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Market Update - August 25, 2016

Economic Comment

Earning season is just about done and we are entering “no mans” land where news headlines seem to dominate. All eyes will be on Friday, September 2nd, when the next Government Jobs report comes out. If that number is in the plus 250,000 range, the FED could be forced to raise short-term rates at their September meeting, something they seem reluctant to do before an election. Let’s review our indicators.

Bullish Percent’s

10 Week Bullish Percent (Short-term) the 10 week BP was trying to relieve some of the overbought level, but to no avail. After hitting 78% at the beginning of August this indicator went to 62% only to travel back to 70%. Still overbought on the short-term.

Optionable Stock Bullish Percent (Intermediate term) this indicator is now on OFFENSE and has floated from 60% over the last two weeks, to 62%. Getting closer to 70% the “high risk zone”.

NYSE Bullish Percent (NYSEBP) (Longer-term) this indicator is on OFFENSE and has also floated higher to 66% which is the same level it hit in April, the high for this indicator for 2016. (Source: Dorsey Wright)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500 the S&P 500 added 10 points in the last two weeks to 2090. 2120 is now first major support in the event of any sell off. Here is what a “faster” chart of the S&P 500 looks like. This helps with identifying short-term support. (Source: Dorsey Wright Website)

S&P 500

SP5008.25.16

Dow Jones Transports We thought we would update you on this chart. The Transports have actually had a good week and are “bending” up. This is moving this chart from bearish to neutral.
(Source: Dorsey Wright Website) 

Dow Jones Transportation Average

DowJones8.25.16

US 10-Treasury Note: The 10-year seems to be in a consolidation phase during the month of August. We will repeat what we said before. 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

10yearTreasury8.25.16

Relative Strength The tightness of the top three asset classes continues with Domestic Equities going back to #1, Commodities at #2 and Fixed Income at #3. Only thirteen signals separate the top three, so a good week or bad week by any asset class could continue to see some changes. (Source: Dorsey Wright Website)

Conclusion

The major averages have continued to float higher the last two weeks. The difference has been that small- and mid-cap averages have made new highs for the year as well. We would like to repeat something we said earlier, that markets that make highs in the summer make us nervous. We are still playing defense and waiting to see if we get an “October” surprise.

Last of the summer weekends ahead! Enjoy!

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