RPT MTA 2016 07 PEEK

Monthly Market Analytics & Technical Analysis
JULY 2016 Edition
FULL MATA REPORT
MATA- JULY 2016
7/11/2016
1 JULY 2016 Edition

Copyright 2016 Gordon T. Long All Rights Reserved
Restricted & Confidential

general@GordonTLong.com
Monthly Market Analytics & Technical Analysis

JULY 2016
HIGHLIGHTS - WHAT YOU NEED TO KNOW ................................................................................................................................. 13
SUMMARY ANALYSIS ............................................................................................................................................................................................ 13
Era of Delusional Distortions & the Super Cycle Pivot b .................................................................................................................................... 28
Defining Chart #1 - "Delusional Distortion" Expectations & the Log-Periodic Cycle ......................................................................................... 30
Defining Chart #2 - Finding the Longer Term Super Cycle Pivot b ................................................................................................................ 31
Defining Chart #3 - The Big M and Super Cycle b ....................................................................................................................................... 31
OUR APPROACH - MACRO ANALYTICS ...................................................................................................................................... 44

JULY 2016: Global Macro Drivers ........................................................................................................................................................................... 46
NEW-WEALTH .................................................................................................................................................................................................. 48
UPDATED-HARD ASSETS - Gold ................................................................................................................................................................ 48
UPDATED-HARD ASSETS Silver .............................................................................................................................................................. 51
NEW-UPDATED-HARD ASSETS Gold : Silver Ratio ................................................................................................................................ 54
UPDATED-HARD ASSETS - Commodities .................................................................................................................................................. 55
NEW-EXCHANGE ............................................................................................................................................................................................. 56
UPDATED-CURRENCIES - USD .................................................................................................................................................................. 56
UPDATED-CURRENCIES - EURO ............................................................................................................................................................... 58
UPDATED-CURRENCIES - YEN .................................................................................................................................................................. 59
UPDATED-CARRY TRADE - The : Cross ............................................................................................................................................... 61
UPDATED-CARRY TRADE - The $: Cross ............................................................................................................................................... 63
NEW-YIELD, CREDIT & SPREAD .................................................................................................................................................................... 64
NEW-EQUITIES - Global ................................................................................................................................................................................... 67
CHARTS & RESEARCH OF NOTE .................................................................................................................................................................. 68
CURRENCIES ............................................................................................................................................................................................... 68
NEW-CURRENCIES The CNHUSD Is Becoming IncreasinglyMore Important ..................................................................................... 68
CREDIT .......................................................................................................................................................................................................... 69
CREDIT EU Credit Ratings Could Be Cut If UK Leaves, Fitch Warns ................................................................................................... 70
CREDIT Moodys lowers credit ratings for Saudi Arabia and other Gulf oil producers ........................................................................... 71
CREDIT Current Gauge of US Credit Markets ....................................................................................................................................... 73
CREDIT Credit versus S&P versus Fed Actions .................................................................................................................................... 74
CREDIT US CLOs Down Significantly .................................................................................................................................................... 74
CREDIT US CLOs Issuances Falling Off ................................................................................................................................................ 75
CREDIT Gross Leverage for Typical IG/HY in Debt-to-EBITDA ............................................................................................................ 75
CREDIT Leveraged Loans and HY Corporate Bond Yields Point to Lower Equities ............................................................................. 76
YIELD ............................................................................................................................................................................................................. 77
NEW-YIELD 7 Year MA of the 10Y UST The Critical 2.5% Threshold .................................................................................................... 77
NEW-YIELD Correlated Bond Ratio With Equity Market Actions ................................................................................................................ 77
NEW-YIELD A Flight To Safety Occurring .................................................................................................................................................. 78
NEW-YIELD Looking for a Bounce in Yield ................................................................................................................................................. 78
NEW-YIELD Global Government Bond Yield Comparison ......................................................................................................................... 79
NEW-YIELD Looking for a Bounce in Yield ................................................................................................................................................. 79
YIELD Flattening Yield Curve ...................................................................................................................................................................... 80
YIELD Yield Curve and Consensus 2016 GDP Growth Expectations v SPX ............................................................................................ 80
YIELD Financial Stocks versus UST 2s-30s ............................................................................................................................................... 81
YIELD US Treasuries are Now Approaching 2 Standard Deviations Expensive ........................................................................................ 81
YIELD US Bonds Approach $40T Up 60% Since 2000 ........................................................................................................................... 81
YIELD Bond Duration and Maturity Increase To Capture Yield .................................................................................................................. 82
YIELD 10Y UST Treasury Yields versus US Nominal Growth Since 1960 ................................................................................................. 82
YIELD US Yield Curve Spread v World Industrial Production ..................................................................................................................... 83
COMMODITIES ............................................................................................................................................................................................. 84
COMMODITIES YTD Commodity Result Comparisons ......................................................................................................................... 84
COMMODITIES YTD Commodity Result Comparisons ......................................................................................................................... 84
COMMODITIES WTI- Log Scale of Price and Percentage Change....................................................................................................... 85
COMMODITIES Real Oil and Average Oil Price Since 1861 ................................................................................................................. 85
COMMODITIES Copper Falls To Fresh 6 Years Low After $GS Says Metal "Poised To Move Even Lower" ...................................... 86
INFLATION .................................................................................................................................................................................................... 87
INFLATION Probability of March Fed Rate Hike = Zero = Weak Inflation ............................................................................................. 87
INFLATION March Rate Hike Odds Falling Rapidly ............................................................................................................................... 88
INFLATION Expected Inflation- One Year and Three Years Ahead ...................................................................................................... 88
PRECIOUS METALS ..................................................................................................................................................................................... 89
PRECIOUS METALS HARD ASSETS - Smart Money" Has Never Been More Bearish On Silver ....................................................... 89
PRECIOUS METALS HARD ASSETS - Classic Ending Diagonal in Gold ............................................................................................ 90
PRECIOUS METALS HARD ASSETS - Gold;Silver Ratio Long Term ............................................................................................... 92
PRECIOUS METALS HARD ASSETS - Gold;Silver Ratio Intermediate Term Term-1 ...................................................................... 92
PRECIOUS METALS HARD ASSETS - Gold;Silver Ratio Intermediate Term Term-2 ...................................................................... 93
PRECIOUS METALS Gold Breaking Out Deutsche Bank Driven? ..................................................................................................... 93
PRECIOUS METALS Gold Breaks Out At Exactly Year Beginning? ..................................................................................................... 93
PRECIOUS METALS Barrels of Oil per Ounce of Gold ......................................................................................................................... 94
RISK: Risk-On versus Risk-Off ................................................................................................................................................................................ 95
JULY 2016 Edition


CHARTS OF NOTE ........................................................................................................................................................................................... 96

