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09/04/2016 – Market Update

September 5, 2016 Leave a comment Go to comments

Extended Sideways Market

The SPX was still trapped in a horizontal narrow trading range, and was unable to break below the lower boundary of the range last week. We have mixed market singles with a bullish reading in the Broad Market Instability index and a bearish reading in the market momentum. The broad stock market is projected to be in a short-term neutral time-window until 9/9/2016.

Table of Contents

Broad Market in Short-Term Neutral Time-Window
Sector Performance Ranking with Semiconductors Sector Leading
S&P 500 Index in Primary Corrective Wave Y
German DAX Index: Elliott Wave
India Bombay Stock Exchange Index in 7-month rising wedge pattern
Shanghai Composite Index: Intermediate-Term Pictures
Major Global Markets Performance Ranking
US Dollar in 19-Month Horizontal Channel
US Treasury Bond in 10-Month Bullish Uptrend Channel
Gold Formed a 7-month Rising Wedge Pattern
Silver Still in Sideways
Crude Oil Forming 5-Month Symmetrical Triangle Pattern
Asset Class Performance Ranking with Equity Leading

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 8 on Friday 9/2/2016 (one change 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 negative. Based on the forecast of LWX, the broad stock market is projected to be in a short-term neutral time-window until 9/9/2016 (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: 9/20/2016

Broad Market Instability Index (BIX): 8, below the panic threshold (bullish)

Momentum Indicator: negative (bearish)

Sector Performance Ranking with Semiconductors 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 2.91% above the EMA89. Outperforming sectors are Semiconductors (9.31%), Wireless Communication (8.38%), and Internet (6.09%). Underperforming sectors are Pharmaceuticals (-1.31%), Utilities (-1.24%), and Telecommunication (0.03%).

S&P 500 Index in Primary Wave Y

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].

Now downward intermediate wave (A) of primary wave [Y] just started.

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] had an intermediate (1)–(2)–(3)–(4)–(5) five-wave sequence. Now the index is in upward primary wave [B] with upward intermediate wave (A). Downward intermediate wave (B) will be the next.

India Bombay Stock Exchange Index in 7-month rising wedge pattern

The India Bombay Stock Exchange 30 Sensex index has formed a 7-month rising wedge pattern. Now prices bounced off the lower boundary of the wedge.

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.

Currently prices are testing the upper boundary of the 6-month ascending triangle pattern. If prices can hold above the upper boundary, the upside price target is projected at 3440.

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 Australia market is underperforming.

US Dollar in 19-Month Horizontal Channel

In the following weekly chart, the U.S. dollar has formed an 19-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 10-Month Bullish Uptrend Channel

The 30-year U.S. treasury bond index is forming a 10-month bullish uptrend channel. Currently it is in a downward swing inside the channel.

Gold Formed 7-month Rising Wedge Pattern

The gold index is forming a 7-month rising wedge. Prices are confined in the wedge before the next breakout. Last week the index just bounced off the lower boundary of the wedge.

Silver Still in Sideways

After it stayed below the 7-week horizontal channel for about two weeks, the silver index moved up again to retest the upper boundary of the channel. Prices most likely will return into the channel towards the upper horizontal boundary.

Crude Oil Forming 5-Month Symmetrical Triangle Pattern

The crude oil is forming a 5-month symmetrical triangle pattern with prices confined between two converging boundaries. Currently the index is in a downward swing towards the lower boundary.

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.