01/29/2017 – Market Update
Risk Increasing with Stock Market Advances
The broad stock market advanced to a new high last week after it stayed in a five-week sideways market. However, our Leading-Wave index became bearish in the first time since mid-November. The broad stock market is projected to be in a short-term neutral time-window until 2/8/2017.
Table of Contents
- Broad Market Going to Turn into 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 Reached Upside Price Target
- 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 Forming 4-Month Downtrend Channel
- Crude Oil 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 10 on Friday 1/27/2017 (down from 12 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 neutral time-window until 2/8/2017. (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: peak
Date of Next Cycle High: 2/8/2017
Broad Market Instability Index (BIX): 10, 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 3.78% above the EMA89. Outperforming sectors are Banks (9.97%), Wireless Communication (9.27%), and Semiconductors (7.58%). Underperforming sectors are Pharmaceuticals (-2.71%), Biotech (-0.47%), and Real Estate (-0.17%).
S&P 500 Index in Primary Wave B
The following chart is a 3-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. Upward wave [B] becomes a 12-month rising wedge, and it is running beyond the beginning of downward wave [A] as an expanded flat. Currently prices are testing the upper boundary of the rising wedge. 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 Reached Upside Price Target
The India Bombay Stock Exchange 30 Sensex index has recently had a breakout to the upside of a 2-month rectangle bottom or a “W” bottom, with an upside price target projected at 27650. After a brief pullback, the index advanced again and reached the price target last week.
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.
Prices found a support at the lower boundary of the wedge, and bounced off the lower boundary of the wedge last week.
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 found a support at the lower boundary of the wedge, and bounced off the lower boundary of the wedge last week.
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
Since it broke below a 17-month ascending broadening wedge pattern in early November, the 30-year U.S. treasury bond index has been bearish and stayed below the wedge. 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.
Recently prices have broken below the bump trendline. The pullback reached our first downside price target of 100.5. Now it should have a short-term bounce from the first parallel line.
Recently prices have broken below the bump trendline. The pullback reached our first downside price target of 100.5. Now it should have a short-term bounce from the first parallel line.
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.
Last month prices broken above the bump trendline and formed a bullish reversal.
After it had a 4-week advance, the index pulled back last week. If the index can stay above the first parallel line, the next upside price target would be projected at 1240 near the lead-in trendline.
Last month prices broken above the bump trendline and formed a bullish reversal.
After it had a 4-week advance, the index pulled back last week. If the index can stay above the first parallel line, the next upside price target would be projected at 1240 near the lead-in trendline.
Silver Forming 4-Month Downtrend Channel
The silver index has formed a 4-month downtrend channel. Currently prices are testing the upper boundary of the channel. A breakout above the upper channel line would be an intermediate trend change for silver.
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. The upside price target is projected at 63.5 as long as prices 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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