08/07/2016 – Market Update
SPX at All Time High
As the S&P 500 index closed at all-time-high, the MACD histogram indicator presented that the stock market is approaching a transition point between a bear market and a bull market in a long-term view. The broad stock market is projected to be in a short-term neutral time-window until 8/12/2016.
Table of Contents
- Broad Market in Short-Term Neutral Time-Window
- Sector Performance Ranking with Precious Metals Sector Leading
- S&P 500 Index in Primary Corrective Wave X
- German DAX Index: Elliott Wave
- India Bombay Stock Exchange Index Bullish Breakout from 18-Month Descending Broadening Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- Major Global Markets Performance Ranking
- US Dollar in 18-Month Horizontal Channel
- US Treasury Bond in 9-Month Bullish Uptrend Channel
- Gold Formed a 6-month Rising Wedge Pattern
- Silver Forming a 5-Week Horizontal Channel
- Crude Oil in a Potential Inverted Bump-and-Run Pattern
- Asset Class Performance Ranking with Equity Leading
Are We Still in a Bear Market?
The following monthly chart of the S&P 500 index is used as one of ways to monitor the status in a major bull market or a major bear market. The historic data from last 20 years indicate there is about 90% of chance for the S&P 500 index in a bear market when the monthly MACD histogram stays in the negative territory. The monthly chart of the S&P 500 index below shows a correspondence with negative MACD histograms for the bear markets of 2000-2001, 2008-2009, and 2015-present (pink zones). The current one has had the MACD histogram in the negative territory since early last year. But now the MACD histogram becomes very close to zero. Once this indicator crosses above zero and gets into the positive territory, the current bear market ends and we are in a bull market again.
Broad Market in Short-Term Neutral 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)
The LWX Indicator in Next Four Weeks (Forecast)
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 18 on Friday 8/5/2016 (up from 16 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 neutral time-window until 8/12/2016 (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 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: 8/22/2016
Broad Market Instability Index (BIX): 18, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)
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 4.26% above the EMA89. Outperforming sectors are Precious Metals (16.83%), Wireless Communication (12.70%), and Semiconductors (10.37%). Underperforming sectors are Utilities (1.23%), Energy (1.34%), and Consumer Goods (2.24%).
S&P 500 Index in Primary Wave X
Upward primary wave [X] started in mid-February is typically 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].
Last month wave [X] broke above the upper boundary of a 3-month broadening triangle pattern. Although the upside price target may be projected at 2210, we should be aware of that this pattern has a high break even failure rate and the average rise is meager according to Thomas Bulkowski.
Last month wave [X] broke above the upper boundary of a 3-month broadening triangle pattern. Although the upside price target may be projected at 2210, we should be aware of that this pattern has a high break even failure rate and the average rise is meager according to Thomas Bulkowski.
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 intermediate wave (4). The index is also in an 18-month bearish downtrend channel. Prices are testing the upper boundary of the channel. A breakout above the downtrend channel will require a re-evaluation of our Elliott Wave counting.
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.
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 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) starts.
Now the index is forming a 6-month ascending triangle pattern. Prices have pulled back from the upper horizontal boundary of the triangle, but still held very well above the lower boundary. This ascending triangle pattern is likely a bottom process.
Now the index is forming a 6-month ascending triangle pattern. Prices have pulled back from the upper horizontal boundary of the triangle, but still held very well above the lower boundary. This ascending triangle pattern is likely a bottom process.
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 market is outperforming, and the Japanese market is underperforming.
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.
US Treasury Bond in 9-Month Bullish Uptrend Channel
The 30-year U.S. treasury bond index is forming a 9-month bullish uptrend channel. Currently it is in a downward swing inside the channel.
Gold Formed 6-month Rising Wedge Pattern
The gold index is forming a 6-month rising wedge. Prices are confined in the wedge before the next breakout.
Silver Forming a 5-Week Horizontal Channel
The silver index is forming a 5-week horizontal channel between 19.25 and 20.75. It is neutral before the next breakout from the trading range.
Crude Oil in a Potential Inverted Bump-and-Run Pattern
After it broke below the lower boundary of a 7-week downtrend channel, crude oil held above the parallel line of the downtrend channel. This pattern could be a precursor of an inverted bump-and-run formation or a bump-and-run bottom.
Asset Class Performance Ranking with Equity Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently equity is outperforming and crude oil is underperforming.
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