NEW-RISK Gobal Monetary Policy Is Simply Failing To Achieve Its Stated Goal Something Will Be Done Eventually! ................... 96
NEW-RISK S&P Has Disconnected From Economic GDP Growth Expectations Elevated Market Risk ............................................... 96
NEW-RISK S&P Has Disconnected From 2016 EPS Expectations .......................................................................................................... 97
NEW-RISK S&P Has Disconnected From 10Y UST .................................................................................................................................. 97
NEW-RISK Collapsing UST Yields Suggest Economic Problems Ahead .................................................................................................. 98
NEW-RISK BREXIT Was A Destabilizing Global Shock Wave .................................................................................................................. 98
RISK S&P 500 Death Cross Similar to 2001 and 2008 .............................................................................................................................. 99
RISK S&P 500 versus UST 2-30s Spread and Consensus 2016 GDP Growth Forecast ......................................................................... 99
RISK Margin Debt Rolling Over - Fast ...................................................................................................................................................... 100
RISK Long Time Since the Last 1% Down Day........................................................................................................................................ 100
RISK Dumb Money Back At Extremes ..................................................................................................................................................... 101
RISK Is the Fed Outright Buying Stocks/Futures to Prop Up the Markets? ............................................................................................. 101
RISK Selling Continues With $2.6 Billion In Equity Outflows, Stocks Sold In 10 Of Past 12 Weeks ...................................................... 103
RISK Rolling 5 Week Flows From Equity Funds ...................................................................................................................................... 105
RISK 4 Week Net Buys - 2008-Present Plunging! ................................................................................................................................ 106
RISK The Bond Market is Screaming Economic Slowdown Equity Markets Hear Fed Stimulus! ................................................... 107
RISK Repeating August 2015 Yuan Devaluation Pattern ........................................................................................................................ 107
RISK Repeating One Year E-Mini Pattern ................................................................................................................................................ 108
RISK Lack of Volatility is a Very Worrying Sign........................................................................................................................................ 108
RISK Global Equity Indices Show Clear Trend Channel with Pre-US Election Turbulence .................................................................... 109
RISK A 5-15% Draw-down should be expected by or within Q3 2016 .................................................................................................... 109
RISK Investors Clearly Exiting US Equity Markets ................................................................................................................................... 110
RISK Investors Clearly Exiting US Equity Markets ................................................................................................................................... 110
RISK Minimizing Volatility The Five Most Popular Exchange Traded Funds This Year ....................................................................... 111
RISK Bracing for Volatility Investors Are Betting Volatility Will Rise ..................................................................................................... 111
RISK Determined Shorts Short Interest Remains Near Bull Market Highs ........................................................................................... 111
RISK Investors Flee Mutual Funds Money Has Left Mutual Funds the Last 8 Straight Weeks........................................................... 112
RISK Corporate Buybacks is the Lone Marlet Buyer ............................................................................................................................... 112
RISK 2016 Y-o-Y Flows By BoAML Client Type ...................................................................................................................................... 113
RISK BoAML Client Type Net Buys 4WMA v S&P 500 2008-Present ................................................................................................ 113
RISK BoAML Client Type Cumulative Flows Since January 2008-Present ........................................................................................... 114
RISK USDJPY Correlation to S&P 500 ..................................................................................................................................................... 114
RISK Breadth Has Turned Counter Rally Stalling .................................................................................................................................. 115
RISK Wall Street's recent rise is stretched relative to the real U.S. economy .......................................................................................... 116
RISK Diverging gap between stocks and corporate-profit expectation ..................................................................................................... 116
RISK historic correlation between stock and bond prices is now very distorted ....................................................................................... 116
RISK Nasdaq risk is dramatically higher than S&P risk ........................................................................................................................... 117
RISK Draghis ECB Announcement Triggers Bull Reversal To Evercore ................................................................................................ 118
RISK High Probability US Recession in 2016 .......................................................................................................................................... 119
RISK Price-to-Sales Presently Second Highest to the Dotcom Bubble Collapse .................................................................................... 119
RISK Industrial Production Is Rolling Over ............................................................................................................................................... 120
RISK NYSE Margin Debt at Record Levels .............................................................................................................................................. 121
RISK Margin Debt to GDP Higher then 2000 and 2007 ........................................................................................................................... 122
RISK Margin Debt to GDP and 3-Year Stock Returns ............................................................................................................................. 123
RISK Investors Sell Dividend Funds, MLPs, REITs and High Yield......................................................................................................... 125
RISK Bull to Bear Ratio Unprecedented Optimism ............................................................................................................................... 126
RISK Turmoil in High Yield Bonds ............................................................................................................................................................ 127
RISK New Global Risk US Growth European Financial Conditions ................................................................................................... 128
RISK Leveraged Loans and HY Corporate Bond Yields Warn of Possible SPX of 1100 ........................................................................ 128
RISK Global Financial Risk ....................................................................................................................................................................... 129
RISK US Financials Stocks versus Credit ............................................................................................................................................. 129
RISK Something Is Seriously Wrong Somewhere in Deutsche Bank 5Y Sub CDS ............................................................................. 130
RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Lehman Comparison ................................................................ 130
RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Ending Diagonal Goes Lower .................................................. 131
RISK Small Cap Stocks versus HY Bond Spread .................................................................................................................................... 131
RISK Net Cash Companies Scarce EBITDA Cash Flow ................................................................................................................... 132
RISK Falling Animal Spirits - Sinking CEO Confidence ........................................................................................................................... 132
RISK Bull-Bear Ratio Collapses ............................................................................................................................................................... 133
RISK SPX Percent off 2009 High ............................................................................................................................................................. 134
RISK SPX Price-Earnings-PE Ratio ......................................................................................................................................................... 134
RISK Stock market more Over-valued than prior to Previous Crashes! .................................................................................................. 135
RISK Coppock Signaling Problems Ahead ............................................................................................................................................... 135
RISK Junk Bond Movements Have Been Dependable Warning Indicators Since Dotcom Bubble Burst ............................................... 136
TECHNO-FUNDAMENTALS ................................................................................................................................................................................. 137
CHARTS OF NOTE ......................................................................................................................................................................................... 137
NEW-CHARTS S&P 500 versus Price-to-Book Ratio .............................................................................................................................. 137
NEW-CHARTS S&P 500 versus Price-to-Sales Ratio ............................................................................................................................. 137
NEW-CHARTS US at 90th Highest Percentile on Trailing EV/EBITDA .................................................................................................... 138
NEW-CHARTS So Many Monetary & Geo-Political Events the Charts Are Becoming Unusually Cluttered .......................................... 138
NEW-CHARTS An Overbought Market .................................................................................................................................................... 139
NEW-CHARTS EU banks are imploding, trading at levels not seen since the depths of the 2011-2012 crisis. ..................................... 140
NEW-CHARTS Russell 2000, which tends to lead the S&P 500, has failed to confirm the move higher. .............................................. 140
NEW-CHARTS The Smart Money Isnt Buying the Post BREXIT Bounce. ............................................................................................. 141
NEW-CHARTS The USJPY Isnt Buying the Post BREXIT Bounce. ....................................................................................................... 141
JULY 2016 Edition


NEW-CHARTS The SPX versus GAAP Earnings is Too Large to Be Sustained .................................................................................... 142
NEW-CHARTS It Continues to be a Reach for Yield as S&P Dividend Paying Stocks Outperform ....................................................... 142
CHARTS The Long Term TBI & PPO Oscillators In Concert Identify Significant Market Turns .............................................................. 143
CHARTS Divergence Doesnt Confirm Breakout nor New Market Highs ................................................................................................ 144
CHARTS As Goes January Doesnt Bode Well for 2016 .................................................................................................................... 145
CHARTS Major Equity Drawdowns Becoming More Frequent and Global Events ................................................................................. 145
CHARTS Markets Historically Dont React Well To Rate Hikes ............................................................................................................... 146
CHARTS S&P 500 Index Is Typically Range-Bound Prior to Election Day ............................................................................................. 146
CHARTS NYSE Margin Debt Showing Clear Pattern Seen Prior to Most Major Market Drawdowns ..................................................... 147
CHARTS Long Term Equity Earnings versus 10Y Bond Yields A Strong Indicator of Expected Future Equity Performance ............... 148
CHARTS US 10Y CDS Prices Rising In Concert with US Primary Debacle ......................................................................................... 149
CHARTS Market Phases Methodology of Richard Wyckoff .................................................................................................................. 150
CHARTS Does Oil Suggest 2016 Markets Will Follow 2015? ................................................................................................................. 151
CHARTS Defensive Stocks Get Pricey PE In Safer Industries Climbing.............................................................................................. 152
CHARTS Sell Side Consensus Indicators Suggest Wall Street Doesnt Believe in this Rally ................................................................. 152
CHARTS Earnings Are The TellTail Between a Bullish Consolidaation & a Bear Market Top .............................................................. 153
CHARTS Warning Signal Setup of the 50DMA Cross of 200DMA .......................................................................................................... 153
CHARTS A Major Rounded Top Pattern .................................................................................................................................................. 154
CHARTS Nov 1994-March 2000 Internet Bubble Comparison to March 2009-Current .......................................................................... 154
CHARTS Is This Rally About Keeping Averages in the Green as We Enter IRA/RSP Tax Deposit Time? ............................................ 155
CHARTS An Established Downward Trend Channel Since High in June 2015 ...................................................................................... 155
CHARTS Divergence in DJ Industrial Average and Transportation Average .......................................................................................... 156
CHARTS SPX has returned into the area of congestion that contained it prior to the January sell-off ................................................... 157
CHARTS Analogy: DJIA, 1961 1962 ..................................................................................................................................................... 158
CHARTS Current Counter Rally Comparison to 2000 Tech Bubble Collapse ......................................................................................... 158
CHARTS Current Counter Rally Comparison to 2007 Financial Crisis .................................................................................................... 159
CHARTS Cumulative Flows by BoAML Client - January 2008-Present .................................................................................................. 159
CHARTS 2016 YTD Flows by BoAML Client Type .................................................................................................................................. 160
CHARTS Upside Break of 2010 => 2085, Downside Break => 1963-1931 and 1902-1891 ................................................................... 161
CHARTS 4 Week MA of Total Net Buys by BoAML Client - January 2008-Present .............................................................................. 162
CHARTS BoAML Corporate Clients 4 Wk Average Buybacks Y-o-Y % Change .................................................................................... 163
CHARTS S&P 500 versus Forward EPS .................................................................................................................................................. 164
CHARTS Clear Signs Of A Market Trying To Roll-Over Against Corporate Buybacks Mysterious Buying ............................................ 164
CHARTS Classic Ending Diagonal In Gold .............................................................................................................................................. 166
CHARTS Value Line Geometric Composite Short Term A 38.2% Retracement ............................................................................... 166
CHARTS Value Line Geometric Composite Long Term A 38.2% Retracement with 23.6% Bounce ............................................... 167
CHARTS MSCI World Index 7.5 Year Cycle ......................................................................................................................................... 168
CHARTS World Equity Markets Have Now Lost Over $16.8 Trillion ....................................................................................................... 168
CHARTS Global Bear Markets ................................................................................................................................................................. 169
CHARTS Possible Head & Shoulders in Play with a Target of 1600 ....................................................................................................... 170
CHARTS Possible Small Degree Head & Shoulders in Play with a Target of 1725 ................................................................................ 170
CHARTS Possible Corrective A-B-C Near Completion .......................................................................................................................... 171
CHARTS Cumulative Flows By Client Type January 2008-Present ..................................................................................................... 171
CHARTS Total World Index Fund versus Long Term Fund ..................................................................................................................... 172
CHARTS Global DOW Drops To Next Support Level .............................................................................................................................. 172
CHARTS VIM remains negative across the board since mid-Nov. .......................................................................................................... 173
CHARTS A falling VIGOR shows net distribution ..................................................................................................................................... 174
CHARTS The RRG reflects a defensive or risk off market....................................................................................................................... 175
CHARTS The average stock in the developed world is off 23% from its 1-year high .............................................................................. 176
CHARTS The average stock in the developed world is down 8% over the past year ............................................................................. 176
CHARTS 52% of all developed world stocks are in a bear market over the past 200-days .................................................................... 177
CHARTS The average energy company is down an astounding 40% of its 1-year high. ........................................................................ 177
CHARTS The average stock in DM Americas is down 14%in the last year ............................................................................................ 178
CHARTS International and Emerging Market Divergence ....................................................................................................................... 178
CHARTS US versus World Stocks ........................................................................................................................................................... 179
CHARTS S&P 500 With and Without FOMC Meeting Dates ................................................................................................................... 180
OUTLOOK - ANALYTICAL ANALYSIS .......................................................................................................................................... 181

