04/03/2017 – Market Update
Stock Market Turned Bullish in Short-Term
The Wilshire 5000 index, as an average or a benchmark of the total market, has been forming lower high and lower low for last five weeks. This is a sign for weakness. The market is expected to be choppy for this week. Crude oil broke above the neckline of a “W” pattern and had a big bounce last week. The broad stock market is projected to be in a short-term bullish time-window until 4/12/2017.
Table of Contents
- Broad Market in Short-Term Bullish 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 Forming 18-Month Rising Wedge
- Shanghai Composite Index: Intermediate-Term Pictures
- Major Global Markets Performance Ranking
- US Treasury Bond Forming 4-Month Descending Broadening Triangle
- US Dollar Forming Head-and-Shoulders Top
- Gold Forming a Potential Inverse Head-and-Shoulders Pattern
- Silver Forming Inverse Head-and-Shoulders Pattern
- Crude Oil Broke from Double Bottom
- Asset Class Performance Ranking with Equity Leading
Broad Market in Short-Term Bullish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 14 on Monday 4/3/2017 (down from 25 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 positive. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bullish time-window until 4/12/2017. (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: 4/12/2017
Broad Market Instability Index (BIX): 14, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)
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 2.29% above the EMA89. Outperforming sectors are Home Construction (8.43%), Technology (5.32%), and Wireless Communication (5.05%). Underperforming sectors are Energy (-2.15%), Oil Equipment (-2.03%), and Telecommunication (-0.34%).
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 A–B–C 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.
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 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 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 Japanese 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 formed a 4-month head-and-shoulders top pattern. Although prices breached the neckline, the dollar index bounced off the neckline last week. The support of the neckline will be tested again. If prices break below the neckline, the downside price target is estimated at 97.
Gold Forming Inverse Head-and-Shoulders Pattern
The gold index formed an inverse head-and-shoulders pattern. Recently prices have breached the neckline. If prices stay above the neckline, the upside price target is projected 1370.
Silver Forming Inverse Head-and-Shoulders Pattern
The silver index is forming an inverse head-and-shoulders pattern. Now prices are reaching the neckline. This pattern is potentially bullish. If prices break above the neckline, the upside price target would be projected at 20.
Crude Oil Reached the Upside Price Target
The crude oil formed a short-term double bottom pattern. Last week prices broke above the neckline of the 49.5 level. The upside price target is 50.75, and this target was reached last week.
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 equity is outperforming and crude oil is underperforming.
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