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01/07/2018 – Market Update

January 8, 2018 Leave a comment

 

Strong New Year Start

 

The stock market advanced to record highs with a strong start in the first week of the new year. A Santa Claus rally finally caught up last week. The S&P index is in a 2-year bullish uptrend channel pattern. Prices are going to test the upper boundary of the channel, and a mid-term corrective wave would start if prices pull back there. The US dollar reached the downside price target 91.5, and a bounce is near. The broad stock market is projected to be in a short-term neutral time-window until 1/12/2018.

 
Table of Contents

 

 

 
Broad Market in Short-Term Neutral Time-Window

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 4 on Friday 1/5/2018 (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 nuetral time-window until 1/12/2018. (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: peak
Date of Next Cycle High: 1/12/2018
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 5.63% above the EMA89. Outperforming sectors are Home Construction (14.64%), Oil Equipment (10.11%), and Energy (9.24%). Underperforming sectors are Utilities (-4.72%), Real Estate (-1.70%), and Wireless Communication (1.24%).
 

 

 
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 a part of 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 is in a process to have 1–2–3–4–5 sub-wave sequence. Intermediate upward wave (3) nears its end with sub-wave 5, 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 formed an 1-month horizontal trading range between 3260 and 3320. Prices broke above the upper boundary of the range. It became bullish with a sharp advance.

 


 
US Treasury Bond Forming 2.5-Month Broadening Wedge Pattern

 

The 30-year U.S. treasury bond index is forming a 2.5-month broadening wedge pattern. It is neutral before prices break out from the wedge.

 


 
US Dollar Downside Price Target Reached

 

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

 


 
Gold Broke above 4-Month Falling Wedge Pattern

 

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

 

 
Silver Forming 3.5-Month Descending Broadening Triangle Pattern

 

The silver index is forming a 3.5-month descending broadening triangle pattern. Prices approach the upper horizontal resistance of the pattern, and are going test the resistance.

 

 
Crude Oil in 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.

 


 
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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