Home > News > 06/19/2016 – Market Update

06/19/2016 – Market Update

 

Financial Markets Waiting for Brexit Vote

 

Financial markets become choppy as the Brexit vote is approaching. We have mixed market signals with a negative momentum of the general stock market and relative low readings of the Broad Market Instability index under the panic threshold. The broad stock market is projected to be in a short-term bearish time-window until 6/27/2016.

 
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 6-17-2016

 

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 6-17-2016

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 18 on Friday 6/17/2016 (up from 20 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 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): 18, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

 
W5000 6-17-2016

 
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 1.05% above the EMA89. Outperforming sectors are Precious Metals (15.97%), Utilities (5.19%), and Oil Equipment (5.18%). Underperforming sectors are Biotech (-5.54%), Banks (-2.89%), and Financials (-0.74%).
 
Sector 6-17-2016


 
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 downward primary wave [Y] has started. Wave [Y] will be divided to (A)(B)(C) intermediate sub-waves. Now it is in downward intermediate wave (A) which will have 1-2-3-4-5 sub-waves.

 
SPX 6-17-2016

 
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.

 
DAX 6-17-2016 (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 6-17-2016 (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.

Prices breached the upper boundary of the 12-month falling wedge two weeks ago, and pulled back after. But prices still above the upper boundary of the wedge. The index is also forming a 4-month symmetrical triangle with higher lows and lower highs. This could be a pattern for a bottom process. Once prices break above the upper boundary of the triangle, upward intermediate wave (B) will resume. 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.

 
SSEC 6-17-2016


 
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 and Indian markets are outperforming, and the Japanese and German markets are underperforming.
 
Global Markets 6-17-2016


 
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. After the index found a short-term support at the first parallel line recently, prices have been in consolidation.

 
USD 6-17-2016 (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 6-17-2016

 
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 in the triangle.

 
GOLD 6-17-2016 (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 in the wedge.

 
Silver 6-17-2016

 
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. Last week prices bounced off the lower boundary of the wedge.

 
Oil 6-17-2016

 
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 6-17-2016
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