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Market Update - January 9, 2018

Economic Comment

Now that the holidays are over and the first week of trading is in the books, we want to get back on schedule! Friday the Government reported the last jobs number of 2017. The December jobs added projections ranged from 190-225K. (Bloomberg) The actual number came in light at 140k. In addition, November’s hot number of 252k jobs added was revised down to 228k. If you remember in May of 2017, a similar slowdown was experienced. Can you believe it has been about a month since we last reviewed our indicators? Let’s see what they have to say.

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

10 Week- Bullish Percent (Short-term): This short-term indicator has risen to overbought at 68%, as a result of the first week in January experiencing a straight up move in the equity markets. Do not be surprised by any short, sharp sell offs in the near future.

Optionable-Stock Bullish Percent (Intermediate term): Still on OFFENSE. Over the last month, this intermediate indicator has climbed to 62%. It has done this quietly and in small increments.

NYSE Bullish Percent (NYSEBP) (Longer-term): Still on OFFENSE at 67%. The recent high for this indicator was 68% in January of 2017. It looks like we may reach the same level in January 2018. (Source: Dorsey Wright)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500: As mentioned a month ago, the S&P 500 has experienced a “parabolic” move up and this trend has continued. The S&P 500 has been positive for nine consecutive quarters, without experiencing a single negative month in 2017.We are witnessing history in the making. However, in our experience these moves do not end well. This period resembles 1999-2002. After peaking in December of 1999, the S&P 500 began 2000 positive only to sell off later in the month. March of 2000 saw a peak in the S&P 50, which then began a decline that would last the rest of the year. History doesn’t repeat its self, but it does rhyme. (Source: Dorsey Wright Website)

S&P 500 1999-2000, arrow denotes peak in S&P 500 in March of 2000

 SP5009900 1.9.18

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


The NASDAQ is showing the same parabolic “moon shot”. Immediately, after breaking through 7,000, the NASDAQ went right through 7,100.(Source: Dorsey Wright Website)


 NASDAQ 1.9.18

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: It looked like the 10 year was going to take off with higher yields the first week of the New Year. However, the tepid job numbers look to be putting a lid on rates for the time being. (Source: Dorsey Wright Website)

10-year Treasury

10yearTreasury 1.9.18
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, continuous: The S&P 500 was on a non-stop rally in 2017. It looks like that baton may have been passed to the crude oil market as we start out 2018. Since the lows set back in June at $42 per barrel, the rally has been straight up with only a brief pause. (Source: Dorsey Wright Website)

CrudeOil 1.9.18

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


It appears as if we are in a full-blown “market melt-up”. The S&P 500 has experienced nine consecutive positive quarters, without a single negative month in 2017(something that has never happened before). Mark pundits will begin the adage, “so goes the first three trading days of the year, so goes the rest of the year”. However, a one-way market with extreme valuations has our risk indicators pegged at the top. This is the only business that I am aware of that when stocks are on sale no one wants to buy, (March of 2009), yet when prices are at all-time highs, (January of 2018) everyone wants in. Our clients have diversified portfolios with various weightings in different asset classes, which helps to reduce risk. We know that it is tempting to chase returns and “hot” sectors, but history has shown those results don’t work in the long run. We remain cautious going into the New Year.

Click on the link, below to see my latest YouTube video with Jill Malandrino from the NASDAQ.

Have a great rest of the week!

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 22 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

© 2018 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.


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").


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