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Market Update - September 15, 2017

Economic Comment

A huge sigh of relief was felt this week, as markets made it through the 911 anniversary without incident; and the impact of hurricane Irma was less than feared. A major tech company’s introduction of a new phone and talks of possible tax reform sent the S&P 500 to a new all-time high. With the remainder of September to maneuver through, lets see what our indicators have to say.

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

10 Week- Bullish Percent (Short-term): To date, the month of September has seen the 10 week go from oversold at 36% to slightly overbought at 56%. Interestingly, since March, the 10 week has remained in the 36-68% range, with no extreme readings this year.

Optionable-Stock Bullish Percent (Intermediate term): Still on DEFENSE. No real movement for the first two weeks of September; and if you remember, the indicator floated down from 54% to 52% in August.

NYSE Bullish Percent (NYSEBP) (Longer-term): Still on DEFENSE. So far for September, no movement as well. (Source: Dorsey Wright)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500: August hit a new high at 2,490, and after a brief pullback to 2,420, the S&P 500 saw a new high for September, as well. We remain focused on 2,423.41 for the S&P 500, which was the close on June 30th. If the S&P 500 closes above that level, it will be EIGHT positive quarters in a row. At the end of August, breaking that level looked like a real possibility. Now the S&P 500 is 2.8% away from that number and 10 trading days are left in the month. (Source: Dorsey Wright Website)

S&P 500

SP500 9.15.17

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

Unlike the S&P 500, the NASDAQ has not reached new highs. The same potential breakdown that was forming in August, has quickly reversed. A possible trading range looks to be forming. (Source: Dorsey Wright Website)

NASDAQ

NASDAQ 9.15.17

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 fear trade from two weeks ago, looks to have been unwound with stocks and bond yields up. After hitting a low of 2.05%, the 10 year has floated back up to 2.17%. The pattern for lower yield still looks intact over the near term. We are watching the 1.8% level, which was the turnaround level in 2016. (Source: Dorsey Wright Website)

10-year Treasury

10YearTreasury 9.15.17


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. We would like to note that International Equities are really moving up in the pitch count over the last month. They were a distant #2 at the beginning of August and now are a very close #2 to US Equites. (Source: Dorsey Wright Website)

Conclusion

If you have been reading this piece on a regular basis, you know that we have been negative on the US Equity markets for the last six months, as our risk indicators are elevated. When the markets make new highs, a cautious stance seems to be the wrong strategy. However, we believe that there are times like now where investors need to be careful. Investment markets seem in recent months, to be ruled by investor sentiment rather than what is taking place in the economy. The market began this rally after the election, based upon hopes of repealing the affordable care act, changes in the tax code and repatriation of foreign dollars held by US companies overseas. So far, none of that has happened. Investor sentiment can fluctuate to the extremes daily and last week and this week are good examples of that. If investor sentiment turns negative for an extended period, (longer than a day), then our defensive stance will be warranted.

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.

This report contains confidential and proprietary information of BWC and is intended for the exclusive use of the parties to whom it was provided by BWC. Its content may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity, without BWC’s prior written permission.

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.

Information contained herein has been obtained from a range of third party sources. While the information is believed to be reliable, BWC has not sought to verify it independently. As such, BWC makes no representations or warranties as to the accuracy of the information presented and takes no responsibility or liability (including for indirect, consequential or incidental damages) for any error, omission or inaccuracy in the data supplied by any third party.

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For the most recent approved ratings of an investment strategy, and a fuller explanation of their meanings, contact your BWC representative.


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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