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Market Update - September 1, 2017

Economic Comment

September 1st seems to be the official end of summer and we are back from Wyoming! Today, we get the employment report for August. The August employment report should give a good read on the summer economy, however, the floods in Texas are sure to skew the employment outlook for the next several months. This week, countries firing rockets, seemed to have little effect on US Equity markets. It has been a month since we checked our indicators. Let’s get to it…

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

10 Week- Bullish Percent (Short-term): At the beginning of August this indicator was at an overbought level of 68%. The 10-week then reversed sharply down to 36%, which is oversold. Now at 42%, it is slightly oversold.

Optionable-Stock Bullish Percent (Intermediate term): Still on DEFENSE. In the month of August, we saw more deterioration, down to 52%. 46% was the low last November.

NYSE Bullish Percent (NYSEBP) (Longer-term): Still on DEFENSE. August was not kind to this indicator either, which is now at 56%. 50% is the level hit last November. (Source: Dorsey Wright)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500: August saw a new high at 2,490. Since then, we have seen a short-term series of lower highs and lower lows. First support is 2,400. June 30, 2017, the S&P 500 closed at 2,423.4. If the S&P 500 closes above that level on September 30, 2017 that would be eight positive quarters in a row. Right now that streak looks to be in jeopardy. (Source: Dorsey Wright Website)

S&P 500 

SP500 9.1.17

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

NASDAQ

July reached a new high at 6,460 for the NASDAQ. Since then, the series of lower highs and lower lows has been even more vicious for the NASDAQ. First support is 6,100. The real question is, if the selling starts, will investors sell the NASDAQ off to lock in profits for the year? (Source: Dorsey Wright Website)

NASDAQ

NASDAQ 9.1.17


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 threat of missiles flying instigated the fear trade to ramp up; and the 10-year has broken down to 2.1%. It looks like we could get a small increase in rates, if the current pattern holds true, but the real pressure seems to be for the 10-year to go lower. Last November the 10-year was at 1.8%. Is it possible that we could see that same level by this November? (Source: Dorsey Wright Website)

10-year Treasury

10YearTreasury 9.1.17

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

Relative Strength: No changes. Domestic Equities are #1; International Equities #2; Fixed Income #3; Cash #4; Commodities #5; and Currencies #6. (Source: Dorsey Wright Website)

Conclusion

The Teflon stock market continues. It appears that even missiles flying cannot seem to bring the US markets down for more than two days. However, cracks are beginning to appear. Small and mid-cap stock indices are rolling over. Big company stocks still seem to be holding up these markets. Using a battle analogy, it looks like the soldiers have left the field and only the generals remain. The US equity markets are entering two of the poorest seasonal months of September and October. If a pullback is coming, the odds favor it happening in these two months. We remain cautious and defensive.

If you are on twitter, I encourage you to follow @NASDAQ and @JillMalandrino, to see the piece we ran on Thursday, August 31st! As always, we would love to hear any feedback.

Have a great weekend.

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 24 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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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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