11/06/2016 – Market Update
Volatile Market Ahead of the Election
The stock market became volatile and the Broad Market Instability index surged up to eight month high last week. The S&P 500 index broke below 2120 which is the lower horizontal support line of a bearish 2-month descending triangle pattern, and triggered a short-term downward wave. The recent most underperformed sectors are biotech, telecommunication, and pharmaceuticals. The broad stock market is projected to be in a short-term bearish time-window until 11/10/2016.
Table of Contents
- Broad Market in Short-Term Bearish Time-Window
- Sector Performance Ranking with Banks Sector Leading
- S&P 500 Index in Primary Corrective Wave Y
- German DAX Index: Elliott Wave
- India Bombay Stock Exchange Index Bearish Below 2-Month Descending Triangle Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- Major Global Markets Performance Ranking
- US Dollar in 22-Month Horizontal Channel
- US Treasury Bond Bearish Breakdown from 17-Month Ascending Broadening Wedge
- Gold in 3-month Descending Broadening Wedge Pattern
- Silver in 4-month Descending Broadening Wedge Pattern
- Crude Oil in 7-Month Ascending Triangle Pattern
- Asset Class Performance Ranking with Gold 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 137 on Friday 11/4/2016 (up from 129 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is below 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 11/10/2016. (see the second table above). Please note that the current market is volatile with possible sudden changes as 2016 election is in progress.
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: 11/10/2016
Broad Market Instability Index (BIX): 137, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)
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 2.60% below the EMA89. Outperforming sectors are Banks (1.92%), Semiconductors (1.02%), and Wireless Communication (0.88%). Underperforming sectors are Biotech (-7.82%), Telecommunication (-7.51%), and Pharmaceuticals (-7.23%).
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) which will have 1–2–3–4–5 sub-waves. Currently it is in downward sub-wave 3.
Last week sub-wave 3 broke below the bottom horizontal support line of a 2-month descending triangle pattern. The nearest downside price target for sub-wave 3 is projected at 2080 based on a breakdown from the descending triangle.
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) which will have 1–2–3–4–5 sub-waves. Currently it is in downward sub-wave 3.
Last week sub-wave 3 broke below the bottom horizontal support line of a 2-month descending triangle pattern. The nearest downside price target for sub-wave 3 is projected at 2080 based on a breakdown from the descending triangle.
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 sideways market.
India Bombay Stock Exchange Index Bearish Below 2-Month Descending Triangle Pattern
The India Bombay Stock Exchange 30 Sensex index formed a 2-month descending triangle pattern bounded by a top sloping downward line and a bottom horizontal support line at the level of 27600. Last week prices broke below the horizontal support, the nearest downside price target is projected at 26800 based on a breakdown from the descending triangle.
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.
This year upward intermediate wave (B) has gone nowhere and its 1–2–3–4–5 sub-waves have been compressed in a 10-month shallow rising wedge pattern which is an ending diagonal according to Elliott Wave principle.
This ending diagonal 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).
This year upward intermediate wave (B) has gone nowhere and its 1–2–3–4–5 sub-waves have been compressed in a 10-month shallow rising wedge pattern which is an ending diagonal according to Elliott Wave principle.
This ending diagonal 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).
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 Australian market is underperforming.
US Dollar in 22-Month Horizontal Channel
In the following weekly chart, the U.S. dollar has formed a 22-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 Bearish Breakdown from 17-Month Ascending Broadening Wedge
The 30-year U.S. treasury bond index formed a 17-month ascending broadening wedge pattern. One week ago prices breached the lower boundary of the wedge. Based on this bearish breakdown, the downside price target is projected at 154. A decline in bond prices implies rising in interest rates.
Gold in 3-month Descending Broadening Wedge Pattern
The gold index is forming a 3-month descending broadening wedge pattern. The upper boundary near 1320 will be a resistance for the current rally.
Silver in 4-month Descending Broadening Wedge Pattern
The silver index is forming a 4-month descending broadening wedge pattern. The upper boundary near 19.50 will be a resistance for the current rally.
Crude Oil in 7-Month Ascending Triangle Pattern
The crude oil is forming a 7-month ascending triangle pattern. Currently prices are in a pullback. The lower boundary of the triangle will be a support near 43.
Asset Class Performance Ranking with Gold Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently gold is outperforming and crude oil is underperforming.
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