Tuesday, February 24, 2015








MARKET UPDATE AND COMMENTARY
February 22, 2015


US and International markets have rallied in February in the face of growing fears that Greece will disrupt the unity of the European Union (EU) by dropping out of this important politico-economic organization. Greece and the EU (along with the International Monetary Fund—IMF, and European Central Bank—ECB) have struggled to find common ground with the newly elected Greek leadership and negotiate new debt service terms agreeable to both sides. However, late Friday it was announced that the parties involved had agreed to a four-month extension of the debt deadline. The agreement provides both parties time to continue negotiating without the immediate threat of Greece’s economic collapse. While the markets cheered this development, the crisis is far from resolved and the retention of Greece within the EU remains uncertain.

The US equity market is now up each of the first three weeks in February reversing January’s negative performance. In addition to reacting favorably to news about Greece, investors were satisfied for now with Federal Reserve Chair Janet Yellen’s recent comments suggesting that raising short-term interest rates remains on hold for now. For the year, the tech-heavy NASDAQ index leads the major indices I follow. Noticeably, smaller capitalization stocks (Russell 2000 index) are holding their own this year after a disappointing performance in 2014.









The top three economic sectors for the year are Health Care (+6.1%), Materials (+5.9%), and Telecommunications (+4.7%) while the bottom three performers are Utilities (-2.9%), Financials (-0.3%), and Energy (+1.6%).

International markets have also rallied in February. Greece certainly is at the forefront of issues facing international markets, but the Russian incursion into Ukraine, and a slowing Chinese economy are also contributing to concerns. Investors appear to be looking beyond these issues for now and overseas markets are strengthening after a poor 2014. Europe-heavy STOXX 600 index leads among all the broad international indices with most European markets up in the 10% to 15% range so far this year. China is flat, Japan is up 5.1%, and India is up 6.3%.







US interest rates continue to rise. The benchmark 10-year US Treasury bond yield has added 43.6 basis points (a basis point is the interest rate equivalent of a penny to a dollar) since the start of February closing Friday at 2.119%. As you can see from the chart below, this is a very significant increase in rates over a relative short period.









The roller coaster move in rates in January (-49 basis points) followed by a 44 basis point jump in February is in part, I believe, driven by investor uncertainty over EU/Greece concerns and timing of US Federal Reserve rate hikes. Fears of a Greek departure from the EU drove investors into US Treasuries creating demand. The more demand there is for anything, the higher the price buyers are willing to pay. In the case of bonds, this demand/price increase pushes yields on bonds down. When negotiations got under way in Europe with the newly elected Greek government officials, bond investors’ sentiment improved lessening the demand for US Treasuries and yields have risen as prices have fallen. Additionally, many bond investors believe the US Federal Reserve will raise short-term rates later in 2015 (mid-summer or early fall) and rates are moving upwards in response. Where interest rates are ultimately headed is still a huge unknown (as it generally is) and how this sorts out will be determined by how my big four economic themes unfold (Greece/EU, US Federal Reserve rate increases, Geopolitical uncertainty, and Domestic political uncertainty) as the year progresses.

One of the immediate effects of higher interest rates has been the decline in the Utility and Real Estate Sectors. Over the past 30 days, the Utility sector has dropped 6.8% while the Real Estate sector has declined 2.3%. Both the Utility and Real Estate sectors are interest rate sensitive, and I believe they will suffer additional pullbacks if rates continue to rise. It is very, very difficult to say how far rates will climb due to the many cross currents influencing bond investors and I would encourage bond investors not to overreact to the current rate jump at this time. Bond markets are too choppy and I believe it is premature to make major adjustments to bond portfolios.

Commodities weakness continues driven in part by falling oil prices. The Dow Jones UBS Commodity Futures index is down 1.5% in 2015 after losing over 17% in 2014. WTI Oil prices fell 9.4% in January, gained 9.4% over the first two weeks in February only to give back 4.6% last week. The net result is that WTI Oil closed Friday at $50.34 per barrel and is down 5.5% so far this year. Oil needs to find a degree of price stability, and the past few weeks may have been the start of a bottoming process. However, as long as supplies continue building (US inventories were up 7.7 million barrels last week), I believe oil prices may continue to come under pressure. Heating Oil prices are the one exception with heavy demand this winter pushing prices for heating oil up over 16% this year.

