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09/17/2017 – Market Update

September 18, 2017 Leave a comment Go to comments

 

Be Cautious in this Market

 

The Dow and S&P 500 closed at record high last week while investor sentiment reached an extreme greed level of optimism. The market focus will turn to Federal Reserve’s “biggest meeting of the year” for its policy setting this coming week. As US inflation hits seven-month high, the central bank is expected to rise interest rates and start trimming its $4.5 trillion portfolio. Stocks and other risky assets could come under selling pressure amid Fed’s asset unwinding. Technical analysis suggests that the short-term time-window of the broad stock market is about to turn from bullish to bearish. The broad stock market is projected to be in a short-term bearish time-window until 10/5/2017.

 
Table of Contents


 

 

 
Broad Market Going to Turn into Short-Term Bearish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 12 on Friday 9/15/2017 (down from 39 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 10/5/2017. (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 Low: 10/5/2017
Broad Market Instability Index (BIX): 12, 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 2.4% above the EMA89. Outperforming sectors are Biotech (9.73%), Semiconductors (6.11%), and Health Care (4.87%). Underperforming sectors are Wireless Communication (-3.89%), Telecommunication (-1.27%), and Oil Equipment (-0.13%).
 

 

 
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 Broke above 5-Week Trading Range


 

The India Bombay Stock Exchange 30 Sensex index is forming a 5-week horizontal trading range between 31200 and 31900. Prices broke above the upper resistance of the channel last week. The upside price target is projected at 32500.

 


 
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 6-Month Uptrend Channel Pattern


 

The 30-year U.S. treasury bond index formed a 6-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 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 Had Bullish Breakout from 6-Month Horizontal Trading Range


 

The gold index formed a 6-month horizontal trading range between 1200 and 1300. Prices have broken above the upper resistance level. The upside price target is projected at 1385.

 

 
Silver Forming 2-Month Uptrend Channel


 

The silver index formed a 2-month uptrend channel. The index is bullish as long as prices stay above the lower boundary of the channel.

 

 
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 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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