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Market Update - June 24, 2016

Economic Comment

News of Europe’s Brexit vote, (Britain leaving the EU) has been the dominating news recently. Last week, when the vote looked close, the global equity markets sold off. Now that all of the market pundits have realized they were wrong about Britain's exit, our defensive position is in full swing.  We don't regal in market drops, but at times defense is the best course of action.  We don't believe that this  market pull back is over at this point in time.  Usually this type of unexpected evetn takes several days, weeks, or even months to play out.

Bullish Percent’s

(Data source Dorsey Wright, see definitions at the end of this report)

10 Week Bullish Percent (Short-term) after the dramatic pullback for this indicator to 44% it has floated higher to 66%, which is slightly overbought.

Optionable Stock Bullish Percent (Intermediate term) this indicator is on DEFENSE, and is milling around at the 55% level. It would need to get to 58% to go positive.

NYSE Bullish Percent (NYSEBP) (Longer-term) this indicator is on DEFENSE. Also wobbling back and forth now at 60.8%. It would need to get back over 66% to turn positive.(Source: Dorsey Wright)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500 after the rally to 2,120, we have seen a pullback to 2,060 and then a recovery to 2,100.This chart is kind of in “no man’s land” and looks like it is consolidating. (Source: Dorsey Wright Website)

S&P 500

NASDAQ in the month of June the NASDAQ did make a short-term new high from the April move getting to 4,980 before selling off to 4,780. Still doesn’t look great. Source: Dorsey Wright Website)

Russell 2000 the Russell 2000 really “popped” in the month of June getting to 1,188. However, it has now put in a series of lower lows and lower highs. This index looks the most vulnerable. (Source: Dorsey Wright Website)

US 10-Treasury Note: big news here! The 10 year broke out of the tight range in May and Brexit fears drove yields to 1.52%! They have since rebounded to 1.7%, but still that picture is a series of lower lows and lower highs. (Source: Dorsey Wright Website)

10-year Treasury

Relative Strength Big news here! Fixed Income is #1, Commodities #2, Domestic Equities #3, Money Funds #4, Currencies #5 and International Equities are in last place. Commodities, driven by oil, have moved from last place this year to 2nd place! However, the difference between the top three places is very small. (Source: Dorsey Wright Website)

Conclusion

The Russell 2000 looks like it is playing the role of “canary in a coal mine” again as it weakens. Although not all of our indicators have kicked into the full defense mode, each week more and more of them are. We are positioning our institutional and retail clients accordingly!

Have a great rest of the week!

Christopher P. Englebert
Managing Director

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