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BWC Market Update - February 15, 2019

Economic Comment

The big news this week has been the progress on China trade talks and avoiding another government shutdown. Earnings season is winding down, so we have to be aware that headlines will start to have a greater impact on investment market movements. Time to update our indicators.

Bullish Percent’s, (Data source: Dorsey Wright 2/14/2019, see definitions at the end of this report.)

10 Week- Bullish Percent (Short-term): The 10-week is pegged at an extreme overbought level. After hitting a high of 82%, the 10-week has backed off to 76%. This tells us that equity markets in the short-term are overbought. Although, they may still continue higher as witnessed by Tuesday’s sharp move up, we would expect some type of short-term consolidation or pullback. (Source: Dorsey Wright,2/14/2019)

Optionable-Stock Bullish Percent (Intermediate term): This indicator is still on OFFENSE and in the month of February has moved up to 46%. This intermediate indicator is approaching midfield at 50%. (Source: Dorsey Wright,2/14/2019)

NYSE Bullish Percent (NYSEBP) (Longer-term): This longer-term indicator has also seen improvement in February and is also at 46%. This means that 46% of the stocks in the NYSE are on point and figure buy signals. (Source: Dorsey Wright, 2/14/2019)

Point and Figure Charts (Source: Dorsey Wright, 2/14/2019)

S&P 500: Not only has the S&P 500 gotten above an important intermediate term trendline, it has also broken out to a new short-term high at 2740. The intermediate term picture for the S&P 500 has definitely improved. However, we still believe that after the sharp rally off the December 2018 bottom, some consolidation is needed in order for the S&P 500 to move higher. On another technical note, the S&P 500 is now back above it’s 200 day moving average. Another positive sign. (Source: Dorsey Wright Website,2/14/2019)

S&P 500

SP500 2.15.19

NASDAQ: The NASDAQ is showing the same nice breakout above an important downtrend line. This now improves the intermediate picture for this index. (Source: Dorsey Wright Website 2/14/2019)

NASDAQ

NASDAQ 2.15.19

US 10-Year Treasury Note: The real mystery here is why the 10-year yield is staying so subdued with the improvement in the US Equity markets. The fear trade is when stocks are sold, and bonds are bought. Now that the US Equity markets have rallied sharply, it would seem there would be an unwinding, with bonds sold, (yields up) as stocks are being bought. It looks to us like yields are consolidating at these lower levels and forming a trading range. (Source: Dorsey Wright Website 2/14/2019) 

10-year Treasury

10yearTreasury 2.15.19

Crude Oil, Continuous: Not much news here. After the December spike lower to $43, Crude oil has recovered and has been locked in a tight trading range between $50-$55. This could be the best pattern for Crude, which would be to create a consolidation pattern and build a base from which to move higher later in the year. (Source: Dorsey Wright Website 2/14/2019)

Crude Oil, Continuous

CrudeOil 2.15.19

Conclusion

Our risk indicators have continued to improve through the middle of February. Our short-term indicators are over extended so any type of 3-5% pullback should not be a surprise. There has been quite a bit of chatter this week about investors who sold out in December and have failed to get back in, missing the nice intermediate recovery in January and February. This money is now “locked” out of the market and could chase the equity averages even higher. This is why we use our risk indicators. At the end of August and September, our risk indicators were flashing yellow and red and we positioned our clients accounts accordingly. By the end of December of 2018 our risk indicators where at levels we haven’t seen since March of 2009. This prompted us to add equity exposure to our client’s portfolios. We continue to believe the US economy is in better shape than what is expected and that the US Equity markets could continue to “surprise on the upside”.

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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