NEW-BANKING & BONDS YIELDS ARE SUGGESTING SOMETHING IS BREWING ................................................................................... 181
CHARTS OF NOTE ......................................................................................................................................................................................... 183
NEW-BANKING & BONDS European Banks Texas Ratios ..................................................................................................................... 183
NEW-BANKING & BONDS ECB Balance Sheet ....................................................................................................................................... 184
NEW-BANKING & BONDS Italian & Spanish Debt-to-GDP...................................................................................................................... 184
NEW-BANKING & BONDS 10Y Global Government Bond Yield Comparisons ....................................................................................... 185
NEW-BANKING & BONDS Global Bank Stocks Have Experienced Serious Drawdowns Y-o-Y............................................................. 185
NEW-BANKING & BONDS Italian Banking System NPL Breakdown ................................................................................................... 186
NEW-BANKING & BONDS European Fiancials Nearing Lows of 2012 Banking Crisis ........................................................................... 186
BANKING & BONDS Flattening Yield Curve ............................................................................................................................................. 187
BANKING & BONDS Yield Curve and Consensus 2016 GDP Growth Expectations v SPX ................................................................... 187
BANKING & BONDS Financial Stocks versus UST 2s-30s ...................................................................................................................... 188
BANKING & BONDS US Treasuries are Now Approaching 2 Standard Deviations Expensive ............................................................... 188
BANKING & BONDS US Bonds Approach $40T Up 60% Since 2000 .................................................................................................. 188
BANKING & BONDS Bond Duration and Maturity Increase To Capture Yield ......................................................................................... 190
BANKING & BONDS 10Y UST Treasury Yields versus US Nominal Growth Since 1960 ....................................................................... 190
BANKING & BONDS A Flattening Yield Curve ......................................................................................................................................... 191
BANKING & BONDS US Yield Curve Spread v World Industrial Production ........................................................................................... 191
JULY 2016 Edition


BANKING & BONDS US Yield Curve Spread v World Export Volume ..................................................................................................... 191
BANKING & BONDS US Yield Curve Spread v World Export Volume ..................................................................................................... 192
BANKING & BONDS US Yield Curve Spread v S&P Revenues .............................................................................................................. 192
RESEARCH OF NOTE .................................................................................................................................................................................... 193
NEW-BANKING & BONDS Europe Wasnt SAVED in 2012 and Its In Even MORE Trouble Now ................................................... 193
NEW-BANKING & BONDS EU Banking Now Nothing More than an Elaborate CONfidence Game .................................................... 195
NEW-BANKING & BONDS EU BANKING CRISIS II MATASII Recaps the Headlines 07-07-16 ...................................................... 196
NEW-BANKING & BONDS EU BANKING CRISIS II MATASII Recaps the Headlines 07-06-16 ...................................................... 200
BANKING & BONDS Pricing And Valuation Of Bonds No Longer Reflects Fundamentals - Why This Matters ...................................... 204
BANKING & BONDS Goldman Warns Of "Upward Shock" To Rates, Hints At Trillions In Losses ......................................................... 206
BANKING & BONDS Signals from the U.S. Yield Curve: World Cant Handle Fed Rate Hikes............................................................... 209
EARNINGS CONTINUING EARNINGS DETERIORATION .............................................................................................................................. 213
NEW-STUDY: Q2 EARNINGS Settting Expectations ........................................................................................................................................ 213
CHARTS OF NOTE ......................................................................................................................................................................................... 213
NEW-Q2 EARNINGS Y-o-Y Earnings Decline Expected to Be -5.6% versus -2.8% on March 31, 2016 ................................................ 213
NEW-Q2 EARNINGS Estimated Earnings Growth at End of Q2 v Actual Growth ................................................................................... 214
NEW-Q2 EARNINGS S&P 500 Trailing 12 Month Net Margins Have Rolled Over .................................................................................. 214
NEW-Q2 EARNINGS S&P 500 EPS Forecasts ........................................................................................................................................ 215
NEW-Q2 EARNINGS S&P 500 EPS Forecasts Imputed Fair Value Down -11.5% Since November 2015 ........................................ 215
NEW-Q2 EARNINGS Corporate Cashflow -3.4% than Q3 2010 When QE2 Started .............................................................................. 216
NEW-Q2 EARNINGS Corporate Cashflow Shortfall is -$1.6T versus a the 2% Underpinning ................................................................ 216
NEW-Q2 EARNINGS Corporate Cashflow Shortfall is Can be Traced to the Labor Participation Rate .................................................. 217
NEW-Q2 EARNINGS S&P 500 Quarterly Bottoms-Up EPS Revisions .................................................................................................... 217
NEW-Q2 EARNINGS Median Stock Trades at 99 Percentile of Historical Valuations ............................................................................. 218
NEW-Q2 EARNINGS What Are Cash Dividends Telling Us? ................................................................................................................... 218
Q2 EARNINGS Q2 To Be 5th Consecutive Quarter of Y-o-Y Earnings Decline....................................................................................... 219
Q2 EARNINGS Cutting Labor Costs to Absorb Inflation Pressures Due to Lack of Revenue Growth .................................................... 220
Q2 EARNINGS AAPL Largest Contributor to S&P Q2 Tech Sector Decline ........................................................................................... 221
Q2 EARNINGS Q2 Earnings Season By the Numbers ......................................................................................................................... 222
Q2 EARNINGS Sixth Consecutive Quarter of Y-o-Y Revenue Declines ................................................................................................. 223
Q2 EARNINGS Earnings Estimates By Sector and S&P 500 Overall ..................................................................................................... 224
Q2 EARNINGS Revenue Estimates By Sector and S&P 500 Overall ..................................................................................................... 224
Q2 EARNINGS Trailing 12 Month Net Margin Deterioration .................................................................................................................... 225
Q2 EARNINGS 12 Mo Forward PE Ratio ................................................................................................................................................. 225
RESEARCH OF NOTE .................................................................................................................................................................................... 226
NEW-Q2 EARNINGS Factsets Complete Q2 Earnings Breakdown ....................................................................................................... 226
Q2 EARNINGS Morgan Stanley Asked Analysts How Companies Were "Exceeding Estimates", The Answer Is Disturbing ............... 226
Q2 EARNINGS Heres how investors are duped each earnings season ................................................................................................. 230
SUPPORT & RESISTANCE .................................................................................................................................................................................. 237
Gann Analysis .................................................................................................................................................................................................. 237
Boundary Conditions ....................................................................................................................................................................................... 237
Channels & Regressions ................................................................................................................................................................................. 239
Fibonacci - Controlling Time Extensions ......................................................................................................................................................... 243
Fibonacci - Controlling Price Extensions ......................................................................................................................................................... 243
Elliott Wave ...................................................................................................................................................................................................... 244
MA & Bollinger Bands ...................................................................................................................................................................................... 246
The Bottom Line............................................................................................................................................................................................... 246
BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT ........................................................................................................................... 247
SENTIMENT & CONFIDENCE Shifting Trend ................................................................................................................................................... 247
NEW-SENTIMENT - Consumer, Investor & Trader ............................................................................................................................................... 248
NEW-Consumer Confidence - Conference Board .......................................................................................................................................... 248
NEW-Consumer Sentiment - Michigan ........................................................................................................................................................... 251
NEW-Consumer Comfort - Bloomberg ............................................................................................................................................................ 253
NEW-American Association of Independent Investors ................................................................................................................................... 255
NEW-Investors Intelligence ............................................................................................................................................................................. 255
NEW-National Association of Active Investment Managers (NAAIM) ............................................................................................................ 256
NEW-Small Business Optimism ...................................................................................................................................................................... 257
NEW-Percentage Stocks above 50 & 200 DMA ............................................................................................................................................. 259
NEW-Margin Levels ......................................................................................................................................................................................... 260
NEW-Margin Debt Levels versus S&P 500 ..................................................................................................................................................... 262
NEW-NYSE Investor Credit versus Market ..................................................................................................................................................... 263
Mutual Fund Cash Levels v S&P 500 .............................................................................................................................................................. 263
NEW-OSCILLATORS & BREADTH: Indicators of Importance ............................................................................................................................ 266
NEW-NYSE Overbought / Oversold ................................................................................................................................................................ 266
NEW-OEX Open Interest (Puts/Calls) ............................................................................................................................................................. 267
NEW-TRIN ....................................................................................................................................................................................................... 268
NEW-McClellan Oscillator ............................................................................................................................................................................... 269
CHARTS OF NOTE ............................................................................................................................................................................................... 270
NEW-CHARTS Small Business Sentiment Trending Down Strongly .......................................................................................................... 270
CHARTS Small Business Sentiment Trending Down Strongly .................................................................................................................... 270
CHARTS Small Business Sentiment Margin Squeeze ............................................................................................................................. 271
CHARTS Bloomberg Consumer Comfort versus Nasdaq ........................................................................................................................... 271
CHARTS Goldmans Short Term Sentiment Indicator Shows Low Suggests Near Term Counter Rally Likely ...................................... 273
CHARTS Global Consumer Confidence Begins Reversal from Trend Resistance ..................................................................................... 274
JULY 2016 Edition


