Home > News > 07/10/2016 – Market Update

07/10/2016 – Market Update

 

SPX Forms Broadening Top Pattern near All Time High

 

The general stock market finished strongly last week while gold and treasury bonds advanced. As prices near all time high, the S&P 500 index is forming a 3-month broadening triangle pattern that reflects a volatile emotional market when bulls and bears are battling to gain control of the market. This pattern is also known as a Broadening Top or Reverse Symmetrical Triangle which is considered a bearish reversal pattern. The broad stock market is projected to be in a short-term bullish time-window until 7/15/2016.

 
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 7-8-2016

 

The LWX Indicator in Next Four Weeks (Forecast)
Next 4 wks LWX 7-8-2016

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 3 on Friday 7/8/2016 (down from 8 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 7/15/2016 (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: 7/15/2016
Broad Market Instability Index (BIX): 3, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 
W5000 7-8-2016

 
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 3.50% above the EMA89. Outperforming sectors are Precious Metals (27.73%), Wireless Communication (10.40%), and Home Construction (8.03%). Underperforming sectors are Banks (-2.40%), Financials (0.75%), and Biotech (1.36%).
 
Sector 7-8-2016


 
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 primary waves [W][X][Y]. From last August to February this year, the S&P 500 index was in corrective primary wave [W] as a flat correction with an intermediate (A)(B)(C) sub-wave structure.

Upward primary wave [X] started in mid-February. 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].

Based on the strong advance broke the previous high last Friday, wave [Y] in our Elliott Wave counting degraded to wave [X]. Actually, since early April, wave [X] has formed a 3-month broadening triangle pattern with a series of higher highs and lower lows as a,b,c,d,and e marked on the chart. This pattern appears to resemble a megaphone with continually increasing price swings in both directions, and reflects a period of time when bulls and bears are battling to gain control of the market. The megaphone pattern is also known as a Broadening Top or Reverse Symmetrical Triangle which is considered a bearish reversal pattern for a volatile emotional market and usually occurs at the major top after a rally.

The upward short-term sub-wave e still has time to continue, until the current short-term bullish time-window ends.

 
SPX 7-8-2016

 
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. Currently it is in downward intermediate wave (5). The index is also in an 18-month bearish downtrend channel.

 
DAX 7-8-2016 (Weekly)
 

India Bombay Stock Exchange Index Bullish Breakout from 18-Month Descending Broadening Wedge Pattern


 

In the weekly chart, the India Bombay Stock Exchange 30 Sensex index has broke above the upper boundary of an 18-month descending broadening wedge pattern. Based on this breakout, the upside price target is projected at 29500.

 
BSE 7-8-2016 (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 have breached the upper boundaries of both a 12-month falling wedge pattern and a 5-month symmetrical triangle pattern. Wave (B) is expected to be a big upward wave, and it would retrace about 30%-70% of the amount of the decline made by wave (A). The upside price target is projected at 3650.

 
SSEC 7-8-2016


 
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 UK markets are outperforming, and the Japanese and German markets are underperforming.
 
Global Markets 7-8-2016


 
US Dollar in 18-Month Horizontal Channel


 

In the following weekly chart, the U.S. dollar has formed an 18-month horizontal channel. The dollar is neutral in a trading range between 93 and 100 before prices break out from the channel.

 
USD 7-8-2016

 
US Treasury Bond Forming 8-Month Bullish Uptrend Channel


 

The 30-year U.S. treasury bond index is forming an 8-month bullish uptrend channel. Currently prices swing up towards the upper boundary of the channel.

 
USB 7-8-2016

 
Gold Formed 5-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 advanced explosively. Then it has formed a 5-month broadening ascending right-triangle pattern. Now prices are around the upper boundary of the triangle. If prices fail to maintain the up slope of the upper boundary, a sharp swing would be triggered towards the lower horizontal boundary of the triangle.

 
GOLD 7-8-2016 (Weekly)
 
Silver Nears the Price Target of 20.5


 

After prices broke above the upper horizontal boundary of a 3-month ascending triangle pattern, the silver index advanced sharply. Based on the breakout from the triangle, the upside price target is projected at 20.5. This price target is almost reached.

 
Silver 7-8-2016

 
Crude Oil Broke Below 5-Month Uptrend Channel


 

Crude oil broke below the lower boundary of a 5-month uptrend channel last week. It is forming a 5-week bearish downtrend channel.

 
Oil 7-8-2016

 
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 7-8-2016
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