03/20/2016 – Market Update
Bearish Rising Wedge Extended on SPX
Global stocks gained last week as rising commodities prices boosted material and energy shares while the US dollar weakened. The S&P 500 index extended its short-term bearish rising wedge pattern to the fifth week, and negative divergence showed up with advanced prices and downward momentum strength. Historic data suggest a late-month weakness in March. We have mixed bullish and bearish signals which the broad market instability index is still low but the short-term time-window is projected to be bearish into April.
Table of Contents
- Broad Market is about to be in Short-Term Bearish Time-Window
- Sector Performance Ranking with Precious Metals 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 Bond Forming 9-Month Broadening Wedge
- Gold Upside Price Target 1300
- Silver in 3-Month Bullish Uptrend Channel
- Crude Oil Price above Upper Boundary of Falling Wedge
- Asset Class Performance Ranking with Gold Leading
Broad Market is about to be 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)
The LWX Indicator in Next Four Weeks (Forecast)
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 9 on Friday 3/18/2016 (up from 4 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. The Wilshire 5000 index is above the 89-day exponential moving average, and the momentum is positive. Based on the forecast of LWX, the broad stock market is about to be in a short-term bearish time-window and will last until 4/8/2016 (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:
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: 4/8/2016
Broad Market Instability Index (BIX): 9, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)
Sector Performance Ranking with Precious Metals 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 3.33% above the EMA89. Outperforming sectors are Precious Metals (26.81%), Utilities (7.83%), and Telecommunication (7.64%). Underperforming sectors are Biotech (-7.37%), Pharmaceuticals (-2.68%), and Healthcare (-2.12%).
S&P 500 Index in Primary Wave A
Since last August, the S&P 500 index has been in 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 upward intermediate wave (4) inside downward primary wave [A]. Intermediate wave (4) is a bear market rally, and will contain a-b-c sub-waves. Now it is in upward sub-wave a (blue), and tests an upside resistance. Downward sub-wave b will be the next.
Currently it is in upward intermediate wave (4) inside downward primary wave [A]. Intermediate wave (4) is a bear market rally, and will contain a-b-c sub-waves. Now it is in upward sub-wave a (blue), and tests an upside resistance. Downward sub-wave b will be the next.
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 upward intermediate wave (4). The index is also in a 14-month downtrend channel.
India Bombay Stock Exchange Index in Bump-and-Run Reversal Top Pattern
In the weekly chart, the India Bombay Stock Exchange 30 Sensex index formed a Bump-and-Run Reversal Top pattern. Early last year, the index broke below the bump trendline, and it signaled a bearish reversal. The downside price target is projected at 21000 near the Lead-in Trendline.
Shanghai Composite Index: Intermediate-Term Picture
The chart below is a daily 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 should have completed downward intermediate wave (C). Currently it is in upward intermediate wave (X).
Besides its 1-year Head-and-Shoulders top pattern, the Shanghai index also formed a 9-month falling wedge pattern. Currently prices approach the upper boundary of the wedge. Upward intermediate wave (X) would extend once prices break above the upper boundary of the wedge.
Besides its 1-year Head-and-Shoulders top pattern, the Shanghai index also formed a 9-month falling wedge pattern. Currently prices approach the upper boundary of the wedge. Upward intermediate wave (X) would extend once prices break above the upper boundary of the wedge.
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 Brazilian and Russian markets are outperforming. The Japanese and Chinese markets are underperforming.
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 bump trendline which is a sell signal for the dollar.
US Treasury Bond Forming 9-Month Broadening Wedge
After an explosive advance, the 30-year U.S. treasury bond index is forming a 9-month broadening wedge pattern. Prices typically have large swings inside the wedge.
After it broke above the upper boundary of an 1-year falling wedge pattern on the weekly chart, the gold index has advanced explosively. This bullish breakout has a projected upside price target at 1300.
Silver in 3-Month Bullish Uptrend Channel
After it broke out from an inverted head-and-shoulders pattern, the silver index has formed a 3-month bullish uptrend channel.
Crude Oil Price above Upper Boundary of Falling Wedge
Crude oil formed a 16-month falling wedge pattern. Recently prices broke above the upper boundary of the wedge. This breakout is a bull sign for the crude oil, and it should have a bullish reversal already.
Asset Class Performance Ranking with Gold Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently gold is outperforming and the US dollar is underperforming.
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