07/23/2017 – Market Update
Time to Turn Cautious on the Markets
The stock market stalled as the Dow and S&P 500 made record high last week. The wave pattern forecast for the general stock market suggests an inflection point during this week and mild consolidation ahead. The US dollar traded near lowest levels in more than a year, and prices may form a dip soon for a profit opportunity from the long side. The broad stock market is projected to be in a short-term bullish time-window until midweek 7/26/2017, and in a bearish time-window right after.
Table of Contents
- Broad Market in Short-Term Bullish Time-Window
- Sector Performance Ranking with Biotech Sector Leading
- S&P 500 Index in Primary Corrective Wave B
- German DAX Index: Elliott Wave
- India Bombay Index Forming 5.5-Month Bullish Uptrend Channel
- Shanghai Composite Index: Intermediate-Term Pictures
- Major Global Markets Performance Ranking
- US Treasury Bond in Bullish 4-Month Uptrend Channel Pattern
- US Dollar Broke Below 4.5-Month Falling Wedge Pattern
- Gold in 5.5-Month Horizontal Trading Range
- Silver Forming 4-month Bearish Downtrend Channel
- Crude Oil Forming 6.5-Month Descending Broadening Wedge
- Asset Class Performance Ranking with Copper Leading Leading
Broad Market in Short-Term Bullish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 8 on Friday 7/21/2017 (unchanged from 8 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 7/26/2017. (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: peak
Date of Next Cycle High: 7/26/2017
Broad Market Instability Index (BIX): 8, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)
Sector Performance Ranking with Biotech 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 2.93% above the EMA89. Outperforming sectors are Biotech (8.90%), Internet (7.85%), and Home Construction (7.31%). Underperforming sectors are Telecommunication (-4.65%), Oil Equipment (-3.75%), and Energy (-2.99%).
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 16-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 5.5-Month Bullish Uptrend Channel
The India Bombay Stock Exchange 30 Sensex index is forming a 5.5-month bullish uptrend channel. The index is approaching the upper boundary of the channel.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index is forming a 2.5-month uptrend channel pattern. The index is bullish as long as prices stay above the lower boundary of the channel.
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 in Bullish 4-Month Uptrend Channel Pattern
The 30-year U.S. treasury bond index formed a 4-month uptrend channel pattern. The index is bullish as long as prices stay above the lower boundary of the channel.
US Dollar Broke Below 4.5-Month Falling Wedge Pattern
The U.S. dollar index formed a 4.5-month falling wedge pattern. Last week prices broke below the lower boundary of the wedge. According to Thomas Bulkowski’s analysis on falling wedge patterns, after a downward breakout, price sometimes curls around the front of the wedge and soars upward. The busted pattern presents a profit opportunity from the long side.
Gold in 5.5-Month Horizontal Trading Range
The gold index is forming a 5.5-month horizontal trading range between 1200 and 1300.
It is neutral before prices break out from the trading range.
It is neutral before prices break out from the trading range.
Silver Forming 4-month Bearish Downtrend Channel
The silver index is forming a 4-month bearish downtrend channel. Prices bounced off the lower boundary of the channel, and advanced towards the upper boundary of the channel.
Crude Oil Forming 6.5-Month Descending Broadening Wedge
Crude oil index is forming a 6.5-month descending broadening wedge pattern. It becomes very volatile inside the wedge.
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 crude oil is underperforming.
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