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BWC Market Update - February 1, 2019

Economic Comment

January of 2019 has proven to be the exact positive, opposite of December of 2018. The bears are lamenting that if the US Equity markets continue to move higher, it will have been the shortest bear market on record. The month kicked off with a much stronger than expected jobs report and earnings season continues to help. Our risk indicators are improving, so let’s review them.

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

10 Week- Bullish Percent (Short-term): The 10-week has made quite a round trip during the last month. After hitting 6% in December, this indicator is now at 70%. It was only higher in January of 2018. This tells us that on a short-term basis, the US equity markets are overbought and could experience a pullback of 3-5% at any time. (Source: Dorsey Wright,1/30/2019)

Optionable-Stock Bullish Percent (Intermediate term): This indicator is still on OFFENSE and continues to move higher now at 36%. The next challenge will be to see if it can get over the December 2018 high of 40%. (Source: Dorsey Wright,1/30/2019)

NYSE Bullish Percent (NYSEBP) (Longer-term): This longer-term indicator is also powering higher and is at 36%. It’s still a good field position to put equity money to work. (Source: Dorsey Wright, 1/30/2019)

Point and Figure Charts (Source: Dorsey Wright, 1/30/2019)

S&P 500: If you saw our “Quick Charts” on Twitter this past Wednesday, this is the same chart. We are focusing on the positive fact that the S&P 500 got back above an important uptrend line and is now challenging an important downtrend line. Typically, the first challenge to a downtrend line fails, however, the S&P 500 is showing very good strength. Once above 2700, the intermediate term picture improves.(Source: Dorsey Wright Website,1/30/2019)

S&P 500

SP500 2.1.19

The NASDAQ is in the same position of challenging an important downtrend line. If the NASDAQ breaks this downtrend line, it has quite a bit more room to run on the upside. (Source: Dorsey Wright Website 1/30/2019)

NASDAQ

NASDAQ 2.1.19

US 10-Year Treasury Note: The 10 year is approaching the first zone of resistance that we pointed out several weeks ago. It will be interesting to see how the 10-year acts when it hits the 2.8-2.9% zone. We still believe that rates over 3% mean the economy is okay and rates below 3% mean investors think a recession is coming. (Source: Dorsey Wright Website 1/30/2019) 

10-year Treasury

10yearTreasury 2.1.19

Crude Oil, Continuous: Crude oil has been trading in a tight range. In fact, once it got back over $50 per barrel it has been locked into a $50-$54 range. This sideways pattern would be good to repair the long-term positive chart and could set the stage for a higher move later in the year. (Source: Dorsey Wright Website 1/30/2019)

Crude Oil, Continuous

CrudeOil 2.1.19

Conclusion

Field position with our risk indicators has us going from DEFENSE to OFFENSE for clients. We have put money to work in the Value sectors of the US Equity markets as well as the Growth sectors. The bears are saying this is just a bounce in a new downtrend. We prefer to use our risk measures to change our client’s portfolio orientation. The US stock market in December 2018 seemed to be pricing in a hard recession for 2019. Although we believe we could get an economic slowdown in 2019, the recent sharp declines have provided investment opportunities we haven’t seen in several years. We constantly monitor our risk indicators and the 10-week bullish percent is telling us that markets are short-term overbought, but that doesn’t mean they can’t get even more overbought. February may be the first test we get in US equity markets, but we will keep you updated!


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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© 2019 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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