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08/26/2017 – Market Update

August 26, 2017 Leave a comment

 

Stock Market Bounced from an Oversold Condition

 

Last week the general stock market bounced from a short-term oversold condition. The Russell 2000 was leading the rebound while the Dow was lagging. Readings of our Broad Market Instability Index retreated below the panic threshold, and the market momentum returned to the positive territory. Prices of gold faces a resistance from the upper boundary of its 6-month horizontal trading range, and prices of crude oil look for a support at the lower boundary of a 2-month ascending broadening wedge. The broad stock market is turning from neutral to bullish, and is projected to be in a short-term bullish time-window until 9/7/2017.

 
Table of Contents

 

 

 
Broad Market Turning in Short-Term Bullish Time-Window

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 26 on Friday 8/25/2017 (down from 116 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 9/7/2017. (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: 9/7/2017
Broad Market Instability Index (BIX): 26, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 


 
Sector Performance Ranking with Utilities 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 0.52% above the EMA89. Outperforming sectors are Utilities (3.85%), Biotech (3.04%), and Home Construction (2.57%). Underperforming sectors are Oil Equipment (-7.20%), Energy (-4.88%), and Consumer Services (-1.43%).
 

 

 
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 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. Recently upward intermediate wave (C) has ended. Downward primary wave [C] is starting with downward intermediate wave (1).

 


 
India Bombay Index Forming 4-Week Descending Triangle Pattern

 

The India Bombay Stock Exchange 30 Sensex index is forming a 4-week descending triangle pattern. It is neutral before prices break out from the triangle. If prices break above the upper boundary of the triangle, the upside price target would be projected at the previous high near 32700.

 


 
Shanghai Composite Index: Intermediate-Term Pictures

 

The Shanghai Stock Exchange Composite index is forming a 4-month ascending broadening wedge. The index is bullish as long as prices stay above the lower boundary of 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 Brazilian market is outperforming, and the Japanese market is underperforming.
 


 
US Treasury Bond in Bullish 6-Month Uptrend Channel Pattern

 

The 30-year U.S. treasury bond index formed a 6-month uptrend channel pattern. The index is bullish as long as prices stay above the lower boundary of the channel.

 


 
US Dollar Forming 6-Month Bearish Downtrend Channel

 

The U.S. dollar index is forming a 6-month bearish downtrend channel. The index is bearish as long as prices stay below the upper boundary of the channel.

 


 
Gold in 6-Month Horizontal Trading Range

 

The gold index is forming a 6-month horizontal trading range between 1200 and 1300.
It is neutral before prices break out from the trading range. Prices are testing the upper boundary of the range.

 

 
Silver Broke above Neckline of 2-month Inverse Head-n-Shoulders Pattern

 

The silver index formed a 2-month inverse head-and-shoulders pattern. Prices have broken above the neckline. It is bullish as long as prices stay above the neckline. The upside price target is projected at 17.9.

 

 
Crude Oil Forming 2-Month Ascending Broadening Wedge

 

Crude oil index is forming a 2-month ascending broadening wedge pattern. It is bullish as long as prices stay above the lower boundary of the wedge. Prices are testing the lower boundary of 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 US dollar is underperforming.
 
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