Wednesday, July 18, 2012


A sharp rally on Friday lifted global markets for the first time in the past seven trading sessions. JPMorgan's good 2nd Quarter earnings lifted the entire banking sector, and reports of a slowdown in China met investor's expectations further boosting confidence on Friday. Prior to JPMorgan's report, investors had little to cheer about as another financial firm (Peregrine Financial Group) was shut down due to fraud, the Federal Reserve affirmed that it had no plans for now to engage in another round of quantitative easing, and consumer sentiment remains weak.

The Dow Jones Industrial Average (DJIA) rallied 204 points (1.6%) on Friday to end the week up 5 points (.04%) closing at 12,777. The S&P 500 also finished the week positive (0.2%), but the Russell 2000 and NASDAQ each finished down -0.8% and -1.0% respectively. For the year, the DJIA is up 4.6%, the S&P 500 is up 7.9%, the Russell 2000 has gained 8.1%, and the NASDAQ leads all major US indexes with an 11.6% gain.

Sector performance was split this past week. Utilities, Health Care, Financials, Consumer Staples, Real Estate, Telecom, and Energy were all positive and each outperformed the DJIA and S&P 500 with Utilities leading all sectors (+1.6%). Consumer Discretionary, Industrials, Materials, and Information Technology were all negative with Information Technology the worst performing sector losing nearly 2%. For the year, Real Estate, Financials, and Health Care are the best performing sectors, while Energy, Utilities, and Materials have been the worst. Only the Energy sector is negative for the year on an absolute price basis.

Conditions in Europe remain challenging and markets there continue to underperform. Italian sovereign debt was downgraded by Moody's two notches and is only several notches above junk status. French automaker, Peugeot, announced it was laying off 8000 workers (8% of its French workforce) in a desperate effort to become profitable. Newly elected French President Hollande said the layoffs were unacceptable and is directing government intervention. This is a great example of the challenges facing Europe. Peugeot is losing an estimated €200 million ($245 million) each month due to years of falling demand and heavy exposure to high-priced French labor and the government is blocking the company's efforts to cut costs. For the week, the MSCI (EAFE) index fell 0.8% and is down -0.7% for the year.

The Euro fell another -0.2% for the week closing Friday at $1.225. The good news for the Euro is that it did rally a bit on Friday and closed off earlier lows in the week. The bad news is that the Euro continued to fall and the economic prospects in Europe are not improving. I will discuss the implications of currency fluctuations on markets in greater detail in the next section of my Update.

Recent concerns over a slowing global economy and rising dollar have not been enough to hold commodity prices in check. The Dow Jones UBS Commodity index gained 2.5% last week and this follows gains of 1.1% and 5.6% during the preceding two weeks. For the year, the Dow Jones UBS Commodity index is down -0.2% for the year. Coffee and Corn led all major commodity sectors while Livestock and Platinum were the worst performing last week. Oil gained 3.1% last week after the US State Department announced that it was taking steps to further enhance the oil sanctions on Iran. It is now estimated that up to 1.5 million barrels of oil per day will be removed from global supply as a result of US efforts. Gold gained 0.8% last week mostly on the news that the slowdown of economic growth in China was not worse than anticipated giving investors some cause for optimism. I believe gold prices have been hurt recently as US Treasuries have become the "go-to" safe-haven investment over gold.

US bonds, especially longer-term US Treasuries, have continued a steady generally upward course in 2012. The yield on both 10 and 30-year Treasuries fell again this past week and remain near historic lows closing Friday at 1.490% and 2.576% respectively. The US Barclays Aggregate US Bond index gained 0.4% last week and is up 3.5% for the year. After periods of high interest rates, falling rates are generally considered bullish and boost economic output. I believe in this economic environment, however, falling interest rates reflect fear and pessimism in the economy. Buyers of the US 10-year Treasury are getting a negative real return of -0.2% at the current level of inflation. Fear is a real part of bond investors' sentiments these days. Italian 10-year yields increased slightly after Moody's downgrade, and Spanish 10-year sovereign debt retreated substantially to 6.663% taking some of the immediate pressure off the European Central Bank and others as they try to fight this crisis.

