01/17/2016 – Market Update
Volatile Market Going Oversold
Table of Contents
- Broad Market in Short-Term Bearish Time-Window
- Sector Performance Ranking with Utilities 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 Bullish Breakout from 9-Month Symmetrical Triangle Pattern
- Gold in 1-Year Falling Wedge Pattern
- Silver in 2-Month Broadening Wedge Pattern
- Crude Oil in 15-Month Falling Wedge Pattern
- Asset Class Performance Ranking with US Treasury Bond Leading
Baltic Dry Index Drops to All-Time Low
Broad Market in Short-Term Bearish Time-Window


The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, surged further and closed at 882 on 1/15/2016 (up from 390 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is below the 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 1/20/2016 (see the second table above), and the oversold market could rebound anytime during the following 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:
Sector Performance Ranking with Utilities 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 8.30% below the EMA89. Outperforming sectors are Utilities (0.76%), Telecommunication (-2.37%), and pharmaceuticals (-4.27%). Underperforming sectors are Oil Equipment (-22.52%), Energy (-14.29%), and Home Materials (-12.85%).
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. Now it is in downward sub-wave 3 (blue). Also, sub-wave 3 (blue) is near the end, and upward sub-wave 4 (bear market rally) will be the next.
German DAX Index: Elliott Wave
India Bombay Stock Exchange Index in Bump-and-Run Reversal Top Pattern
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). Currently it is in downward intermediate wave (C).
The Shanghai index formed also an 1-year Head-and-Shoulders top pattern with a neckline near the level of 3000 as a major support. The head and shoulders pattern is not complete and the uptrend is not reversed until neckline support is broken. As it dropped below 3000 last week, the Shanghai index broke through the neckline to the downside and the uptrend reversal is confirmed. After this downward breakout, the projected price decline is typically found by measuring the distance from the neckline to the top of the head. This distance is then subtracted from the neckline to reach a price target. However, I would like to project 2000 as a conservative price target. That will be about another 1000-point falling (over 30% decline) for the Shanghai index. For more information, you may read “How To Trade The Head And Shoulders Pattern” at Investopedia.
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 Russian, Chinese, and Brazilian markets are underperforming.
US Dollar in Bump-and-Run Reversal Top Pattern
US Treasury Bullish Breakout from 9-Month Symmetrical Triangle
Gold is in 1-Year Falling Wedge
Silver in 2-month Broadening Wedge Pattern
Crude Oil Forming 15-Month Falling Wedge Pattern
Asset Class Performance Ranking with US Treasury 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.