Home > News > 04/10/2016 – Market Update

04/10/2016 – Market Update

 

A Cautious Market

 

Gold and precious metals stocks hold strength from safe haven buying while the bank and internet sectors are weak. The overbought stock market developed a negative momentum last week. The bear market rally is near the late part with a cautious mood. We may see a choppy market this week. Based on the forecast of the Leading-Wave Index (LWX), the broad stock market is projected to be in a short-term neutral time-window until 4/13/2016.

 
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 4-8-2016

 

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 4-8-2016

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 3 on Friday 4/8/2016 (up from 1 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 negative. Based on the forecast of LWX, the broad stock market is in a short-term neutral time-window until 4/13/2016 (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: 4/20/2016
Broad Market Instability Index (BIX): 3, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

 
W5000 4-8-2016

 
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 2.27% above the EMA89. Outperforming sectors are Precious Metals (23.30%), Utilities (5.85%), and Real Estate (5.21%). Underperforming sectors are Banks (-5.56%), Financials (-0.52%), and Internet (-0.22%).
 
Sector 4-8-2016


 
S&P 500 Index in Primary Wave X


 

After carefully re-evaluated the market, we adapted a new wave counting to the S&P 500 index last week. The current bear market started from last August has become a complicate correction, potentially in a combination of complex corrective waves W-X-Y. From last August to February this year, the S&P 500 index was in corrective primary wave [W]. 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 just a link wave inside the complex W-X-Y wave structure. Wave [X] may or may not have a A-B-C sub-wave structure. This is a challenge for us to probe when wave [X] ends.

Once wave [X] finishes, the next market correction with wave [Y] would be more dramatic than the flat correction of wave [W], and the low of February would be re-tested. Upcoming downward wave [Y] should be a zigzag correction with another set of intermediate waves (A)(B)(C). The time duration of upcoming downward wave [Y] would be roughly same as wave [W], i.e., about 6 months. More information about correction combinations can be found at elliottwave.com.

 
SPX 4-8-2016

 
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 downward intermediate wave (5) has started. The index is also in a 14-month bearish downtrend channel.

 
DAX 4-8-2016 (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 4-8-2016 (Weekly)
 

Shanghai Composite Index: Long-Term and Intermediate-Term Pictures


 

Long-Term Picture:

The chart below is a weekly chart of the Shanghai Stock Exchange Composite index for last 25 years. From the market top of 2007 to early 2014, it was in a (A)(B)(C) correction. Then it had an explosive advance until the middle of last year. Originally we thought the advance should be a new uptrend with primary wave [1]. However, excessive speculation of market participants pumped prices up so fast and dumped shares so quick after. The advance became a short-lived pulse and was unable to maintain an uptrend. Primary wave [1] actually became shock wave [X] which would link another set of (A)(B)(C) correction. The dramatic decline started from the middle of last year should be the first down-leg with downward intermediate wave (A). Upward intermediate (B) will be the next. Please keep reading Intermediate-Term Picture below.

 
SSEC 4-8-2016 Weekly
 

Intermediate-Term Picture:

The chart below is a daily chart of the Shanghai Stock Exchange Composite index for last 12 months. Downward intermediate wave (A) has been developing a falling wedge with a 1-2-3-4-5 sub-wave sequence. Now sub-wave 4 is near the upper boundary of the wedge. There is potential downward sub-wave 5 still left to complete intermediate wave (A). Sub-wave 5 holds a threat to re-test the low of sub-wave 3. Once sub-wave 5 ends, upward intermediate wave (B) will start. Regardless, we will use the upper boundary of the falling wedge to gauge a breakout of upcoming upward-wave (B).

 
SSEC 4-8-2016 2


 
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 Russian and Brazilian markets are outperforming. The Japanese markets is underperforming.
 
Global Markets 4-8-2016


 
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 4-8-2016 (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 4-8-2016

 
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 4-8-2016 (Weekly)
 
Silver in 2-Month Horizontal Channel


 

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

 
Silver 4-8-2016

 
Crude Oil in 3-Month Bullish Uptrend Channel


 

After recently prices broke above the upper boundary of the 1.5-year falling wedge, crude oil has been forming a 3-month bullish uptrend channel.

 
Oil 4-8-2016

 
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 crude oil is underperforming.
 
Asset 4-8-2016
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