Dave Moenning

What A “Blow-Off” Looks/Feels Like

The title of yesterday’s missive was “The Blow-Off Stage?”. The suggestion was given that the dominant color on my favorite models/indicator boards relating to the stock market’s trend and momentum is green, it could be possible that we are seeing what is termed a “blow-off” phase.

However, it occurred to me that not everyone reading my oftentimes meandering morning market missive might be familiar with the term. So, this morning, I thought we’d review what a “blow-off” phase looks and feels like. And then I’ll throw in a few stats, just to keep it interesting.

In general, a “blow-off” phase tends to mark the end of a cyclical bull phase. To review, the database at Ned Davis Research tells us that the cyclical bull moves in the stock market (defined as an increase in the DJIA of at least 30% after 50 calendar days – or a gain of 13% over a period of at least 155 days) since 1900 have produced an average gain of 85.5% over 768 days.

However, as logic would dictate, cyclical uptrends that occur when the stock market is in the midst of a secular bull run (note that several cyclical moves tend to occur within secular moves, which tend to last many years) tend to be longer and stronger. For example, the average gain for cyclical bull markets that occur within secular bulls since 1900 has been 106.7% over 1027 days.

To be sure, identifying a blow-off stage is best done with a healthy dose of hindsight. As such, anyone trying to suggest that such a move is occurring in real time is likely “making a call.” And to clarify, I am not suggesting that what we are seeing IS, in fact, a blow-off phase. No, I am merely trying to alert everyone to the idea that we COULD be seeing such a move here. (Or not!)

I’ve witnessed a grand total of 10 blow-offs during my career, which began in 1980. There were 3 in the 1980’s, 3 in the 1990’s, 4 in the 2000’s (well, to be fair, the blow-off that ended in January 2000 should probably be placed in the 1990’s category as it was a doozie!), and 1 so far in the decade that began in 2010.

The first thing to recognize here is that we haven’t seen a blow-off phase since April 2011. So, it’s been awhile.

Next, blow-offs tend to be characterized by an overly bullish mood (if not euphoric) from a sentiment standpoint. By the time stocks make their final run during what amounts to a fairly long bull cycle, just about everybody in the game understands and can recite the bull case. I.E. everybody “knows” the reasons that stocks are going to continue to go up. The term “no brainer” tend to get used a lot during the blow-off phase.

Earnings are growing. The economy is humming along. And something is happening to cause investors to think that risk in the stock market is an antiquated concept. (In this case, I’ll argue that the “something that is happening” is a combination of QE and tax reform.)

And finally, there is a little something called capitulation. This is where fund managers who may have been concerned about risk factors in the market (valuations come to mind on this front here) simply give up. Performance anxiety sets in as year-end bonuses are on the line. So, managers simply throw up their hands and jump on the bull band wagon.

The Average Blow-Off…

As for what to expect from a statistical standpoint, Ned Davis himself published a report this week that shed some light on what the blow-off phase has looked like.

However, the first point the venerable Mr. Davis makes is that his table of “blow-offs” is “too subjective for my taste.” Ned says that (a) there have been many instances where a big rally doesn’t actually wind up being the final rally of the cyclical trend and (b) the starting dates of the final moves can vary depending on who is making the call and the criteria they are using.

With these caveats out of the way, I find it interesting to note that since 1960, NDR has identified 13 blow-off phase rallies that marked the end of cyclical bull moves. The average gain on the DJIA during these moves has been 12.7%. And the average duration of the rally has been 58 trading days.

Ned also points out that IF we are seeing a blow-off at the present time, the move likely began on August 18th with the Dow closing at 21,674.51. The high of this move occurred a week ago at 23,441.76, putting the gain for the current move at 8.15% on the Dow (which has been the strongest index of late).

So, based on history, if the DJIA winds up putting in an average blow-off move (trust me, it won’t), the Dow could add another 4.55% – putting the high at 24,509.

For anyone thinking that the next bear market is going to look a lot like 2008 (I doubt it), you are probably thinking that it might be best to exit stage left now. Why not skip that last little leg and save yourself the pain of the ensuing bear, right?

The problems with this thinking include (a) we don’t know if this is indeed a blow-off stage, (b) the stock market has a strong upward bias over time, (c) the final moves in bull markets vary greatly, and (d) in my experience, the final move tends to last longer than anyone can possibly imagine.

It is for this reason that I prefer to avoid “making a call” and suggesting that I know what is going to happen next. No, I prefer to deal with what “IS” happening in the market and adapt when necessary. And the bottom line right now is the bulls are in control of the game. So until some of our market models start to wave red flags, its a bull market until proven otherwise and the dips should continue to be bought.