UNDERSTANDING THE IMPACT OF US DOLLAR FLUCTUATIONS WITHIN MARKETS

As I evaluate markets on a week-to-week basis, I have made comments such as, "a strong US dollar is acting as a headwind on the price of gold," or, "oil prices fell as the US dollar gained strength." So this week I thought I would discuss the impact of a rising or falling US dollar on a variety of asset classes and sectors. Dorsey Wright & Associates in Richmond, Virginia, gathered the data I will be using in my discussion.

Let me begin by describing why currency valuations change with respect to other currencies. The "why" is based on the most fundamental concept of economic theory-supply and demand. Events and policies within a country or region like the European Union (EU) can cause investors to move money into or out of a country. For example, if the Bank of Country High is paying 5% interest on their 10-year sovereign bond and Country Low's central bank is paying just 2% for a similar bond, investors will borrow money from Country Low at 2%, convert their cash into Country High's currency and buy Country High's higher yielding bonds profiting on the spread between bond yields. This creates demand for High's currency pushing up the value of that currency and supply for Country Low's currency pushing that currency value down. The example I have just described is known as the "Carry Trade" among investors. Other factors that can influence the demand (either up or down) for a currency include civil wars, political instability, changes to gross domestic product (GDP), trade deficits/surpluses, and inflation.

Dorsey Wright analyzed the movement of fifteen asset classes/sectors from 1985 through June 7, 2012 with respect to a rising or falling US dollar. During this nearly 28-year time-frame, there have been 11 periods of a rising US dollar trend and 11 periods of a falling trend. The chart below shows how each of these fifteen asset classes/sectors performed on an absolute basis as the US dollar rose and fell. The red bars represent the average return of the asset class/sector during periods when the US dollar is falling and the green bars represent returns when the US dollar is rising. For example, the value of gold increased 24% on average when the US dollar was falling and lost 5% during rising periods. Not surprisingly, commodities and international stocks were the most affected asset classes/sectors because they have the greatest exposure to foreign currencies. Commodities in general, and gold and oil in particular have performed much better during periods of US dollar weakness. The reason for this, I believe, is because the vast majority of the 25 billion commodity contracts traded yearly are priced in US dollars. Anyone wanting to engage in the commodity business generally must do so in US dollars. Therefore, a rising US dollar makes the value of that commodity to foreign investors more expensive to buy. Rising prices typically causes demand to fall, which in turn causes the price of that commodity to fall as well. Similarly, a strengthening US dollar means that international stock investors are most likely selling their international holdings (driving prices down) and replacing them with US denominated investments.

SOURCE: Dorsey Wright & Associates

The most widely accepted index used to track the US dollar's performance is the U.S. Dollar Index (DX/Y).The DX/Y is a measure of the US dollar compared to an unequal basket of six major currencies: the Euro (€)-57.6%, the Japanese Yen (¥)-13.6%, the British Pound (£)-11.9%, Canadian Dollar ($)-9.1%, Swedish Krona (kr)-4.2%, and the Swiss Franc (Fr)-3.6%. The DX/Y has been on a positive trend since bottoming on May 2, 2011, gaining over 14% over that period. During this same timeframe, international stocks (MSCI EAFE) have fallen about 23%, WTI Oil has pulled back 25%, and Gold has held steady gaining about 1.5%. Additionally, US large capitalization stocks (S&P 500) and small/mid-capitalization stocks (Russell 2000) are down about 6%, and the Barclays Aggregate Bond Index is up just over 5%. Looking at all the data it appears that international stocks and commodities do better in a falling US dollar environment, and US stocks and bonds are, on average, less affected by US dollar fluctuations.

