12/18/2016 – Market Update
Bullish and Cautious about the Stock Market
The momentum of the S&P 500 index weakened after Fed’s interest rate hike last week. The Russian, Japanese and German stock markets outperformed, but the Chinese stock market continued to slide down. The US dollar is in a chart pattern of a potential Bump and Run Reversal Top while gold develops a potential Bump and Run Reversal Bottom. The 30-year US Treasury Bond continued its decline and was very near the projected downside price target of 147. The broad stock market is projected to be in a short-term bullish time-window until 12/22/2016.
Table of Contents
- Broad Market in Short-Term Bullish 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 Forming a Potential Bump and Run Reversal Top Pattern
- US Treasury Bond Bearish Below 18-Month Ascending Broadening Wedge
- Gold Forming a Potential Bump and Run Reversal Bottom Pattern
- Silver in 5-month Descending Broadening Wedge Pattern
- Crude Oil Broke above 8-Month Ascending Triangle Pattern
- Asset Class Performance Ranking with Copper Leading
Broad Market in Short-Term Bullish 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 11 on Friday 12/16/2016 (up from 3 the previous week) which is below the panic threshold level of 43 and indicates a bullish market. The Wilshire 5000 index is above the 89-day exponential moving average, and the momentum is slightly positive. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bullish time-window until 12/22/2016. (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:
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): 11, 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 4.34% above the EMA89. Outperforming sectors are Banks (16.13%), Oil Equipment (8.48%), and Financials (8.36%). Underperforming sectors are Precious Metals (-16.92%), Real Estate (-1.00%), and Biotech (-0.83%).
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.
The SPX has formed a 2-year 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.
The SPX has formed a 2-year 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. And 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 swing in the middle of the wedge.
Shanghai Composite Index: Intermediate-Term Pictures
This year upward intermediate wave (B) has gone nowhere and its 1–2–3–4–5 sub-waves have been compressed in an 11-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 sub-wave 5 has ended and downward intermediate wave (C) has started.
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 sub-wave 5 has ended and downward intermediate wave (C) has 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 Forming a Potential Bump and Run Reversal Top Pattern
The U.S. dollar index is forming a potential Bump and Run Reversal Top pattern. Since the index broke above a 6-month uptrend channel in the middle of last month, prices have advanced sharply along a steep bump trendline as excessive speculation drives prices up in a bump phase. Now prices are reaching the second parallel line. The uptrend will continue only if prices break above the second parallel line and stay above the bump trendline.
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 Forming a Potential Bump and Run Reversal Bottom Pattern
The gold index is forming a potential Bump and Run Reversal Bottom pattern. The middle of last month, the index broke below a 3-month downtrend channel. Since then prices have declined sharply along a steep bump trendline as excessive speculation drives prices down in a bump phase. Now prices are testing the second parallel line. The downtrend will continue only if prices break below the second parallel line and stay below the bump trendline.
Silver in 5-month Descending Broadening Wedge Pattern
The silver index has formed a 5-month descending broadening wedge pattern. Currently it is near the lower boundary of the wedge. It is also forming an 1-month falling wedge pattern.
Crude Oil Broke above 8-Month Ascending Triangle Pattern
The crude oil formed an 8-month ascending triangle pattern. Last week prices broke above the upper boundary of the triangle. 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 gold is underperforming.
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