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Market Update - August 11, 2016

Economic Comment

We are back from vacation and many interesting events have been going on. Last Friday, the monthly government jobs number came in stronger than expected and the US Equity markets have continued to “float” to new highs. We have seen some changes in our indicators so let’s review them.

Bullish Percent’s

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

10 Week Bullish Percent (Short-term) the little bit of selling we have seen in the last two weeks has caused this short-term indicator to move from an overbought 78% level, down to 62% and then back to 70%. This is still in overbought territory and larger pullbacks could be expected at any time.

Optionable Stock Bullish Percent (Intermediate term) this indicator is now on OFFENSE and over the last two weeks has added 2% to get to 60%. 70% is considered the “high risk zone”.

NYSE Bullish Percent (NYSEBP) (Longer-term) this indicator is on OFFENSE but has not advanced in the last two weeks after hitting 64%. The high in April was 66%.Source: Dorsey Wright)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500 The S&P 500 just keeps floating higher. Short-term support is 2175 and a move below 2150 would be a short-term breakdown. At these levels, there is no indication where the S&P 500 could stop. (Source: Dorsey Wright Website)

S&P 500

SP5008.11.16

Dow Jones Transports This chart continues to show no real enthusiasm for the rally in the S&P and the DJIA. In fact, there was a sharp selloff to 7640 which keeps this chart firmly in a down trend.
(Source: Dorsey Wright Website)

Dow Jones Transportation Average

DowJones8.11.16

US 10-Treasury Note: After getting back up to 1.625% in July, the 10-year keeps trending lower. The current range of 1.5-1.6% looks to be intact for the time being. If the 1.475% level is broken and then 1.35%, I would expect the 10-year to get under 1%. (Source: Dorsey Wright Website)

10-year Treasury

10yearTreasury8.11.16

Relative Strength The top three relative strength asset classes are so tight and close together that they are swapping places. Commodities are still #1, however, US Equities swapped third place and moved to #2 while Fixed Income is #3. However, our measures are so close that the top three could easily change places on any given day. (Source: Dorsey Wright Website)

Conclusion

After coming back from vacation last week, not much has changed. The S&P 500 and Dow Jones Industrial Averages have floated higher and the Dow Jones Transports have not kept up. We are still cautious. It seems that investors are more focused on the Summer Olympics and going to the beach to get relief from this heat. We are still looking for that “pop up” thunderstorm that could dampen the financial markets.

Hopefully the last “super” hot weekend of the year!

Christopher P. Englebert
Managing Director

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