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01/14/2018 – Market Update

January 15, 2018 Leave a comment Go to comments

 

Be Cautious about the Fast-Rising Stock Market

 

The U.S. stock market extended its New Year’s win streak with record closes last week. The S&P 500 index broke above the upper channel line of a 2-year bullish uptrend channel. As excessive speculation kicks in, fast price rising above the upper channel line sends a warning sign for entering the bump phase of a potential Bump and Run Reversal Top pattern. The broad stock market is projected to be in a short-term bullish time-window until 1/19/2018.

 
Table of Contents


 

 

 
Broad Market in Short-Term Bullish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 18 on Friday 1/12/2018 (up 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 bullish time-window until 1/19/2018. (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: 1/19/2018
Broad Market Instability Index (BIX): 18, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 


 
Sector Performance Ranking with Oil Equipment 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 6.68% above the EMA89. Outperforming sectors are Oil Equipment (13.44%), Home Construction (13.35%), and Energy (11.39%). Underperforming sectors are Utilities (-6.24%), Real Estate (-4.30%), and Wireless Communication (-0.52%).
 

 

 
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 12345 sub-wave sequence. Now intermediate upward wave (3) has upward sub-wave 5 in development.

Please note that sub-wave 5 has broken above the upper line of the uptrend channel. This is a warning sign for forming a potential Bump-and-Run Reversal Top pattern. As prices cross above the upper channel line, excessive speculation kicks in and pushes prices rising fast to form a bump top.

 


 
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 Reached Price target 34450


 

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. This price target was reached last week.

 


 
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 has been bullish with a sharp advance.

 


 
US Treasury Bond Forming 3-Month Broadening Wedge Pattern


 

The 30-year U.S. treasury bond index is forming a 3-month broadening wedge pattern. It is neutral before prices break out from the wedge.

 


 
US Dollar in Descending Broadening Wedge Pattern


 

The U.S. dollar index is forming a 3-month descending broadening wedge pattern. Price touches the lower boundary of the wedge. The dollar index currently is bearish and volatile.

 


 
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 4-Month Descending Broadening Triangle Pattern


 

The silver index is forming a 4-month descending broadening triangle pattern. Price is near the upper horizontal resistance of the pattern, and may test the resistance.

 

 
Crude Oil in Bullish 5-Month Uptrend Channel


 

Crude oil index is forming a 5-month bullish uptrend channel. Now price touches the upper channel line. 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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