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10/01/2017 – Market Update

October 2, 2017 Leave a comment Go to comments

 

Rising Market Optimism for Tax-Cut Hopes

 

Much influenced by the Trump tax-cut plan last week, market sentiment again reached an extreme greed level of optimism but somehow it contradicted the prospect of our wave analysis for the market. The small-cap Russell 2000 Index continued leading the stock market higher. Prices of gold and the US treasury bonds were under selling pressure. The US dollar bounced off its 32-month low and approached a critical point to test its 7-month downtrend line. An upward breakout from a symmetrical triangle pattern turned crude oil bullish for higher prices. The broad stock market is expected to be generally rangebound this coming week, and it is projected to be in a short-term bearish time-window until 10/20/2017.

 
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 4 on Friday 9/29/2017 (down from 6 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 about to turn into a short-term bearish time-window and it is projected to be in the bearish time-window until 10/20/2017. (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: 10/20/2017
Broad Market Instability Index (BIX): 4, 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 2.98% above the EMA89. Outperforming sectors are Biotech (7.95%), Home Construction (7.85%), and Semiconductors (7.18%). Underperforming sectors are Wireless Communication (-2.59%), Precious Metals (-1.22%), and Utilities (-0.53%).
 

 

 
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 below 3-Month Asymmetrical Triangle

 

The India Bombay Stock Exchange 30 Sensex index is forming a 3-month asymmetrical triangle pattern. Last week prices broke below the lower boundary of the triangle. The downside price target is projected at 30700.

 


 
Shanghai Composite Index: Intermediate-Term Pictures

 

The Shanghai Stock Exchange Composite index is forming a 5-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 Australian market is underperforming.
 


 
US Treasury Bond in 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 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. Recently prices have broken 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 have broken above 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.
 
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