LOOKING AHEAD

Stocks are in the midst of 2nd Quarter earnings season and traders will be scrutinizing reports as they are released this week. The slowing US economy and the growing global slowdown are likely to cause earnings to be less robust this quarter, but by how much? This is the question everyone will be evaluating as this week and the next few weeks pass.

The Dorsey Wright & Associates (DWA) current technical analysis shows US stocks and Bonds as the two strongest major asset classes followed by Currencies, International stocks, and Commodities. Within the US stock asset class, Middle capitalization stocks are favored, growth is favored over value, and equal-weighted indexes are favored over capitalization-weighted indexes. On a relative strength basis, Consumer Discretionary, Real Estate, Health Care, and Consumer Staples are the strongest major economic sectors. Energy, Materials, and Industrials are the weakest. Information Technology has fallen from second to seventh position in the past week. Within the Bond major asset category, US Treasuries and International bonds are favored. Other than the changes within the major economic sectors, all previous relationships remain unchanged.

The New York Stock Exchange Bullish Percent (NYSEBP) closed at 52.10 rising by just 0.04% last week and remains in a column of X's (demand is in control). Looking at valuations over the past ten weeks, the DJIA and S&P 500 are considered to be fairly valued with the DJIA very slightly oversold at -5% while the S&P 500 is overbought by just 2%. Values north of 100 and approaching 150 are considered very overbought, while values of -100 to -150 are considered very oversold. Looking across many asset classes and sectors, fixed-income is the most overbought asset class with long-duration bonds the most overbought sector within the fixed-income asset class at +153. The most oversold sector is inverse fixed-income at -66%. While I do not use the overbought/oversold numbers as a primary indicator, it does help me gauge whether or not to start new positions within certain sectors. In this case, anything reading over 100 I will generally wait for a correction before initiating new positions.

A lot of economic data will be reported next week. Retail sales will start the week off on Monday morning. This is a very important indicator given the size of the consumer relative to the US's GDP. Consensus is looking for sales to improve by 0.2% after several months of declining sales-principally on the back of falling oil prices. This is a statistic where the details truly matter and so investors will be parsing the results carefully. The Consumer Price Index (no change) and Industrial Production (+0.3%) will be released Tuesday morning. Housing starts come out on Wednesday with a slight improvement over May expected. Jobless Claims (365,000) will be Thursday morning as ususal along with Existing Home Sales (slight increase), and the Philadelphia Fed Survey of General Business Conditions. The Philadelphia survey, while contracting, is anticipated to be better than May's number. Toss in two appearances by Fed Chairman Bernanke next week and economists and reporters will have a lot to discuss in this busy week.

The NYCE US Dollar Index is a measure that calculates the value of the US dollar through a basket of six currencies, the Euro, the Japanese Yen, the British Pound, the Canadian Dollar, the Swedish Krona, and the Swiss franc. The Euro is the predominant currency making up about 57% of the basket.

Currencies and futures generallyare volatile and are not suitable for

all investors. Investment in foreign exchange related products is subject to many factors that contribute to or increase volatility, such as national debt levels and trade deficits, changes in domestic and foreign interest rates, and investors' expectations concerning interest rates, currency exchange rates and global or regional political, economic or financial events and situations.

Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, including international economic, political and regulatory developments.

Emerging market investments involve higher risks than investments from developed countries and also involve increased risks due to differences in accounting methods, foreign taxation, political instability, and currency fluctuation. The main risks of international investing are currency fluctuations, differences in accounting methods, foreign taxation, economic, political or financial instability, and lack of timely or reliable information or unfavorable political or legal developments.

The Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities. This index aims to provide a broadly diversified representation of commodity markets as an asset class. The index represents 19 commodities which are weighted to account for economic significance and market liquidity. This index cannot be traded directly. The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Past performance is no guarantee of future results. These investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in the future.

