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Market Update - September 30, 2016

Economic Comment

The news was dominated this week by the first Presidential debate and worries about a large German bank. With the end of the third quarter approaching, global markets are experiencing a lot of cross current. Let’s review our indicators.

Bullish Percent’s

10 Week Bullish Percent (Short-term): Lots of action in the last two weeks with this short-term indicator. After falling to 36% (over sold) last week, it bounce to 58%, only to get slapped back down to 46%, which is pretty much neutral.

Optionable Stock Bullish Percent (Intermediate term): After reversing to OFFENSE in mid-July, this indicator hasn’t done much. It is floating within a couple of percent range and currently at 59.44%. A reverse to DEFENSE would be expected to occur at 56%.

NYSE Bullish Percent (NYSEBP) (Longer-term):This indicator is on OFFENSE and currently at 62.8%. Kind of floating around as well. The reversal to DEFENSE would be expected to happen at 60%.(Source: Dorsey Wright)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500: All eyes are focused on the short-term “line in the sand” at 2,120. In the month of September, the S&P 500 has bounced off this level twice; and has floated back up to 2,170. The next level of support is 2,000-2,040 which is 6-8% lower. 2,000 is where a strong up-trend line has been established. (Source: Dorsey Wright website)

S&P 500


Crude Oil: For all the bearish talk about crude oil, the point and figure chart shows that it has been hugging an important uptrend line. After a sharp rally in April, that went through an important downtrend line. Crude made a high at $51 and currently looks to be consolidating. If the uptrend is for real, we would expect crude to go higher from here.
(Source: Dorsey Wright Website) 

Continuous Crude Oil


US 10-Treasury Note: The 10 year’s higher yields in September looked to be a buying opportunity, as yields have collapsed back down to 1.55%. Downtrend lines are powerful and this one proved to be no exception. (Source: Dorsey Wright Website)

10-year Treasury


Relative Strength: Big news this week! International Equities finally have beaten Cash in the relative strength horse race. The current standing is Domestic Equities #1, Commodities #2, Fixed Income #3, International Equities #4, Cash #5 and Currencies at #6. (Source: Dorsey Wright Website)


After the recent pullback, positive Fed news has helped the US Equity markets float higher. Even though International Equities have moved up in the relative strength horse race, the negative news on a large German bank has kept many of the major European averages muted this week. We are still playing DEFENSE for the time being and focusing on risk.

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