CHARTS US Economic Index Steadily Eroding ........................................................................................................................................... 275

CHARTS UMich Consumer Confidence with Biggest Miss on Record ........................................................................................................ 275
CHARTS Economic Surprise Index lower highs, lower lows and a reluctant bounce .............................................................................. 275
CHARTS Cumulative Flows by Client Type - YTD ....................................................................................................................................... 277
CHARTS Historical Risk versus Returns ...................................................................................................................................................... 277
CHARTS Cumulative Flows by Client Type January 2008-Present ......................................................................................................... 278
CHARTS Q Ratio Since 1900 ....................................................................................................................................................................... 278
CHARTS Nominal & Real Household Spending Expectations .................................................................................................................... 279
CHARTS Household Spending Expectations by Income Bucket ................................................................................................................ 279
CHARTS A Very Neutral (Highly Unusual) Bull Market ............................................................................................................................... 280
CHARTS Historical Swings in Sentiment ..................................................................................................................................................... 280
CHARTS Investors Intelligence Bulls & Bears ............................................................................................................................................. 281
CHARTS A/D Line Diverging from Price, Suggesting Weakening Momentum ........................................................................................... 282
CHARTS Smart Money OEX Open Interest Put/Call Ratio Now Off the Charts! .................................................................................... 282
CHARTS UMich Consumer Sentiment Tumbles Most In 16 Months ........................................................................................................... 283
CHARTS Consumer Comfort Plunges Most In 10 Months .......................................................................................................................... 284
CHARTS Only 16% Think Future Employment Opportunities Will Be Better .............................................................................................. 285
CHARTS Inequality Eventually Leads to Economic Adjustments Often Precipitously ............................................................................. 285
CHARTS - NFIB Small Business Sentiment ................................................................................................................................................... 286
CHARTS - Orange Book .................................................................................................................................................................................. 286
CHARTS Asset Allocation Global Equities ................................................................................................................................................ 287
CHARTS Asset Allocation Global Bonds .................................................................................................................................................. 287
CHARTS Active versus Passive Funds Allocation ....................................................................................................................................... 288
CHARTS Investors Intelligence Survey of % Bears ..................................................................................................................................... 288
CHARTS Sentiment at Post 2008 Crisis Highs ............................................................................................................................................ 289
CHARTS CNBC Viewership Steadily Falling ............................................................................................................................................... 290
CHARTS Investor Allocation Trends for Stocks, Bonds and Cash .............................................................................................................. 291
CHARTS Uptick in Feds Financial Stress Index Composite ....................................................................................................................... 292
CHARTS Fear Barometer Diverges with VIX, CDS IG Index ...................................................................................................................... 293
CHARTS Extreme Complacency Seen Near End of Cycles ........................................................................................................................ 293
CHARTS Complacency Seen In PE/VIX ....................................................................................................................................................... 294
CHARTS Post Crisis Sentiment Profile Shows a Clear Ending Pattern ...................................................................................................... 294
CHARTS Smart Money Flows ...................................................................................................................................................................... 295
CHARTS Fed Assets versus Bullish Sentiment ........................................................................................................................................... 295
CHARTS Macro Support Has Technically Broken Down ............................................................................................................................. 296
CHARTS US Surprise Index Setting Up for Downturn ................................................................................................................................. 296
CHARTS The Public No Longer Trusts the Market Feel it is Manipulated and Ineffectively Regulated ............................................... 297
RESEARCH OF NOTE .......................................................................................................................................................................................... 298
NEW-SENTIMENT: NYSE Margin Debt Increased Again in April .................................................................................................................. 298
NEW-SENTIMENT: Economic Confidence Tumbles To 2 Year Lows As Democrats Lose Faith.................................................................. 302
NEW-SENTIMENT: NFIB Slams Fed, Obama As Small Business Optimism Crashes To 2 Year Lows ....................................................... 303
INTERMEDIATE TERM RISK ANALYSIS ................................................................................................................................. 306

UPDATED-AGGREGATED GLOBAL FINANCIAL RISK INDEX .......................................................................................................................... 306
NEW-BANKING RISK - LIBOR-OIS SPREAD ................................................................................................................................................ 307
NEW-BANKING RISK - TED SPREAD ........................................................................................................................................................... 307
NEW-CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS ....................................................................................................................... 308
NEW-CREDIT RISK - EU CREDIT DEFAULT SWAPS .................................................................................................................................. 308
NEW-CONSUMER RISK - HOUSING - RATE OF CHANGE ......................................................................................................................... 309
NEW-ECONOMIC RISK - ECRI LEADING INDEX ......................................................................................................................................... 310
NEW-INFLATION RISK - MONEY SUPPLY GROWTH - M3 ......................................................................................................................... 312
NEW-INFLATION RISK - MONEY VELOCITY ............................................................................................................................................... 312
MONETARY RISK - BANK LIABILITIES ......................................................................................................................................................... 313
NEW-COST OF MONEY RISK - INTEREST RATES .................................................................................................................................... 314
AGGREGATED RISK LEVEL ................................................................................................................................................................................ 315
NEW-STUDY - It's 2000 All Over Again! ............................................................................................................................................................... 316
STUDY - The Killer Wave Confirms a Big Bear Market Lies Ahead ........................................................................................................... 320
CHARTS OF NOTE ............................................................................................................................................................................................... 326
NEW-RISK US 10Y CDS Prices Rising In Concert with US Primary Debacle ...................................................................................... 326
NEW-RISK S&P 500 Death Cross Similar to 2001 and 2008 .................................................................................................................. 326
NEW-RISK S&P 500 versus UST 2-30s Spread and Consensus 2016 GDP Growth Forecast .............................................................. 327
NEW-RISK Margin Debt Rolling Over - Fast ............................................................................................................................................ 327
NEW-RISK Long Time since the Last 1% Down Day .............................................................................................................................. 328
NEW-RISK Dumb Money Back At Extremes ............................................................................................................................................ 328
NEW-RISK The Bond Market is Screaming Economic Slowdown Equity Markets Hear Fed Stimulus! ......................................... 330
NEW-RISK Repeating August 2015 Yuan Devaluation Pattern ............................................................................................................... 330
NEW-RISK Repeating One Year E-Mini Pattern ...................................................................................................................................... 331
NEW-RISK Lack of Volatility is a Very Worrying Sign .............................................................................................................................. 331
NEW-RISK Global Equity Indices Show Clear Trend Channel with Pre-US Election Turbulence .......................................................... 332
NEW-RISK A 5-15% Draw-down should be expected by or within Q3 2016 ........................................................................................... 332
NEW-RISK Investors Clearly Exiting US Equity Markets ......................................................................................................................... 333
NEW-RISK Investors Clearly Exiting US Equity Markets ......................................................................................................................... 333
NEW-RISK Minimizing Volatility The Five Most Popular Exchange Traded Funds This Year ............................................................. 334
NEW-RISK Bracing for Volatility Investors Are Betting Volatility Will Rise ........................................................................................... 334
NEW-RISK Determined Shorts Short Interest Remains Near Bull Market Highs ................................................................................. 334
JULY 2016 Edition


