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BWC Market Update - December 19, 2018

Economic Comment

Last week, saw another down week for US Equity markets. Today, (Wednesday), the Federal Reserve had their last meeting of the year. All markets are waiting to see if Chairman Powel, gives the US Equity markets a Santa Claus rally! Let’s see if our indicators give us a preview of how 2018 will finish and 2019 will start! This will be our last comment until 2019!

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

10 Week- Bullish Percent (Short-term): Last week’s equity declines have seen this indicator reverse back down to 24%. The low in October was 12%. This is still short-term oversold. (Source: Dorsey Wright,12/17/2018)

Optionable-Stock Bullish Percent (Intermediate term): This indicator is on DEFENSE and at 30%. The low in October was 28%. (Source: Dorsey Wright,12/17/2018)

NYSE Bullish Percent (NYSEBP) (Longer-term): This indicator is also DEFENSE and at 30% which is the same level it hit in October. Remember, the NYSEBP is loaded with financials and the fact that they have had a tough couple of months is affecting this indicator. As we have said previously, it is not unusual for this indicator to be negative, turn positive, then turn negative one more time before improving.(Source: Dorsey Wright, 12/17/2018)

Point and Figure Charts (Source: Dorsey Wright, 11/30/2018)

S&P 500: After the sharp rally in November to 2810, the down trend line rejected the advance. Now the S&P 500 is probing down to the February lows of 2560-2580. That looks to be some type of support. The S&P 500 is now negative for the year and would need some type of rally back to 2800 and a breakout to make the intermediate picture look better. Right now, it still looks like a trading range. (Source: Dorsey Wright Website,12/17/2018)

S&P 500

SP500 12.19.18

NASDAQ: The NASDAQ has been whipping around so much that we “slowed” down the chart to get a better intermediate term perspective. You can see we are using 50 points for price changes. 6650-6800 looks like some type of support. (Source: Dorsey Wright Website 12/17/2018)

NASDAQ

NASDAQ 12.19.18

US 10-Year Treasury Note: The risk-off trade last week, (sell stocks, buy bonds), helped the 10-Year get down to 2.8%. The move under 3% was quick and decisive. Since 3% could be resistance on any move back up. As we said in our last note, “It looks like the 3% level is important to watch. Below 3% could mean the economy is slowing down, above 3%, everything is okay.” (Source: Dorsey Wright Website 12/17/2018) 

10-year Treasury

10yearTreasury 12.19.18

Crude Oil, Continuous: So far crude has been stabilizing at the $50 level and a mini trading range seems to be developing. That range is $50-$54 for the time being. With the drop of this magnitude, crude could trade in this range for a while. (Source: Dorsey Wright Website 12/17/2018)

Crude Oil, Continuous

CrudeOil 12.19.18

Conclusion

With only seven trading days left, this looks like it could be the year the S&P 500 breaks the string of nine consecutive up years. Believe it or not, our risk indicators are extremely compressed, telling us that risk in the US Equity markets is decreasing. Many sectors of the stock market such as autos, home builders and banks have sold off to levels that would indicate a severe recession in 2019, maybe on the order of magnitude of 2008. We don’t see such a hard recession happening. Even with the decline in the FAANG stocks, the difference between value and growth is at record levels. We are putting money to work in the value sector, especially high dividend paying US Equities. As we said before, “This market could be shaping up like the 1999-2004 market. During that period of the .com bust, investors went back to companies that had reasonable valuations and paid a dividend.”

This is our last note for 2018. We would like to thank all our readers and our clients. We truly appreciate you and look forward to 2019!

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


About Beirne Wealth Consulting Services, LLC
Beirne Wealth Consulting Services, LLC (“BWC”) is a growing, privately owned, SEC Registered Investment Advisor with offices 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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