06/11/2017 – Market Update
Alert from a Big Dow-Nasdaq Divergence
It is a warning sign for the stock market that the technology sector plunged last Friday as the mega-cap “FAANG” stocks Facebook, Amazon, Apple, Netflix, and Google led the selloff. The Nasdaq 100 Index declined 2.44% while the Dow surged 0.42% to a record high, that marks one of the biggest daily divergences between the two key indexes since the general election last November. Gold and silver also formed bearish partial ring patterns last week. The Fed meeting next week is expected to raise interest rates. The broad stock market is projected to be in a short-term bearish time-window until 6/27/2017.
Table of Contents
- Broad Market Turning into Short-Term Bearish Time-Window
- Sector Performance Ranking with Semiconductor Sector Leading
- S&P 500 Index in Primary Corrective Wave B
- German DAX Index: Elliott Wave
- India Bombay Index Forming 4-Month Bullish Uptrend Channel
- Shanghai Composite Index: Intermediate-Term Pictures
- Major Global Markets Performance Ranking
- US Treasury Bond Forming 6-Month Broadening Wedge Pattern
- US Dollar Forming Bearish 6-Month Downtrend Channel
- Gold Forming 5-Month Ascending Broadening Pattern
- Silver forming 4-month descending triangle Pattern
- Crude Oil Forming 5-Month Descending Broadening Wedge
- Asset Class Performance Ranking with Equity Leading
Broad Market Turning into Short-Term Bearish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 8 on Friday 6/9/2017 (down from 12 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 slightly positive. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bearish time-window until 6/27/2017. (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: 6/27/2017
Broad Market Instability Index (BIX): 8, below the panic threshold (bullish)
Momentum Indicator: slightly positive (bullish)
Sector Performance Ranking with Semiconductors 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 2.80% above the EMA89. Outperforming sectors are Semiconductors (6.29%), Home Construction (5.05%), and Internet (4.93%). Underperforming sectors are Oil Equipment (-7.50%), Energy (-4.24%), and Telecommunication (-1.90%).
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 rising wedge with (A)–(B)–(C) intermediate waves, and it runs beyond the beginning of downward wave [A] as an expanded flat. The index is bullish as long as prices stay above the lower boundary of the 15-month-long rising wedge, except a bearish bias for a potential downward breakout.
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. Upward primary wave [B] has developed with (A)–(B)–(C) intermediate waves. And now upward intermediate wave (C) is ending. Downward primary wave [C] will be the next.
India Bombay Index Forming 4-Month Bullish Uptrend Channel
The India Bombay Stock Exchange 30 Sensex index is forming a 4-month bullish uptrend channel. The index just bounced off the upper boundary of the channel last week.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index is forming an one-month rising wedge pattern. It is neutral before prices break out from the wedge.
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 Russian market is underperforming.
US Treasury Bond Forming 6-Month Inverted Roff Pattern
The 30-year U.S. treasury bond index is forming a 6-month inverted roof pattern. It can be any direction leading to the pattern depending on which side to break out. The upcoming FED meeting this following week will drive the index.
US Dollar Bearish in 6-Month Downtrend Channel
The U.S. dollar index is forming a bearish 6-month downtrend channel. Prices just bounced off the lower boundary of the channel.
Gold Forming 5-Month Ascending Broadening Pattern
The gold index is forming a 5-month ascending broadening wedge pattern. The index advanced near a month after prices found a support at the lower boundary of the wedge. But the rally terminated last week before prices reach the upper boundary of the wedge, and formed a partial rising which is a bearish indication for retest the lower boundary of the wedge.
Silver forming 4-month descending triangle Pattern
The silver index is forming a 4-month descending triangle pattern. After prices found a support at the lower boundary of the wedge, the index bounced sharply. But the rally terminated last week before prices reach the upper boundary of the triangle, and formed a partial rising which is a bearish indication for retest the lower boundary of the wedge.
Crude Oil Forming 5-Month Descending Broadening Wedge
Crude oil index is forming a 5-month descending broadening wedge pattern. It is very volatile inside the wedge. The index would become bullish if it can form a partial decline before prices reach the lower boundary of the wedge.
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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