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11/27/2016 – Market Update

November 28, 2016 Leave a comment

 

Strong Stock Market in an Expended Flat

 

It is a long-term bullish sign that the monthly MACD histogram of the S&P 500 index became positive last week. Elliott Wave analysis suggests that the S&P 500 index is in an expended flat pattern with [A]-[B]-[C] primary corrective waves. Currently upward wave [B] is running beyond the beginning of downward wave [A] in last year as in an expanded flat to reflect a strong market. However, there is downward primary wave [C] ahead once current upward wave [B] ends. Gold and silver are due for a bounce when prices get a support from the lower boundary of their intermediate descending broadening wedge patterns. The broad stock market is projected to be in a short-term bearish time-window until 12/15/2016.

 
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Broad Market Turning into 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-11-25-2016

 

The LWX Indicator in Next Four Weeks (Forecast)
next-4-wks-lwx-11-25-2016

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 2 on Friday 11/25/2016 (down from 14 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 positive. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bearish time-window until 12/15/2016. (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: peak
Date of Next Cycle Low: 12/15/2016
Broad Market Instability Index (BIX): 2, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 
w5000-11-25-2016

 
Sector Performance Ranking with Banks 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 3.81% above the EMA89. Outperforming sectors are Banks (16.20%), Semiconductors (8.40%), and Financials (7.83%). Underperforming sectors are Precious Metals (-16.70%), Real Estate (-3.89%), and Pharmaceuticals (-3.74%).
 
sector-11-25-2016

 
 
SPX Monthly MACD Histogram Became Positive


 

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 stayed 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 2015-2016 (pink zones). But this indicator became positive last week. If the histogram stays in the positive territory, we would be in a bull market going forward.

 
spx-11-25-2016-monthly
 

 
S&P 500 Index in Primary Wave B


 

The long-term picture of the stock market has been re-evaluated because of the surprised changes in the financial markets driven by the post-election market enthusiasm, especially the positive change of the SPX Monthly MACD Histogram. The following chart is an 8-year weekly chart of the S&P index. The previous multi-year bull market was characterized as an upward [1][2][3][4][5] primary wave sequence from 2009 to 2015.

Since the middle of 2015, the SPX has been in a broadening top pattern or a potential expended flat pattern with [A][B][C] primary corrective waves. Currently upward wave [B] is running beyond the beginning of downward wave [A] as in an expanded flat. Once wave [B] ends, downward primary wave [C] will start.

Wave [C] typically fails to travel its full distance, falling short of the level at which wave [A] ended. Therefore, we will look for a partial decline of wave [C] inside the broadening wedge. We will track wave [C] when it starts.

 
spx-11-25-2016-weekly

 
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 has been in a flat sideways market since August.

 
dax-11-25-2016-weekly

 
India Bombay Stock Exchange Index Forming 3-Month Descending Broadening Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 3-month descending broadening wedge pattern. Last week prices sharply bounced off the lower boundary of the wedge, and started a wave towards the upper boundary of the wedge.

 
bse-11-25-2016

 
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.

This year upward intermediate wave (B) has gone nowhere and its 12345 sub-waves have been compressed in a 10-month shallow rising wedge pattern which is an ending diagonal according to Elliott Wave principle.

This rising wedge is a bearish pattern because downward intermediate wave (C) will start once intermediate wave (B) ends. Sub-wave 5 is the last upward wave of intermediate wave (B).

 
ssec-11-25-2016

 
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 Japanese market is outperforming, and the Indian market is underperforming.
 
global-markets-11-25-2016


 
US Dollar Bullish Breakout from Near 2-Year Horizontal Channel


 

In the following weekly chart, the U.S. dollar has broken above the upper horizontal resistance of a near 2-year horizontal channel between 93 and 100. Based on this bullish breakout, the upside price target is projected at 105.6.

 
usd-11-25-2016

 
US Treasury Bond Bearish Below 17-Month Ascending Broadening Wedge


 

The 30-year U.S. treasury bond index has broken below a 17-month ascending broadening wedge pattern. Although the first downside price target of 154 was reached, the downside risk still remains. The next downside price target is projected at 147 which is the low of July.

 
usb-11-25-2016

 
Gold in 4-month Descending Broadening Wedge Pattern


 

The gold index has formed a 4-month descending broadening wedge pattern. Currently it is testing the lower boundary of the wedge. Gold is due for a bounce once prices get a support from the lower boundary of the wedge.

 
gold-11-25-2016
 
Silver in 5-month Descending Broadening Wedge Pattern


 

The silver index has formed a 5-month descending broadening wedge pattern. Our downside price target 16.25 was reached last week. Currently prices are testing the lower boundary of the wedge. Silver is due for a bounce once prices get a support from the lower boundary of the wedge.

 
silver-11-25-2016
 
Crude Oil in 8-Month Ascending Triangle Pattern


 

The crude oil is forming an 8-month ascending triangle pattern. Last week the failed rally formed a partial rising which is a bearish sign for the crude oil. Prices may re-test the lower boundary of the triangle.

 
oil-11-25-2016

 
Asset Class Performance Ranking with Copper Leading


 

The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently copper is outperforming and the US treasury bond is underperforming.
 
asset-11-25-2016