03/12/2017 – Market Update
Bearish Signs Remain for Stock Market
There were bearish signs for the stock market with negative readings of the Lead-Wave Index and readings of the Broad Market Instability Index above the panic threshold level last week. Attention will be on the Fed’s meeting in this coming week. The broad stock market is projected to be in a short-term bearish time-window until 3/17/2017.
Table of Contents
- Broad Market in Short-Term Bearish Time-Window
- Sector Performance Ranking with Home Construction Sector Leading
- S&P 500 Index in Primary Corrective Wave B
- German DAX Index: Elliott Wave
- India Bombay Index is Topping
- Shanghai Composite Index: Intermediate-Term Pictures
- Major Global Markets Performance Ranking
- US Treasury Bond Broke Below 3.5-Month Horizontal Channel
- US Dollar Forming a Potential Bump and Run Reversal Top Pattern
- Gold Forming a Potential Inverted Head-and-Shoulders Pattern
- Silver Forming a Potential Inverted Head-and-Shoulders Pattern
- Crude Oil Bearish Breakdown from 3-Month Ascending Triangle
- Asset Class Performance Ranking with Equity Leading
Broad Market in Short-Term Bearish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 41 on Friday 3/10/2017 (up from 40 the previous week) which is right below the panic threshold level of 42 and indicates a bullish market. 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 3/17/2017. (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: 3/17/2017
Broad Market Instability Index (BIX): 41, right below the panic threshold (bullish)
Momentum Indicator: negative (bearish)
Sector Performance Ranking with Home Construction 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 3.65% above the EMA89. Outperforming sectors are Home Construction (13.25%), Banks (8.12%), and Technology (6.48%). Underperforming sectors are Precious Metals (-6.47%), Energy (-4.08%), and Oil Equipment (-3.27%).
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 pulled back from the upper boundary of the channel for a consolidation.
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.
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. This price target was reached one week ago. Now the index is topping.
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 started from mid January could not reach the upper boundary of the wedge, and formed a partial rising which is a bearish sign for 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 started from mid January could not reach the upper boundary of the wedge, and formed a partial rising which is a bearish sign for 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 Broke Below 3.5-Month Horizontal Channel
The 30-year U.S. treasury bond index formed a 3.5-month horizontal channel between 149 and 153. Last week prices broke below the lower boundary of the channel. The downside price target is projected at 143.
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 ended, and a downward wave just started.
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 ended, and a downward wave just started.
Gold Forming a Potential Inverted Head-and-Shoulders Pattern
The gold index is forming a potential inverted head-and-shoulders pattern. The current pullback from the neckline is forming the right shoulder. This pattern is potentially bullish. If prices break above the neckline, the upside price target would be projected at 1360.
Silver Forming a Potential Inverted Head-and-Shoulders Pattern
The silver index is forming a potential inverted head-and-shoulders pattern. The current pullback from the neckline is forming the right shoulder. This pattern is potentially bullish. If prices break above the neckline, the upside price target would be projected at 20.
Crude Oil Bearish Breakdown from 3-Month Ascending Triangle
The crude oil formed a 3-month ascending triangle pattern. Last week prices broke below the lower boundary of the triangle. Based on this bearish breakdown, the downside price target is projected at 49. The decline has already passed through this price target.
Asset Class Performance Ranking with Equity Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently equity is outperforming and crude oil is underperforming.
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