10/08/2017 – Market Update
The Stock Market in Overbought Condition
The Dow, S&P 500 and Nasdaq 100 extend further into record territory last week. The stock market is in a short-term overbought condition with an alert of dramatically reducing market momentum last Friday. Gold and precious metals stocks formed bullish reversal candlestick patterns for a potential rebound while crude oil pulled back sharply for lower prices. The broad stock market is projected to be in a short-term bearish time-window until 10/25/2017.
Table of Contents
- Broad Market is about to Turn into Short-Term Bearish Time-Window
- Sector Performance Ranking with Home Construction Sector Leading
- S&P 500 Index in Primary Corrective Wave B
- German DAX Index: Elliott Wave
- India Bombay Index Forming 3-Month Trading Range
- Shanghai Composite Index: Intermediate-Term Pictures
- Major Global Markets Performance Ranking
- US Treasury Bond Broke Below 6-Month Rising Wedge Pattern
- US Dollar Forming 2.5-Month Descending Broadening Triangle Pattern
- Gold Forming 10-Month Uptrend Channel
- Silver Broke below 2.5-Month Ascending Broadening Wedge
- Crude Oil Forming 9-Month Inverse Roof Pattern
- Asset Class Performance Ranking with Copper Leading
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 3 on Friday 10/6/2017 (down from 4 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 slightly positive but it reduced a lot. 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 10/25/2017. (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: 10/25/2017
Broad Market Instability Index (BIX): 3, below the panic threshold (bullish)
Momentum Indicator: slightly positive (neutral)
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 3.78% above the EMA89. Outperforming sectors are Home Construction (9.73%), Semiconductors (8.27%), and Biotech (7.95%). Underperforming sectors are Wireless Communication (-2.29%), Utilities (0.22%), and Real Estate (0.23%).
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. Now it is in a sideways-wave sequence.
India Bombay Index Forming 3-Month Trading Range
The India Bombay Stock Exchange 30 Sensex index is forming a 3-month horizontal trading range between 31200 and 32600. It is neutral before prices break out from the range.
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 Broke Below 6-Month Rising Wedge Pattern
The 30-year U.S. treasury bond index formed a 6-month rising wedge pattern. Last week prices broke below the lower boundary of the wedge. The downside price target is projected at 150.
US Dollar Forming 2.5-Month Descending Broadening Triangle Pattern
The U.S. dollar index is forming a 2.5-month descending broadening triangle pattern. 94 is a resistance level, and prices may pull back from here. This pattern is likely an intermediate-term bottom process.
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 Forming 9-Month Inverse Roof Pattern
Crude oil index is forming a 9-month inverse roof pattern. Recently prices have pulled back from the upper resistance boundary. The index will test the lower boundary around 48.
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 treasury bond is underperforming.
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