Thought For The Day:

Well-timed silence hath more eloquence than speech. -Martin Farquhar Tupper

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of Tax Reform

      2. The State of the Earnings Season

      3. The State of Fed Policy/Leadership

      4. The State of the Economy

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.

Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Advisory services are offered through Sowell Management Services.

Dave Moenning

What Could Go Wrong?

Yesterday’s missive took a glass-is-half-full stance by exploring the various tailwinds the bulls are counting on to keep stock prices movin’ on up. The list included earnings, economic growth, low inflation, ongoing QE, favorable seasonality, the flows into passive funds/ETFs, performance anxiety, performance chasing, the preponderance of dip-buying, and, of course, the tax trade. Good stuff.

However, since one of the key attributes of a good analyst is objectivity, I thought it might be a good idea to wander across the field this morning and talk to the players on the opposing sideline. The goal here is to try and understand each team’s key points so that we can make an informed decision on which argument is stronger.

So here goes… A rundown of the major issues that our furry friends in the bear camp are focused on from a near-term perspective.

What Everybody Knows… As the saying goes, something that everybody on Wall Street already knows isn’t worth knowing. The key here is that by the time everybody can (a) understand and then (b) quickly/easily espouse the reasons that something is supposed to happen in the market, the event is likely priced in. As such, the bears argue that the laundry list of positives are well known by now and thus, are likely priced into the market at this stage.

Earnings: I know what you’re thinking; how can both teams count an issue as theirs? In short, it depends on your point of view. While the bulls argue that earnings are growing at a strong clip, the bears suggest that the current trend of great quarters isn’t going to last much longer. Exhibit A here is although EPS for the S&P 500 enjoyed double-digit growth in the first two quarters of the year, the pace of growth is about to slow dramatically. According to FactSet’s approach (which combines actual results from companies that have reported with estimates for those yet to report results) EPS growth is expected to come in at 2.4% compared to the year-ago quarter. Now factor in (a) tougher comps going forward (especially at the beginning of next year) (b) some high profile misses from the likes of General Electric (NYSE: GE) and Wells Fargo & Co. (NYSE: WFC), and (c) the hit that insurers and reinsurers are likely to take in response to this year’s hurricane season. From the bears’ perspective, what you are left with is less than stellar fundamental support for stock prices.

Inflation: I know, I know… The bulls counted this one as a positive as well. While everybody knows that inflation has been MIA this year, the key here is the bears contend that there are signs of underlying inflationary pressures building – especially in wages. Whether or not these pressures materialize remains to be seen. However, this is an area to watch in the coming months because nothing can kill a bull market faster than a bout of inflation.

The Next Fed Chair: The betting markets suggest that the decision on the next Fed Chairman is down to Powell and Taylor. The key here is to understand that Powell is more of a status quo pick while analysts believe a Taylor nomination could lead to a higher “neutral” zone for Fed Funds and an extended tightening cycle. By the way, the bears don’t want to talk about the possibility of Janet Yellen getting the nod as this would likely be a bullish outcome for stock prices.

Valuations: We’ve covered this topic six ways to Sunday recently. And yes, everyone in the game knows that valuations are elevated. The point is there can be no denying that high valuation levels mean risk factors are also quite elevated.

Sentiment: Current sentiment readings are also quite high here. For example, one of the questions asked in the University of Michigan’s survey of consumers is the outlook for stock prices over the coming year. This week’s reading came in at an all-time high.

Yields: One of the main bear arguments is an oldie but a goodie – the end of the 30+ year secular bull market in bonds. Unfortunately, anyone singing this song has been dead wrong for years now. However, the current move on the 10-year from 2.06% on September 7 to yesterday’s 2.45% is causing the bond bears to start yapping about this issue again. The current thinking is that if/when 10-year yields hit 3%, bonds could actually become competition for stocks. Remember, post-crisis, stocks have been the only game in town as the Fed created a “cash is trash” environment.

Tax Reform Delay/Derail: It is easy to argue that much of the most recent run in stock prices is attributable to the prospects for tax reform to get done in the near-term. However, our furry friends remind us that pushing this deal across the goal line is by no means a sure thing. The bears contend that negotiations are likely to be intense and as such, there is headline risk relating to the deal ending up like the repeal/replace effort on the ACA. The bottom line is if tax reform is either delayed or worse, derailed, the 1800 point move on the Dow since mid-August could be given back in short order.