The US Dollar has found some stability recently among the other key currencies in the world. The US Dollar index is down 0.6% in February after rising 5% in January and 12.8% in 2014. The cooling of the Greek crisis calmed Euro traders. The Euro has gained 0.8% against the US Dollar this month after falling 6.7% in January. While currency stories do not typically lead the news cycle, a global competition is developing between central bankers as they try to push down the value of their currencies to spur exports. The US Federal Reserve, in my opinion, has been held back from raising rates partly due to the European Central Bank’s announcement that it would begin purchasing bonds (quantitative easing--QE) in March. This European version of QE is widely anticipated to put downward pressure on the Euro. February’s moves aside, I believe the US Dollar is likely to move higher relative to other key currencies in the months ahead. If this happens, US exports will be more expensive (bad for US manufacturers), imports cheaper (good for US consumers), commodity prices may continue to drift downward, and investments abroad will face a currency headwind putting a drag on returns.


THE GREEK CONUNDRUM

The Greek problem for the EU and investors is not going away; it has simply been pushed back four months.

The far-left party, Syriza (Syriza is an abbreviation in Greek for Coalition of the Radical Left), has been forced to accept for now, that they must negotiate with Greece’s creditors to find a way out of the economic mess the country is in. Recall that Syriza’s Prime Minister, Alexis Tsipras, was elected on the promise that he would not negotiate with Greece’s creditors and demand an end to the austerity programs the previous Greek government was required to implement in order to secure additional loans to keep the country afloat. The four-month extension agreed to Friday by Greece calls for the Tsipras to provide, by Monday (February 23rd), a list of economic and policy reforms that will satisfy Greece’s lenders. This extension agreement does allow Tsipras to set his own priorities, but it does not fundamentally alter the situation. Greece must make meaningful progress to grow their economy, collect taxes, slash bureaucracies, and ultimately repay all the money they have borrowed if the country wants to remain in the European Union. To me, unless Tsipras adopts solid, growth-oriented policies, he will accomplish nothing. Quoting one of my favorite clich├ęs, all this talking will be like rearranging the deck chairs on the Titanic.

My optimism about Greece is subdued because Tsipras is a radical left-wing politician, a former member of the Greek Communist Party, and his ideological beliefs do not conform with the actions he must implement to put Greece on a solid economic footing. His coalition partner in Greece is the far right wing nationalistic Independent Greeks party that equally hates the austerity measures imposed by the Europeans and who want to leave the EU. Tsipras and his allies must find a way to overcome their internal biases and come up with a solution that satisfies the EU, their own electorate, and actually reforms the economy. This is a tall order for any group of politicians, right, left, or in-between.

I want remind everyone that the European Union has much to lose as well if Greece fails. The turmoil created by Greece’s departure is more political than economic. The latest economic data I have on Greece’s GDP is that this country of just over 11 million people produced about $249 billion in economic output in 2014 (Source: Global Finance Magazine, Stanford University). For comparison purposes, this ranks Greece between Oregon (25th) and Louisiana (24th) in economic output, and the Commonwealth of Virginia (11th) is producing 1.9 times more economically than Greece.

For the EU, the stability of the union is paramount, and a Greek exit from the EU could open the door to other weaker nations like Portugal, Ireland, and even Italy to follow. A shared currency has benefits to all participants, however, it can only happen if each country surrenders some of their sovereignty to a higher power (the EU and ECB) to maintain order. I believe both sides, after political grandstanding and brinksmanship, will give a little and an agreement reached to keep Greece in the EU for now. This has been the way before and I expect it to continue.

LOOKING AHEAD

There have been no changes to my macro view of the markets. US equities and Bonds are the preferred major asset categories followed by International stocks, Money market funds, Currencies, and Commodities. As I noted before, rising interest rates has already had an impact on the Utility and Real Estate sectors and I will be watching rates very closely in the coming weeks to see if this trend will continue hurting these two strong sectors. I prefer the floating rate and high-yield bond sectors and caution investors about any longer-term maturity bonds.

Looking ahead to key US economic events/reports, Fed Chair Janet Yellen will be speaking to Congress on Tuesday and Wedensday mornings. Her comments always attract the interest of investors. Additionally, housing data will be out (slight decreases expected over December data), and the second estimate of the 4th quarter Gross Domestic Product (GDP) will be released this Friday morning. The first estimate disappointed investors dropping from a consensus growth of 3.2% to 2.6%. The consensus anticipates a further revison downward to 2.1%. Anything below 2% would be problematic in my mind.

If you have any questions or comments, please do not hesitate to reach out to me.




Paul L. Merritt, MBA, C(k)P®, 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.

