Monthly Market Analytics & Technical Analysis: Sectional Report

Monthly Market Analytics & Technical Analysis
SEPTEMBER 2015 Edition
SECTIONAL REPORT
MATA- SEPTEMBER 2015
9/14/2015
1 SEPTEMBER 2015 Edition

Copyright 2015 Gordon T. Long All Rights Reserved
Restricted & Confidential

general@GordonTLong.com
Monthly Market Analytics & Technical Analysis

SEPTEMBER 2015
HIGHLIGHTS - WHAT YOU NEED TO KNOW ................................................................................................................................. 12
SUMMARY ANALYSIS ............................................................................................................................................................................................ 13
Era of Delusional Distortions & the Super Cycle Pivot b .................................................................................................................................... 24
Defining Chart #1 - "Delusional Distortion" Expectations & the Log-Periodic Cycle ......................................................................................... 26
Defining Chart #2 - Finding the Longer Term Super Cycle Pivot b ................................................................................................................ 27
Defining Chart #3 - The Big M and Super Cycle b ....................................................................................................................................... 29
Defining Chart #4 Intermediate Term Topping Process ................................................................................................................................. 30
The Bottom Line................................................................................................................................................................................................. 33
OUR APPROACH - MACRO ANALYTICS ...................................................................................................................................... 36

SEPTEMBER 2015: Global Macro Drivers .............................................................................................................................................................. 38
NEW-WEALTH .................................................................................................................................................................................................. 40
UPDATED-HARD ASSETS - Gold ................................................................................................................................................................ 40
UPDATED-HARD ASSETS Silver .............................................................................................................................................................. 42
UPDATED-HARD ASSETS - Commodities .................................................................................................................................................. 43
UPDATED-NEW-EXCHANGE .......................................................................................................................................................................... 44
CURRENCIES - USD .................................................................................................................................................................................... 44
UPDATED-CURRENCIES - EURO ............................................................................................................................................................... 45
CURRENCIES - YEN ..................................................................................................................................................................................... 47
UPDATED-CARRY TRADE - The : Cross ............................................................................................................................................... 49
UPDATED-CARRY TRADE - The $: Cross ............................................................................................................................................... 52
NEW-YIELD, CREDIT & SPREAD .................................................................................................................................................................... 53
NEW-EQUITIES - Global ................................................................................................................................................................................... 55
CHARTS & RESEARCH OF NOTE .................................................................................................................................................................. 56
YIELD ............................................................................................................................................................................................................. 56
NEW-YIELD 30Y Treasury Yield Bursts Above 3.00% - 6-Week Highs ................................................................................................ 56
YIELD Albert Edwards: "Prepare For Sub-1% Treasury Yields and another Financial Crisis" .............................................................. 56
YIELD "This Will End Badly" High Yield Bonds Tumble To Worst Since 2011 ...................................................................................... 59
YIELD Federal Reserve is Running Out of Runway Unless Negative Nominal Rates are Ahead?....................................................... 60
YIELD Bond Route Reduced Negative Nominal Eurozone Sovereign Debt by 1T .............................................................................. 61
YIELD Total Debt Securities Growth ....................................................................................................................................................... 63
CREDIT .......................................................................................................................................................................................................... 64
NEW- CREDIT Credit Risk Increasing .................................................................................................................................................... 64
NEW- CREDIT TED Spread Increasing.................................................................................................................................................. 64
NEW- CREDIT VIX Pricing in Credit Problems ...................................................................................................................................... 65
NEW- CREDIT Credit Always Leads Markets Its the Life Blood! ...................................................................................................... 65
NEW- CREDIT Global Credit Markets Need QE to Survive ................................................................................................................... 66
CREDIT TSY 2s30s 2003-2006 versus 2012-2015 ............................................................................................................................. 67
CREDIT HYCDX, IGCDX versus S&P .................................................................................................................................................... 67
CREDIT This Alarming Indicator Is Back At A Level Last Seen 10 Days Before The Bear Stearns Collapse ...................................... 67
CREDIT Why Credit Market Moves Are Now "Hyperbolic," Citi Explains .............................................................................................. 70
CREDIT Margin Debt Has It Peaked? ................................................................................................................................................. 71
CREDIT Why the Chinese Economic Model is not Long-term Sustainable ........................................................................................... 72
CREDIT Financial Conditions Tighter Now Than At Any Point Since 2009 According To Chicago Fed ............................................... 73
CREDIT Global EM 5 Yr CDS ................................................................................................................................................................. 76
CURRENCIES ............................................................................................................................................................................................... 77
NEW-CURRENCIES It is Still About the Japanese Carry Trade But Concerns Growing .................................................................... 77
CURRENCIES Everyone Is Probably Wrong About the US Dollar ........................................................................................................ 77
CURRENCIES 3 charts that show the weak euro might be about to turn around ................................................................................. 80
CURRENCIES Blood on the European Streets As EUR-Yuan Carry Unwinds Crush Stocks .............................................................. 84
CURRENCIES Is the Decline in the Euro Over? .................................................................................................................................... 84
CURRENCIES Japan Much Less Risky Than Europe From a Currency Perspective ........................................................................... 86
CURRENCIES First Break of Overhead Resistance on USDYEN Monthly in 17 Years ....................................................................... 87
CURRENCIES The Yen Is At The Most Undervalued Level In Nearly 30 Years ................................................................................... 87
CURRENCIES Long-End Of US Yield Curve Suggests A Stronger Yen ............................................................................................... 89
CURRENCIES The Rate of Change of the US$ is Disruptive ................................................................................................................ 90
CURRENCIES US$ Parabolic Surge the 2nd Biggest & Fastest Rally Ever - Extreme 11.9 Year High, ............................................. 91
COMMODITIES ............................................................................................................................................................................................. 92
NEW-COMMODITIES Algos Locked into WTI Crude & Alternatively the USDJPY ............................................................................... 92
"the BOJ will do more QE on October 30" momo-mojoo, the levered correlation algos switched to the other asset that was going up:
crude oil. And that's the only, and ery simple, reason why your financial markets are being levitated this morning: S&P correlation
algos: just tracking whatever is going up, tick for tick. ....................................................................................................................... 92
COMMODITIES Why commodities are dying the death of 1,000 cuts ................................................................................................... 92
COMMODITIES The Weak Trend In EM currencies and Commodities Isnt Abating ............................................................................ 93
COMMODITIES How Saudi Arabia Sets the Global (Currency) Markets .............................................................................................. 94
COMMODITIES Dr. Copper Is Down, Not Out ....................................................................................................................................... 98
COMMODITIES Are Commodities And EM Stocks Becoming Less Sensitive To The Dollar? ............................................................. 99
COMMODITIES Don't Waste Your Time On Commodity ETFs ........................................................................................................... 101
COMMODITIES Iron Ore Prices Tell the Real Story of Global Deflation ............................................................................................. 109
COMMODITIES Global Shipping Index has Crashed To Its Lowest Level Ever ................................................................................. 110