As I mentioned yesterday, this is by no means an exhaustive list of the potential negatives in the market. However, I believe we’ve hit the highlights this morning. And since I think it is important to take a walk in the other guy’s shoes every once in a while – in order to keep one’s objectivity in place – this morning’s exercise helps remind us that trees don’t grow to the sky.

Thought For The Day:

The trouble with talking too fast is you may say something you haven’t thought of yet. -Ann Landers

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of Tax Reform

      2. The State of the Earnings Season

      3. The State of Fed Policy/Leadership

      4. The State of the Economy

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.

Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Advisory services are offered through Sowell Management Services.

Dave Moenning

The Next Bear Won’t Look Like The Last One

Don’t look now fans, but the United States is enjoying one of the longest economic expansions in history. In fact, First Trust tells us that if the economy can avoid slipping into recession for the next 18 months, this will become the longest period of economic growth on record. Granted, the pace has been maddening at times, but it is important to recognize that the economy appears to be doing just fine, thank you.

It is also worth noting that the stock market has been a stellar place to be invested over the last eight years. According to my calculator, the S&P 500 is up more than 280% from the March 9, 2009 crisis-low. However, I will admit that it was rough sledding there for a while after the crisis ended.

On that note, if we look at the gains in the market since the 2011 low, which occurred after the first couple go-rounds with Greece and the downgrade of U.S. debt, we find that stock market investors have enjoyed a “double” with the S&P sporting gains of more than 125%.

Even if one waited to invest in stocks until the most recent mini-bear ended in February 2016, their gain would now be approaching 40%. Not bad. Not bad at all.

And yet, investors remain nervous that the bad old days of 2000-02 and 2008 will return at any moment. Financial advisors are no different. I had meetings with 6 different financial professionals last week and to a man, they all believed stocks were sure to enter a bear market any day now.

From a behavioral perspective, I believe this represents a classic case of “recency bias,” which is the tendency to believe that the recent trends will continue in the future. As such, advisors and investors alike are adamant that they will be ready for the bears this time around.

The bottom line is nobody wants to see their 401K turn into a “201K” ever again!

Fighting The Last War

In my experience, this is called “fighting the last war.” You see, one lesson I’ve learned in my 30+ years of professional investing is that the next bear market is unlikely to look anything like the last one.

During my career, there have been several meaningful declines in the stock market. First there was the “Crash of ’87,” which was triggered by computers and something called “portfolio insurance.” In 1990, stocks declined in response to the first Gulf War. Next was the flirtation with recession in 1994. Then the Russian debt default/LTCM crisis in 1998. Next up was the bursting of the Tech Bubble of 2000-02. Then the Credit Crisis of 2007-early 2009 which was caused primarily by the alphabet soup of derivatives, a bubble in the housing market, and mark-to-market accounting.

The point here is that none of these declines mirrored the prior one as there was a new set of problems to deal with each and every time the bears took control of the game.

Will This Time Be Different?

The question, of course, is if it will be different this time around. My guess is the answer is no. For example, just about everyone, everywhere in the game has been busy looking for the next bubble – because nobody wants to be fooled again. So, in my opinion, it is a pretty safe bet that the next bear won’t have anything to do with housing or bubbles of any kind.

I also believe it is important to recognize that the stock market is currently in a secular bull trend. The key here is to recognize that, according to Ned Davis Research, cyclical bear markets that occur within an ongoing secular bull cycle tend to be shorter and shallower than both the average bear market (which sees losses of -30.6% on the DJIA) as well as the bears that occur when stocks are in the grips of a secular bear cycle.

For example, the average decline for the DJIA during cyclical bear markets that occur within a secular bear has been -36.3%. However, cyclical bears taking place within a secular bull trend create an average loss of just -21.8%. If my math is correct, this means that bear markets taking place within a secular bull trend are 40% less severe than the bears that occur in a secular bear and 29% less damaging than the average bear seen since 1900.

So, the good news is that even if the bears do find a raison d’etre in the next year, history suggests the damage isn’t likely to be as severe as what was seen in 2008.

The takeaway here is that brutal bear markets – like the declines seen in 2000-02 and 2008 – are actually pretty rare. In addition, bear markets usually need a trigger or a “reason” to begin. Remember, stocks don’t dive just because the bulls have been in charge for a long period of time. And finally, since stocks are currently in the midst of a secular bull trend, the next bear isn’t likely to look like the last one.

Thought For The Day:

It is best to deal with your problems before they deal with your happiness. –Unknown

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of Tax Reform

      2. The State of the Economic/Earnings Growth (Fast enough to justify valuations?)

      3. The State of Fed Policy

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.

Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Advisory services are offered through Sowell Management Services.

Dave Moenning

One Of The Best Ways to Manage Risk Is…

Although stocks rebounded nicely Tuesday and the major indices appeared to regain their footing, we need to keep in mind that the August/September time frame tends to be tough sledding in the stock market. And with approximately 40% of the stocks in the S&P 500 down at least 10% from their highs, one can argue that we remain in correction/pullback mode.

The good news is that the S&P 500 opens on this fine Wednesday morning a mere 1.14% from the all-time high set early in the month. The point here is that while yesterday was fun, we need to accept that this corrective phase may not have ended just yet.

Sure, I can argue that the recent dance to the downside was just the type of pause that can refresh the bullish mood as some of the complacency was washed away. However, with Trump threatening to shut down the government unless he gets his wall built and the debt ceiling fast approaching, well, this may not be the best time to abandon a cautious stance.

Speaking of which, before I was consumed with the move, we were exploring a few different ways to manage risk in one’s portfolios. We first talked about what I will call the “BlackRock Method,” which entails utilizing a lower volatility approach in your equity exposure both here at home and overseas.

BlackRock’s research shows that utilizing “low vol” indices (the iShares Min Vol USA ETF – USMV – would be the poster child for this) is a great way to ride the market during bull cycles and to “lose less” during those nasty bear phases.

While I applaud BLK loudly for their public stance telling investors that managing risk is mission critical in the long run, I personally am concerned that the “low vol” space may have become overly popular during this specific bull market.

If you will recall, this has been one of the most hated bull markets in history due to the seemingly endless stream of crises (most of which stemmed from the PIIGS and the European banking system) that arose from 2009 forward. As such, a great many investors decided that if they were going to be invested in stocks, they would do so in a more conservative fashion. Enter the “low vol” and “high dividend” trade.

The problem, from my point of view, of course, is that this may have become a very crowded trade. As such, when the bears do come to call again (and trust me, they will at some point), these more conservative indices may not provide the downside protection they did in the past as everyone tries to flee from the same place.

It is important to recognize that no single investing strategy/methodology works during all market environments. And if you aren’t sick of hearing me preach this message, do yourself a favor and reread the prior sentence. Or better yet, write these words on a sticky note and spack it on your computer screen so that you can be reminded of this message before the opening bell rings each day. In short, I believe this is probably the most important lesson investors need to learn if they expect to succeed over the long-term.

Repeat after me… There is no Holy Grail of investing! Trust me, no matter how smart you, how many letters you have after your name, are or how hard you try, you will not discover the secret to getting every move in the stock market right. P.S. There is no “all weather” strategy that works all the time, either. So, please run far, far away, as quickly as you can, from anyone who suggests otherwise!

One risk management firm I spoke with recently suggested that their approach to capital preservation during market declines works in 4 out of 5 bear market environments. To me, this was very refreshing to hear because, in my experience, this concept is spot on – no matter what method you employ to manage risk, there will be an environment where the approach gets “fooled” and fails to fully do its job.

It is for this reason that I am a proponent of utilizing multiple strategies in order to create portfolios that are diversified in a modern fashion (i.e. diversification that goes beyond using multiple asset classes).

And this, dear readers, is, in and of itself, a very strong way to manage the risk of severe bear market declines. It’s simple, really. Don’t put all your risk management eggs in a single strategy/methodology basket. Instead, diversify by employing multiple risk management strategies in your portfolio.

Tomorrow, I’ll talk about another specific strategy, something I call the “exposure method.” After that, we’ll explore some other ideas such as trend-following, the use of Alts, and an oldie, but a goody, the 60/40 method.

Thought For The Day:

Go in the direction of your dreams. Live the life you’ve imagined. -Thoreau

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of the Trump Administration

      2. The State of the Economic/Earnings Growth (Fast enough to justify valuations?)

      3. The State of Geopolitics

      4. The State of Fed Policy

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.

Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Advisory services are offered through Sowell Management Services.

Dave Moenning

Wait, BlackRock Is Saying What?

With no fewer than three potential big, bad events (and a fourth – the FOMC meeting – on tap for next week), traders appear to be in wait-and-see mode at the present time. And since I do not believe in making predictions about what the news will be – or more importantly how Ms. Market is going to react to said news – I would like to spend our time this morning talking about the subject of managing risk in the stock market.

