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Market Update - December 15, 2016

Economic Comment

Friday, December 2nd, the monthly job report came in at 178,000 jobs added. The rumor was that the number was going to be “hot” and it wasn’t. This may bring some relief to the bond market’s sharp sell off since the election. Let’s check our indicators.

Bullish Percent’s

10 Week Bullish Percent (Short-term) As oversold as this indicator was in October getting down to 26% is as overbought as it is now in December at 72%. A 2-4% pullback in equity indices could happen at any time.

Optionable Stock Bullish Percent (Intermediate term) This indicator is now on OFFENSE at 58%. It hit a high in August of 62%.

NYSE Bullish Percent (NYSEBP) (Longer-term) This indicator also flipped to OFFENSE during the post-election week. Now at 60% it is farther away from the 66% it hit in August.(Source: Dorsey Wright)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500 the S&P 500 has managed to rally to new highs for the year, post-election. This is an 8.1% rally without a pause. Resistance now becomes support at 2190. (Source: Dorsey Wright Website)

S&P 500

SP500 12.15.16

Crude Oil Crude oil’s sell off was short lived as the OPEC came to an agreement. Crude is now showing a breakout to new highs for the year. $55 will be important resistance. If oil breaks thought that level it could be off to the races. (Source: Dorsey Wright Website)

Continuous Crude Oil

ContinuousCrudeOil 12.15.16

US 10-Treasury Note: interest rates as measured by the 10-year treasury have made a large unprecedented move, post-election. If you remember your statistics class, this is a 3 almost 4 standard deviation move. The 10 year is very overbought and a countertrend decline in rates could happen at any time. (Source: Dorsey Wright Website)

10-year Treasury

10YearTreasury 12.15.16

Relative Strength Another change! Weakness in bonds has now changed the lineup. Domestic Equities #1, Commodities #2, International Equities are #3, Fixed Income #4, Cash #5 and Currencies at #6. (Source: Dorsey Wright Website)

Conclusion

If you would have told any investor that if a surprise candidate won the presidential election, rates would be higher and so would stocks, there would have been disbelief. It looks to us that there is more value in the bond market than the stock market. Having said that, our indicators have improved and defense is slowly leaving the field. We are still cautious since the equity move has been straight up since the election, but the overall tone of the markets are improving.

Have a great rest of the week!

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