01/15/2017 – Market Update
Gold Gained for Third-Straight Week
Gold rose for a third-straight week as the U.S. dollar retreated. The general stock market has been nearly flat for about four weeks except the Nasdaq index had a nice advance to all-time highs. The Chinese stocks weakened, and the Shanghai Composite index slipped to a critical juncture near 3100 having a potential risk of breaking below an 1-year uptrend line. The broad stock market is projected to be in a short-term neutral time-window until 1/20/2017, and thereafter a bearish time-window.
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 Bullish Breakout from Bottom
- Shanghai Composite Index: Intermediate-Term Pictures
- Major Global Markets Performance Ranking
- US Treasury Bond Bearish Below 18-Month Ascending Broadening Wedge
- US Dollar Forming a Potential Bump and Run Reversal Top Pattern
- Gold Forming a Potential Bump and Run Reversal Bottom Pattern
- Silver Breaking above 2-Month Falling Wedge Pattern
- Crude Oil Broke above 8-Month Ascending Triangle Pattern
- Asset Class Performance Ranking with Copper Leading
Broad Market in Short-Term Neutral Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 4 on Friday 1/13/2017 (unchange from 4 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 positive. Based on the forecast of LWX, the broad stock market is projected to be in a short-term neutral time-window until 1/20/2017, and thereafter a bearish time-window. (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: peak
Date of Next Cycle High: 1/20/2017
Broad Market Instability Index (BIX): 4, 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 3.62% above the EMA89. Outperforming sectors are Banks (11.15%), Semiconductors (6.30%), and Financials (6.17%). Underperforming sectors are Precious Metals (-0.43%), Pharmaceuticals (-0.20%), and Consumer Goods (-0.02%).
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.
The SPX also formed a 2-year broadening wedge pattern. Prices have been stayed near the upper boundary of the wedge for about five weeks. A downward wave will start if prices fail to break above the upper boundary of the wedge.
The SPX also formed a 2-year broadening wedge pattern. Prices have been stayed near the upper boundary of the wedge for about five weeks. A downward wave will start if prices fail to break above the upper boundary of the wedge.
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 has (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 Bullish Breakout from Bottom
One week ago the India Bombay Stock Exchange 30 Sensex index broke above the upper boundary of a 4-month descending broadening wedge pattern, and it became bullish. The index also further broke to the upside from a 2-month rectangle bottom or a “W” bottom, with an upside price target projected at 27650.
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. It failed to break above the upper boundary of the wedge for the price target of 3650.
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.
Now prices are going to test the lower boundary of the wedge again. A sell-off could be triggered if a breakdown from the level of 3100 occurs. A potential decline is projected to go down to 2900.
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.
Now prices are going to test the lower boundary of the wedge again. A sell-off could be triggered if a breakdown from the level of 3100 occurs. A potential decline is projected to go down to 2900.
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 Chinese market is underperforming.
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 last July.
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. The uptrend will continue only if prices break above the second parallel line and stay above the bump trendline.
Recently prices have broken below the bump trendline after near three weeks of unsuccess to break above the second parallel line. The dollar became bearish. Now the bump trendline becomes a resistance. The 100.5 level near the first parallel line would be a support to test.
Recently prices have broken below the bump trendline after near three weeks of unsuccess to break above the second parallel line. The dollar became bearish. Now the bump trendline becomes a resistance. The 100.5 level near the first parallel line would be a support to test.
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.
Recently prices have broken above the bump trendline with a bullish reversal. The gold index rose for a third-straight week. Now prices are above the first parallel line which becomes a support, and prices may have a consolidation soon. If the index can stay above the first parallel line, the next upside price target would be projected at 1250 near the lead-in trendline.
Recently prices have broken above the bump trendline with a bullish reversal. The gold index rose for a third-straight week. Now prices are above the first parallel line which becomes a support, and prices may have a consolidation soon. If the index can stay above the first parallel line, the next upside price target would be projected at 1250 near the lead-in trendline.
Silver Breaking above 2-Month Falling Wedge Pattern
The silver index has formed a bearish 6-month descending broadening wedge pattern.
Recently prices have bounced off the lower boundary of the broadening wedge. The index also formed a 2-month falling wedge pattern. One week ago prices broke above the upper boundary of the falling wedge. It would be bullish if prices stay above the falling wedge.
Recently prices have bounced off the lower boundary of the broadening wedge. The index also formed a 2-month falling wedge pattern. One week ago prices broke above the upper boundary of the falling wedge. It would be bullish if prices stay above the falling wedge.
Crude Oil above 8-Month Ascending Triangle Pattern
The crude oil has broken above the upper horizontal resistance boundary of an 8-month ascending triangle pattern. Last week prices retreated to test the upper boundary of the triangle. The upside price target is projected at 63.5 as long as price stay above 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.
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