Long-time readers of my oftentimes meandering morning market missive know that I am a risk manager. I always have been. I always will be. My career was shaped in the early 1980’s by the likes the late Marty Zweig, Ned Davis, and Stan Weinstein. They taught me early on that one of the best ways to make money in the long run was to avoid losing a lot of money in the short-run. And while my approach has shifted over the years (I’m much more big-picture/long-term oriented these days) my overriding objective of investing hasn’t changed. In short, I strive to stay in tune with what the market is doing and to lose the least amount possible when the bears are in control on Wall Street.

To be sure, this hasn’t always been a popular approach. In the late 1990’s for example, the idea of managing risk was almost laughable as the secular bull was raging, 10-year returns in the high-teens were normal, and the mutual fund industry had convinced investors that the key to success was to simply buy and hold. “Time, not timing” was the battle cry and back then, investors and advisors alike were taught to be “long-term” in their approach.

However, what I’ve learned over my career is that advisors and clients alike tend to be long-term – as long as they are making money!

The bottom line is that after two of the most brutal bear markets in history occurred within a nine-year period, a great many investors have decided to rethink their approach. Gone is the notion that investors should just put their money in a mutual fund and leave it there – forever. Gone is the idea that managing risk is a fool’s game. And gone is the concept of just riding things out when the bears come to call at the corner of Broad and Wall.

“My 401K is Now a 201K”

No, investors distinctly remember the pain of their “401K’s turning into 201K’s” during the 2000-2008 period and they don’t want that to EVER happen again. Never mind the fact that the next bear market usually looks nothing like the last one. Today, investors want assurance that the destruction they witnessed in their accounts during the 2000-2002 and 2008 through March 2009 bear markets won’t happen again.

While I may be guilty of “talking my book” here, the idea of trying to “do something” (anything!) to prevent the vicious declines that can accompany bear markets sounds pretty darned appealing to most of the folks I talk to.

Ask yourself this question: If you have a choice, do you want to remain fully exposed to stock market risk during the next bear market decline?

For those that answered, “Sure, I’m long-term – I don’t look at my retirement accounts anyway,” feel free to stop reading now – and you can skip some of next week’s missives as well.

But for the rest of you, now might be an excellent time to think about your strategy for the next bear market.

To be clear, I’m not suggesting that a bear market is imminent. However, given that (a) the current economic recovery is now nine years old (and one of the weakest in the post-war era), (b) stock market valuations are very high from an historical perspective, and (c) this is now the second longest period in stock market history without a 20% correction, now might be a great time to put a plan to “lose less” during the next bear market.

Even BlackRock Agrees!

And much to my surprise, one of the biggest money managers on the planet – a little company called BlackRock – agrees with me.

Yep, that’s right. Unlike the 1990’s, when Wall Street told you to hang in there and not to even THINK about adjusting your portfolio during bearish environments, today BlackRock is encouraging investors to understand risk and to actually do something about it.

So… Next time (likely on Tuesday), we will review the presentation BlackRock made at our advisor conference – a presentation that encourages investors to “win more by losing less.” What a concept!

Publishing Note: I am traveling for the rest of this week and will not publish report on Friday.

Thought For The Day:

Do what you feel in your heart to be right – for you’ll be criticized anyway. -Eleanor Roosevelt

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of the U.S. Economy

      2. The State of Earning Growth

      3. The State of Trump Administration Policies

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.

Looking for a “Modern” approach to Asset Allocation and Portfolio Design?

Looking for More on the State of the Markets?


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.

Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Advisory services are offered through Sowell Management Services.

Dave Moenning

Are You Prepared For The Big, Bad Bond Bear? (Should You Be?)

Most market analysts will concur that interest rates bottomed out in the summer of 2016. More specifically, after trending lower for approximately 35 years, the yield on the U.S. Gov’t 10-year Treasury Note hit an all-time low of 1.367% on July 5, 2016. And most every bond guru on the planet agrees that unless another global economic crisis hits, last summer’s low is unlikely to be exceeded any time soon.

Now consider the following: (1) U.S. economic growth is expected to continue to improve. (2) Inflation expectations have increased. (3) The Fed has embarked on a mission to normalize rates. (4) European economic growth is surprising to the upside. (5) The U.S. has reached “full employment.” And (6) the new administration’s policies (assuming they are implemented, of course) are expected to give the economy an extra boost. From a macro perspective, it is fairly easy to argue that this combination is bearish for bonds and as such, a big, bad bear market in bonds is likely waiting in the wings.

However, I think it is worth noting that this has been one of the most anticipated market events in history. Everywhere you turn, there is another article, webinar, or fund salesman touting what you need to do to avoid the coming calamity in bonds. And if you recall, this theme has been going strong since the “Taper Tantrum” of 2013 (when Ben Bernanke first started talking about backing off the Fed’s QE programs).

