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BWC Market Update - March 7, 2018

Economic Comment

Once again, we are back in “no man’s land’ of jobs and earnings reports. The headlines are driving the markets and last week the talk of trade embargos really drove the US Equity markets. Let us see how the renewed volatility in global equity is affecting our indicators.

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

10 Week- Bullish Percent (Short-term): February was a very volatile month for this short-term indicator. After reaching a high of 74% in January, February produced a deeply oversold reading of 16%, followed by a quick run to 42%, only to be reversed once again down to 26%. This indicator is now oversold on a short-term basis.

Optionable-Stock Bullish Percent (Intermediate term): Two weeks ago, the sharp rally we experienced, pushed this indicator to OFFENSE, as it reversed up from 44% to 50% (right in the middle of the field). Field position is about as NEUTRAL as you can get.

NYSE Bullish Percent (NYSEBP) (Longer-term): February 16 saw this indicator move to OFFENSE, after a sharp drop at the end of January and the beginning of February. Now at 50%, this indicator is only 2% away from returning to DEFENSE. (Source: Dorsey Wright)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500: The “parabolic” rise that we have pointed out in the last month has given way to a sharp rally, which has subsequently sold off. The S&P 500 has experienced some technical damage and needs to hold at current levels. If 2,540 is taken out on the downside, this opens the S&P 500 to the 2,400 level and then the 2,160 level. (Source: Dorsey Wright Website)

S&P 500

SP500 3.7.18
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


NASDAQ

Same volatile chart and a lower high. Bulls have a lot of work in front of them before upward trend can resume.(Source: Dorsey Wright Website)

NASDAQ

NASDAQ 3.7.18

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: The 10-year has “banged” against 2.925% three times and retreated. The flight to safety trade, (stocks down, investors buy bonds) may have helped. First support is 2.75% before lower rates can be seen. (Source: Dorsey Wright Website)

10-year Treasury

10yearTreasury 3.7.18

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: Crude Oil experienced a small rally at the end of February and seems to be consolidating at these levels. Break above $66 would be a resumption of the uptrend. (Source: Dorsey Wright Website)

CrudeOil 3.7.18

Conclusion

The market experienced a parabolic advance in January, immediately followed by a blow off in February. Then we saw a sharp bounce upwards in the equity markets late February, followed by a “trade wars” sell off. Obviously, 2018’s rollercoaster volatility in the first 2 months stands in sharp contrast to 2017. The BWC team works with many institutional money managers and the consensus amongst the bonds managers is that we may have reached the highs for interest rates for the year; while the equity managers feel the lows for the stock market have yet to come. Our indicators are a real mixed bag, but we still believe caution is warranted, considering the increased volatility. We remain on the DEFENSE.


Click on the link below to hear me talk about investment considerations in a bear market.

https://youtu.be/p6KsKThVIco

Have a great rest of the week!


Christopher P. Englebert
 

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 market update 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 update 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 does not constitute an offer or a solicitation of an offer to buy or sell securities, commodities and/or any other financial instruments or products or constitute a solicitation on behalf of any of the investment managers, their affiliates, products or strategies that BWC may evaluate or recommend.


This market update 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. 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. 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.

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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