Home > News > 05/29/2016 – Market Update

05/29/2016 – Market Update

 

Market Topping as Wave X Continues

 

The general stock market moves back to the previous high but it is still in the flat correction which started from last August. A sideways market near the all time high is confusing. We should be extra careful when short-term market prices rise as upward wave X continues, because we are in a bear market having a corrective pattern of WXY (Double Three) complex waves rather than classic ABC (Zig-Zag). The broad stock market is projected to be in a short-term bullish time-window until 6/8/2016.

 
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 5-27-2016

 

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 5-27-2016

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 8 on Friday 5/27/2016 (down from 25 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 bullish time-window until 6/8/2016 (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: 6/8/2016
Broad Market Instability Index (BIX): 8, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 
W5000 5-27-2016

 
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 3.18% above the EMA89. Outperforming sectors are Precious Metals (7.00%), Semiconductors (5.83%), and Internet (5.65%). Underperforming sectors are Biotech (1.17%), Consumer Services (1.28%), and Telecommunication (1.58%).
 
Sector 5-27-2016


 
S&P 500 Index in Primary Wave X


 

The SPX since last August has been in a bear market with 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] that 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 wave inside the complex W-X-Y wave structure to link two corrective sequences. It seemed that wave [X] ended last month. But the upward move last week tells us that wave [X] still continues. The upward move last week also negated the formation of a 2-month head-and-shoulders top pattern. Now it becomes a 2.5-month horizontal channel as a sideways market.

The next wave after wave [X] will be primary wave [Y] that should be a major downward wave as a zigzag correction, and it would be more dramatic than the flat correction of wave [W].

 
SPX 5-27-2016

 
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. Currently it is still in upward intermediate wave (4). The index is also in a 16-month bearish downtrend channel.

 
DAX 5-27-2016 (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. Since then, it has developed a descending broadening wedge. Now prices are testing the upper boundary of the wedge.

 
BSE 5-27-2016 (Weekly)
 

Shanghai Composite Index: Intermediate-Term Pictures


 

The chart below is a daily chart of the Shanghai Stock Exchange Composite index for last 12 months. Since last June, downward intermediate wave (A) has been developing a falling wedge with a 12345 sub-wave sequence. Now it is in downward sub-wave 5. Potentially, sub-wave 5 holds a threat to re-test the low of sub-wave 3.

Sub-wave 5 is the last downward wave of intermediate wave (A). Once sub-wave 5 ends, upward intermediate wave (B) will start. Wave (B) is expected to be a big upward wave, and it would retrace about 30%-70% of the amount of wave (A). In other words, wave (B) could advance to a level between 3800 and 4800 once prices break above the upper boundary of the falling wedge.

 
SSEC 5-27-2016


 
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 Russian market is outperforming, and the Chinese market is underperforming.
 
Global Markets 5-27-2016


 
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. Early this year prices broke below the bump trendline which is a sell signal for the dollar. Since then, prices has declined. Recently the index found a short-term support at the first parallel line.

 
USD 5-27-2016 (Weekly)

 
US Treasury Bond Forming 12-Month Broadening Wedge


 

The 30-year U.S. treasury bond index is forming an 12-month broadening wedge pattern. Prices typically have large swings inside the wedge before the next breakout.

 
USB 5-27-2016

 
Gold Forming 4-month Right Triangle Pattern


 

After it broke above the upper boundary of an 1-year falling wedge pattern on the weekly chart, the gold index has advanced explosively. Currently it is forming a 4-month right triangle pattern, and prices are testing a support level near 1210.

 
GOLD 5-27-2016 (Weekly)
 
Silver Forming 6-Month Ascending Broadening Wedge


 

The silver index is forming a 6-month ascending broadening wedge. Prices typically have large swings inside the wedge before the next breakout.

 
Silver 5-27-2016

 
Crude Oil in 5-Month Rising Wedge Pattern


 

Crude oil has formed a 5-month rising wedge. It will swing inside the wedge before the next breakout.

 
Oil 5-27-2016

 
Asset Class Performance Ranking with Crude Oil Leading


 

The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently crude oil is outperforming and gold is underperforming.
 
Asset 5-27-2016
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