BWC Market Update - March 8, 2019
All eyes are focused on today’s job report. This report is late because of the government shutdown. The big news in January was how hot the number was at 304k jobs added versus the expect positive 165K. February has come in exactly opposite with a big miss of only 20k jobs added versus the forecast for 180k jobs added. (data retrieved 3/6/2019 from www.fxstreet.com). The question remains, will the US economy slowdown in 2019? Let’s see what our indicators say about the Equity markets.
Bullish Percent’s, (Data source: Dorsey Wright, see definitions at the end of this report.)
10 Week- Bullish Percent (Short-term): The 10-week is currently extremely overbought. In the month of February, it reached 86%, a reading we haven’t seen in years. So far for March 2019, it has backed off to 80%, but even this level is extremely overbought.(Source: Dorsey Wright,2/6/2019)
Optionable-Stock Bullish Percent (Intermediate term): This indicator is still on OFFENSE and has moved up nicely to 54%. This is still in the middle of the field and in a neutral, yet positive position. (Source: Dorsey Wright,2/6/2019)
NYSE Bullish Percent (NYSEBP) (Longer-term): The NYSEBP is also moving up nicely at 56%, with the same view of neutral, yet slightly positive. (Source: Dorsey Wright, 2/6/2019)
Point and Figure Charts (Source: Dorsey Wright, 2/6/2019)
S&P 500: In the month of February, the S&P 500 broke above an important downtrend line at 2700. After a brief pullback to 2690, the S&P 500 put in a strong performance reaching 2810. The S&P 500 is at a very important resistance point at 2800. You can see that it reached this level after selling off in September three times! Once in October 2018, once in December 2018 and now in March of 2019. If it can break this level, it really has the chance to make new highs. However, with the current overbought position, this might be too much to ask. (Source: Dorsey Wright Website,2/6/2019)
NASDAQ: The NASDAQ has also broken above an important downtrend line and accelerated higher. The chart for the NASDAQ actually looks better since the NASDAQ has broken above the November 2018, December 2018 and February 2019 highs. (Source: Dorsey Wright Website 2/6/2019)
US 10-Year Treasury Note: The 10 year remains range bound so far for 2019. As you can see by the chart, last year at this time, yields were marching higher from 2.5% level. In May of 2018, we saw a peak at 3.1%. So far, 2019 is playing in a much more subdued manner. (Source: Dorsey Wright Website 2/6/2019)
Crude Oil, Continuous: Crude is showing a small breakout in February. Crude may start trading sideways at a higher level. We still believe that in 2019 crude prices will continue to try to move higher and get back to the $60-$65 level. (Source: Dorsey Wright Website 2/6/2019)
Crude Oil, Continuous
The S&P 500 has rallied 20% from the intraday low on December 24th, 2018 to the intraday high on February 25, 2019. We were fortunate enough to push money onto the equity table the first two weeks in January and our clients have been rewarded. Although we are bullish on 2019, we could envision a scenario where the US Equity markets start out hot for 2019 and then trade sideways for an extended period of time. With our short-term indicators over extended and the ferocious rally we have just experienced, we are currently on hold with committing new money to the Equity markets.
Have a great weekend!
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.
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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