01/01/2017 – Market Update
Stock Market Pulled Back and Gold Bounced
While the US dollar hit a bump and retreated, gold had a bounce as prices broke above a bump trendline. The momentum of the general stock market continued fading for the third week. The period within the last five days of the year and the first two in January is typical time for a Santa Claus rally. However, last week Santa failed to show in the market. The broad stock market is projected to be in a short-term neutral time-window until 1/13/2017.
Table of Contents
- Broad Market in Short-Term Neutral 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 Index in 4-Month Descending Broadening Wedge
- 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 6-month Descending Broadening Wedge Pattern
- Crude Oil Broke above 8-Month Ascending Triangle Pattern
- Asset Class Performance Ranking with Crude Oil Leading
Broad Market in Short-Term Neutral Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 7 on Friday 12/30/2016 (down from 13 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 negative.
The period within the last five days of the year and the first two in January is typical time for a Santa Claus rally. Due to an overrun of the post-election surge already, there may be not much left for a Santa Claus rally this time. Indeed, last week Santa failed to show in the market. We will see how it plays this coming week. Based on the forecast of LWX, the broad stock market is projected to be in a short-term neutral time-window until 1/13/2017. (see the second table below).
The period within the last five days of the year and the first two in January is typical time for a Santa Claus rally. Due to an overrun of the post-election surge already, there may be not much left for a Santa Claus rally this time. Indeed, last week Santa failed to show in the market. We will see how it plays this coming week. Based on the forecast of LWX, the broad stock market is projected to be in a short-term neutral time-window until 1/13/2017. (see the second table below).
The LWX Indicator in Last Four Weeks (Actual)
The LWX Indicator in Next Four Weeks (Forecast)
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: 1/13/2017
Broad Market Instability Index (BIX): 7, below the panic threshold (bullish)
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 2.47% above the EMA89. Outperforming sectors are Banks (12.72%), Financials (6.53%), and Wireless Communication (6.50%). Underperforming sectors are Precious Metals (-7.53%), Biotech (-2.49%), and Home Construction (-1.67%).
S&P 500 Index in Primary Wave B
The following chart is a 3.5-year weekly chart of the S&P index. The SPX has formed a 2-year 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 an expanded flat. Once wave [B] ends, downward primary wave [C] will start.
After prices were in a pause near the upper boundary of the broadening pattern for two weeks, the SPX just started to pull back last week.
After prices were in a pause near the upper boundary of the broadening pattern for two weeks, the SPX just started to pull back last week.
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). Downward primary wave [C] will be the next.
India Bombay Index in 4-Month Descending Broadening Wedge Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 4-month descending broadening wedge pattern. Prices are going to test the upper boundary of the wedge. It would become bullish if prices break above the upper boundary.
Shanghai Composite Index: Intermediate-Term Pictures
Last year upward intermediate wave (B) went nowhere and its 1–2–3–4–5 sub-waves were 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.
Prices are testing the lower boundary of the wedge. A further sell-off could be triggered once a breakdown from the wedge occurs.
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.
Prices are testing the lower boundary of the wedge. A further sell-off could be triggered once a breakdown from the wedge occurs.
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 November, prices have advanced sharply along a steep bump trendline as excessive speculation drives prices up in a bump phase. Now prices are pulling back from 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 broke 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. In the middle of November, 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. The downtrend will continue only if prices break below the second parallel line and stay below the bump trendline.
Last week prices bounced off the second parallel line as the bump trendline got breached.
Last week prices bounced off the second parallel line as the bump trendline got breached.
Silver Bearish in 6-month Descending Broadening Wedge Pattern
The silver index has formed a bearish 6-month descending broadening wedge pattern. Currently it is near the lower boundary of the wedge. It is also forming a 2-month falling wedge pattern.
Crude Oil Broke above 8-Month Ascending Triangle Pattern
The crude oil has broken above the upper horizontal resistance boundary of an 8-month ascending triangle pattern. The upside price target is projected at 63.5.
Asset Class Performance Ranking with Crude Oil Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently crude oil is outperforming and gold is underperforming.
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