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. The STOXX® Europe 600 is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the STOXX Europe 600 represents large, mid, and small capitalization countries of the European region. The Dow Jones Global ex-US index represents 77 countries and covers more than 98% of the world's market capitalization. A full complement of sub indices, measuring both sectors and stock-size segments, are calculated for each country and region.

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. The CBOE Volatility Index - more commonly referred to as "VIX" - is an up-to-the-minute market estimate of expected volatility that is calculated by using real-time S&P 500® Index (SPX) option bid/ask quotes. VIX uses nearby and second nearby options with at least 8 days left to expiration and then weights them to yield a constant, 30-day measure of the expected volatility of the S&P 500 Index.
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.

Monday, February 9, 2015








MARKET UPDATE AND COMMENTARY
February 8, 2015


Most equity markets reversed their January losses during the first week in February and are now essentially flat after five trading weeks in 2015.




European markets (STOXX 600) continued to rally as the European Central Bank (ECB) embarks on its own version of quantitative easing (QE).







US markets rallied last week primarily upon consistent economic data and strong job growth numbers. On Friday morning, the Bureau of Labor Statistics (BLS) announced that job growth in January grew by 257,000 jobs and revised previous reports upwards as well. According to the BLS, the US has created over 1 million new jobs since November by far the best increase over a three-month period in years. The unemployment rate, however, ticked up from 5.6% to 5.7% due to a jump in the number of formerly unemployed people re-entering the work force. Not everyone is impressed by the jobs numbers including Gallup chairman, Jim Clifton, who wrote an editorial on the Gallup website arguing that the unemployment rate is extremely misleading and under-reports how many people are either unemployed or severely under-employed. He cited his company’s own statistics that report only 44% of Americans 18+ work at least 30 hours per week and receive a regular paycheck. He blames the government’s methodology of not counting those who have not looked for a job in the past 30 days and those severely under-employed as not being in the workforce for making the numbers appear far more bullish than what is really going on in the job market. He may be right, but there is no denying that jobs growth continues.

I believe the biggest story last week was the surge in interest rates. The US Treasury 10-year yield jumped 25.6 basis points (a basis point is 0.01% of a percent, like a penny to the dollar) to close Friday at 1.94%. This was the largest increase since June 2013. The catalyst for the yield increase was the jobs report and its possible impact on Federal Reserve monetary policy (more on that in a moment). Interest rate sensitive sectors like Real Estate (-1.6%) and Utilities (-3.4%) suffered pullbacks as the rest of the major sectors rallied.

Oil rallied both at home and abroad. WTI Oil closed Friday at $51.69 up 13.4% in the past two weeks. A union walkout at several US refineries and a report showing a significant curtailment in operating oil rigs in the US have led investors to reduce anticipated production of crude oil in the coming months. Market Watch reports that US rigs in operation fell 24% since early December and total producing rigs are at their lowest level in five years. This is consistent with my belief that oil producers will make adjustments to bring supply in line with demand. It is the natural ebb and flow of commodity production. Natural gas prices have continued to fall and are now down more than 13% since the start of the year and down over 38% since the start of 2014.

Strength in the US Dollar continues to gather steam as many countries and regions (like the European Union (EU)) are embarking on some variation of QE to help weaken their currencies and improve their competitive edge among other nations. Growing fears of a turbulent falling out with Greece and the EU also contributed to the overall demand for the US Dollar by Europeans. For the year, the US Dollar Index is up 4.5% adding to the gain of 12.8% in 2014. A stronger US Dollar coupled with rising interest rates hurt gold prices pushing the precious metal down 3.5% for the week and cutting the year-to-date gain nearly in half.

THE FEDERAL RESERVE

In my last Market Update and Commentary, I laid out four important issues facing investors in 2015 that could have a real impact on how markets move during the year. Those issues are Greece and the EU, the Federal Reserve’s monetary policy actions, geopolitical uncertainty, and domestic political uncertainty. I want to spend a little more time today looking at the Federal Reserve.

The Fed has kept short-term interest rates in a range between 0% and 0.25% since late 2008. Everything about this policy is unprecedented. The Federal Reserve’s website states it lowered interest rates (and engaged in QE) “in response to the financial crisis to help stabilize the U.S. economy and financial system.” QE has ended but the federal funds rate still remains near zero.

There is little consensus among economists and financial experts about the effectiveness of these actions, and I am not going to debate whether this policy move and duration was proper. What I am interested in is what’s next and what impact will a rate increase have on the markets?

