12/10/2017 – Market Update
Markets Out of Sync
The Dow Jones Industrial Average and S&P 500 made another all-time closing high on Friday. But the technology sector has been moving out of sync with either the Dow or S&P 500 since mid-November. The Russell 2000 Small Cap index, one of the reliable “risk-on” indicators, became lagging the market. The general stock market currently seems hard to be measured by a single market index on the overall market, and could be in store for a choppy market heading into the end of the year. The broad stock market is projected to be in a short-term neutral time-window until 12/13/2017, then in a bearish time-window right after.
Table of Contents
- Broad Market in Short-Term Neutral 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 2-Month Descending Broadening Triangle Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond Forming 8-Week Rising Wedge Pattern
- US Dollar in 4-Month Uptrend Channel
- Gold Broke below 12-Month Uptrend Channel
- Silver Bearish below 3-Month Descending Triangle Pattern
- Crude Oil Forming Bullish 4-Month Uptrend Channel
- Asset Class Performance Ranking with Crude Oil Leading
Broad Market in Short-Term Neutral Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 6 on Friday 12/8/2017 (down from 12 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. Based on the forecast of LWX, the broad stock market is projected to be in a short-term neutral time-window until 12/13/2017. (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: 12/28/2017
Broad Market Instability Index (BIX): 6, 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 4.06% above the EMA89. Outperforming sectors are Home Construction (14.64%), Banks (7.88%), and Financials (5.63%). Underperforming sectors are Precious Metals (-6.24%), Wireless Communication (-2.92%), and Oil Equipment (-1.85%).
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 2-Month Descending Broadening Triangle Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 2-month descending broadening triangle pattern. Prices become volatile inside the triangle before next breakout from the triangle.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index is forming an 1-month falling wedge pattern. It should have a rebound when prices break above the upper boundary of the wedge.
US Treasury Bond Forming 8-Week Rising Wedge Pattern
The 30-year U.S. treasury bond index is forming an 8-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 bounced off the lower boundary of the channel last week. It is bullish as long as prices stay above the lower boundary of the channel.
Gold Broke below 12-Month Uptrend Channel
The gold index broke below the lower boundary of a 12-month uptrend channel. It is bearish and 1200 will be a level to test support.
Silver Bearish below 3-Month Descending Triangle Pattern
The silver index formed a 3-month descending triangle pattern. Prices have broken below the lower horizontal boundary with a projected downside price target at 15.7. This price target was reached last week.
Crude Oil Forming Bullish 4-Month Uptrend Channel
Crude oil index is forming a 4-month bullish uptrend channel. It is bullish as long as prices stay above the lower boundary of the channel.
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 gold is underperforming.
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