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12/04/2016 – Market Update
December 4, 2016
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Momentum Fading for Stock Market
The general stock market was losing momentum especially technology stocks fell sharply on heavy selling last week. Crude oil and energy stocks skyrocketed as OPEC confirmed deal to cut production. Gold, silver and precious metal stocks started to bounce after they got oversold. The broad stock market is projected to be in a short-term bearish time-window until 12/15/2016.
Table of Contents
- Broad Market Turning into Short-Term Bearish Time-Window
- Sector Performance Ranking with Banks Sector Leading
- S&P 500 Index in Primary Corrective Wave B
- German DAX Index: Elliott Wave
- India Bombay Stock Exchange Index Forming 3-Month Descending Broadening Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- Major Global Markets Performance Ranking
- US Dollar in 7-Month Ascending Broadening Wedge Pattern
- US Treasury Bond Bearish Below 17-Month Ascending Broadening Wedge
- Gold in 4-month Descending Broadening Wedge Pattern
- Silver in 5-month Descending Broadening Wedge Pattern
- Crude Oil in 8-Month Ascending Triangle Pattern
- Asset Class Performance Ranking with Copper Leading
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)
The LWX Indicator in Next Four Weeks (Forecast)
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 10 on Friday 12/2/2016 (up from 2 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 just slightly 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).
Please note that the short-term time-window will be degraded from projected bearish to neutral if Italian referendum results of December 4th surprisingly strengthen the market.
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:
Please note that the short-term time-window will be degraded from projected bearish to neutral if Italian referendum results of December 4th surprisingly strengthen the market.
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: 12/15/2016
Broad Market Instability Index (BIX): 10, below the panic threshold (bullish)
Momentum Indicator: slightly positive (bullish)
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 2.41% above the EMA89. Outperforming sectors are Banks (15.89%), Oil Equipment (9.27%), and Financials (7.06%). Underperforming sectors are Precious Metals (-11.58%), Pharmaceuticals (-4.86%), and Home Construction (-4.18%).
S&P 500 Index in Primary Wave B
The following chart is an 8-year weekly chart of the S&P index. The previous multi-year bull market from 2009 to 2015 was characterized as an upward [1]–[2]–[3]–[4]–[5] primary wave sequence.
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.
Depending on the market strength, wave [C] may or may not decline its full distance beyond the level at which wave [A] ended.
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.
Depending on the market strength, wave [C] may or may not decline its full distance beyond the level at which wave [A] ended.
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.
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 the failed rally formed a partial rising. Prices become volatile and may retest the previous low.
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 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).
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 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).
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 Russian market is outperforming, and the Indian market is underperforming.
US Dollar in 7-Month Ascending Broadening Wedge Pattern
The U.S. dollar is forming a 7-month ascending broadening wedge pattern. Prices bounced off the upper boundary of the wedge last week. The index is getting into a consolidation.
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. The next downside price target is projected at 147 which is the low of July.
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.
Silver in 5-month Descending Broadening Wedge Pattern
The silver index formed a 5-month descending broadening wedge pattern. Our downside price target 16.25 has been reached, and prices have bounced off the lower boundary of the wedge.
Crude Oil in 8-Month Ascending Triangle Pattern
The crude oil is forming an 8-month ascending triangle pattern. Last week oil prices skyrocketed as OPEC confirmed deal to cut production. Now prices are testing the upper boundary of the triangle.
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.
