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12/31/2017 – Market Update

January 1, 2018 Leave a comment

 

Missing Santa Claus Rally

 

The stock market has moved sideways for two weeks without a Santa Clause rally but it slid on the final trading day of 2017. The S&P 500 index is still in a long-term uptrend with the fifth primary upward wave and it nears a beginning of a mid-term corrective wave. The crude oil resumed its uptrend from a several-week-long consolidation. Gold has become bullish after prices broke above a 4-month downtrend line. The US dollar is bearish with a downward breakout from a descending triangle pattern. The broad stock market is projected to be in a short-term bearish time-window until 1/17/2018.

 
Table of Contents

 

 

 
Broad Market Turning into Short-Term Bearish Time-Window

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 4 on Friday 12/29/2017 (unchanged 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 positive. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bearish time-window until 1/17/2018. (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: 1/17/2018
Broad Market Instability Index (BIX): 4, 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 3.70% above the EMA89. Outperforming sectors are Home Construction (11.29%), Energy (6.05%), and Telecommunication (6.04%). Underperforming sectors are Utilities (-2.74%), Pharmaceuticals (-0.18%), and Wireless Communication (0.12%).
 

 

 
S&P 500 Index in Primary Upward Wave 5

 

The SPX formed a 2-year bullish uptrend channel pattern on the weekly chart. This uptrend channel can be counted as primer impulse wave [5] which is the last upward wave inside a multi-year primer [1]–[2]–[3]–[4]–[5] five-wave sequence started from 2009. The current primer upward wave [5] is in progress to develop an intermediate (1)–(2)–(3)–(4)–(5) five-wave sequence. We are in the middle of primer wave [5] with intermediate upward wave (3) that has developed 1–2–3–4–5 sub-waves. Now intermediate upward wave (3) nears its end, and intermediate corrective wave (4) will be the next.

 


 
German DAX Index: Elliott Wave

 

In the following weekly chart, the German DAX index is in primer impulse wave [5] of a multi-year primer [1]–[2]–[3]–[4]–[5] five-wave sequence. Upward primer wave [5] is in progress to develop an intermediate (1)–(2)–(3)–(4)–(5) five-wave sequence. Currently it is in intermediate corrective wave (4).

 


 
India Bombay Index above 2-Month Descending Broadening Triangle Pattern

 

The India Bombay Stock Exchange 30 Sensex index formed a 2-month descending broadening triangle pattern. Prices have broken above the upper horizontal boundary of the triangle. It is bullish with an upside price target projected at 34450 as long as prices stay above the support level of 33800.

 


 
Shanghai Composite Index: Intermediate-Term Pictures

 

The Shanghai Stock Exchange Composite index is forming an 1-month horizontal trading range between 3260 and 3320. It is neutral before prices break out from the range.

 


 
US Treasury Bond below 2-Month Rising Wedge Pattern

 

The 30-year U.S. treasury bond index formed a 2-month rising wedge pattern. Prices have recently broken below the lower boundary of the wedge. The projected downside price target at 150 was reached, and prices rebounded.

 


 
US Dollar Broke below 2.5-Month Descending Triangle Pattern

 

The U.S. dollar index formed a 2.5-month descending triangle pattern. Prices broke below the lower boundary of the triangle last week. It is bearish with a projected downside price target at 91.5.

 


 
Gold Broke above 4-Month Falling Wedge Pattern

 

The gold index formed a 4-month falling wedge pattern. Prices broke above the upper boundary of the wedge. It is bullish with an upside price target projected at 1355.

 

 
Silver Broke above 4-Month Downtrend Channel Pattern

 

The silver index formed a 4-month downtrend channel pattern. Priced broke above the upper boundary of the channel. It becomes bullish as long as prices stay above the upper boundary of the channel.

 

 
Crude Oil Forming Bullish 4.5-Month Uptrend Channel

 

Crude oil index is forming a 4.5-month bullish uptrend channel. It is bullish as long as prices stay above the lower boundary of the channel. Last week prices resumed uptrend after a several-week-long consolidation.

 


 
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 the US dollar is underperforming.
 
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