INFLATION .................................................................................................................................................................................................. 112

INFLATION Inflation Expectations & Relative Performance................................................................................................................. 112
INFLATION US CPI 1958 2015 Annual Percentage Change ........................................................................................................ 113
INFLATION The Rise of Deflation ......................................................................................................................................................... 114
INFLATION World Inflation Falls To 59-Month Low ..................................................................................................................... 114
PRECIOUS METALS ................................................................................................................................................................................... 116
PRECIOUS METALS Gold demand in Asia hit by weak local currencies; Indian prices at discount .................................................. 116
PRECIOUS METALS Gold Tracked US Debt Until Recently Will Likely Re-Establish Long Term Pattern .................................. 117
RISK: Risk-On versus Risk-Off .............................................................................................................................................................................. 118
CHARTS OF NOTE ......................................................................................................................................................................................... 119
NEW-RISK Credit Risk Increasing ............................................................................................................................................................ 119
NEW-RISK TED Spread Increasing ......................................................................................................................................................... 119
NEW-RISK VIX Pricing in Credit Problems .............................................................................................................................................. 120
NEW-RISK Credit Always Leads Markets Its the Life Blood!............................................................................................................. 120
NEW-RISK The Pattern is Clear QE the Market Driver......................................................................................................................... 121
NEW-RISK Internal deterioration in the market is more consistent with the development of more major bull market peaks .............. 122
NEW-RISK A huge gap has opened up between reality and perceptions ............................................................................................... 123
NEW-RISK Economic Surprise Index lower highs, lower lows and a reluctant bounce ....................................................................... 124
NEW-RISK Weekly Equity Outflows ......................................................................................................................................................... 124
NEW-RISK Weekly EM Fund Outflows .................................................................................................................................................... 125
NEW-RISK Net Outflows as a % of AUM by Year ................................................................................................................................... 126
RISK HG Spread Per Point of Equity Volume .......................................................................................................................................... 127
RISK Widening Gap between Debt & Equity ............................................................................................................................................ 127
RISK HY Bond ETF (HYG) versus S&P 500 ............................................................................................................................................ 127
RISK HY Credit versus 2007-2008 Credit Always Leads Equity ........................................................................................................ 128
RISK Leutholds High/Low Logic Index Sending a Clear Signal .............................................................................................................. 129
RISK Just Too Many One in a Million Standard Deviation Events! ....................................................................................................... 130
RISK Days with > 100 NYSE & NASDAQ New Highs AND New Lows ................................................................................................... 130
RISK Correlated, Confirmed Hindenburg Omens .................................................................................................................................... 131
RISK Broad Global Equity Index Sitting on the Precipice ........................................................................................................................ 132
RISK Global DOW at Potential Key Support Levels ................................................................................................................................. 132
RISK The Correction Counter Rising Across Assets Classes ............................................................................................................... 133
RISK # of days Since a 2% Up or Down Move......................................................................................................................................... 133
RISK Margin Debt in Perspective ............................................................................................................................................................. 134
RISK PE/VIX Market Emotion Indicator .................................................................................................................................................. 134
RISK Margin Debt Breaks Out- Hits New Record 50% Higher Than Last Bubble Peak ......................................................................... 135
RISK DOW Industrial v Transports ........................................................................................................................................................... 135
