Broad Stock Market Still In Consolidation While Gold Is Breaking Out

August 27, 2013

No significant changes from the previous update, except the short-term time-window of the broad stock market became neutral from bearish. The short-term neutral time-window is expected to last until 8/30/2013.

Short-Term Cycle: Trough

Date of Next Cycle High: 9/11/2013

Broad Market Instability Index (BIX): 18, below the panic threshold (bullish)

Momentum Indicator: negative (bearish)

 

Short-Term Picture: S&P500 Index in a 4-Month Uptrend Channel

The S&P500 index has formed a 4-month bullish uptrend channel. A pullback or a downward wave towards the lower boundary of the channel around 1600 is expected.

 

Long-Term Picture: Elliott Wave Count on S&P500 Index

The following chart is a weekly chart of the S&P 500 index, with my Elliott Wave count, in a four-year time span. The stock market crash of 2008 had a massive washout and reset the market in early March 2009 as “ground zero” for the beginning of wave count.

There are three degrees of waves: Primary, Intermediate, and Minor waves in this weekly chart. It shows that the SPX currently is in primary wave [3], intermediate wave (4), and minor wave A.

A long-term price target for primary wave [3] is projected at 1770 by using 0.618 extension of wave [1]. However, there would be a corrective wave, i.e., intermediate wave (4), before the price target of 1770.

Intermediate wave (4) should have started as the SPX is in minor wave A. Please note that Intermediate wave (4) is an intermediate-term corrective wave and minor wave A is a short-term corrective wave.

 

Euro vs. U.S. Dollar: The chart below is a weekly chart for the ratio of the euro to the U.S. dollar in last seven years. The ratio has been in a symmetrical triangle pattern for six years. The central line of the triangle is at 1.7. Currently the ratio swings up towards 1.70 to make Euro stronger than the US dollar.

 

Gold Bullish Breakout from 7-Week Ascending Triangle

The gold index is formed a 7-week bearish ascending triangle on the daily chart. Recently prices broke above the horizontal resistance line and gold became short-term bullish. Based on this breakout from the ascending triangle, the upside price target is estimated at 1462.

 

Long-Term Picture: Silver in a 2.5-Year Falling Wedge Pattern

The silver index has formed a 2.5-year falling wedge pattern. Now prices are near the lower boundary of the wedge. Silver will remain bearish with range-bounded swings before a breakout from the wedge.

 

Gold/Silver Mining Stocks Forming 4-Month Inverted Roof Pattern

Gold/silver mining stocks broke above the upper boundary of the 10-month downtrend channel recently. Now they are forming a 4-month inverted roof pattern. They could become bullish once prices break above the horizontal resistance line of the inverted roof.

 

US Dollar in 5-Month Broadening Symmetrical Triangle Pattern

The U.S. dollar formed a 5-month Broadening Symmetrical Triangle pattern. Prices should have big swings inside the triangle before next breakout from the pattern.

 

Nu Yu, Ph.D.

http://marketweeklyupdate.com

Nu Yu is co-founder and managing partner of Numarkan Investments.  He publishes a weekly newsletter providing market updates with technical review of the current market status for major indices of US equities, gold and silver, oil, US Treasury, and US dollar.  His website is www.MarketWeeklyUpdate.com.

Gold is the world’s oldest and most known currency.