NEW-RISK Investors Flee Mutual Funds Money Has Left Mutual Funds the Last 8 Straight Weeks ................................................. 335
NEW-RISK Corporate Buybacks is the Lone Marlet Buyer ...................................................................................................................... 335
NEW-RISK 2016 Y-o-Y Flows By BoAML Client Type ............................................................................................................................. 336
NEW-RISK BoAML Client Type Net Buys 4WMA v S&P 500 2008-Present ...................................................................................... 336
NEW-RISK BoAML Client Type Cumulative Flows Since January 2008-Present ................................................................................. 337
NEW-RISK USDJPY Correlation to S&P 500 ............................................................................................................................................ 337
NEW-RISK Breadth Has Turned Counter Rally Stalling ........................................................................................................................ 338
NEW-RISK Wall Street's recent rise is stretched relative to the real U.S. economy ................................................................................ 339
NEW-RISK Diverging gap between stocks and corporate-profit expectation ........................................................................................... 339
NEW-RISK historic correlation between stock and bond prices is now very distorted ............................................................................. 340
NEW-RISK Nasdaq risk is dramatically higher than S&P risk .................................................................................................................. 340
NEW-RISK Draghis ECB Announcement Triggers Bull Reversal To Evercore ...................................................................................... 341
NEW-RISK High Probability US Recession in 2016 ................................................................................................................................. 342
NEW-RISK Price-to-Sales Presently Second Highest to the Dotcom Bubble Collapse .......................................................................... 342
NEW-RISK Industrial Production Is Rolling Over ..................................................................................................................................... 343
NEW-RISK NYSE Margin Debt at Record Levels .................................................................................................................................... 344
NEW-RISK Margin Debt to GDP Higher then 2000 and 2007 ................................................................................................................. 345
NEW-RISK Margin Debt to GDP and 3-Year Stock Returns ................................................................................................................... 346
NEW-RISK Margin Debt to GDP and 3-Year Stock Returns ................................................................................................................... 347
NEW-RISK Investors Sell Dividend Funds, MLPs, REITs and High Yield ............................................................................................... 348
NEW-RISK Bull to Bear Ratio Unprecedented Optimism ..................................................................................................................... 349
NEW-RISK Turmoil in High Yield Bonds .................................................................................................................................................. 350
NEW-RISK New Global Risk US Growth European Financial Conditions .......................................................................................... 351
NEW-RISK Leveraged Loans and HY Corporate Bond Yields Warn of Possible SPX of 1100 .............................................................. 351
NEW-RISK Global Financial Risk ............................................................................................................................................................. 352
NEW-RISK US Financials Stocks versus Credit ................................................................................................................................... 352
NEW-RISK Something Is Seriously Wrong Somewhere in Deutsche Bank 5Y Sub CDS ................................................................... 353
NEW-RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Lehman Comparison ...................................................... 353
NEW-RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Ending Diagonal Goes Lower ......................................... 354
NEW-RISK Small Cap Stocks versus HY Bond Spread .......................................................................................................................... 354
NEW-RISK Net Cash Companies Scarce EBITDA Cash Flow .......................................................................................................... 355
NEW-RISK Falling Animal Spirits - Sinking CEO Confidence .................................................................................................................. 355
NEW-RISK Bull-Bear Ratio Collapses ...................................................................................................................................................... 356
NEW-RISK SPX Percent off 2009 High .................................................................................................................................................... 357
NEW-RISK SPX Price-Earnings-PE Ratio ............................................................................................................................................... 357
NEW-RISK Stock market more Over-valued than prior to Previous Crashes!......................................................................................... 358
NEW-RISK Coppock Signaling Problems Ahead ..................................................................................................................................... 358
NEW-RISK Junk Bond Movements Have Been Dependable Warning Indicators Since Dotcom Bubble Burst ..................................... 359
NEW-RISK Corporate Profits and Wages Diverge ................................................................................................................................... 359
NEW-RISK Russell 1000 Equal Weight: Cap-Weight Ratio .................................................................................................................. 360
NEW-RISK Long Term Monthly Reversal Signal ..................................................................................................................................... 360
NEW-RISK Markets Historically Fail after Three months of Falling Margin Debt We Have 2 Months ................................................. 361
NEW-RISK Margin Debt Channel is Pretty Clear High Odds of Troubles Ahead ................................................................................. 361
NEW-RISK Goldman Joins the Chorus Warning on Bond Market Liquidity ............................................................................................ 362
NEW-RISK So Goes Retail So Goes the US Economy ........................................................................................................................ 362
NEW-RISK Consumer Discretionary Sending Signals ............................................................................................................................. 363
NEW-RISK Net EBITDA 2x Highest since 2006 % of companies with net cash Lowest since 2006 ...................................................... 365
NEW-RISK US Corporate Net Debt Has Exploded & Now Massively Exceeds EBITDA ........................................................................ 365
NEW-RISK CBOE Skew Index ................................................................................................................................................................. 366
NEW-RISK Gap Between Uncertainties Priced in the Debt & Equity Markets ........................................................................................ 366
NEW-RISK Beware of EPS manipulation ................................................................................................................................................. 367
NEW-RISK Total NYSE Short Interest & Monthly Change ...................................................................................................................... 368
NEW-RISK Contrasting Post October Market Drawdowns 1973s Slow Pain versus 1987 Crash ..................................................... 368
NEW-RISK Historical Post-Crash Price Actions 1950 to 2015 ............................................................................................................. 369
RISK Nasdaq risk is dramatically higher than S&P risk ........................................................................................................................... 369
RISK Draghis ECB Announcement Triggers Bull Reversal To Evercore ................................................................................................ 371
RISK High Probability US Recession in 2016 .......................................................................................................................................... 372
RISK Price-to-Sales Presently Second Highest to the Dotcom Bubble Collapse .................................................................................... 372
RISK Industrial Production Is Rolling Over ............................................................................................................................................... 373
RISK NYSE Margin Debt at Record Levels .............................................................................................................................................. 374
RISK Margin Debt to GDP Higher then 2000 and 2007 ........................................................................................................................... 375
RISK Investors Sell Dividend Funds, MLPs, REITs and High Yield......................................................................................................... 378
RISK Bull to Bear Ratio Unprecedented Optimism ............................................................................................................................... 379
RISK Turmoil in High Yield Bonds ............................................................................................................................................................ 380
RISK New Global Risk US Growth European Financial Conditions ................................................................................................... 381
RISK Leveraged Loans and HY Corporate Bond Yields Warn of Possible SPX of 1100 ........................................................................ 381
RISK Global Financial Risk ....................................................................................................................................................................... 382
RISK US Financials Stocks versus Credit ............................................................................................................................................. 382
RISK Something Is Seriously Wrong Somewhere in Deutsche Bank 5Y Sub CDS ............................................................................. 383
RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Lehman Comparison ................................................................ 383
RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Ending Diagonal Goes Lower .................................................. 384
RISK Small Cap Stocks versus HY Bond Spread .................................................................................................................................... 384
RISK Net Cash Companies Scarce EBITDA Cash Flow ................................................................................................................... 385
RISK Falling Animal Spirits - Sinking CEO Confidence ........................................................................................................................... 385
RISK Bull-Bear Ratio Collapses ............................................................................................................................................................... 386
JULY 2016 Edition


RISK SPX Percent off 2009 High ............................................................................................................................................................. 387

