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10/29/2017 – Market Update

October 30, 2017 Leave a comment

 

Bullish Pattern Breakouts of US Dollar and Oil Prices

 

The US dollar had a powerful bullish breakout from a 3-month inverse head-and-shoulders pattern last week and added pressure on gold and silver. Crude oil prices also had a strong advance after a bullish breakout from its 9-month inverse roof pattern. There is a red flag for the stock market as readings of our Broad Market Instability Index (BIX) surged to the panic threshold last Friday. The broad stock market is projected to be in a short-term bearish time-window until 11/1/2017.

 
Table of Contents


 

 

 
Broad Market in Short-Term Bearish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 43 on Friday 10/27/2017 (up from 9 the previous week) which is above (alert!) the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is above the 89-day exponential moving average, and the momentum is negative. Based on the forecast of LWX, the broad stock market is projected to be in the bearish time-window until 11/1/2017. (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: 11/1/2017
Broad Market Instability Index (BIX): 43, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

 


 
Sector Performance Ranking with Home Construction 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 3.61% above the EMA89. Outperforming sectors are Home Construction (14.05%), Semiconductors (12.27%), and Technology (8.00%). Underperforming sectors are Oil Equipment (-4.61%), Telecommunication (-4.11%), and Precious Metals (-3.67%).
 

 

 
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. As the wedge is getting narrow and narrow, there is 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. Now it is in a sideways-wave sequence.

 


 
India Bombay Index Broke above 3-Month Trading Range


 

The India Bombay Stock Exchange 30 Sensex index formed a 3-month horizontal trading range between 31200 and 32600. Prices broke above the upper resistance level of the channel. It is bullish for an upside price target projected at 33800.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index is forming a 6-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 Japanese market is outperforming, and the UK market is underperforming.
 


 
US Treasury Bond Broke Below 6-Month Rising Wedge Pattern


 

The 30-year U.S. treasury bond index formed a 6-month rising wedge pattern. Recently prices have broken below the lower boundary of the wedge, and become bearish. The short-term downside price target is projected at 149.

 


 
US Dollar Broke above 3-Month Descending Broadening Triangle Pattern


 

The U.S. dollar index formed a 3-month descending broadening triangle pattern. Also it formed a 3-month inverse head-and-shoulders pattern. 94 is a resistance level as a neckline. Prices broke sharply above the the neckline last week. The dollar becomes bullish for an upside price target projected at 96.

 


 
Gold in 11-Month Uptrend Channel


 

The gold index is forming a 11-month uptrend channel. Prices are pulling back towards the lower boundary of the channel. It would be a confirmation for a trend change if prices break below the lower boundary of the channel.

 

 
Silver in 2.5-Month Descending Triangle Pattern


 

The silver index is forming a 2.5-month descending triangle pattern. Prices are going to test the lower horizontal boundary of the triangle. If prices break below the lower boundary, the silver index could go down to 15.8.

 

 
Crude Oil Broke above 9-Month Inverse Roof Pattern


 

Crude oil index formed a 9-month inverse roof pattern which is a bullish pattern.
Last week prices broke above the upper resistance boundary. The oil index is bullish for an upper price target projected at 59.8.

 


 
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 treasury bond is underperforming.