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BWC Market Update - May 11, 2018

Economic Comment

Earning season is history and all eyes are back on global headlines. This seems to lend to more “noise” for the markets to deal with. Let’s look at our indicators for clues as to how the summer will fare.

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

10 Week- Bullish Percent (Short-term): This indicator finished April at 64%. So far for May the 10 week has seen a retreat to 48% followed by a small gain to 54%. This is now at a slightly overbought level.

Optionable-Stock Bullish Percent (Intermediate term): On April 18th this indicator reversed back up to OFFENSE, but not from a great level. Now at 46.68% it would have to get under 44% to reverse back down.

NYSE Bullish Percent (NYSEBP) (Longer-term): This indicator went positive on April 17th and now sits at 47.73%. It would also take a move under 44% to turn this indicator back down, but for now it is on OFFENSE. (Source: Dorsey Wright)

Point and Figure Charts(Source: Dorsey Wright)

S&P 500: After getting as low as 2600 in April, the S&P 500 has had a nice little rally. Next resistance is 2710. However, right now there has been a series of lower highs and higher lows leading to a triangle formation. Typically, the first move in either direction out of a triangle formation tends not to be the intermediate term trend. (Source: Dorsey Wright Website)

S&P 500 

SP500 5.11.18

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

So, goes the FAANG trade , so goes the NASDAQ. Two large cap tech stocks in the NASDAQ are really pushing the NASDAQ index around, both up and down. (Source: Dorsey Wright Website)

NASDAQ

SP500 5.11.18

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: After hitting 3%, in the month of May the 10-year has pulled back to 2.92% and is making another run to 3%. Like we said several weeks ago, usually the first move higher is followed by a retracement. This pullback was very short. (Source: Dorsey Wright Website)

10-year Treasury

10yearTreasury 5.11.18
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 is resuming its rally mode and looks to be going to the $70-$75 level. (Source: Dorsey Wright Website)

CrudeOil 5.11.18

Conclusion

May has seen US Equity markets improve, but once again we are entering the historically weak period for stocks. Last year the “sell in May and go away” trade did not work as it has in years past. 2018 maybe entirely different. We don’t believe the sharp sell offs that marked the last four months are the end of corrections in the stocks market. We remain cautious.

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

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© 2018 Beirne Wealth Consulting Services, LLC (BWC). All rights reserved. Reproduction or Use without permission is prohibited.

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.
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 asset classes and ranks the asset classes from strongest to weakest based upon relative strength (RS). We feel asset classes can be ranked like 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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