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10/23/2016 – Market Update

October 23, 2016 Leave a comment

 

SPX Found Interim Support at 2120

 

The S&P 500 index is forming a 6-week descending triangle pattern as prices are bounded by a top sloping downward line and a bottom horizontal support line at the level of 2120. Prices are waiting for a breakout but the breakout direction will highly depend on Fed’s upcoming decision on an interest rate hike. The broad stock market is projected to be in a short-term bearish time-window until 10/24/2016 and thereafter a transition to a bullish time-window.

 
Table of Contents


 


 
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)
last-4-wks-lwx-10-21-2016

 

The LWX Indicator in Next Four Weeks (Forecast)
next-4-wks-lwx-10-21-2016

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 34 on Friday 10/21/2016 (up from 26 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 bearish time-window until 10/24/2016. (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: downward
Date of Next Cycle Low: 10/24/2016
Broad Market Instability Index (BIX): 34, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

 
w5000-10-21-2016

 
Sector Performance Ranking with Internet 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% above the EMA89. Outperforming sectors are Internet (5.58%), Oil Equipment (5.11%), and Semiconductors (4.00%). Underperforming sectors are Telecommunication (-6.32%), Precious Metals (-6.01%), and Home Construction (-5.41%).
 
sector-10-21-2016


 
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 12345 sub-waves. Currently it is in downward sub-wave 3. Now the index is forming a 6-week descending triangle pattern with a horizontal support line at the level of 2120. It could break out to either upside or downside from the triangle depending on Fed’s upcoming decision on interest rates.

 
spx-10-21-2016

 
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.

 
dax-10-21-2016-weekly
 

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.

 
bse-10-21-2016
 

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 12345 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. Now prices test the upper boundary of the triangle.

 
ssec-10-21-2016


 
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.
 
global-markets-10-21-2016


 
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.

 
usd-10-21-2016

 
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. Although prices bounced off the lower boundary of the wedge last week, it could be tough to reach the upper boundary of the wedge.

 
usb-10-21-2016

 
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.

 
gold-10-21-2016
 
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.

 
silver-10-21-2016
 
Crude Oil Forming 6-Month Ascending Triangle Pattern


 

The crude oil is forming a 6-month ascending right triangle pattern. Last week prices bounced off the upper horizontal resistance line. A pullback is expected. We look for a partial decline.

 
oil-10-21-2016

 
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.
 
asset-10-21-2016