Index (BIX) surged above the panic threshold level while the general stock market went up near 2% last Friday. Please note that the short-term time-window would immediately turn from neutral to bearish early if a selloff is triggered anytime during the coming week.

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: 12/24/2015
Broad Market Instability Index (BIX): 64, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

W5000 12-4-2015

 

Sector Performance Ranking with Semiconductors 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 1.16% above the EMA89. Outperforming sectors are Semiconductors (7.30%), Internet (6.73%), and Technology (4.74%). Underperforming sectors are Oil Equipment (-12.86%), Wireless Communication (-5.99%), and Energy (-5.50%).

Sector 12-4-2015

 

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 12-4-2015

 

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 12-4-2015 (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 12-4-2015 (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 12-4-2015

 

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 US market is outperforming. The Brazilian market is underperforming.

Global Markets 12-4-2015

 

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. Last week prices broke below the second parallel line which is a sell signal for the dollar.

USD 12-4-2015 (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 12-4-2015

 

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. Last week prices bounced off the lower boundaries of both patterns. Prices swing inside the wedge before a breakout from the wedge.

GOLD 12-4-2015 (Weekly)

 

Silver in 5-month Broadening Triangle Pattern


The silver index formed a 5-month broadening triangle pattern. The horizontal boundary becomes a strong support. Last week prices bounced off the horizontal boundary of the triangle, and advanced sharply. Prices could become very volatile in this broadening triangle pattern.

Silver 12-4-2015

 

Crude Oil Forming 14-Month Falling Wedge Pattern


Crude oil formed an 14-month falling wedge. Prices swing inside the wedge. It could become bullish once prices break above the upper boundary of the wedge.

Oil 12-4-2015

 

Asset Class Performance Ranking with Equity Leading


The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently equity is outperforming and crude oil is underperforming.

Asset 12-4-2015
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