RISK SPX Price-Earnings-PE Ratio ......................................................................................................................................................... 387
RISK Stock market more Over-valued than prior to Previous Crashes! .................................................................................................. 388
RISK Coppock Signaling Problems Ahead ............................................................................................................................................... 388
RISK Junk Bond Movements Have Been Dependable Warning Indicators Since Dotcom Bubble Burst ............................................... 389
RISK Corporate Profits and Wages Diverge ............................................................................................................................................ 389
RISK Russell 1000 Equal Weight: Cap-Weight Ratio ........................................................................................................................... 390
RISK Long Term Monthly Reversal Signal ............................................................................................................................................... 390
RISK Markets Historically Fail after Three months of Falling Margin Debt We Have 2 Months ........................................................... 391
RISK Margin Debt Channel is Pretty Clear High Odds of Troubles Ahead........................................................................................... 391
RISK Goldman Joins the Chorus Warning on Bond Market Liquidity ...................................................................................................... 392
RISK So Goes Retail So Goes the US Economy .................................................................................................................................. 392
RISK Consumer Discretionary Sending Signals....................................................................................................................................... 393
RISK Net EBITDA 2x Highest since 2006 % of companies with net cash Lowest since 2006 ................................................................ 395
RISK US Corporate Net Debt Has Exploded & Now Massively Exceeds EBITDA .................................................................................. 395
RISK CBOE Skew Index ........................................................................................................................................................................... 396
RISK Gap Between Uncertainties Priced in the Debt & Equity Markets .................................................................................................. 396
RISK Beware of EPS manipulation........................................................................................................................................................... 397
RISK Total NYSE Short Interest & Monthly Change ................................................................................................................................ 398
RISK Contrasting Post October Market Drawdowns 1973s Slow Pain versus 1987 Crash............................................................... 398
RISK Historical Post-Crash Price Actions 1950 to 2015 ....................................................................................................................... 399
RISK Historical Post-Crash Price Pattern Has Taken an Average of 27 days to Double Bottom ........................................................... 399
RISK Credit Fleeing IG,HY & EM ............................................................................................................................................................. 400
RISK Credit Fleeing IG,HY & EM ............................................................................................................................................................. 400
RISK Margin Debt in NYSE Accounts versus S&P 500 ........................................................................................................................... 401
RISK Credit Risk Increasing ..................................................................................................................................................................... 402
RISK TED Spread Increasing ................................................................................................................................................................... 402
RISK VIX Pricing in Credit Problems ........................................................................................................................................................ 403
RISK Credit Always Leads Markets Its the Life Blood! ...................................................................................................................... 403
RISK The Pattern is Clear QE the Market Driver .................................................................................................................................. 404
RISK Internal deterioration in the market is more consistent with the development of more major bull market peaks ........................ 405
RISK A huge gap has opened up between reality and perceptions ......................................................................................................... 406
RISK Economic Surprise Index lower highs, lower lows and a reluctant bounce ................................................................................. 407
RISK Weekly Equity Outflows ................................................................................................................................................................... 407
RISK Weekly EM Fund Outflows .............................................................................................................................................................. 408
RISK Net Outflows as a % of AUM by Year ............................................................................................................................................. 409
RISK HG Spread Per Point of Equity Volume .......................................................................................................................................... 410
RISK Widening Gap between Debt & Equity ............................................................................................................................................ 410
RISK HY Bond ETF (HYG) versus S&P 500 ............................................................................................................................................ 411
RISK HY Credit versus 2007-2008 Credit Always Leads Equity ........................................................................................................ 411
RISK Leutholds High/Low Logic Index Sending a Clear Signal .............................................................................................................. 412
CASSANDRAS NEW ADDITIONS TO THE LIST ............................................................................................................................................. 413
CASSANDRA: "Severe Correction Or Cyclical Bear" Ahead: Leuthold Major Trend Index Turns Negative ................................................. 414
CASSANDRA: CANARIES - Warnings Everywhere! ...................................................................................................................................... 415
CASSANDRA: Stephen Schork: The Commodity Crash Is "A Canary In The Coal Mine For The Global Economy" ................................... 417
CASSANDRA: Emerging Market Mayhem: Gross Warns Of "Debacle" As Currencies, Bonds Collapse ..................................................... 419
CASSANDRA: "Another Crisis Is Coming": Jamie Dimon Warns Of the Next Market Crash ........................................................................ 426
CASSANDRA: Steen Jakobsen: Get Ready For The Biggest Margin Call In History .................................................................................... 427
CASSANDRA: Wynn Calls "Big" Recovery "Complete Dream" As Gaming Revenues Collapse .................................................................. 429
CASSANDRA: Stan Druckenmiller's "Horrific Sense" Of Deja Vu: "This Will End Very Badly" ..................................................................... 431
CASSANDRA: Hedge Fund Legend Julian Robertson Warns Of A "Complete Explosion" Unless Fed Contains "Boiling, Bubble" ............ 436
CASSANDRA: Kyle Bass Warns "The Fed Is Backed Into A Corner... Equities Are My Biggest Liquidity Worry" ........................................ 437
CASSANDRA: Paul Tudor Jones Warns "Disastrous Market Mania" Will End In "Revolution, Taxes, or War" ............................................ 438
CASSANDRA: John Hussman - A Who's Who Of Awful Times To Invest ..................................................................................................... 440
CASSANDRA: Carl Icahn - One Day You'll See A Break Like A Few Weeks Ago But The Market Won't Come Back ................................ 443
CASSANDRA: Sam Zell Warns Of Stock Market Correction On CNBC ........................................................................................................ 444
CASSANDRA: Billionaire Carl Icahn warns on US stock prices ..................................................................................................................... 444
CASSANDRA: Soros Bets $2 Billion on Stock Market Collapse .................................................................................................................... 445
CASSANDRA: Dont Ignore Janet Yellens Stock Market Warnings 07-21-14 Fiscal Times ......................................................................... 446
CASSANDRA: Doug Kass: We're Heading for a Bear Market So Plan Accordingly ...................................................................................... 449
CASSANDRA: Comstock Funds Weighs In .................................................................................................................................................... 451
CASSANDRA: Michael Lombardi Weighs In ................................................................................................................................................... 453
CASSANDRA: Ron Paul Portfolio, 'Craziest' we've ever seen? ..................................................................................................................... 455
CASSANDRA: John Mauldin Goes Negative .................................................................................................................................................. 456
CASSANDRA: Hayman Capital Dramatically Reduces Risk .......................................................................................................................... 464
CASSANDRA: Byron Wien Warns "Oblivious Markets" Of 20% Correction ................................................................................................... 465
CASSANDRA: Harry Dent Warns Stocks to Sink More than 60% by End of 2014 ........................................................................................ 465
CASSANDRA: Stanley Druckenmiller: "When You Get This Kind Of Rigging, It Will End Badly".................................................................. 466
CASSANDRA: Mohamed El-Erian: "Prices Are Artificially High - Its Time to Take Profits" .......................................................................... 467
CASSANDRA: Felix Zulauf: World Headed Toward 1987 Style Market Collapse .......................................................................................... 468
CASSANDRA: Doug Kass: 'I'm Getting The Summer Of 1987 Feeling' In The Market Right Now ............................................................... 468
CORRELATION & COMPLACENCY A PROBLEM .............................................................................................................................................. 470
EVENT RISK A PROBLEM .................................................................................................................................................................................... 473
Q2 EARNINGS & THE R WORD .............................................................................................................................................................. 473
POLITICAL-ECONOMIC TENSIONS .......................................................................................................................................................... 473
CENTRAL BANK POLICY MISCUES.......................................................................................................................................................... 473
JULY 2016 Edition


ASIAN ECONOMIC SLOWDOWN SPILLAGE ............................................................................................................................................ 473

PETRO$ CRISIS BREWING IN BRIICS...................................................................................................................................................... 473
LONGER TERM - FUNDAMENTAL ANALYSIS .............................................................................................................................. 474

