Home > News > 03/26/2017 – Market Update

03/26/2017 – Market Update

 

High Anxiety in Stock Market

 

The stock market became anxious as a new healthcare bill to repeal and replace Obamacare was pulled from vote last Friday. The momentum of the market remained negative although our Broad Market Instability index turned below the panic threshold level. A potential inverse head-and-shoulders formation of gold indicates gold is on the verge of a bullish chart breakout while the US dollar faces a potential downward breakout from a bearish head-and-shoulders top. The crude oil is forming a potential double-bottom pattern, and could have a bounce if prices find a support at the level of 47.75. The broad stock market is projected to be in a short-term extended neutral time-window until 4/5/2017.

 
Table of Contents


 

 

 
Broad Market in Short-Term Neutral Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 25 on Friday 3/24/2017 (up from 13 the previous week) which is 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 neutral time-window until 4/5/2017. (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: upward
Date of Next Cycle High: 4/20/2017
Broad Market Instability Index (BIX): 25, 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 1.85% above the EMA89. Outperforming sectors are Home Construction (9.14%), Wireless Communication (5.90%), and Technology (5.04%). Underperforming sectors are Energy (-4.72%), Oil Equipment (-4.24%), and Precious Metals (-0.90%).
 

 

 
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 potential expended flat pattern with [A][B][C] primary corrective waves. Upward wave [B] becomes an over 1-year uptrend channel with ABC intermediate waves, and it runs 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. Intermediate wave C could be ending. Downward primary wave [C] will be the next.

 


 
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 Forming 18-Month Rising Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 18-month rising wedge pattern. The current upward wave has reached the upper boundary of the wedge, and just has just bounced off the upper boundary.

 


 
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). Sub-wave 5 has ended and downward intermediate wave (C) has started.

The 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 Indian market is outperforming, and the Brazilian market is underperforming.
 


 
US Treasury Bond Forming 4-Month Descending Broadening Triangle


 

The 30-year U.S. treasury bond index is forming a 4-month descending broadening triangle pattern. Last week prices bounced off the lower boundary of the triangle. Although prices may retest the upper boundary of the triangle, it is neutral before a breakout from the triangle occurs.

 


 
US Dollar Forming Head-and-Shoulders Top


 

The U.S. dollar index recently has broken below the 89-day exponential moving average, which indicates that the intermediate-term trend is bearish. The dollar index formed a 4-month head-and-shoulders top pattern, and prices reached the neckline last week. The support of the neckline will be soon tested. If prices break below the neckline, the downside price target is estimated at 97.

 


 
Gold Forming a Potential Inverse Head-and-Shoulders Pattern


 

Since it had a bullish reversal on a bump-and-run bottom pattern in the late December, gold has staged a sharp bounce for more than two months. Recently prices of gold moved above the 89-day exponential moving average which objectively indicates that the intermediate-term becomes bullish. The trading moves during last several months have begun to form a potential inverse head-and-shoulders pattern, as shown on the chart below. This formation is usually viewed as a bullish signal that a change in price trend is about to occur.

The pullback of gold in March looks like the right shoulder of the pattern, and it is near its completion now. The closing price last week reached right below the neckline of the pattern. The resistance of the neckline will be soon tested. Once gold crosses its inverse H&S neckline at this point, the buying pressure will likely bring gold price going higher. If we calculate the height of the pattern and multiply it by 74% of the percentage meeting price target defined by Thomas Bulkowski’s measure rule, we get a price target of 1370, which also coincides with the high of last August. But for this formation to get validated, it will need to break above the neckline and continue its upward move in the coming weeks.

 

 
Silver Forming a Potential Inverse Head-and-Shoulders Pattern


 

The silver index is forming a potential inverse head-and-shoulders pattern. Now it is in the late part of 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 Forming Potential Double Bottom


 

The crude oil is forming a potential short-term double bottom pattern. Currently prices are near the second bottom. If prices find a support at the level of 47.75, the oil index would bounce towards the previous high near 49.5.

 


 
Asset Class Performance Ranking with Gold Leading


 

The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently gold is outperforming and crude oil is underperforming.
 
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