Home > News > 01/03/2016 – Market Update

01/03/2016 – Market Update

 

Buckle Up for Market Turbulence in 2016

 

The general stock market finished its 2015 with a lackluster performance. This shouldn’t be any surprise to us, since we had seen a bad omen earlier last year from several bearish indications such as Santa Claus rally failure, poor first five trading days of the year, and negative January performance. The stock market has been in a bear market since last August. The Santa Claus rally we just had this time in December was just a very weak bear market rally. The Elliott Wave analysis suggests that the market is heading towards south with downward waves in both long-term and mid-term. We are in a bear market, buckle up!


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 12-31-2015

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 12-31-2015

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 4 on 12/31/2015 (down from 10 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. The Wilshire 5000 index is below the 89-day exponential moving average, and the momentum is positive. Based on the forecast of LWX, the broad stock market is in a short-term neutral time-window until 1/8/2016 (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: peak
Date of Next Cycle Low: 1/22/2016
Broad Market Instability Index (BIX): 4, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

W5000 12-31-2015

 

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 0.86% below the EMA89. Outperforming sectors are Semiconductors (2.14%), Internet (2.01%), and Real Estate (1.40%). Underperforming sectors are Oil Equipment (-14.55%), Energy (-7.94%), and precious metals (-6.18%).

Sector 12-31-2015

 

S&P 500 Index in Primary Wave A


After it completed the 8-month ending diagonal in last 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].

Intermediate wave (3) is a relative big middle-term downward wave and it would go below the August low. Wave (3) will have 1-2-3-4-5 sub-waves. As I mentioned last week, sub-wave 2 (blue) is a bear market rally although it is an upward wave. It is ending now, and downward sub-wave 3 (blue) is going to start.

Please check attached Elliott Wave graph below to find out where we are now in the market.

SPX 12-31-2015

This Elliott Wave graph below shows a big picture of the market status. Currently the long-term wave is downward with primary wave [A], and the middle-term wave is downward with the early part of intermediate wave (3). We are in a bear market!
Elliott Wave 12-31-2015

 

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 12-31-2015 (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. Last 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 12-31-2015 (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 last 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 12-31-2015 (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 Australian market is outperforming. The Brazilian and Russian markets are underperforming.

Global Markets 12-31-2015

 

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 12-31-2015 (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 12-31-2015

 

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 12-31-2015 (Weekly)

 

Silver in 2-month Broadening Wedge Pattern


The silver index is forming a 2-month broadening wedge pattern. Prices typically have volatile large swings inside this pattern before a breakout. Hopefully, it may become a bottom for silver.

Silver 12-31-2015

 

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 12-31-2015

 

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 12-31-2015
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