HIGHLIGHTS ......................................................................................................................................................................................................... 474
NEW-VALUATION SUMMARY ....................................................................................................................................................................... 474
VALUATION: Alternative Methodologies ............................................................................................................................................................... 476
NEW-FOUR SET CONSOLIDATED MARKET VALUATION INDICATORS .................................................................................................. 476
NEW-Crestmont from the Arithmetic ............................................................................................................................................................... 480
NEW-Cyclical PE 10 Ratio............................................................................................................................................................................... 484
NEW-Q Ratio ................................................................................................................................................................................................... 491
NEW-S&P Composite Regression-to-the-Trend ............................................................................................................................................. 496
NEW-Reference Methodologies Analysis ....................................................................................................................................................... 498
CHARTS OF NOTE ......................................................................................................................................................................................... 504
NEW-VALUATIONS Declining Profits Heighten Risk of Corporate Margin Defense Via Lower Labor Input .......................................... 504
NEW-VALUATIONS Tobin Q Ratio Suggests a Possible 80% Market Re-pricing over Next 3 Years .................................................... 504
NEW-VALUATIONS Forecast Returns in USD Terms Appear Poor .................................................................................................... 506
NEW-VALUATIONS Equity / FX Correlations Have Turned on EURUSD & JPYUSD ............................................................................ 506
NEW-VALUATIONS Growth of the S&P 500 and Components Since 2011 Has Been PE Expansion .................................................. 507
NEW-VALUATIONS US Non-Financials Y-o-Y Change in Net Debt v Operating Cash Flows ............................................................... 507
NEW-VALUATIONS US Equities versus Real Yields 2015-2016 ......................................................................................................... 508
NEW-VALUATIONS World Stock Index v World Bond Yield ................................................................................................................... 509
NEW-VALUATIONS US Corporate Leverage Surges .............................................................................................................................. 509
NEW-VALUATIONS Dividend Cuts On the Rise to Preserve Cash ........................................................................................................ 510
VALUATIONS Price-to-Sales Presently Second Highest to the Dotcom Bubble Collapse ..................................................................... 511
VALUATIONS Cumulative Flows .............................................................................................................................................................. 511
VALUATIONS GAAP versus Non-GAAP Net Margins ............................................................................................................................. 512
VALUATIONS Forward 12-Month P/E Ratio 10 Years.......................................................................................................................... 512
VALUATIONS Forward 12-Month EPS versus Change in Price 10 Years ........................................................................................... 513
VALUATIONS Net Margin Growth ............................................................................................................................................................ 514
VALUATIONS 10 Year Trailing 12 Mo Net Margin Growth Historically High ........................................................................................ 514
VALUATIONS Record Profits Yet Historically Low Capital Asset Growth ............................................................................................... 515
VALUATIONS Historical Ranking of PE Values ....................................................................................................................................... 516
VALUATIONS Median Price/Cash Flow Multiple for US Stocks .............................................................................................................. 517
VALUATIONS Median Price/Earnings Multiple for US Stocks ................................................................................................................. 518
VALUATIONS Median Price to Book Multiple for US Stocks ................................................................................................................... 519
VALUATIONS Price/Book; Price/Cash flow; Price/Sales ......................................................................................................................... 520
VALUATIONS Global Equities Reported PE, PE before XO & Fwd PE ............................................................................................... 521
2016 EARNINGS Earnings Projections .............................................................................................................................................................. 522
STUDY: 2016 EARNINGS - ................................................................................................................................................................................... 522
CHARTS OF NOTE ......................................................................................................................................................................................... 522
NEW-2016 EARNINGS Y-o-Y Change in Net Debt versus Operating Cash Flow (%)............................................................................ 522
2016 EARNINGS Historical Global Consensus Earnings Estimates ....................................................................................................... 523
2016 EARNINGS 12 Month Forward EPS Consensus ............................................................................................................................ 523
2016 EARNINGS SPX Earnings CY 2016 ............................................................................................................................................ 524
2016 EARNINGS A 2016 Hockey Stick Forecast Only the Nave Would Believe ................................................................................. 524
2016 EARNINGS US Forward PE versus Fed Funds Rate ..................................................................................................................... 525
2016 EARNINGS US Operating Profit Margin versus US Monetary Indicators ....................................................................................... 525
RESEARCH OF NOTE .................................................................................................................................................................................... 526
2016 EARNINGS 2016 EPS Growth Estimates Slashed By 50% Just One Month Into The Year ......................................................... 526
2016 EARNINGS Another Data Point To Ignore: Dividend Cuts Have Surpassed 2008 ........................................................................ 528
2016 EARNINGS Profit, Multiple & Margin Trouble Are In Store For Global Equities In 2016 ................................................................ 530
STUDY: Q2 2016 EARNINGS ............................................................................................................................................................................... 532
CHARTS OF NOTE ......................................................................................................................................................................................... 532
NEW-Q2 EARNINGS Slowing Earnings Correlate to Recessions ........................................................................................................... 532
NEW-Q2 EARNINGS SPX versus GAAP Earnings ................................................................................................................................. 532
NEW-Q2 EARNINGS SPX versus 12Mo Forward Earnings Expectations .............................................................................................. 533
STUDY: Q1 2016 EARNINGS ............................................................................................................................................................................... 534
CHARTS OF NOTE ......................................................................................................................................................................................... 534
NEW-Q1 EARNINGS Q1 Earnings Growth .............................................................................................................................................. 534
NEW-Q1 EARNINGS Q1 Revenue Growth .............................................................................................................................................. 535
NEW-Q1 EARNINGS Q2 Earnings & Revenue Growth Projections ........................................................................................................ 535
NEW-Q1 EARNINGS Ongoing deterioration in Sales and Profits ........................................................................................................... 537
NEW-Q1 EARNINGS LTM Quarterly S&P 500 GAAP and Non-GAAP EPS........................................................................................... 538
NEW-Q1 EARNINGS S&P 500 Annual GAAP and Non-GAAP EPS ....................................................................................................... 539
Q1 EARNINGS S&P Forward Earnings Expectations versus S&P 500 .................................................................................................. 540
Q1 EARNINGS Falling Profits Now in Contraction Territory Lowest Levels Since 2008 ...................................................................... 541
Q1 EARNINGS Top Line Sales and Revenue Growth is Clearly Falling ................................................................................................. 541
Q1 EARNINGS Pro-Forma and GAAP Earnings Diverge Significantly ................................................................................................... 541
Q1 EARNINGS Profits Fall the Most Since 2008 ..................................................................................................................................... 542
Q1 EARNINGS Corporate Profits as a Percentage of GDP .................................................................................................................... 543
Q1 EARNINGS Peaks in Real Profit Margins versus S&P 500 ............................................................................................................... 543
Q1 EARNINGS Biggest Quarterly Drop in Profits Since 2009 ................................................................................................................. 543
Q1 EARNINGS Largest S&P Q1 EPS Drop in first 2 Mo of a Quarter Since Q1 2009............................................................................ 544
Q1 EARNINGS S&P 500 Earnings Growth Q1 2016 Down -8.3% .......................................................................................................... 545
JULY 2016 Edition


Q1 EARNINGS S&P 500 EPS: GAAP vs. Non-GAAP ............................................................................................................................. 545