RISK ISE Index and ETF Call/Put Hits a 6 Year High .............................................................................................................................. 136
RISK Value Line Composite Breaks Trend After a 26 Year Top ............................................................................................................. 137
RISK ADX Suggests Big Move (Lower) Coming ...................................................................................................................................... 138
RESEARCH OF NOTE .................................................................................................................................................................................... 139
NEW-RISK Interbank Credit Risk Is Rising Ominously Again In America ............................................................................................... 139
NEW-RISK Doug Kass: There is a Blizzard Ahead! .............................................................................................................................. 140
NEW-RISK Oblivious To Risk - Complacency Still Reigns ...................................................................................................................... 141
NEW-RISK Why Selling the Blips Makes Sense ...................................................................................................................................... 145
NEW-RISK Biggest Outflow from Equity Funds In 2015 Offset By Longest Treasury Inflow Streak In 4 Years ..................................... 146
NEW-RISK The 17-year river [of reserve currency buildup and QE around the world] is no longer flowing ........................................... 150
NEW-RISK New Strategies "Are Creating Volatility" ................................................................................................................................ 150
NEW-RISK Why SocGen Is Very Nervous About the Recent Loss Of $9 Trillion In Global Market Cap ................................................ 152
NEW-RISK Goldman Warns, VIX "Is Pricing In A Lot Of Economic Damage" ........................................................................................ 154
RISK This Alarming Indicator Is Back At A Level Last Seen 10 Days before The Bear Stearns Collapse ............................................. 157
RISK Beware 1200 On The Russell - Breadth Breakdown Is Big Risk To Small Caps, BofA Warns ..................................................... 160
RISK When Hindenburg Omens Are Ominous......................................................................................................................................... 161
RISK "One Would Be Bucking Pretty Stiff Odds To Ignore This Development" ...................................................................................... 163
RISK One-In-A-Billion "Hiccups" Are Happening All The Time, Citi Warns Something Is Wrong ........................................................... 164
RISK The Chart That No Stock Market Bull Wants To See ..................................................................................................................... 165
RISK According To Bank of America, This Is "The Biggest Risk to Global Equities" .............................................................................. 168
RISK The "Smartest Money" Liquidating At a Record Pace: "Selling Everything ................................................................................... 170
RISK Top CEO Warns Of Global Reset: "It's In The Cards For Sure... It Could Happen This Year" ...................................................... 172
RISK $140 Billion Bond Fund Goes To Cash As It "Braces For Bond-Market Collapse" ........................................................................ 174
RISK "It's Time To Hold Physical Cash", Fidelity Manager Warns Ahead Of "Systemic Event" ............................................................. 177
RISK Sweden's Largest Fund Manager Is Quietly Dumping Stocks Before The "Herd" Is Caught In A Selling Vortex ......................... 178
RISK When Paper Wealth Vanishes ........................................................................................................................................................ 180
RISK Countdown to the stock-market Crash of 2016 is ticking louder .................................................................................................... 186
RISK Total Assets At The Fed At Six Month Lows ................................................................................................................................... 189
RISK Economic Releases Are "Missing" In The Two Largest Countries In The World ........................................................................... 192
RISK NYSE Margin Debt Charged To New All-Time Highs In March ...................................................................................................... 197
RISK The Step Down In Long-Term US Growth Rates Breaks Lower .................................................................................................... 199
RISK Are Asset Prices In The Midst Of A Change In Trend Or Simply A Counter-Trend Rally? ............................................................ 202
RISK Equity Performance Trends Have Completely Flip-Flopped In April .............................................................................................. 207
TECHNO-FUNDAMENTALS ................................................................................................................................................................................. 209
CHARTS OF NOTE ......................................................................................................................................................................................... 209
NEW-CHARTS DOW Industrial 200 WMA Boundary Condition & Trend Direction Change Indicator .................................................... 209
NEW-CHARTS DOW Industrial 200 WMA Boundary Condition & Trend Direction Change Trigger ...................................................... 209
NEW-CHARTS Global 150 Equity Index Bounces off Lower Support Channel ...................................................................................... 210
NEW-CHARTS Global 150 Equity Index Potential Key Support Levels ............................................................................................... 210


