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Market Update - April 7, 2017

Economic Comment

It is that time of the month when the government reports monthly job creation numbers. On Wednesday, we got a preview when ADP reported that 263k jobs were created in March, when the expectation was around 185k. The consensus number from Bloomberg for the government’s report had the forecast in a range of 130k-200k, (Bloomberg website) and the number, shockingly, came in at 98k, well below what was expected. The previous two months’ numbers were revised downward by 38K. Let us see how the markets digest this surprise!

Bullish Percent’s, (Data source: Dorsey Wright, See definitions at the end of this report.)

10 Week- Bullish Percent (Short-term): In the month of March, the 10-week has gone from overbought at 68% down to oversold at 42%. Currently at 52%, this indicator is neutral.

Optionable-Stock Bullish Percent (Intermediate term): On March 22nd, enough point and figure sell signals were generated and this indicator flipped to DEFENSE. Usually the shorter-term indicators go negative first, but this time around, the NYSEBP led the way.

NYSE Bullish Percent (NYSEBP) (Longer-term): This indicator is on DEFENSE at 61%. No real, follow through from last week, just kind of holding in at this level. (Source: Dorsey Wright)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500: In March, the S&P 500 sold off to 2,325, which will now act as short-term support. It looks as if for the month of April, the S&P 500 is trying to make a run back to 2,400. (Source: Dorsey Wright Website)

S&P 500 

SP500 4.7.2017

Horizontal Axis: Time (numbers represent months, for example, 1=January 2=February and so on, when you reach October, months are represented as letters, A= October, B= November & C= December).
Vertical Axis: Price

Crude Oil: We are back to our comments on crude oil because it looks as though it is at an important juncture. In March, crude oil broke a long-term uptrend line at $50 per barrel. The important action so far for April is the ability of crude oil to close back over this uptrend line, which it has. The trend upward is still intact as long as crude oil continues to ride this long-term uptrend line. Monthly closes below the uptrend line could change the price action to lower level. (Source: Dorsey Wright Website)

Crude Oil (continuous contract)

ContinuousCrudeOil 4.7.17

Horizontal Axis: Time (numbers represent months, for example, 1=January 2=February and so on, when you reach October, months are represented as letters, A= October, B= November & C= December).
Vertical Axis: Price

US 10 Year Treasury Note: The 10-year is challenging the lower end of the recent trading range at 2.3%. All eyes are on this important level. A break below 2.3% could signal lower rates ahead. However, with the strong jobs report it looks like now the 10-year is floating back to the top of the range. (Source: Dorsey Wright Website)

10-year Treasury

10YearTreasury 4.7.2017

Horizontal Axis: Time (numbers represent months, for example, 1=January 2=February and so on, when you reach October, months are represented as letters, A= October, B= November & C= December).
Vertical Axis: Price

Relative Strength: Some changes this week. Fixed Income and Commodities are fighting it out in the middle of the pack range. We now have Domestic Equities #1, International Equities #2, Fixed Income #3, Commodities #4, Cash #5 and Currencies at #6. (Source: Dorsey Wright Website)

Conclusion



Now that college basketball March madness is over, we move to golf and the Masters. The equites markets saw some March madness of their own with US equity indices experience a shallow pullback. Strong payroll numbers are having the equity markets experience a better showing, just like in golf, were low rounds the first two days can get a golfer ready for Saturday’s moving day at the Masters. However, many golfers at the Masters have seen big leads evaporate as they play conservative golf on Sunday’s final round. We however, are still conservative and defensive at this point because our risk indicators have begun to deteriorate. We do not want to give up our lead so far this year. Investing is different from golf; the match in the investing world lasts longer! Golf is only for the weekend!

Have a great weekend! Starts out rainy, finishes nice!