I believe that the Fed will raise the federal funds rate (the rate at which banks lend money held on deposit with the Federal Reserve to other banks) sometime in 2015. Following the January jobs report and continued positive economic reports, consensus now expects the Fed to announce a rate increase of 0.25% on June 17th after the June meeting. Fed Chair Janet Yellen is widely expected to signal this June hike following the March meeting on March 18th. What impact this will have on markets depends a great deal on how you view what happened to the liquidity created by the Fed resulting from its bond purchases and low interest rates.

I have found that there are generally two schools of thought regarding the impact of QE on the stock markets. One is that the liquidity created by the Fed flowed directly through to the stock market, and that the highs made by the stock market over the past couple of years is a result of this liquidity and not by productivity and economic activity. If you believe this, and many do, then you should expect a major market selloff beginning when the Fed signals a rate increase and building until the actual announcement. If you believe, like I do, that the vast majority of the liquidity created by QE went directly on deposit with the Fed as banks and their depositors demanded safety above all else, then you will see the rise in rates as an overall positive to the markets. I support this latter view because inflation has not materialized, the money supply remains on a normal trajectory, and business lending remained subdued during most of this low interest rate period. I will point out that according to the Federal Reserve, commercial lending has jumped 13.7% over the past year and has accelerating to an annualized rate of 15.1% over the past three months. Money is moving into the economy and the demand for safe assets is dropping which will force the Fed to move sooner rather than later.

I believe that those who feel like the markets are at an artificial high will sell into the news and will create some initial downward pressure on the markets. However, I further believe this will be temporary and the markets, all else being equal, will continue to improve as the economy continues to grow.

The Federal Reserve does not act in a vacuum. With the ECB and a number of other countries embarking on their own versions of QE, there is pressure for the Fed not to act out-of-step with the rest of the world. This is a real consideration for delaying any rate hikes, however, I do not believe the Fed can ignore the economic data here and let the money supply and inflation get out of hand. If the Fed does move forward in the face of QE abroad, I believe the US Dollar will continue to gain against other currencies, and I believe that gold prices will fall.

Those of you that follow my writing know that I do not generally try to make predictions because it is so hard to do correctly on a consistent basis. I am making an exception here because I believe this issue is so important that I feel compelled to provide a foundation of knowledge and understanding on this topic as we move towards this extremely important policy change.


LOOKING AHEAD

There have been no changes to my macro view of the markets. US equities and Bonds are the preferred major asset categories followed by International stocks, Money market funds, Currencies, and Commodities. As I noted before, rising interest rates has already had an impact on the Utility and Real Estate sectors and I will be watching rates very closely in the coming weeks to see if this trend will continue hurting these two strong sectors.

Even though bonds remain in the #2 ranked position of the major asset categories, it has been a tough time for bond investors. With the jump in interest rates last week, the Barclays US Aggregate Bond index fell 1.2%. This is the largest single week drop since late June 2013 when the Barclays fell 1.9%. Particularly hard hit were longer duration bonds which have performed so well as rates have fallen. I continue to like the high-yield, bank loan, and multi-sector bond sectors going into 2015.

There is minimal economic reporting due next week and markets will be closed the following Monday (February 16th) for President’s Day. Later the following week there will be reporting on housing, prices, and the release of the detailed minutes of the Fed’s January meeting. The every Thursday Jobless Claims report is always important as an indicator of how the Fed may act with regards to rate increases, so keep an eye on those reports.

Beyond the US, I will continue to watch Greece’s efforts to get free money out of the rest of the EU. The Germans who have given the most money to Greece till now do not seem particularly inclined to give away anymore of their money. Pressure will be mounting on both sides to get some kind of deal done following the elections because the Greeks are likely to run out of money to pay their bills within the next couple of months. How this situation is handled will, in my view, have significant repercussions on the EU and possibly our markets here at home.

If you have any questions or comments, please do not hesitate to reach out to me.



Paul L. Merritt, MBA, C(k)P®, 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.

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. The STOXX® Europe 600 is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the STOXX Europe 600 represents large, mid, and small capitalization countries of the European region. The Dow Jones Global ex-US index represents 77 countries and covers more than 98% of the world's market capitalization. A full complement of sub indices, measuring both sectors and stock-size segments, are calculated for each country and region.

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. The CBOE Volatility Index - more commonly referred to as "VIX" - is an up-to-the-minute market estimate of expected volatility that is calculated by using real-time S&P 500® Index (SPX) option bid/ask quotes. VIX uses nearby and second nearby options with at least 8 days left to expiration and then weights them to yield a constant, 30-day measure of the expected volatility of the S&P 500 Index.
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.