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BWC Market Update - September 28, 2018

Economic Comment

As the third quarter ends, it is apparent for the second year in a row the “sell in May and go away” trade hasn’t worked. The S&P 500 had 15 consecutive months up in a row that ended in February. After a negative February and March, the S&P 500 is looking to close out September with a string of six consecutive positive months in a row. (Data courtesy of YCharts) The S&P 500 once again is demonstrating low volatility and no real pullbacks of great than 2%, very similar to 2017. If the fourth quarter of 2018 is like the rest of the year and the S&P 500 finishes positive for 2018, it would be the 10th consecutive year of positive gains for the S&P 500. Let’s 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): In September, this indicator sold off from 62% and is now at 48% which is short-term neutral. (Source: Dorsey Wright, 9/26/2018)

Optionable-Stock Bullish Percent (Intermediate term): Still on DEFENSE, this intermediate term indicator hasn’t seen any follow through to the downside in the month of September. The April low of 44%.(Source: Dorsey Wright, 9/26/2018)

NYSE Bullish Percent (NYSEBP) (Longer-term): Still on OFFENSE at 56%. It would take a move under 52% to go negative. (Source: Dorsey Wright, 9/26/2018)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500: After a brief pause from the new highs of August, the S&P 500 rolled right into September with a new high at 2940. The consolidation/breathers are getting shorter and shorter as the S&P 500 accelerates. A 2% pullback (which we haven’t had since June) would bring this index down to 2880. (Source: Dorsey Wright Website 9/26/2018)

S&P 500

 SP500 9.28.18

(Source: Dorsey Wright Website 9/26/2018)

NASDAQ: After the new high for the NASDAQ in August, this index has seen a period of consolidation. Good support at 7900. (Source: Dorsey Wright Website 9/26/2018)


NASDAQ 9.28.18

(Source: Dorsey Wright Website 9/26/2018)

US 10- Year Treasury note: Bond investors have seen the 10-year breakout of the tight range it was in with a quick move to 3.10%, the highs of May. This move up in September has been quite strong and a period of consolidation may be in order. This might just be a move back to the top of the trading range, or the precursor of a move to higher interest rates. (Source: Dorsey Wright Website 9/26/2018) 

10-year Treasury

10yearTreasury 9.28.18

(Source: Dorsey Wright Website 9/26/2018)

Crude Oil, continuous: August saw crude oil sell off to $65 only to rebound and setup a trading range. That trading range has been broken to the upside. If the $68 level holds, crude could challenge the July highs in the not too distance future. (Source: Dorsey Wright Website 9/26/2018)

CrudeOil 9.28.18

 (Source: Dorsey Wright Website 9/26/2018)


Complacency has seemed to set in for the major US Equity averages. International and Emerging Markets have seen negative returns for 2018 along with US Bonds. On January 26th, 2018, the S&P 500 peaked and had a sharp sell of 10%. If the same was to occur in the 4th quarter of 2018, it would wipe out equity gains for the year. Several of our indicators continue to flash “warning” signs. It would not surprise us if investors wanted to “lock” in gains for the rest of the year in October. We remain cautious.

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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.

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.
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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© 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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