Q1 EARNINGS S&P 500 EPS: GAAP vs. Non-GAAP for FY 2015 vs. 2014 .......................................................................................... 546
Q1 EARNINGS Non-GAAP EPS Writeoffs ............................................................................................................................................... 547
Q1 EARNINGS 2015 Y-o-Y % Change in EPS GAAP vs Non-GAAP ..................................................................................................... 547
Q1 EARNINGS S&P Trailing 4-Quarter GAAP vs. Non-GAAP Net Margins ........................................................................................... 548
RESEARCH OF NOTE .................................................................................................................................................................................... 548
NEW-Q1 EARNINGS The True State Of The US Consumer: All Six Retail Companies Reporting April Comp Sales Missed .............. 548
NEW-Q1 EARNINGS This Tech Bubble Is Bursting ................................................................................................................................ 550
NEW-Q1 EARNINGS Amazon Smashes Expectations On Surge In Cloud Profits ................................................................................. 552
NEW-Q1 EARNINGS Carl Icahn Dumps Entire Stake Of AAPL .............................................................................................................. 555
NEW-Q1 EARNINGS JPM Summarizes Earnings Season So Far: At -8%, The S&P500 Q1 EPS Growth Is The Worst Since 09 ... 557
NEW-Q1 EARNINGS S&P 500 EPS Divergence ..................................................................................................................................... 560
NEW-Q1 EARNINGS Apple Tumbles After Missing Sales And Earnings, Guides Below Lowest Estimate ........................................... 560
Q1 EARNINGS Behind U.S. GDP Data - Weak Profits ........................................................................................................................... 567
Q1 EARNINGS When the "Mother's Milk" of Earnings Runs Dry ............................................................................................................ 568
Q1 EARNINGS Why Companies Don't Want You To Look At GAAP Earnings ...................................................................................... 570
Q1 EARNINGS Largest Drop in S&P 500 EPS Estimate Over First Two Months of a Quarter since Q1 2009 ...................................... 575
Q1 EARNINGS Non-GAAP Earnings Are About To Plunge The Most Since 2009; As For GAAP Don' Even Ask ................................ 576
BUYBACKS Widening Credit Spreads Become A Problem ............................................................................................................................... 582
CHARTS OF NOTE ......................................................................................................................................................................................... 582
NEW-BUYBACKS Y-o-Y Change in Corporate Net Debt versus Cash Flow (%) .................................................................................... 582
BUYBACKS Buybacks Tend to be Absent During Earnings Season Window ........................................................................................ 583
BUYBACKS Shrinking Monetary Base Will Put Pressures on Buybacks ................................................................................................ 583
BUYBACKS Buybacks to Net Income ...................................................................................................................................................... 583
BUYBACKS Top 10 Buyback Queens versus Stock Performance .......................................................................................................... 585
BUYBACKS Underwhelming Performance of Buyback Queens.............................................................................................................. 585
BUYBACKS Seasonal Slowdown in Buybacks ........................................................................................................................................ 586
BUYBACKS Buyback Activity at Two-Year High ...................................................................................................................................... 586
BUYBACKS Cost of Buybacks In Increasing ........................................................................................................................................... 587
BUYBACKS BoAML Corporate Clients Buybacks in the First 9 Weeks of Each Year ......................................................................... 587
BUYBACKS BoAML Corporate Clients 4 Wk Average Buybacks Y-o-Y % Change ............................................................................... 587
BUYBACKS Buybacks Have Accounted for Around 1/3 of EPS Growth Since Q3 2011 ........................................................................ 588
BUYBACKS Net Cash Companies Are Increasingly Scarce .................................................................................................................. 589
BUYBACKS EBITDA Growth Is the Worst Since 2000 ............................................................................................................................ 589
BUYBACKS Buybacks v SPX Total Return Indices ................................................................................................................................. 590
BUYBACKS Proof that Buybacks Mainly Funded By Debt ...................................................................................................................... 590
BUYBACKS US Companies Continuing to Borrow To Buyback Stock .................................................................................................... 591
BUYBACKS Debt/EBITDA v FCF-Cost of Debt - 2013 ............................................................................................................................ 591
BUYBACKS Debt/EBITDA v FCF-Cost of Debt 2015 ........................................................................................................................... 592
BUYBACKS Buybacks & Dividends as a Percentage of Net Income ...................................................................................................... 593
BUYBACKS After Historic Buybacks the Y-o-Y Change in 12 Month Profits Per Share Still Shrinks! .................................................... 593
BUYBACKS Buybacks & Dividends as a Percentage of Net Income Against Spending on Buybacks................................................... 594
BUYBACKS Outperformance of Stocks with Large Buybacks Programs vs S&P 500 ............................................................................ 594
BUYBACKS Gross Leverage for Typical IG/HY Non-Financial Debt-EBITDA ..................................................................................... 595
BUYBACKS Equity Market Performance v S&P 500 Uses of Cash ........................................................................................................ 596
BUYBACKS Default Rate v Net Equity Buybacks .................................................................................................................................... 596
BUYBACKS S&P 500 Buyback Index 200 DMA ................................................................................................................................... 597
BUYBACKS S&P 500 v Buyback Index Performance.............................................................................................................................. 597
BUYBACKS S&P 500 Annualized Share Buybacks, Dividends and Earnings ........................................................................................ 598
BUYBACKS Falling Investment Grade Spreads Hurting Buybacks ......................................................................................................... 598
BUYBACKS Quarterly Share Repurchases & No. of Companies Repurchasing Shares Slows ............................................................. 598
BUYBACKS Dollar-Value Buybacks to Free Cash Flow Trailing Twelve Month Basis ........................................................................ 599
BUYBACKS Nearly 25% of Annual Buybacks Occur in November & December .................................................................................... 600
BUYBACKS Outperformance of Stocks with Large Buybacks Programs vs S&P 500 ............................................................................ 601
BUYBACKS Gross Leverage for Typical IG/HY Non-Financial Debt-EBITDA ..................................................................................... 601
BUYBACKS Equity Market Performance v S&P 500 Uses of Cash ........................................................................................................ 602
BUYBACKS Default Rate v Net Equity Buybacks .................................................................................................................................... 602
BUYBACKS S&P 500 Buyback Index 200 DMA ................................................................................................................................... 603
BUYBACKS S&P 500 v Buyback Index Performance.............................................................................................................................. 603
BUYBACKS S&P 500 Annualized Share Buybacks, Dividends and Earnings ........................................................................................ 604
BUYBACKS The real reason for the slowdown has to do with the spread on investment grade debt .................................................... 604
BUYBACKS Falling Investment Grade Spreads Hurting Buybacks ......................................................................................................... 605
BUYBACKS Quarterly Share Repurchases & No. of Companies Repurchasing Shares Slows ............................................................. 605
BUYBACKS Dollar-Value Buybacks to Free Cash Flow Trailing Twelve Month Basis ........................................................................ 606
BUYBACKS Nearly 25% of Annual Buybacks Occur in November & December .................................................................................... 606
TARGETS ................................................................................................................................................................................ 608

CONCLUSIONS....................................................................................................................................................................... 612
MARKET MESSAGE ............................................................................................................................................................................................. 612
I DEFINING CHARTS ......................................................................................................................................................................................... 619
Defining Chart #3 - The Big M and Super Cycle b ..................................................................................................................................... 619
Boundary Conditions ....................................................................................................................................................................................... 620
Channels & Regressions ................................................................................................................................................................................. 622
II TARGETS ........................................................................................................................................................................................................ 630
10
JULY 2016 Edition


III QUARTERLY SENTIMENT RISK AND FUNDAMENTALS ........................................................................................................................... 634

NEW-SENTIMENT .......................................................................................................................................................................................... 634
NEW-RISK ANALYSIS - Complacency .......................................................................................................................................................... 641
NEW-VALUATION SUMMARY ....................................................................................................................................................................... 642
IV STUDIES ........................................................................................................................................................................................................ 643
EARNINGS CONTINUING EARNINGS DETERIORATION .............................................................................................................................. 643
NEW-STUDY: Q2 EARNINGS Settting Expectations ........................................................................................................................................ 643
CHARTS OF NOTE ......................................................................................................................................................................................... 643
NEW-Q2 EARNINGS Y-o-Y Earnings Decline Expected to Be -5.6% versus -2.8% on March 31, 2016 ................................................ 643
NEW-Q2 EARNINGS Estimated Earnings Growth at End of Q2 v Actual Growth ................................................................................... 644
NEW-Q2 EARNINGS S&P 500 Trailing 12 Month Net Margins Have Rolled Over .................................................................................. 644
NEW-Q2 EARNINGS S&P 500 EPS Forecasts ........................................................................................................................................ 645
NEW-Q2 EARNINGS S&P 500 EPS Forecasts Imputed Fair Value Down -11.5% Since November 2015 ........................................ 645
NEW-Q2 EARNINGS Corporate Cashflow -3.4% than Q3 2010 When QE2 Started .............................................................................. 646
NEW-Q2 EARNINGS Corporate Cashflow Shortfall is -$1.6T versus a the 2% Underpinning ................................................................ 646
NEW-Q2 EARNINGS Corporate Cashflow Shortfall is Can be Traced to the Labor Participation Rate .................................................. 647
NEW-Q2 EARNINGS S&P 500 Quarterly Bottoms-Up EPS Revisions .................................................................................................... 647
NEW-Q2 EARNINGS Median Stock Trades at 99 Percentile of Historical Valuations ............................................................................. 648
NEW-Q2 EARNINGS What Are Cash Dividends Telling Us? ................................................................................................................... 648
NEW-BANKING & BONDS YIELDS ARE SUGGESTING SOMETHING IS BREWING ................................................................................... 649
CHARTS OF NOTE ......................................................................................................................................................................................... 651
NEW-BANKING & BONDS European Banks Texas Ratios ..................................................................................................................... 651
NEW-BANKING & BONDS ECB Balance Sheet ....................................................................................................................................... 652
NEW-BANKING & BONDS Italian & Spanish Debt-to-GDP...................................................................................................................... 652
NEW-BANKING & BONDS 10Y Global Government Bond Yield Comparisons ....................................................................................... 653
NEW-BANKING & BONDS Global Bank Stocks Have Experienced Serious Drawdowns Y-o-Y............................................................. 653
NEW-BANKING & BONDS Italian Banking System NPL Breakdown ................................................................................................... 654
NEW-BANKING & BONDS European Fiancials Nearing Lows of 2012 Banking Crisis ........................................................................... 654
V - TRIGGER$ ZONES .......................................................................................................................................................................................... 655
VI - DRIVER$ & BIA$ ............................................................................................................................................................................................. 656
11
JULY 2016 Edition



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Monthly Market Analytics & Technical Analysis

JULY 2016 Edition

FULL MATA REPORT

MATA- JULY 2016

1 JULY 2016 Edition

Restricted & Confidential

Monthly Market Analytics & Technical Analysis

OUR APPROACH - MACRO ANALYTICS ...................................................................................................................................... 44

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CHARTS OF NOTE ........................................................................................................................................................................................... 96

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OUTLOOK - ANALYTICAL ANALYSIS .......................................................................................................................................... 181

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Restricted & Confidential

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CHARTS US Economic Index Steadily Eroding ........................................................................................................................................... 275

INTERMEDIATE TERM RISK ANALYSIS ................................................................................................................................. 306

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RISK SPX Percent off 2009 High ............................................................................................................................................................. 387

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ASIAN ECONOMIC SLOWDOWN SPILLAGE ............................................................................................................................................ 473

LONGER TERM - FUNDAMENTAL ANALYSIS .............................................................................................................................. 474

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Q1 EARNINGS S&P 500 EPS: GAAP vs. Non-GAAP ............................................................................................................................. 545

TARGETS ................................................................................................................................................................................ 608

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III QUARTERLY SENTIMENT RISK AND FUNDAMENTALS ........................................................................................................................... 634

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