NEW-CHARTS The Rout May Have Just Began According to Some ..................................................................................................... 211
NEW-CHARTS The VIX Termination Algo ............................................................................................................................................... 211
NEW-CHARTS The VIX Termination Algo ............................................................................................................................................... 212
NEW-CHARTS Pick-Up In Buyback Activity ............................................................................................................................................ 213
NEW-CHARTS Buybacks Are Tied to Investment Grade Credit Spreads ............................................................................................... 213
NEW-CHARTS Coincident / Lagging Indicator Ratio ............................................................................................................................... 214
NEW-CHARTS Annual Change in Durable Goods Orders ...................................................................................................................... 214
NEW-CHARTS Durable Goods v Core-Durable Goods (Ex Defense) .................................................................................................... 215
NEW-CHARTS Real Gross Domestic Investment ................................................................................................................................... 215
NEW-CHARTS Total Real Private Fixed Investment as % of Real GDP ................................................................................................ 216
NEW-CHARTS Businesses Operate Against Actual Demand ................................................................................................................. 216
NEW-CHARTS ISM Composite Index ...................................................................................................................................................... 217
NEW-CHARTS Capacity Utilization versus Industrial Production ............................................................................................................ 217
NEW-CHARTS Retail Sales (NSA) Annual % Chg of 12 Month Average ............................................................................................... 218
NEW-CHARTS Monthly Retail Control Purchases Y-o-Y % Chg ....................................................................................................... 219
NEW-CHARTS Major Economic Trends .................................................................................................................................................. 219
NEW-CHARTS $9T Loss In Global Market Cap ...................................................................................................................................... 220
NEW-CHARTS Median EV/EBITDA Ratio for MSCI World (ex Financials)............................................................................................. 220
NEW-CHARTS 15 Developed Country Aggregate Bond PLUS Stock Valuations .................................................................................. 221
NEW-CHARTS 15 Developed Country Aggregate -83% are in their top 20% of valuations through history .......................................... 221
CHARTS Death Cross .............................................................................................................................................................................. 221
CHARTS Asian Dollar Index Flags Crisis Events ..................................................................................................................................... 223
CHARTS TSY 2s30s Spread .................................................................................................................................................................... 223
CHARTS S&P versus HY(High Yield) & IG (Investment Grade) .............................................................................................................. 224
CHARTS Fed Balance Sheet versus HYG (HY Bond ETF) ..................................................................................................................... 224
CHARTS Commodity Carnage ................................................................................................................................................................. 225
CHARTS Market Expectations of Support & Resistance ......................................................................................................................... 226
CHARTS Russell 2000 Head & Shoulders versus AD Line ..................................................................................................................... 226
CHARTS NYSE - NYA Head & Shoulders versus AD Line ..................................................................................................................... 227
CHARTS Dotcom Bubble Burst 2 Year Process and a Year After the Long Trend Broken Was Broken ............................................ 228
CHARTS 54% of All EM Stocks Are In A Bear Market Even As The MSCI EM Index Is Off Only 7% .................................................... 228
CHARTS A Spike in New Lows around the World ................................................................................................................................... 229
CHARTS A Spike in New Lows around the World MSCI Europe ......................................................................................................... 229
CHARTS A Spike in New Lows around the World North America ........................................................................................................ 229
CHARTS A Spike in New Lows around the World MSCI Pacific .......................................................................................................... 230
CHARTS A Spike in New Lows around the World MSCI Emerging Markets ....................................................................................... 230
CHARTS A Spike in New Lows around the World MSCI EM EMEA .................................................................................................... 231
CHARTS A Spike in New Lows around the World MSCI EM Latin America ........................................................................................ 231
CHARTS A Spike in New Lows around the World MSCI EM Asia........................................................................................................ 232
CHARTS Copper Prices Just Made a 6-Year Low ................................................................................................................................... 233
CHARTS Volatility is Stealthy Reemerging into the Equity Market .......................................................................................................... 233
CHARTS S&P 500 Suffers First 2% Down Day Since End of 2014......................................................................................................... 234
CHARTS More Stocks Than You Might Guess Are In A Correction - World ........................................................................................... 235
CHARTS More Stocks Than You Might Guess Are In A Correction North America ............................................................................. 235
CHARTS More Stocks Than You Might Guess Are In A Correction Europe ........................................................................................ 235
CHARTS More Stocks Than You Might Guess Are In A Correction Pacific ......................................................................................... 237
CHARTS Percentage of stocks that are fully in a bear market (down over 20%) is 15% of the MSCI World Index. .............................. 237
CHARTS Percentage of stocks that are fully in a bear market (down over 20%) is 11% of the MSCI Europe Index. ............................ 238
CHARTS Percentage of stocks that are fully in a bear market (down over 20%) is 14% of the MSCI Pacific Index. ............................. 238
CHARTS Percentage of stocks that are fully in a bear market (down over 20%) is 20% stocks of the MSCI N. America Index. ......... 239
CHARTS 12 Mo MACD Sends Longer Term Signal ................................................................................................................................ 240
CHARTS DOW Transports Diverge Significantly A DOW Theory Trigger Signal ................................................................................. 241
CHARTS NYSE AD Line Breaks at Previous Cyclical Stock Market Peaks ............................................................................................ 242
CHARTS Equal-Weight S&P 500 Losing Relative Strength v Weighted Index ....................................................................................... 243
CHARTS % of Unprofitable IPOs Surpass 2000 Dotcom Bubble ............................................................................................................ 244
CHARTS Declining Corporate Profits v The Stock Market at its Highs ................................................................................................... 245
CHARTS US Macro-v-SPX Divergence ................................................................................................................................................... 245
CHARTS The Short Squeeze Game ........................................................................................................................................................ 246
CHARTS The Short Squeeze Game-On No Volumes ............................................................................................................................. 246
CHARTS US Macro Surprise Index Falls at Fastest Rate Ever! ........................................................................................................... 247
OUTLOOK - ANALYTICAL ANALYSIS .......................................................................................................................................... 248

