12/03/2017 – Market Update
Climbing Stock Market with Weakness in Tech Stocks
The general stock market exploded to record highs last week except the technology sector. There was a significant sector rotation from semiconductor stocks to bank stocks. Crude oil maintained staying above a 2-month uptrend line for its bullish course towards an updated price target 62. Silver was bearish as its prices broke below the horizontal support at 16.6 of a 3-week descending triangle pattern. Fueled by the news of that Senate passes their versions on the GOP tax bill, the stock market is likely to extend gains this coming week. The broad stock market is projected to be in a short-term bullish time-window until 12/7/2017.
Table of Contents
- Broad Market in Short-Term Bullish 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 in Consolidation
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond Forming 6-Week Rising Wedge Pattern
- US Dollar in 4-Month Uptrend Channel
- Gold in 12-Month Uptrend Channel
- Silver Broke below 3-Month Descending Triangle Pattern
- Crude Oil Bullish above 4.5-Month Uptrend Channel
- Asset Class Performance Ranking with Crude Oil Leading
Broad Market in Short-Term Bullish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 12 on Friday 12/1/2017 (up from 2 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 projected to be in a short-term bullish time-window until 12/7/2017. (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: upward
Date of Next Cycle high: 12/7/2017
Broad Market Instability Index (BIX): 12, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)
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 4.24% above the EMA89. Outperforming sectors are Home Construction (17.55%), Banks (6.87%), and Semiconductors (5.83%). Underperforming sectors are Wireless Communication (-3.50%), Precious Metals (-3.29%), and Oil Equipment (-0.86%).
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 a near 2-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 a–b–c.
India Bombay Index Forming 1-Month Trading Range
The India Bombay Stock Exchange 30 Sensex index is forming an 1-month horizontal trading range between 32800 and 33800. Prices are going to test the lower boundary of the range. If prices break below the lower boundary, the index would go down to 31800.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index formed a 3-month ascending broadening triangle pattern. Prices broke below the lower boundary of the triangle last week. The downside price target is projected at 3300.
US Treasury Bond Forming 6-Week Rising Wedge Pattern
The 30-year U.S. treasury bond index is forming a 7-week rising wedge pattern. The direction of a breakout from the wedge will determine next price move.
US Dollar in 4-Month Uptrend Channel
The U.S. dollar index is forming a 4-month uptrend channel. Prices are going to test the lower boundary of the channel.
Gold in 12-Month Uptrend Channel
The gold index is forming a 12-month uptrend channel. Although it had a sharp pullback, prices hold above the lower boundary of the channel. It should be watched closely if prices breach the lower boundary of the channel.
Silver Broke below 3-Month Descending Triangle Pattern
The silver index formed a 3-month descending triangle pattern. Prices broke below the lower horizontal boundary last week. The index is bearish, and the downside price target is projected at 15.7.
Crude Oil Bullish above 4.5-Month Uptrend Channel
Crude oil index formed 4.5-month bullish uptrend channel. Prices have further sharply broken above the upper boundary of the channel as excessive speculation kicked in. It is forming a potential bump-and-run top pattern with a current status in the bullish bump phase with fast rising prices following a sharp bump trendline until prices reach a bump height with at least twice the lead-in height. The upside price target is projected at 62.
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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