Home > News > 06/12/2016 – Market Update

06/12/2016 – Market Update

 

Don’t Ignore Downside Risk in Stock Markets

 

The S&P 500 index just started a downward wave with the first decline leg of a new correction. The broad market instability index began to jump up. The 30-year treasury bond and gold were up on a flight to safety as the markets got nervous for Fed’s decision on interest rates in the coming week. The broad stock market is projected to be in a short-term bearish time-window until 6/27/2016.

 
Table of Contents


 


 
Broad Market Turning 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 6-10-2016

 

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 6-10-2016

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 20 on Friday 6/10/2016 (up from 5 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 turning into a short-term bearish time-window and will be in a bearish time-window until 6/27/2016 (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: 6/27/2016
Broad Market Instability Index (BIX): 20, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

 
W5000 6-10-2016

 
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 2.42% above the EMA89. Outperforming sectors are Precious Metals (19.06%), Oil Equipment (5.78%), and Materials (5.64%). Underperforming sectors are Biotech (-2.85%), Banks (-0.11%), and Consumer Services (0.69%).
 
Sector 6-10-2016


 
S&P 500 Index in Primary Wave Y


 

The SPX since last August has been in a bear market with a complicate correction, potentially in a combination of complex corrective primary 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. 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].

Currently upward primary wave [X] is ending, and downward primary wave [Y] is starting. Wave [Y] will be divided to (A)(B)(C) intermediate sub-waves. Now it should just started the first downward leg with intermediate wave (A).

 
SPX 6-10-2016

 
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 in downward intermediate wave (5). The index is also in a 16-month bearish downtrend channel, and prices just bounced off the upper boundary of the channel.

 
DAX 6-10-2016 (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 6-10-2016 (Weekly)
 

Shanghai Composite Index: Intermediate-Term Pictures


 

Since last June, downward intermediate wave (A) has developed a falling wedge on the Shanghai Stock Exchange Composite index with a 12345 sub-wave sequence. Sub-wave 5 is the last downward wave of intermediate wave (A). Once wave (A) ends, upward intermediate wave (B) will start.

One week ago prices breached the upper boundary of the 12-month falling wedge. This is a bullish sign that wave (B) begins, as long as prices maintain above the upper boundary of the wedge. Wave (B) is expected to be a big upward wave, and it would retrace about 30%-70% of the amount of wave (A). The upside price target is projected at 3650. It may retest the upper boundary of the wedge if the global stock markets weaken.

 
SSEC 6-10-2016


 
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 German market is underperforming.
 
Global Markets 6-10-2016


 
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. Last month the index found a short-term support at the first parallel line, and prices were in consolidation.

 
USD 6-10-2016 (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 6-10-2016

 
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. Then it was in consolidation and formed a 4-month right triangle pattern. Currently prices are in an upward swing of the triangle.

 
GOLD 6-10-2016 (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. Currently prices are in an upward swing of the wedge.

 
Silver 6-10-2016

 
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 6-10-2016

 
Asset Class Performance Ranking with Agriculture Leading


 

The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently agriculture is outperforming and the US dollar is underperforming.
 
Asset 6-10-2016
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