03/05/2017 – Market Update
Short-Term Bearish Technical Picture
The readings of our Broad Market Instability Index continued to rise, and were very close to the panic threshold level last Friday. The momentum of the stock market has become negative. The broad stock market is projected to be in a short-term bearish time-window until 3/20/2017.
Table of Contents
- Broad Market in Short-Term Bearish 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 Touched Upside Price Target
- Shanghai Composite Index: Intermediate-Term Pictures
- Major Global Markets Performance Ranking
- US Treasury Bond in 3.5-Month Horizontal Channel
- US Dollar Forming a Potential Bump and Run Reversal Top Pattern
- Gold Forming a Potential Bump and Run Reversal Bottom Pattern
- Silver Bullish Breakout from 4-Month Downtrend Channel
- Crude Oil Forming 3-Month Ascending Triangle Pattern
- Asset Class Performance Ranking with Copper Leading
Broad Market in Short-Term Bearish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 40 on Friday 3/3/2017 (up from 30 the previous week) which is right below the panic threshold level of 42 and indicates a bullish market. However, the BIX is rising and approaching the panic threshold level. The Wilshire 5000 index is above the 89-day exponential moving average, and the momentum is negative. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bearish time-window until 3/20/2017. (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: 3/20/2017
Broad Market Instability Index (BIX): 40, right 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 4.84% above the EMA89. Outperforming sectors are Banks (10.28%), Home Construction (10.27%), and Wireless Communication (8.34%). Underperforming sectors are Precious Metals (-4.96%), Energy (-1.67%), and Oil Equipment (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 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.
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 Upside Price Target Reached
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. Based on the breakout from the 4-month descending broadening wedge, the upside price target was projected at 29000. Last week this price target was reached. Now the index just formed a bearish reversal top.
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). Sub-wave 5 has ended and downward intermediate wave (C) has started.
The 1-month-long rally could not reach the upper boundary of the wedge, and formed a partial rising which is a bearish sign to indicate a downward breakout from the wedge ahead.
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). Sub-wave 5 has ended and downward intermediate wave (C) has started.
The 1-month-long rally could not reach the upper boundary of the wedge, and formed a partial rising which is a bearish sign to indicate a downward breakout from the wedge ahead.
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 German market is outperforming, and the Russian market is underperforming.
US Treasury Bond in 3.5-Month Horizontal Channel
The 30-year U.S. treasury bond index is forming a 3.5-month horizontal channel between 149 and 153. It is neutral before prices have a breakout from the channel.
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. After the decline breached the first parallel line, the index has been in a short-term bounce. Now the bounce is near the end.
In early January prices broke below the bump trendline and formed a bearish reversal. After the decline breached the first parallel line, the index has been in a short-term bounce. Now the bounce is near the end.
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 stay above the lead-in trendline, the next upside price target would be projected at 1370.
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 stay above the lead-in trendline, the next upside price target would be projected at 1370.
Silver in Consolidation
The silver index broke above the upper boundary of a 4-month downtrend channel at the end of January, and continued its advance. Last week prices reached the upside first parallel line, and pulled back sharply. The silver index now is in a consolidation.
Crude Oil Forming 3-Month Ascending Triangle Pattern
The crude oil is forming a 3-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.
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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