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BWC Market Update - November 9, 2018

Economic Comment

Whew! busy week this week with Tuesday’s elections dominating the news cycle. After a rough October all eyes are focused on what the election may mean for the financial markets for the rest of the year. Time to 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 short-term indicator really sold off hard in the month of October all the way down to 12%, a much oversold level. Market rallies can be expected when the 10-week is so oversold. Now at 28%, it is still at the oversold level. (Source: Dorsey Wright 11/7/2018)

Optionable-Stock Bullish Percent (Intermediate term): As of November 2nd, this indicator is now on OFFENSE. After the sharp decline in October to the 28% level, enough stocks reversed and gave point and figure buy signals to get this indicator up to 36%. (Source: Dorsey Wright, 11/7/2018)

NYSE Bullish Percent (NYSEBP) (Longer-term): As of November 6th, this indicator is back on OFFENSE. October saw a decline to 30% and then a reversal over 36% to get back to OFFENSE. Now, the comment we would like to make, is that we have seen this longer-term indicator move back to offense after a sharp decline, only to reverse course and go back to DEFENSE. We aren’t positive that the “all-clear” signal has been sounded. (Source: Dorsey Wright, 11/7/2018)

Point and Figure Charts (Source: Dorsey Wright, 11/7/2018)

S&P 500: The sell-off in October has done some serious technical damage to the S&P 500 chart. A major uptrend line has been broken. The longer the S&P 500 stays below this trend line and doesn’t make a recovery, the more serious the picture looks. Several daily closes above the 2820-2860 level are needed to keep the year’s uptrend intact. (Source: Dorsey Wright Website 11/7/2018)

S&P 500

 SP500 11.9.18

The NASDAQ: is showing much more technical damage than the S&P 500. The decline from the high in August, to October’s low was 14.7%. It looks like the trend for the NASDAQ near term is at best sideways. (Source: Dorsey Wright Website 11/7/2018)

NASDAQ

 NASDAQ 11.9.18

US 10-Year Treasury Note: The real mystery for the 10 year is the question that after a bad month of October, the flight to safety (sell stocks, buy bonds) hasn’t materialized. The 10 year dipped from 3.22% to 3.07%, but then quickly rose back to 3.2%. It looks as though the 10 year has found a new level, over the 3% range. (Source: Dorsey Wright Website 11/7/2018) 

10-year Treasury

10yearTreasury 11.9.18

Crude Oil, Continuous: Since Octobers’ new high at $76, crude oil has had a sharp pullback and has broken a strong, multi-year uptrend line. The $64-$65 was important support. Crude oil needs to regain that level, or a longer-term price top could be in place. (Source: Dorsey Wright Website 11/7/2018)

Crude Oil, Continuous

CrudeOil 11.9.18

Conclusion

The month of October hammered many of our risk indicators to levels not seen in years. The speed of the market sell-off in October was quick and painful. Although, our bullish percent indicators are signaling that demand is coming back into the markets, the point and figure charts need some repair. We are reviewing positions and looking to put the offense back on the field, but the mixed picture is making us cautious. As we said several weeks ago, “long-term trends lines could be challenged.” These long-term trend lines have now been broken and the US equity markets are struggling to regain them. We did see gains for the year in US Equity averages wiped out in October. There could be some recovery into year end, but we are not sounding the “all-clear” yet.

Have a great weekend!

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Bullish Percent Definitions

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.

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.


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.

https://www.quandl.com/data/CHRIS/CME_CL1-Crude-Oil-Futures-Continuous-Contract-1-CL1-Front-Month


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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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