TIPS are U.S. government securities designed to protect investors and the future value of their fixed-income investments from the adverse effects of inflation. Using the Consumer Price Index (CPI) as a guide, the value of the bond's principal is adjusted upward to keep pace with inflation. Increase in real interest rates can cause the price of inflation-protected debt securities to decrease. Interest payments on inflation-protected debt securities can be unpredictable.

As always, if you have any specific questions on your portfolio or wish to talk to me, please do not hesitate to call.

P.S. If you think this type of analysis would be of benefit to anyone you know, please share this communication with them.

Sincerely,






Paul Merritt, MBA, AIF ®, CRPC ®

Principal
NTrust Wealth Management

Corporate bonds contain elements of both interest rate risk and credit risk. Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and if held to maturity, offer a fixed rate of return and fixed principal value. U.S. Treasury bills do not eliminate market risk. The purchase of bonds is subject to availability and market conditions. There is an inverse relationship between the price of bonds and the yield: when price goes up, yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity. Some bonds have call features that may affect income.

Past performance is not indicative of future results and there is no assurance that any forecasts mentioned in this report will be obtained. Technical analysis is just one form of analysis. You may also want to consider quantitative and fundamental analysis before making any investment decisions.

Information in this update has been obtained from and is based upon sources that NTrust Wealth Management (NTWM) believes to be reliable, however NTWM does not guarantee its accuracy. All opinions and estimates constitute NTWM's judgment as of the date the update was created and are subject to change without notice. This update is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities must take into account existing public information on such security or any registered prospectus.

The bullish percent indicator (BPI) is a market breath indicator. The indicator is calculated by taking the total number of issues in an index or industry that are generating point and figure buy signals and dividing it by the total number of stocks in that group. The basic rule for using the bullish percent index is that when the BPI is above 70%, the market is overbought, and conversely when the indicator is below 30%, the market is oversold. The most popular BPI is the NYSE Bullish Percent Index, which is the tool of choice for famed point and figure analyst, Thomas Dorsey.

All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors, this is a market capitalization weighted index, meaning the largest companies in the S&P 500 have a greater weighting than smaller companies. The S&P 500 Equal Weighted Index is determined by giving each of the 500 stocks in the index the same weighting in the index. The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company. The Dow Jones Corporate Bond Index is comprised of 96 investment grade issues that are divided into the industrial, financial, and utility/telecom sectors. They are further divided by maturity with each of the sectors represented by 2, 5, 10 and 30-year maturities. The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index is a broad-based index composed of non U.S. stocks traded on the major exchanges around the globe. The Russell 2000 Index is comprised of the 2000 smallest companies within the Russell 3000 Index, which is made up of the 3000 biggest companies in the US.

Securities and Advisory Services offered through Commonwealth Financial Network®,

Member FINRA/SIPC, a Registered Investment Adviser.





Wednesday, July 11, 2012


Markets here and abroad continue to struggle under relentless concerns over the European Union’s debt crisis and a US economy that seems to be growing but at a decelerating rate.  The European Central Bank (ECB) lowered interest rates by 0.25% last Thursday to 0.75% in an effort to deal with their slow economic growth prompting a sell-off of the Euro and push into US Treasuries.

The Dow Jones Industrial Average (DJIA) lost 108 points (-0.84%) over the holiday-shortened trading week.  The S&P 500 fell 0.55%, while the Russell 2000 and the NASDAQ gained 1.08% and 0.1% respectively.  For the year, the DJIA is up 5.4%, the S&P 500 is up 8.3%, the Russell 2000 has gained 7.8%, and the NASDAQ leads all major US indexes with a 12.7% gain.

Every sector outperformed the DJIA for the week.  The best performing major economic sectors were Telecom, Real Estate, and Consumer Staples. The worst performing sectors were Industrials, Health Care, and Financials.  For the year, Real Estate, Consumer Discretionary, and Financials are the best performing sectors, while Energy, Utilities, and Industrials have been the worst.  Only the Energy sector is negative for the year.