RECESSION SIGNALS Revenue, Earnings & Economic .................................................................................................................................. 248
NEW-STUDY: RECESSION SIGNALS ................................................................................................................................................................. 248
NEW-CHARTS OF NOTE ............................................................................................................................................................................... 248
NEW-RECESSION CT 2015 Revenue Recession ................................................................................................................................... 248
NEW-RECESSION Q2 2015 Revenue Recession ................................................................................................................................... 248
NEW-RECESSION 4 Consecutive months of y/y Spending Declines ..................................................................................................... 249
NEW-RECESSION BOA: Retail sales ex-autos, plunged 0.8% mom seasonally adjusted .................................................................. 250
NEW-RECESSION Top 10 US Market Areas Signal Retail Problem Underway ..................................................................................... 250
NEW-RECESSION Wholesale Inventories to Sales Spiking To Areas Seen During Recession Trends ................................................ 251
NEW-RECESSION Wholesale Inventories Less Wholesale Sales ......................................................................................................... 252
NEW-RECESSION Wholesale Inventories vs GDP Trends .................................................................................................................... 252
NEW-RECESSION Auto Inventories to Sales .......................................................................................................................................... 253
NEW-RECESSION Falling Collateral and Residuals Undermine Real Growth .................................................................................... 253
NEW-RECESSION Coincident / Lagging Indicator Ratio versus Recessions ......................................................................................... 254


NEW-RECESSION Annual Change in Durable Goods Orders v Recessions ......................................................................................... 254

