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12/18/2015 – Market Update

December 21, 2015 Leave a comment Go to comments

 

Roller Coaster Markets

 

Fed interest rate hike for the first time in nearly a decade last week set financial markets on a roller coaster ride. The stock market was very volatile and our Broad Market Instability Index (BIX) stayed above the panic threshold. The broad stock market is projected to be in a short-term bearish time-window until 12/24/2015, followed by a bullish time-window afterwards. The market may have a bullish reversal early anytime before 12/24/2015, to expect a Santa Claus Rally which the price of stocks often surge in the week between Christmas and New Year’s Day.


Table of Contents



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 12-18-2015

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 12-18-2015

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 123 on 12/18/2015 (down from 148 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is 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 12/24/2015, followed by a bullish time-window afterwards (see the second table above).

Please note that the market may have a bullish reversal early anytime before 12/24/2015, to anticipate a Santa Claus Rally which the price of stocks often surge in the week between Christmas and New Year’s Day.

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): 123, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

W5000 12-18-2015

 

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 2.88% below the EMA89. Outperforming sectors are Internet (1.44%), Semiconductors (1.39%), and Real Estate (-0.06%). Underperforming sectors are Oil Equipment (-20.38%), Energy (-11.27%), and precious metals (-8.32%).

Sector 12-18-2015

 

S&P 500 Index in Primary Wave A


After it completed the 8-month ending diagonal in July, 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. Currently it is in intermediate downward wave (3) inside primary wave [A].

Wave (3) is a relative big intermediate downward wave and it would go below the August low. Wave (3) will have 1-2-3-4-5 sub-waves. Sub-wave 1 (blue) is a downward wave and it has developed since early December. The end of this downward sub-wave is near, and upward sub-wave 2 is the next. Anticipated upward sub-wave 2 may coincident with a Santa Claus Rally which the price of stocks typically surge in the week between Christmas and New Year’s Day.

SPX 12-18-2015

 

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 downward intermediate wave (3) of primary wave [A]. Wave (3) would go below wave (1).

DAX 12-18-2015 (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 12-18-2015 (Weekly)

 

Shanghai Composite Index: Intermediate-Term Picture


The chart below is a weekly chart of the Shanghai Stock Exchange Composite index. 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 12-18-2015 (Weekly)

 

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 Japanese market is outperforming. The Russian market is underperforming.

Global Markets 12-18-2015

 

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

USD 12-18-2015 (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. Now it is testing the upper boundary of the triangle.

USB 12-18-2015

 

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

GOLD 12-18-2015 (Weekly)

 

Silver in 5-month Broadening Triangle Pattern


The silver index is forming a 5-month broadening triangle pattern. Prices typically have volatile large swings inside this pattern before a breakout. Hopefully, it may become a broadening bottom for silver.

Silver 12-18-2015

 

Crude Oil Forming 14-Month Falling Wedge Pattern


Crude oil formed an 14-month falling wedge. Prices swing inside the wedge. Now it is testing the lower boundary of the wedge. It is bearish until prices break above the upper boundary of the wedge.

Oil 12-18-2015

 

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 12-18-2015
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