But so far at least, all the hand wringing and teeth gnashing over the big, bad bond bear has been, well… to borrow a line from William Shakespeare, “much ado about nothing.” In fact, the Barclays Aggregate Bond Index sports a cumulative gain of 11.12% since the end of 2013 (through 4/30/17). Thus, I might suggest that all the preparation for the bond debacle has been a bit premature, which, in my business, is another word for being wrong.

So, my first point on this fine Wednesday morning is that while everyone in the game has been busy preparing for the can’t-miss disaster in the bond market, it has actually been business as usual in the bond pits lately. Sure, rates bounced off the all-time lows as inflation and economic growth expectations increased last year. But, c’mon, what did you expect to see with the economy improving?

Long-Term Perspective

Take a look at the chart below. This is the yield of the U.S. 10-year Treasury Note over the last 23 years. As you can see, the trend has been moving from the upper left to the lower right for quite some time!

U.S. Gov’t 10-Year T-Note Yield – Monthly

View Larger Image

What this chart doesn’t show is that rates have actually been in a downtrend since late 1981. And since bond prices rise when yields fall, it is plain to see that this has been a mega bull market.

What is being talked about here is a sea change of epic proportions for the bond market. I.E. a secular bull morphing into a secular bear. And since the last secular shift took place in 1981, folks are expecting this to be a pretty big deal.

The natural progression – and the general consensus in the financial community – is to expect rates to rise going forward. And since bond prices fall when rates rise, this is where all the angst about the big, bad bond bear originates. Never mind the fact that most of the folks shouting from the rooftops about this event have been singing the same song for nearly four years, this time it’s different!

Are You Prepared? (Should You Be?)

Given the simplicity of the macro logic (I.E. a stronger economy means higher inflation, which, in turn, means higher rates – rinse and repeat ad infinitum), it is easy to understand why nearly every fund company and ETF creator has developed products intended to protect investors from the inevitable rising rate environment. After all, given the magnitude of what is expected to transpire, Wall Street has assumed that everyone will need to rework their portfolios to protect themselves from the massive bond bear. Makes sense, right?

As you may have surmised by my hints of sarcasm above, there is a side of this story that many advisors and clients are probably not familiar with. For example, did you know that the bond market has been through this type of sea change before? Did you know that the U.S. has seen prolonged periods of rising rates in the past? And more importantly, do you know how the bond market reacted during these periods?

So, tomorrow we will look back at history and explore what type of downside we might expect to see from the much-ballyhooed disaster on the horizon for the bond market.

Thought For The Day:

Those at the top of the mountain didn’t just happen upon it.

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of Trump Administration Policies

      2. The State of the U.S. Economy

      3. The State of Earning Season

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.

Looking for a “Modern” approach to Asset Allocation and Portfolio Design?

Looking for More on the State of the Markets?


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.

Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Advisory services are offered through Sowell Management Services.

Dave Moenning

My Back-of-the-Napkin Take

In yesterday’s missive, I began a back-of-the-napkin review of market conditions. For me, the question at hand is whether the bulls will be able to break out of the trading range that has been in place for the past two and one-half months. I stated that in situations like these, I like to look at the macro backdrop, the historical tendencies, and my market models for clues.

We began with a big-picture review of the macro situation, concluding that stocks remain in a secular bull market and that unless accompanied by a recession, any meaningful decline in the stock market is likely to be shorter and shallower than normal – and that the dips should continue to be bought. We then explored the history of the “Sell in May and Go Away” rule and decided that although the May – October periods haven’t exactly been gangbusters in this cycle, there didn’t seem to be any big reason for investors to head to the sidelines.

This morning, we will review what the cycle composite is projecting here and take a look at the message from my major market models.

What Do the Historical Cycles Say?

Before we begin, let me say that I do not believe in managing money based on “market calls,” predictions, or “gut feelings.” No, I prefer to utilize a disciplined approach that is guided by a “weight of the indicators” methodology. In short, I prefer to stay in tune with what the market “is doing” and avoid getting caught up in what I think stocks “should be” doing.”

As such, the use of a cycle composite would seem to be counter-intuitive. To review, the cycle composite is a combination of all the 1-year seasonal cycles, the 4-year Presidential cycles, and the 10-year decennial cycles going back to the early 1900’s.

