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10/16/2016 – Market Update
October 17, 2016
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Market Volatility is Back
A short-term down wave was triggered last week when the S&P 500 index broke below the lower boundary of an 1-month symmetrical triangle pattern. Currently most underperformed sectors were precious metals, biotech, and home construction. Gold and the treasury bond were still weak with speculation of a Fed rate hike ahead. The broad stock market is projected to be in a short-term bearish time-window until 10/26/2016.
Table of Contents
- Broad Market in Short-Term Bearish 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 Bearish below 8-month rising wedge pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- Major Global Markets Performance Ranking
- US Dollar in 21-Month Horizontal Channel
- US Treasury Bond Forming 17-Month Ascending Broadening Wedge
- Gold Bearish Breakdown from 8-month Rising Wedge Pattern
- Silver Bearish Breakdown from 3-Month Horizontal Channel
- Crude Oil Forming 6-Month Ascending Triangle Pattern
- Asset Class Performance Ranking with Crude Oil Leading
Broad Market in Short-Term Bearish 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 26 on Friday 10/14/2016 (up from 17 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. The Wilshire 5000 index is below the 89-day exponential moving average, and the momentum is very negative. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bearish time-window until 10/26/2016. (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:
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: downward
Date of Next Cycle Low: 10/26/2016
Broad Market Instability Index (BIX): 26, 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 0.21% below the EMA89. Outperforming sectors are Semiconductors (4.87%), Oil Equipment (4.53%), and Wireless Communication (3.91%). Underperforming sectors are Precious Metals (-12.63%), Biotech (-6.15%), and Home Construction (-5.46%).
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. Current downward sub-wave 3 has broken below the lower boundary of an 1-month symmetrical triangle pattern.
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. Current downward sub-wave 3 has broken below the lower boundary of an 1-month symmetrical triangle pattern.
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) and it could be a sideways market.
India Bombay Stock Exchange Index Broke below 8-month rising wedge pattern
The India Bombay Stock Exchange 30 Sensex index has broken below the lower boundary of the 8-month rising wedge pattern. Based on this bearish breakdown, the downside price target is projected at 25740.
Shanghai Composite Index: Intermediate-Term Pictures
Since the middle of last year, 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 an 8-month ascending triangle pattern.
Currently the index is in a bottoming process and prices are still confined in an 8-month ascending triangle pattern.
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 US market is underperforming.
US Dollar in 21-Month Horizontal Channel
In the following weekly chart, the U.S. dollar has formed a 21-month horizontal channel. The dollar is neutral in the trading range between 93 and 100 before prices break out from the channel.
US Treasury Bond Forming 17-Month Ascending Broadening Wedge
The 30-year U.S. treasury bond index is forming a 17-month ascending broadening wedge pattern. The lower boundary of the wedge would get tested.
Gold Bearish Breakdown from 8-month Rising Wedge Pattern
The gold index has broken below the lower boundary of its 8-month rising wedge pattern. Based on this bearish breakdown, the downside price target is projected at 1200.
Silver Bearish Breakdown from 3-Month Horizontal Channel
The silver index broke below the lower boundary of its 3-month horizontal channel between 18.50 and 20.75. Based on this bearish breakdown, the downside price target is projected at 17. Please note that the price target is very near.
Crude Oil Forming 6-Month Ascending Triangle Pattern
The crude oil is forming a 6-month ascending right triangle pattern. Currently prices are meeting a resistance at the upper horizontal boundary line of the triangle.
Asset Class Performance Ranking with Crude Oil Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently crude oil is outperforming and gold is underperforming.
