Home > News > 04/03/2016 – Market Update

04/03/2016 – Market Update

 

Sideways Markets in a Flat Correction

 

The US stock market finished slightly positive in the first quarter this year, and formed a sideways market. Our new analysis suggests that the current bear market started from last August will be most likely a complex combination of multiple corrective waves with flats and zigzags. Based on the forecast of the Leading-Wave Index (LWX), the broad stock market is projected to be in a short-term bearish time-window until 4/8/2016.

 
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 4-1-2016

 

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

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 1 on Friday 4/1/2016 (down from 9 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 in a short-term bearish time-window 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:

Short-Term Cycle: downward
Date of Next Cycle Low: 4/22/2016
Broad Market Instability Index (BIX): 1, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 
W5000 4-1-2016

 
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 (17.56%), Utilities (8.66%), and Telecommunication (7.64%). Underperforming sectors are Banks(-2.50%), Oil Equipment (-2.17%), and Biotech (-1.85%).
 
Sector 4-1-2016


 
S&P 500 Index in Primary Wave X


 

Since last August, the S&P 500 index has been in a bear market which have a primary corrective [A][B][C] wave sequence, according to the wave counts we had. We have stayed counting primary wave [A] with an intermediate (1)(2)(3)(4)(5) sub-wave structure.

However, we encountered a problem with this wave counting when recently intermediate wave (4) went to overlap with intermediate wave (1). Based on the Elliott Wave theory, this overlapping makes the 5-wave sequence invalid with primary [A].

After carefully re-evaluated the market, we think this bear market started from last August is no longer a simple zigzag correction, and it should be a combination of complex corrective waves W-X-Y. Now we have a new wave counting. The S&P 500 index was in corrective primary wave [W] from last August to February this year. Wave [W] has finished in a flat correction with an intermediate (A)(B)(C) sub-wave structure.

Since mid-February, upward primary wave [X] has developed. Wave [X] typically is a link wave inside the complex W-X-Y wave structure. Since wave [W] was a flat correction, following downward wave [Y] should be a zigzag correction. In other words, after wave [X] finishes, the next market correction with wave [Y] would be more dramatic than flat correction of wave [W]. More information about correction combinations can be found at elliottwave.com.

 
SPX 4-1-2016

 
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 upward intermediate wave (4). The index is also in a 14-month bearish downtrend channel. Please note that currently the DAX is weaker than the SPX and we stay the current wave counting for the DAX.

 
DAX 4-1-2016 (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 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.

 
BSE 4-1-2016 (Weekly)
 

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. Now wave (X) is testing the upper boundary of the wedge.

 
SSEC 4-1-2016

 
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 markets is underperforming.
 
Global Markets 4-1-2016


 
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. Recently prices broke below the bump trendline which is a sell signal for the dollar.

 
USD 4-1-2016 (Weekly)

 
US Treasury Bond Forming 10-Month Broadening Wedge


 

After an explosive advance, the 30-year U.S. treasury bond index is forming a 10-month broadening wedge pattern. Prices typically have large swings inside the wedge.

 
USB 4-1-2016

 
Gold in Price Consolidation


 

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. Now it is in a consolidation.

 
GOLD 4-1-2016 (Weekly)
 
Silver in 2-Month Horizontal Channel


 

The silver index is forming a 2-month horizontal channel in a sideways.

 
Silver 4-1-2016

 
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. Please keep in mind that prices may re-trace back to re-test the upper boundary of the wedge.

 
Oil 4-1-2016

 
Asset Class Performance Ranking with Equity Leading


 

The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently equity is outperforming and crude oil is underperforming.
 
Asset 4-1-2016
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