Home > News > 02/19/2017 – Market Update

02/19/2017 – Market Update

February 20, 2017 Leave a comment Go to comments

 

The Market is Very Overbought

 

The general stock market continued to advance to a new high last week. The major indexes become very overbought, and the market momentum is losing steam. Gold is testing its 6-month downtrend line for a potential intermediate-trend change. The 30-year U.S. treasury bond has been in a narrow trading range for 3 months and it is waiting for a breakout from the range. Crude oil is forming a 2.5-month ascending triangle pattern and waiting for a breakout too. The broad stock market is projected to be in a short-term bearish time-window until 3/14/2017.

 
Table of Contents


 

 

 
Broad Market in Short-Term Bearish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 14 on Friday 2/17/2017 (up from 7 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 slight positive. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bearish time-window until 3/14/2017. (see the second table below).

 

The LWX Indicator in Last Four Weeks (Actual)
last-4-wks-lwx-2-17-2017

 

The LWX Indicator in Next Four Weeks (Forecast)
next-4-wks-lwx-2-17-2017

 

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 Low: 3/14/2017
Broad Market Instability Index (BIX): 14, below the panic threshold (bullish)
Momentum Indicator: slight positive (bullish)

 
w5000-2-17-2017

 
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 4.85% above the EMA89. Outperforming sectors are Banks (10.55%), Wireless Communication (9.63%), and Technology (7.44%). Underperforming sectors are Energy (-1.94%), Oil Equipment (-0.34%), and Telecommunication (0.37%).
 
sector-2-17-2017

 

 
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 uptrend channel, and it is running beyond the beginning of downward wave [A] as an expanded flat. Currently prices reach the upper boundary of the channel, and a consolidation is near.

 
spx-2-17-2017-weekly

 
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.

 
dax-2-17-2017-weekly

 
India Bombay Index Upside Price Target Updated


 

In early January the India Bombay Stock Exchange 30 Sensex index had a breakout to the upside of both a 4-month descending broadening wedge and a 2-month rectangle bottom or a “W” bottom, and continued to advance to the level of 28400. Based on the breakout from the 4-month descending broadening wedge, the next upside price target is projected at 29000.

 
bse-2-17-2017

 
Shanghai Composite Index: Intermediate-Term Pictures


 

Last year upward intermediate wave (B) went nowhere and its 12345 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 month. If the current rally fails to reach the upper boundary of the wedge, a partial rising could indicate a downward breakout from the wedge ahead.

 
ssec-2-17-2017

 
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 Brazilian market is outperforming, and the Chinese market is underperforming.
 
global-markets-2-17-2017


 
US Treasury Bond in 3-Month Horizontal Channel


 

The 30-year U.S. treasury bond index is forming a 3-month horizontal channel between 149 and 153. It is neutral before prices have a breakout from the channel.

 
usb-2-17-2017

 
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.

In early January prices broke below the bump trendline and formed a bearish reversal. The decline has breached the first parallel line, and now the index is in a short-term bounce.

 
usd-2-17-2017

 
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.

In late December prices broke above the bump trendline and formed a bullish reversal.
The gold index has had a significant bounce, and has reached our upside price target at 1240 near the lead-in trendline. Now prices are testing the lead-in trendline. If prices decisively break above the lead-in trendline, the next upside price target would be projected at 1370.

 
gold-2-17-2017
 
Silver Bullish Breakout from 4-Month Downtrend Channel


 

The silver index broke above the upper boundary of a 4-month downtrend channel at the end of January, and continued its advance. This breakout is an intermediate trend change for silver.

 
silver-2-17-2017
 
Crude Oil Forming 2.5-Month Ascending Triangle Pattern


 

The crude oil is forming a 2.5-month ascending triangle pattern, and it is looking for a breakout. If prices break above the upper horizontal boundary of the triangle, the upside price target would be projected at 58.

 
oil-2-17-2017

 
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.
 
asset-2-17-2017
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