Beirne Wealth Consulting Services, LLC (“BWC”) is a growing, privately owned, SEC Registered Investment Advisor with just over $2 billion in assets under advisement and over 25 employees in Connecticut, Pennsylvania and Florida. BWC provides independent, fee-based investment management services and customized financial planning solutions. Our institutional business provides consulting expertise to defined benefit and defined contribution plans, endowments, foundations and non-profit organizations. Our private clients include high net-worth individuals and prominent families, many of whom bring complex wealth management challenges and multigenerational planning needs. For more information, please visit www.beirnewealth.com or give us a call today at 888-231-6372

© 2017 Beirne Wealth Consulting Services, LLC (BWC). All rights reserved.

This report is not intended to be a client‐specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon.

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The findings, ratings and/or opinions expressed herein are the intellectual property of BWC and are subject to change without notice. They are not intended to convey any guarantees as to the future performance of the investment products, asset classes or capital markets discussed. Past performance does not guarantee future results. BWC’s ratings do not constitute individualized investment advice.

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Bullish Percent Definitions

NYSE Bullish Percent: This is a major market indicator, which tells us whether to be on the offense or defense. It is calculated by dividing the number of NYSE stocks trading on point and figure buy signals by the total listed on the Exchange. The percent of stocks on buy signals in is then plotted on a grid from 0% to 100%, where each box equals 2%. Levels above 70% are generally considered overbought, and below 30% are considered oversold. The best buy signals come when the NYSE Bullish Percent goes below 30% and then reverses up (must reverse 6%). The best sell signals come when the indicator moves above 70% and then reverses below 70%. The most important concept to keep in mind is field position and what team is on the field. When the NYSE Bullish Percent is in X's, the offensive team is on the field and wealth accumulation strategies are the focus. Conversely, when the NYSE Bullish Percent is in O's, the defensive team is on the field and wealth preservation strategies are the focus.

The Bullish Percent can also be calculated on various indices, for example, the 10-week BP is a short-term indicator and is calculated on 10 weeks’ worth of NYSE price data. The optionable stock bullish percent is calculated off the index of all optionable stocks on the NYSE.

Asset Indexes

An index is unmanaged and not available for direct investment.
Dow Jones Industrial Average is a price-weighted average of 30 U.S. stocks traded on the New York Stock Exchange and NASDAQ.
Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.
S&P 500 Index is a capitalization-weighted index calculated on a total-return basis with dividends reinvested. The index includes 500 widely held U.S. market industrial, utility, transportation and financial companies.
A 10-year treasury note is a debt obligation issued by the United States government that matures in 10 years. A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturity.

The NYSE Composite (^NYA) is a stock market index covering all common stock listed on the New York Stock Exchange, including American depositary receipts, real estate investment trusts, tracking stocks, and foreign listings.

Historical Futures Prices: Crude Oil Futures, Continuous Contract #1. Non-adjusted price based on spot-month continuous contract calculations. Raw data from CME. For more on the roll algorithm used please see this page: https://ww.quandl.com/collections/futures/continuous.

https://www.quandl.com/data/CHRIS/CME_CL1-Crude-Oil-Futures-Continuous-Contract-1-CL1-Front-Month

Relative Strength Calculation Explained: Tactical decisions are made utilizing the research and evaluation techniques of Dorsey, Wright & Associates who has extensive expertise in a technique known as Point & Figure charting. This type of analysis attempts to evaluate the supply and demand forces of particular asset classes and ranks the asset classes from strongest to weakest based upon relative strength (RS). We feel asset classes can be ranked similar to the way one might rank sports teams. If you think about your favorite sport, they rank teams based upon how well they perform against their opponents. The more games, matches or races won, the higher in ranking the team will go. We believe the same thing can be done in the investment markets. In the financial markets, a “game” is played each day and it consists of comparing the daily performance of one asset class to another. Each day we compare asset classes to one another to determine which asset classes are the strongest or weakest compared to one another. The ranking process is comprised of the following 4 steps and represents DWA's Tactical Portfolio Research strategy ("the strategy").

5steps

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