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.

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 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:

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%).
 

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.

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.

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.

Since last June, downward intermediate wave (A) has developed a falling wedge on the Shanghai Stock Exchange Composite index with a 1–2–3–4–5 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.

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.
 

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.

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.

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.

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.

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

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.