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09/24/2017 – Market Update

September 25, 2017 Leave a comment

 

Divergent Market Calls for a Higher Level of Caution

 

Last week small-cap stocks did better than the rest of the market, and the Russell 2000 Index closed at record high with the biggest weekly gain. However, the NASDAQ 100 Index kept sliding last week, and the technology sector was dragged down by a poor performance in Apple stock. Wave analysis suggests that the market is going through a transition period from bullish to bearish. The broad stock market is projected to be in a short-term bearish time-window until 10/16/2017.

 
Table of Contents


 

 

 
Broad Market is about to Turn into Short-Term Bearish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 6 on Friday 9/22/2017 (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 positive. Based on the forecast of LWX, the broad stock market is going to turn into a short-term bearish time-window and it is projected to be in the bearish time-window until 10/16/2017. (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: 10/16/2017
Broad Market Instability Index (BIX): 6, 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 2.36% above the EMA89. Outperforming sectors are Biotech (8.43%), Semiconductors (5.50%), and Materials (4.84%). Underperforming sectors are Consumer Goods (-0.59%), Real Estate (-0.42%), and Utilities (-0.14%).
 

 

 
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. Upward intermediate wave (C) has ended. Downward primary wave [C] has started and it should be going to have an intermediate (1)(2)(3)(4)(5) five-wave sequence. Currently it is in upward intermediate wave (2), and downward intermediate wave (3) will be the next.

 


 
India Bombay Index Forming 3-Month Asymmetrical Triangle


 

The India Bombay Stock Exchange 30 Sensex index is forming a 3-month asymmetrical triangle pattern. It is in sideways before prices break out from the triangle.

 


 
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 UK market is underperforming.
 


 
US Treasury Bond in Bullish 7-Month Uptrend Channel Pattern


 

The 30-year U.S. treasury bond index formed a 7-month uptrend channel pattern. The index also formed a partial rising that failed to reach the upper boundary of the channel. The partial rising is a bearish sign for prices to breach the lower boundary of the channel.

 


 
US Dollar Forming 7-Month Bearish Downtrend Channel


 

The U.S. dollar index is forming a 7-month bearish downtrend channel. The index is bearish as long as prices stay below the upper boundary of the channel.

 


 
Gold Forming 10-Month Uptrend Channel


 

The gold index is forming a 10-month uptrend channel. Prices are pulling back towards the lower boundary of the channel. A support level is projected at 1260.

 

 
Silver Broke below 2.5-Month Ascending Broadening Wedge


 

The silver index formed a 2.5-month ascending broadening wedge pattern. Last week prices broke below the lower boundary of the wedge. The downside price target is projected at 15.6.

 

 
Crude Oil Broke above 3-Month Symmetrical Triangle


 

Crude oil index formed a 3-month symmetrical triangle pattern. Prices breached the upper boundary of the triangle. The upside price target is projected at 55 as long as prices stay above the upper boundary of the triangle.

 


 
Asset Class Performance Ranking with Crude Oil Leading


 

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