Europe continues to lag the United States as that region copes with the on-going debt crisis, contracting economies, and high unemployment.  For the week, the MSCI (EAFE) index fell 0.7% and is up just 0.1% for the year.  The Americas region of the world leads all other regions in 2012 with a gain of 6.4% followed by the Asia/Pacific Region (4.3%).  Emerging markets are up 2.3%.

The Euro posted its worst one-week performance in 2012 losing 3.0% to close Friday at $1.228.  This is the lowest price to the US dollar since mid-June 2010.  The 0.25% interest rate cut by the ECB certainly contributed to the Euro’s drop, but concerns about the decreasing quality of European debt in general has helped drive investors to convert Euros into other currencies—notably the US dollar and Swiss Franc.  Other European currencies such as the Polish Zloty, the Hungarian Forint, the Czech Koruna, and Danish Krone all improved as well as European investors dumped Euros.  For the year, the Euro is now down 5.1% against the US dollar.

Commodities have stabilized recently and a broad basket commodity index, the Dow Jones UBS Commodity index, gained 1.1% last week.  This follows a gain of 5.6% the week before.  For the year, the Dow Jones UBS Commodity index is down 2.7%.  Gold and WTI Oil were both off last week losing 1.6% and 0.6% respectively.  I believe that gold has become an indicator for the market’s consensus of further monetary easing by the US Fed.  As such, gold is a currency alternative to paper currencies and the more central banks devalue their currencies, the higher gold prices may possibly move.  Oil is subject to broad global economic factors with shrinking economic output reducing the demand for oil and driving the price of this important commodity down.  Grains and agricultural commodities were the best performing commodity sectors this past week as investors expect the heat wave in the United States to reduce grain production. Industrial metals were the worst performing sectors as economic growth continues to contract.

US bonds, especially longer-term US Treasuries, have continued a steady generally upward course in 2012.  The yield on both 10 and 30-year Treasuries fell and remain near historic lows closing Friday at  1.548% and 2.694% respectively.  The US Barclays Aggregate US Bond index gained 0.6% last week and is up 3.1% for the year.  Spanish 10-year sovereign debt is pushing right back up to 7% closing Friday at 6.954%.  This is not a positive development in Europe and raises serious questions about the efficacy of current efforts by the ECB and other international agencies to stabilize the situation there.  As investors leave Europe, US Treasuries have been a popular alternative to European sovereign debt and demand has pushed our interest rates to their current low levels.  Longer duration US Treasuries and corporate bonds were the best performing bond sectors last week, while short duration government debt, both US and international, were the weakest performing bond sectors.  For the year, preferreds, high yield, and extended-duration US Treasuries have been the best performing sectors, while short-duration US and international government have been the weakest.  In general, the bond market continues to be a stable, low-volatility major asset category for investors this year.

EUROPE REMANINS A MESS

I am sick and tired of talking about Europe.  Those of you who read my Update know that I regularly say this.  Nevertheless, events demand me using more space to discuss this important region of the world. 

As I have watched the Europeans these past few months I am reminded of times when I wanted a snack at work and had no change for the vending machine.  The hungrier I was, the harder I searched for change.  I would ask my co-workers to help me out and most times I could get the necessary quarter or two for the machine.  When I could not easily get spare change, I would resort to looking in every drawer of my desk, going out to the parking lot to locate any lost coins in the center console or under the seats of my car.  I would look anywhere to find change.  I see Europe playing the same game, only they are looking for billions of Euros to pay all the bills they have coming due.