I have been watching the cycle composite’s projections for years. And the bottom line is that, for the most part, stocks tend to follow the general trend indicated by the projection. Not on a day-to-day, or even week-to-week basis. But, again, generally speaking, over longer periods of time, the projection tends to be scary good. And it is for this reason, that I employ the cycle composite’s projection as one of the 10 inputs in my weekly market model.

But to be clear, we need to remember that Ms. Market has a mind of her own and will, at times, diverge completely from the historical trends.

Looking at the composite projection for 2017, stocks largely followed the historical script until early February, when the market shot higher instead of moving lower into early March, as the projection had called for. But since the beginning of March, the market appears to be back “in sync” with the historical cycles.

Looking ahead, the composite suggests a dip into mid- to late-May, to be followed by a strong rally through mid-July.

Unfortunately, this is where the good news ends. After a topping phase projected for mid-July through early August, the cycles suggest a meaningful decline to ensue for several months. A decline that would wind up wiping out the years’ gains and doesn’t finally bottom out until mid-October/November.

So, if the cycle composite holds up this year, investors would be wise to use the projected rally to prepare for an ensuing pullback. Put another way, investors with a longer-term time frame should be ready to buy the dip.

Will the market follow the script through the rest of the year in 2017? Who knows. However, I find it useful to have an inkling of what “could” happen in the months ahead.

What Do My Market Models Say?

Since I do a detailed review of my favorite market indicators and models every Monday morning, I’m going to skip the minutiae and cut to the chase here.

In short, I have four market models that I call my “primary cycle” indicators. These are four very different models designed to provide me with the “state of market.” I have been following these models for many years (two since 1993) and I can say that while nothing is perfect in this business, these models tend to get the big picture mostly right, most of the time.

Below is a summary of the current readings of the models from Monday’s report.


View Online

I like to say that you can get a very good feel for the health of the overall market by simply glancing at the colors of boxes that contain the indicator ratings. So, in reviewing the table above, the key is I don’t exactly get a warm and fuzzy feeling.

With the market making new all-time highs (microscopic as they may be), one would expect this indicator scoreboard to be sporting a bright shade of green. However, there are no green boxes to be found as the indicators are all neutral – or worse – at the present time.

In fact, two of the four models have issued sell signals in the past few months.

The bottom line message here is simple – risk is elevated and this is no time to have your foot to the floor.

Summing Up

Let’s summarize. First, we should recognize that stocks remain in a secular bull market trend. As such, all dips should be bought and bears tend to be shorter and shallower than average. Next, the “Sell in May” rule is in effect. However, as recent history shows, this is not exactly a reason to bury one’s head in the sand. Then there is the cycle composite projection, which is calling for a strong rally to begin momentarily and to take the market to new heights. But then later in the summer, the cycles project a nasty pullback that could even qualify as a mini bear. And finally, my favorite, big-picture market models are telling me that all is not right with the market and that some caution is warranted.

If I add these inputs together, it appears that we have an aging bull on our hands where leadership is narrowing and the key internals are weakening. As such, I will conclude that this is not a low-risk environment.

Looking ahead, my guess is that we could see a classic “blowoff” phase commence in the coming months – a type of overexuberant phase that tends to precede meaningful corrections. However, given that there is no reason to believe the secular bull trend that began in 2009 is ending, a buy-the-dips strategy still seems to make sense.

It is for this these reasons that our primary tactical allocation programs are currently in their “lower risk profile” mode. We haven’t moved to cash. But we are trying to stay in tune with the state of the indicators by taking our exposure to risk down a notch.

Thought For The Day:

Win or lose you will never regret working hard, making sacrifices, being disciplined or focusing too much. -John Smith

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of Trump Administration Policies

      2. The State of the U.S. Economy

      3. The State of Earning Season

      4. The State of World Politics

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.

Looking for a “Modern” approach to Asset Allocation and Portfolio Design?

Looking for More on the State of the Markets?


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.

Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Advisory services are offered through Sowell Management Services.

Dave Moenning

The Current Pattern On Wall Street Is Clear. So…

Once again, the headlines blared something along the lines of “Stock Market Closes at Another New High.” However, for the second session in a row – and technically the second consecutive new all-time high for the S&P 500 – one needed a microscope to see the record close on the chart (the S&P advanced a whopping 0.09 points – or 0.00% – yesterday). So, call me cynical if you must, but I’m going to opine that the stock market remains in a consolidation phase, awaiting a catalyst (or at least some sort of a reason) to move higher from here.

Yes, I aware of the fact that the NASDAQ Composite is in a clear uptrend and the chart looks great. And frankly, this gives me hope that the rest of the market will follow the lead of the FANGs and eventually join in the new-high fun. But if one looks at the charts of the rest of the major stock market indices, the message is the same as the S&P, Dow, Midcaps, and Smallcaps are all going nowhere fast.

