WEEKLY RESEARCH: Weekly Insider Data and Commentary files were last updated on Sunday, January 15th, with data from the Friday, January 13th SEC closeout. Please review your Commentary File for particulars. The Insider portion of the Workbook section of the WebSite was populated with new weekly data and e-mail versions were distributed as well. (Data for all companies, and broad strategy commentary highlights) The Insider Commentary file of the past weekend includes an updated, thumbnail Strategic view of the Markets from the top-down perspective of all models. The MPT Top Down View Remains at an outright Sell this week. All models suggest that a significant and sharp decline in prices lie directly ahead. At the Sector level, Aerospace/Defense remains at the top in Sector ranking, and Utilities are an Overweight. Finance remains particularly problematic from the Insider perspective. The Markets cannot be viewed as a singular snapshot, but are instead a dynamic, moving picture. Employing MPT research to follow and anticipate the most probable trend features and changes is an important aspect of the research.
MONTHLY RESEARCH: The January 2017 edition of Market Profile Theorems was run based on the data close-out of Friday, December 30th, 2016. Your specific data files were pushed to you on Sunday January 1st, 2017. The WEB site data (Workbook section) were available on Sunday, and include refreshed Probability Plots, Screening features, and Files located in the monthly File Download section of the Web-site. The Strategy notebook should have arrived on Thursday, January 5th. If you did not receive your files, or the notebook by the dates indicated, please contact us. Reach us by e-mail or call 206-890-6789 if you wish to schedule a conference call in January.
GENERAL COMMENTARY: Style closed December with no Capitalization preference and a Value bias. The January asset allocation projection has a Small-Capitalization preference, and remains geared toward an expectation that Value will lead performance. MPT bottom-up model performance, relative to the S&P 500, was fair in December, and best in selecting Underperformers. The aggregate top-down model remains Bearish at "-4" this week. The negative trend of the Top-down Earnings model continued last week (-6.67), and remains in a well-defined, descending channel, arguing for patience in the longer-term. A mark-down phase is well underway, and the rally window, from Feb of 2016, closed in June. Yields have moved aggressively higher and this will test the ability of an already weak economy to improve. The quickening pace of inflation, and the typical post-election rebound has led to a less negative GDP reading for Q4 than we had anticipated. Accelerating downward analyst revisions, The most recent GDP for Q3 was 3.2%, and Q4 estimates are now around 2.9%. The last half of 2016 did better than the first half, with 1.9% for the year a good estimate. The overall trend remains concerning for the Markets - especially with what we see as alarmingly high valuations present for equities. See the weekly Insider Commentaries, and the monthly Strategist, (Green Book) for further details and interpretation. The weekly Insider Commentary provides additional color. Higher Bond Yields, a stronger Dollar, and the recent uptick in inflation are problematic for the economy - particularly with the recent fall off in orders. Gold is rallying off what we see is a long-term bottoming area.
The Market Cycle, in terms of MPT's "Market Clock," remains at 10:30, was in a MARK DOWN phase for the last half of 2014 through 2015, and began 2016 with the same profile. This Bull cycle within a Secular Bear Market has closed. Please see the current weekend's Commentary, as this has important implications for the Equity Markets. Insider, and the Summary model, will drive performance going forward.
Top-Down Review: Following a very accurate 2011 and 2012 for Buy and Sell price targets based on our Top-down models, 2013 started a period where top-down pricing levels were more difficult animals to wrestle with. Our upside targets were far short of levels reached that year, and our downside view too aggressive. 2014 started out weaker and was more in line with our long-held expectations for significantly lower equity prices but, with the exception of the Small-cap space, the trend into the close of 2014. 2015 was an anemic year for overall price performance in the major benchmarks. 2016 was an average performance year for equities with gains around 9.5% for the S&P 500 - far better than the significant loss we had anticipated. Bottom up performance for all of our models was quite good in 2016, with all long-side selection portfolios outperforming the S&P 500. Our expected price range for the S&P 500 in 2017 is again Bearish with a high of 2300, low of 1560, and a close of 1950.
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