Europe’s tills are running out of money and politicians are looking everywhere they can for a spare billion or two to maintain the spending that they have grown accustomed.  The latest push is for the Germans to give their approval to an expansion of shared debt.  Shared debt meaning the Germans will back new debt issued by less responsible European governments.  The Germans have thus far refused to go along with this expansion believing that unless spendthrift governments are forced to be more accountable, they will not make the necessary reforms to prevent them from coming back for more money again.  Chancellor Merkel let up a bit and agreed in last week’s European Summit to allow direct bank funding from the European Stability Mechanism (ESM) for Spain’s wobbling banking system.  She did this with few or any strings attached.  In the meantime, Mrs. Merkel is pushing for a European-wide banking system and regulator.  This would require governments to surrender some of their sovereignty and it remains to be seen if this is even possible.  European finance ministers will meet this Monday (July 9th) to hammer out the details of this plan.  For those looking to keep score, Merkel’s agreement last week was seen as a victory to the French and Italians who have thus far proved incapable of pushing any real reforms to fix their gluttony of deficit spending and inflexible labor regulations, and a defeat for Merkel’s demands for greater reform. 

I believe Europe will survive in its current form for as long as the Germans agree to keep paying the bills of their fellow Europeans.  If the Germans withdraw their support, countries like Spain and Italy will have no source of new money.  They will have drained their coffers and spent every Euro they could find in the center console or under the floor mats.  Private lenders will not buy their bonds, and I suspect the European Union will look nothing like what it did before Greece fell apart.  Countries have only two real alternatives to deal with their massive debt: inflate their debt or default.  The greatest likelihood going forward will be inflation induced by turning on the printing presses.  Print money, pay off debt with cheap Euros, continue funding a lifestyle with cheap Euros, and inflation will inevitably follow.  It is terrible for those who have to live it, but until the pain is really felt by voters, do not look for any real reform.  One additional event to watch is a German court case in which the plaintiffs are challenging the constitutionality of recent German moves supporting the ESM.  A ruling on a temporary injunction is expected on Tuesday. 

Sound like the US?  Guess you can draw parallels.  It is early in the cycle for us.

LOOKING AHEAD

US unemployment did not improve in June, consumer confidence is falling, and industrial output is shrinking as well.  Doesn’t sound great for markets, but through all of this, the New York Stock Exchange Bullish Percent (NYSEBP) reversed up to a column of X’s signalling that demand has taken over in US stock markets.  After bottoming at 42.66% on June 4th, the NYSEBP has posted four consecutive weeks of gains culminating in reversing on July 3rd.  The NYSEBP closed Friday at 52.08%.  How long the NYSEBP remains with stocks in demand has varied over time.  The shortest time the NYSEBP spent in a column of X’s since 1987 was just seven days (September 19 – September 26, 2008) while the longest has been 349 days (April 2, 2003 – March 16, 2004) with the average being 82 days.  The time the NYSEBP spends in a column of O’s (supply or selling in control) on average is 47 days.  The NYSEBP is an impartitial signal of what the nearly 3000 stocks listed on the New York Stock Exchange are doing in the face of current events.

The Dorsey Wright & Associates (DWA) current technical analysis shows US stocks and Bonds as the two strongest major asset classes followed by Currencies, International stocks, and Commodities.  Within the US stock asset class, middle capitalization stocks are favored, growth is favored over value, and equal-weighted indexes are favored over capitalization-weighted indexes.  On a relative strength basis, Consumer Discretionary, Information Technology, Health Care, and Real Estate are the strongest major economic sectors.  Energy, Telecom, and Materials are the weakest.  Within the Bond major asset category, US Treasuries and International bonds are favored.

Next week will be relatively quiet with regards to major economic data reports.  The International Trade Balance report will be issued Wednesday morning and with the recent drop in oil prices, this number is expected to improve.  The Jobless Claims report will be announced as it always is on Thursday morning.  Consensus calls for 375,000 first time claims matching recent levels.  On Friday morning the Producer Price Index will be released with an expectation of a drop of 0.4% thanks primarily due to a fall in energy prices.  Falling prices are certainly a welcome reprieve. 

Finally, Monday kicks off earnings season when corporations report their second quarter earnings.  In addition to actual earnings, investors will be parsing corporate statements for their outlook on the rest of 2012.