The bears contend that the divergence between the tech-heavy NASDAQ and the rest of the market is a harbinger of bad things to come. Our furry friends argue that the bull is growing old and starting to look a bit saggy, leadership has narrowed dramatically, there have been no “thrust” signals from the most recent advance, the France news didn’t get it done, earnings season is winding down, the Fed is going to raise rates next month (triggering the old “three steps and a stumble” rule), oil is a problem again, investors are complacent (the VIX closed yesterday at the lowest level since 1993), tax reform is going to be delayed, the “hard” economic data has been weak, and valuations remain a problem. In sum, those seeing the market’s glass as at least half-empty contend that stocks have nowhere to go but down.

On the other side of the court, though, the message remains a bit more upbeat. The bulls continue to argue that the economy is stronger than the data suggests, earnings are going in the right direction, the jobs market has recovered from the Great Recession, housing is back, and that Trump’s policies will ensure the future remains bright from an economic/earnings standpoint.

With both teams having seemingly good arguments, the result is, yep, you guessed it; a sideways market.

Is Sideways the New Down?

While the reasons can be argued, I have contended for some time now that bouts of sideways consolidation after a rally has replaced the “two steps forward and one step back” maxim – well, at least during the current cyclical bull market, anyway.

Take a look at the chart below. This is the S&P 500 daily from January through October 2016.

S&P 500 – Daily (Jan – Oct 2016)

View Larger Image

Note that the initial rally from February 11, 2016 through April 20, 2016 gained about 15% in two months. And from there, a period of sideways action – aka a consolidation phase – set in.

In my opinion, this sloppy period acted as a digestive phase after a big advance and was followed by the “freakout” over the BREXIT vote.

From the BREXIT low, the S&P proceeded to tack on 9.5% in less than a month before entering another period of sideways consolidation.

Next up, there was the pre-election jitters as Mr. Comey’s headlines caused traders to fret about the outcome of the election (in both directions).

The chart below shows what has happened since that pre-election low…

S&P 500 – Daily (Sep 2016 – May 8, 2017)

View Larger Image

From the pre-election low, stocks jumped about 9% before… wait for it… another period of consolidation set in. By now, you all know the reasons why the “Trump Trade” stalled as investors worried that tax reform and stimulus might be held up by all the political wrangling over healthcare. Oh, and the “hard economic” data started to kinda stink up the joint (Q1 GDP, for example).

But after the initial failure of “repeal and replace,” the White House made it clear that tax reform was its next priority. Included in the administration’s initial tax plan was the opportunity to repatriate a gazillion dollars or so back to the U.S., some of which, it is assumed, will get spent on growth here at home. And of course, this creates the hope that the current economic assumptions are too low. As a result, stocks started to discount this hope with another rally of 7%.

So, what came next, you ask? What did stocks do after a 9% rally, a pause, and another 7% advance? Enter another period of sideways consolidation, that’s what. Anybody besides me starting to see a pattern here?

Where To From Here?

The natural question is, what should we expect to see from here? Assuming the recent pattern holds, my guess is that something will come out of the woodwork that will allow traders to discount greener pastures ahead. This, of course, would be followed by a period of, well, you get the idea.

However, the funny thing about patterns on Wall Street is they eventually come to an end. In my experience, this occurs when there is a change in the market narrative. So, given (a) the age of the current bull, (b) the fact that my major market models are not in their happy places right now, and (c) our cycle composite is calling for a meaningful decline later this summer, I’m currently pondering what might cause the current “hope narrative” to change.

Although my crystal ball is in the shop again for repairs, I will opine that a potential combination of (1) the Fed making an additional move (and potentially becoming hostile to the market in the process) and (2) the ECB announcing an end to its QE program, might just turn hope into worry.

But before you run out and load up on put options and inverse ETFs, please understand that I don’t see a “mini bear” putting the current secular bull in the ground. As such, I will contend that any meaningful dips (such as the type of cyclical bear that occurred from August 2015 – February 2016) would represent a long-term buying opportunity.

Thought For The Day:

Great things don’t emanate from the comfort zone…

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of Trump Administration Policies

      2. The State of the U.S. Economy

      3. The State of Earning Season

      4. The State of World Politics

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.

Looking for a “Modern” approach to Asset Allocation and Portfolio Design?

Looking for More on the State of the Markets?


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.

Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Advisory services are offered through Sowell Management Services.