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BWC Market Update - August 8, 2018

Economic Comment

It’s was the first Friday of August last week and the financial news took a break from reporting company earnings to reporting July’s nonfarm payrolls. The headline number was a miss from consensus at 157,000, but May and June saw a combined revision higher by 59,000. (CNBC Website,08/03/2018) The revisions from the previous months seemed to help offset the weaker headline number. It has been several weeks so let’s review our indicators!

Bullish Percent’s, (Data source: Dorsey Wright 08/06/2018, see definitions at the end of this report.)

10 Week- Bullish Percent (Short-term): After peaking at 68%, in June, July saw this indicator bounce from 50% to 64%. In August, this indicator has declined to 52% which is neutral. (Source: Dorsey Wright, 08/06/2018)


Optionable-Stock Bullish Percent (Intermediate term): This indicator is still on OFFENSE at 53.26%. Still in the middle of the field. It would take a move below 52% to turn this indicator negative. (Source: Dorsey Wright, 08/06/2018)

NYSE Bullish Percent (NYSEBP) (Longer-term): Still on OFFENSE at 55.41% which is farther away from the reversal level of 52%. (Source: Dorsey Wright, 08/06/2018)

Point and Figure Charts(Source: Dorsey Wright, 08/06/2018)

S&P 500: After breaking through 2790 the S&P 500 is moving in a choppy fashion higher. The question is how long before it breaks above the January high of 2870? (Source: Dorsey Wright Website, 08/06/2018)

S&P 500

SP500 8.8.18

NASDAQ

Another new high was made by the NASDAQ in July. However, earnings reports from a couple of key companies in the NASDAQ has seen a sharp selloff of this index. But a few days later the NASDAQ is once again trying to move higher. This chart is showing bigger and bigger price swings which may worry some investors. (Source: Dorsey Wright Website, 08/06/2018)

NASDAQ
NASDAQ 8.8.18


US 10- Year Treasury note: Just when it looks like the 10-year is breaking out higher at 3% to challenge 3.1%, it seems to turn right around and head lower. This is surprising considering the stronger previous revisions in the employment numbers. However, like we mentioned several weeks ago. “Is the decline in yield in the 10-year telling us something about the future strength of the US economy in the 2nd half of 2018?” (Source: Dorsey Wright Website, 08/06/2018)

10-year Treasury

10yearTreasury 8.8.18

Crude Oil, continuous: After making a new high for the year at $75, Crude seems to be in the midst of an orderly pullback. A break below $66 could signal a move to the low $60’s. However, if crude oil holds at these levels, a challenge to the $75 could come quickly. (Source: Dorsey Wright Website 08/06/2018)

CrudeOil 8.8.18

Conclusion

It appears that we could be coming to the end of the current economic cycle. The last time we had a recession was 2008 during the global fiscal crisis. The laws of business cycles with booms and busts cannot be repealed. Although, it may seem that the US economy is immune to a recession, eventually every economy experiences one. With record high stock market valuations, we continue to remain cautious.

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.
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.

The Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange.

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.

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

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.

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