BWC Market Update - September 11, 2018
It was the first Friday of September last week and the Government reported non-farm payrolls increased 201,000 versus consensus of 191,000 new jobs created. (Bloomberg website, 9/7/2018). However, the previous months of June and July saw jobs numbers revised lower. News of more tariffs however, has weighed on the global equity markets so we will review our indicators to see what they are telling us.
Bullish Percent’s, (Data source: Dorsey Wright, see definitions at the end of this report.)
10 Week- Bullish Percent (Short-term): August saw this indicator peak at 62%, which is slightly overbought. It has now declined to 52% which is neutral. (Source: Dorsey Wright)
Optionable-Stock Bullish Percent (Intermediate term): Without too much fanfare, this indicator rolled over and went to DEFENSE in the month of August. Now at 52%, we will see if it takes out the April low of 44%. (Source: Dorsey Wright)
NYSE Bullish Percent (NYSEBP) (Longer-term): Still on OFFENSE at 55.90%. It would take a move under 52% to go negative. (Source: Dorsey Wright)
Point and Figure Charts (Source: Dorsey Wright)
S&P 500: Right at the end of August, a new high was made at 2910. So far for September, we have seen a pullback which is not unusual after a breakout. Lots of support appears to be in the 2800-2840 zone. Strong support at the uptrend line of 2730. (Source: Dorsey Wright Website 9/7/2018)
The NASDAQ also saw a new high, right at the end of August as well. However, several of the large cap, key stocks that are in the NASDAQ, are really causing the NASDAQ to whip around. Because of the rapid rise in the NASDAQ, it could be prone to “slicing” through several levels of support. 7775 could be first support, but “real” support at the strong uptrend line isn’t until 7400, which is 6% lower. (Source: Dorsey Wright Website 9/7/2018)
US 10- Year Treasury note: A case can be made that the 10-year is in a tight trading range bounded by 2.82% on the low side and 3% on the upside. The 10-year is now challenging the 3% level after just recently hitting the 2.8% level in August. This has been an unusually extended period in such a tight range. (Source: Dorsey Wright Website9/7/2018)
Crude Oil, continuous July has seen a new high for crude oil followed by a quick sell off. August saw somewhat of a recovery. However, a quick pullback to $65 was followed by a failed rally now in September. With the strong multiyear move up in crude oil a test of the $61 at the uptrend line would not be out of the question. (Source: Dorsey Wright Website 9/7/2018)
Labor Day weekend marks the end of summer and kids are back in school. Investors seem to be back from vacation as well. We have seen significantly more trading volume and larger swings in the global equity markets. Several of our indicators are “flashing” warning signs. As trade tariffs news flow continues, more investors might look to lock in profits before the end of the year. As we have said before, with record high equity market valuations, we continue to remain cautious.
Have a great rest of the week!
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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.
10-week Bullish Percent is a short-term indicator and is calculated on 10 weeks’ worth of NYSE price data.
Optionable-Stock Bullish Percent is calculated off the index of all optionable stocks on the NYSE.
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.
Nasdaq 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.
The Crude Oil Continuous price is showing chart data presented in such a way that the expiring contract, i.e. the present front month, “feeds into” the next contract month. This is repeated monthly to get a “continuous price”.
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.
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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.
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