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Market Update - December 11, 2015

Friday, December 11, 2015

Economic Comment

We apologize to our readers for being “dark” the last several months. Technical difficulty was the reason, but now we are back. Friday was the government jobs report and it came in strong which sparked a 350 point rally in the Dow Jones. The early part of this week the markets have given some of last week’s gains back. The question is will the global equity markets give us a Santa Claus rally or a lump of coal? Time to look at our indicators since there have been some major changes since September. 

Bullish Percent’s

10 Week Bullish Percent (Short-term) since September the 10 week retested a low of 14%. It then turned around and for the month of October has rocketed up to 64%. In November this indicator actually hit 70% and had been very over bought. So far for December the 10 week has declined to 34% which is now oversold. (Data source Dorsey Wright, see definitions at the end of this report).

Optionable Stock Bullish Percent (Intermediate term) this indicator on OFFENSE and has rallied from 28% to 50% from October to December. It is now right at mid field but still positive. (Source: Dorsey Wright)

NYSE Bullish Percent (NYSEBP) (Longer-term) this indicator was on OFFENSE but this week enough stocks gave point and figure sell signals that it has flipped back to DEFENSE. From October to December this indicator rallied from 28% to 50%, but enough stocks gave point and figure sell signals that it came down 6% which is enough to go back on Defense. (Source: Dorsey Wright)

Point and Figure Charts (Source: Dorsey Wright)

S&P 500 has had a great run from October 1st to a high in November of 2110. Since that time this chart has been trading back and forth between resistance at 2110-2130 and support at 2020-2040. This looks to be a period of consolidation. (Source: Dorsey Wright Website) 

NASDAQ the NASDAQ has had a huge run from 4500 to 5160. For the month of December 5160 was challenged again. It now looks like this index is also in a consolidation mode with 5000 on the low end and 5160 on the high end. (Source: Dorsey Wright Website) 

Russell 2000 the Russell 2000 broke through a bearish downtrend line in November and made it to 1204. Now for the month of December the Russell 2000 has retraced down to an important uptrend line at 1144. We still think small cap stocks play catch up by the end of year. (Source: Dorsey Wright Website) 

US 10-Treasury Note:  just when it looks like rates are going back down the 10 year see rates back up. For the month of December the 10 year made it down to 2.15% only to rally back to 2.35%. However, in the last week, rates are floating back down to 2.2%. This looks like an extension of the bigger trading range only tighter. (Source: Dorsey Wright Website) 

Relative Strength US Equities still number 1, Fixed Income number 2 and Money Funds are number 3. (Source: Dorsey Wright Website) 

Conclusion

The commodities markets especially oil are weighing on the global equity markets. When the calendar changed from September to October oil and global equity markets rallied. It looks like the same situation is setting up for December 31st and the change over to the New Year. It appears that retail investors are taking losses on energy stocks and selling them down before year end. It still looks to us that with our indicators improving, the markets could have a year-end rally that spills over to the 1st quarter of 2016 even with a predicted interest rate hike.

Unseasonably warm weekend ahead!

Have a great weekend!

Christopher P. Englebert

Managing Director  

Beirne Wealth Consulting, LLC

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