Paul L. Merritt, MBA, AIF®, CRPC®
Principal
NTrust Wealth Management

P.S.  If you think this type of analysis would be of benefit to anyone you know, please share this communication with them.

Past performance is not indicative of future results and there is no assurance that any forecasts mentioned in this report will be obtained.  Technical analysis is just one form of analysis.  You may also want to consider quantitative and fundamental analysis before making any investment decisions.

Information in this update has been obtained from and is based upon sources that NTrust Wealth Management (NTWM) believes to be reliable; however, NTWM does not guarantee its accuracy. All opinions and estimates constitute NTWM's judgment as of the date the update was created and are subject to change without notice. This update is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities must take into account existing public information on such security or any registered prospectus.
Emerging market investments involve higher risks than investments from developed countries and involve increased risks due to differences in accounting methods, foreign taxation, political instability, and currency fluctuation. The main risks of international investing are currency fluctuations, differences in accounting methods, foreign taxation, economic, political or financial instability, and lack of timely or reliable information or unfavorable political or legal developments.

The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Past performance is no guarantee of future results. These investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in the future.  The Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities.  This index aims to provide a broadly diversified representation of commodity markets as an asset class.  The index represents 19 commodities, which are weighted to account for economic significance and market liquidity.  This index cannot be traded directly.

TIPS are U.S. government securities designed to protect investors and the future value of their fixed-income investments from the adverse effects of inflation. Using the Consumer Price Index (CPI) as a guide, the value of the bond's principal is adjusted upward to keep pace with inflation. Increase in real interest rates can cause the price of inflation-protected debt securities to decrease.  Interest payments on inflation-protected debt securities can be unpredictable.

The NYCE US Dollar Index is a measure that calculates the value of the US dollar through a basket of six currencies, the Euro, the Japanese Yen, the British Pound, the Canadian Dollar, the Swedish Krona, and the Swiss franc.  The Euro is the predominant currency making up about 57% of the basket.

Currencies and futures generally are volatile and are not suitable for all investors.  Investment in foreign exchange related products is subject to many factors that contribute to or increase volatility, such as national debt levels and trade deficits, changes in domestic and foreign interest rates, and investors’ expectations concerning interest rates, currency exchange rates and global or regional political, economic or financial events and situations.

Corporate bonds contain elements of both interest rate risk and credit risk. Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and if held to maturity, offer a fixed rate of return and fixed principal value. U.S. Treasury bills do not eliminate market risk. The purchase of bonds is subject to availability and market conditions. There is an inverse relationship between the price of bonds and the yield: when price goes up, yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity. Some bonds have call features that may affect income. 

 The bullish percent indicator (BPI) is a market breath indicator.  The indicator is calculated by taking the total number of issues in an index or industry that are generating point and figure buy signals and dividing it by the total number of stocks in that group.  The basic rule for using the bullish percent index is that when the BPI is above 70%, the market is overbought, and conversely when the indicator is below 30%, the market is oversold.  The most popular BPI is the NYSE Bullish Percent Index, which is the tool of choice for famed point and figure analyst, Thomas Dorsey.

All indices are unmanaged and are not available for direct investment by the public.  Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors and is a capitalization-weighted index meaning the larger companies have a larger weighting of the index.  The S&P 500 Equal Weighted Index is determined by giving each company in the index an equal weighting to each of the 500 companies that comprise the index.  The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company.   The Russell 2000 Index Is comprised of the 2000 smallest companies of the Russell 3000 Index, which is comprised of the 3000 biggest companies in the US.   The NASDAQ Composite Index (NASDAQ) is an index representing the securities traded on the NASDAQ stock market and is comprised of over 3000 issues.  It has a heavy bias towards technology and growth stocks.

Securities and Advisory Services offered through Commonwealth Financial Network®,
Member FINRA/SIPC, a Registered Investment Adviser.