Archive for December 12, 2016

12/11/2016 – Market Update

December 12, 2016 Leave a comment


Stock Market Rally ahead of Fed Meeting


Last week incredibly positive market reaction on the outcome of the Italian referendum turned the German DAX index into a bullish intermediate upward wave. It also boosted the Dow and S&P 500 to all-time record high closes, except the Shanghai Stock Exchange Composite index showed a bearish sign for an intermediate-term correction. The 30-year US Treasury Bond is still in a downtrend towards the price target of 147. Crude oil and gold are near chart pattern breakout points. The financial markets most likely have priced in interest rate hike of this week’s Fed meeting. The broad stock market is projected to be in a short-term neutral time-window until 12/15/2016.

Table of Contents



Broad Market in Short-Term Neutral 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 3 on Friday 12/9/2016 (down from 10 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. Last week the short-term time-window was degraded from projected bearish to neutral because Italian referendum results of December 4th surprisingly strengthened the market. Based on the forecast of LWX, the broad stock market is projected to be in a short-term neutral 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 High: 12/22/2016
Broad Market Instability Index (BIX): 3, below the panic threshold (bullish)
Momentum Indicator: 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 5.25% above the EMA89. Outperforming sectors are Banks (20.29%), Financials (10.74%), and Oil Equipment (9.40%). Underperforming sectors are Precious Metals (-13.23%), Pharmaceuticals (-3.86%), and Biotech (-2.61%).


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.


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. A flat sideways market since August with intermediate wave (B) finished last week. Now it is in upward intermediate wave (C).


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. Now prices in an upward swing inside the wedge.


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). Now it looks like that sub-wave 5 ended and a downward wave just started.


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 are in 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 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. It is also forming a 2-month falling wedge pattern. A breakout is near, and it could be explosive if prices break upward.

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 has formed an 8-month ascending triangle pattern. Now prices are testing the upper boundary of the triangle. Once prices break above the upper horizontal resistance, the upside price target is projected at 63.5.


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.
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