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Market Update - June 11, 2018

Economic Comment

Global headlines have really dominated the global equity markets. Last week’s concern about Italian debt caused the US markets to sell off. This week, positive trade news has seen several US indices, (NASDAQ and Russell 2000), hit new highs. So far, the sell in May and go away trade, is not working, since so far in June, US Equity indices are higher. Let’s review our indicators.

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

10 Week- Bullish Percent (Short-term): This indicator got as low as 48% in May and now for the first two weeks in June has rallied to 66% which is overbought. (Source: Dorsey Wright)

Optionable-Stock Bullish Percent (Intermediate term): On April 18th this indicator reversed back up to OFFENSE, and in the month of May and June has advanced to 54%. Positive, but in the middle of the field. (Source: Dorsey Wright)

NYSE Bullish Percent (NYSEBP) (Longer-term): This indicator went positive on April 17th and has advanced in May and June to 54%. (Source: Dorsey Wright)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500: The resistance at 2740 has now been slightly breached. Next resistance is now 2800. A trading range from 2700 to 2800 could now be developing. (Source: Dorsey Wright Website)

S&P 500

SP500 6.11.18

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

The FAANG trade is back! It has powered the NASDAQ to new all-time highs. Might be ready for a breather soon. (Source: Dorsey Wright Website)

NASDAQ

NASDAQ 6.11.18

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: The 10 years so far, this year has hit a peak at 3.1% and saw a quick pullback, (flight to safety trade after the Italian debt scare). Now floating back up to the 2.92% level. This chart could also be telling us a possible trading range is forming. (Source: Dorsey Wright Website)

10-year Treasury

10yearTreasury 6.11.18


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 After a huge run for 2018 with a peak at $72. Crude oil has seen a 10% pullback from the recent high. However, the uptrend is still intact. $60 seems to be a level to watch. (Source: Dorsey Wright Website)

CrudeOil 6.11.18

Conclusion

So far for the first two weeks in June the “sell in May and go away” trade is not working. New highs in the NASDAQ and the Russell 2000 make for positive news. The question is if the S&P 500 and DJIA will follow. Complacency has once again set in. Sell offs are being bought. However, like a summer day that seems bright and sunny, thunder clouds can quickly move in and create a strong downpour. It looked like last week the Italian debt crisis was going to be that thunderstorm that would affect the US Equity markets. We do believe that a conservative investment posture is prudent. Equity valuations are rich and the large stock tech dominance is a very crowded trade We remain cautious.

Have a great weekend!

PS. Don’t forget to follow me on Facebook and Twitter @CEnglebertRIA

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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