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01/31/2016 – Market Update

January 31, 2016

 

Shadow of Negative January

 

The month of January comes to a close with a terrible performance of the stock market. The S&P 500 index lost 5.07%, and it is now 8.94% below its all time high. Biotech, banks, and internet sectors were most heavily sold off and almost every sector had losses, except precious metals, telecommunication, and utilities sectors. The end of January triggers something called the January Barometer, i.e., as the S&P 500 goes in January, so goes the year. Seeing as the month ended on such a negative note, this could be a bad omen for stock market in the rest of the year. A surprise move on Friday from the Bank of Japan to cut interest rates below zero sparked a rally in stocks. Based on the forecast of the Leading-Wave Index (LWX), the broad stock market is projected to be in a short-term bullish time-window until 2/8/2016.

 

Sector Performance January 2016
 
Table of Contents


 

 

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 1-29-2016

 

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 1-29-2016

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 18 on Friday 1/29/2016 (down from 64 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 bullish time-window until 2/8/2016 (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: upward
Date of Next Cycle High: 2/8/2016
Broad Market Instability Index (BIX): 18, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 

W5000 1-29-2016

 

Sector Performance Ranking with Telecommunication 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 4.11% below the EMA89. Outperforming sectors are Telecommunication (5.82%), Utilities (5.23%), and Precious Metals (1.99%). Underperforming sectors are Biotech (-12.96%), Oil Equipment (-9.80%), and Materials (-8.63%).
 
Sector 1-29-2016

 

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 has gone below the August low. Wave (3) will have 1-2-3-4-5 sub-waves (blue). Currently, it is in upward sub-wave 4 (bear market rally). The 89-day exponential moving average near 2000 will be a resistance for the current rally.

 

SPX 1-29-2016

 

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 1-29-2016 (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 1-29-2016 (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). Currently it is in downward intermediate wave (C).

The Shanghai index also has broken below the neckline near the level of 3000 of an 1-year Head-and-Shoulders top pattern. The downside price target is projected at 2000. For more information about the Head-and-Shoulders top pattern, you may read “How To Trade The Head And Shoulders Pattern” at Investopedia.

 

SSEC 1-29-2016 (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 UK market is outperforming. The Chinese markets is underperforming.

Global Markets 1-29-2016

 

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. Prices are testing the second parallel line which is a sell-line for the dollar.

 

USD 1-29-2016 (Weekly)

 

US Treasury Bullish Breakout from 9-Month Symmetrical Triangle


 

The 30-year U.S. treasury bond index formed a 9-month symmetrical triangle pattern. Recently prices broke above the upper boundary of the triangle.  This bullish breakout has an upside price target at 165.

 

USB 1-29-2016

 

Gold is in 1-Year Falling Wedge


 

The weekly chart shows that the gold index has formed an 1-year falling wedge. Recently prices bounced off the lower boundary. Prices swing inside the wedge before a breakout from the wedge.

 

GOLD 1-29-2016 (Weekly)

 

Silver in 3-month Inverted Head-and-Shoulders Pattern


 

The silver index is forming a 3-month inverted head-and-shoulders pattern.  It seems that prices are in a bottom process.

 

Silver 1-29-2016

 

Crude Oil Forming 15-Month Falling Wedge Pattern


 

Crude oil formed an 15-month falling wedge. Prices swing inside the wedge. Recently prices bounced off the lower boundary of the wedge. It is bearish until prices break above the upper boundary of the wedge.

 

Oil 1-29-2016

 

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.

Asset 1-29-2016