09/18/2016 – Market Update

September 18, 2016 Leave a comment

Holding at 89-Day Moving Average

The Broad Market Instability Index (BIX) stayed above the panic threshold last week. The S&P 500 index is at a critical point as prices test the 89-day exponential moving average. The broad stock market is projected to be in a short-term neutral time-window until 9/26/2016.

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 20-Month Horizontal Channel
US Treasury Bond Forming 16-Month Ascending Broadening Wedge
Gold Formed a 7-month Rising Wedge Pattern
Silver Forming 11-Week Horizontal Channel
Crude Oil Forming 5-Month Symmetrical Triangle Pattern
Asset Class Performance Ranking with US Dollar 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 47 on Friday 9/16/2016 (up from 43 the previous week) which is above the panic threshold level of 42 and indicates a bearish 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 9/26/2016 (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: 10/14/2016

Broad Market Instability Index (BIX): 47, above the panic threshold (bearish)

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 0.60% above the EMA89. Outperforming sectors are Semiconductors (8.40%), Technology (5.21%), and Internet (4.84%). Underperforming sectors are Precious Metals (-4.18%), Home Construction (-3.33%), and Real Estate (-2.50%).

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].

Currently the SPX is in downward primary wave [Y] and it will have an intermediate corrective (A)–(B)–(C) wave sequence. Now it is in downward intermediate wave (A).

Intermediate wave (A) will have 1–2–3–4–5 sub-waves. Downward sub-wave 1 has developed, and upward sub-wave 2 will be the next.

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. Currently the index is in upward primary wave [B] which will have (A)–(B)–(C) intermediate waves. Now it is in downward intermediate wave (B).

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. Recently prices have bounced more quickly between two boundaries 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 the index is in a bottoming process and prices are still confined in a 7-month ascending triangle pattern. The lower boundary of the triangle pattern would be a support.

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 Indian market is outperforming, and the Australia market is underperforming.

US Dollar in 20-Month Horizontal Channel

In the following weekly chart, the U.S. dollar has formed a 20-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 Forming 16-Month Ascending Broadening Wedge

The 30-year U.S. treasury bond index is forming a 16-month ascending broadening wedge pattern. The lower boundary of the wedge would get tested.

Gold Forming 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. Early this month the index formed a partial rising inside the wedge which is a bearish sign for prices to break through the lower boundary of the wedge.

Silver Forming 11-Week Horizontal Channel

The silver index is forming an 11-week horizontal channel between 18.50 and 20.75. It is neutral before prices break out from the channel.

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.

Asset Class Performance Ranking with US Dollar Leading

The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently the US dollar is outperforming and crude oil is underperforming.