NEW-RECESSION Durable Goods v Core-Durable Goods (Ex Defense) versus Recessions .............................................................. 255
NEW-RECESSION Real Gross Domestic Investment versus Recessions ............................................................................................. 255
NEW-RECESSION Total Real Private Fixed Investment as % of Real GDP versus Recessions .......................................................... 256
NEW-RECESSION Businesses Operate Against Actual Demand versus Recessions ........................................................................... 256
NEW-RECESSION ISM Composite Index versus Recessions ................................................................................................................ 257
NEW-RECESSION Capacity Utilization versus Industrial Production versus Recessions ...................................................................... 257
NEW-RECESSION Retail Sales (NSA) Annual % Chg of 12 Month Average versus Recessions ......................................................... 258
NEW-RECESSION Monthly Retail Control Purchases Y-o-Y % Chg versus Recessions ................................................................. 258
NEW-RECESSION Major Economic Trends ............................................................................................................................................ 259
NEW-RESEARCH OF NOTE .......................................................................................................................................................................... 260
NEW- RECESSION Corporate Revenue Recession Spreads past Dollar, Energy ................................................................................. 260
NEW- RECESSION Retail Sales Slump on Deck .................................................................................................................................... 262
NEW- RECESSION This Is another "Subprime" Waiting To Blow ........................................................................................................... 265
NEW- RECESSION Record Gap between US Inventories and Sales Screams Recession ................................................................... 268
NEW- RECESSION August spending was the weakest in nominal dollar terms since 2012 .................................................................. 270
NEW- RECESSION The Next Recession Will Definitely Not Happen In 2018 ........................................................................................ 275
STUDY: RISK-OFF ................................................................................................................................................................................................ 277
CHARTS OF NOTE ......................................................................................................................................................................................... 277
RISK-OFF Cumulative Flows by Client Type - YTD ................................................................................................................................. 277
RISK-OFF Historical Risk versus Returns ................................................................................................................................................ 277
RISK-OFF Cumulative Flows by Client Type January 2008-Present ................................................................................................... 278
RISK-OFF Q Ratio Since 1900 ................................................................................................................................................................. 278
RESEARCH OF NOTE .................................................................................................................................................................................... 279
RISK-OFF Post Q2 Quadruple Witch - Institutional Money Changing Direction ..................................................................................... 279
RISK-OFF The Worst Time In History To Be Invested In Stocks............................................................................................................. 283
STUDY: LEVEL OF WARNINGS ........................................................................................................................................................................... 288
RESEARCH OF NOTE .................................................................................................................................................................................... 288
WARNINGS According To Bank of America, This Is "The Biggest Risk to Global Equities" ................................................................... 288
WARNINGS The "Smartest Money" Liquidating At a Record Pace: "Selling Everything ....................................................................... 290
WARNINGS Top CEO Warns Of Global Reset: "It's In The Cards For Sure... It Could Happen This Year" .......................................... 293
WARNINGS $140 Billion Bond Fund Goes To Cash As It "Braces For Bond-Market Collapse" ............................................................ 294
WARNINGS "It's Time To Hold Physical Cash", Fidelity Manager Warns Ahead Of "Systemic Event" .................................................. 297
WARNINGS Sweden's Largest Fund Manager Is Quietly Dumping Stocks Before The "Herd" Is Caught In A Selling Vortex .............. 299
SENTIMENT & CONFIDENCE Shifting Trend ................................................................................................................................................... 301
STUDY: SENTIMENT ............................................................................................................................................................................................ 301
CHARTS OF NOTE ......................................................................................................................................................................................... 301
NEW-SENTIMENT Global Consumer Confidence Begins Reversal from Trend Resistance ................................................................. 301
NEW-SENTIMENT US Economic Index Steadily Eroding ....................................................................................................................... 302
NEW-SENTIMENT UMich Consumer Confidence with Biggest Miss on Record .................................................................................... 302
NEW-SENTIMENT Economic Surprise Index lower highs, lower lows and a reluctant bounce .......................................................... 302
RESEARCH OF NOTE .................................................................................................................................................................................... 304
NEW-SENTIMENT Oblivious To Risk - Complacency Still Reigns .......................................................................................................... 304
NEW-SENTIMENT UMich Consumer Confidence Tumbles to 12-Month Lows with Biggest Miss on Record ....................................... 308
NEW-SENTIMENT Elderly Americans' Confidence Collapses To 11-Month Lows (As Middle-Aged Hope Surges) ............................. 309
SHORT TERM TECHNICAL ANALYSIS ..................................................................................................................................... 311

SUPPORT & RESISTANCE .................................................................................................................................................................................. 311
Gann Analysis .................................................................................................................................................................................................. 311
Boundary Conditions ....................................................................................................................................................................................... 311
Channels & Regressions ................................................................................................................................................................................. 313
Fibonacci - Controlling Time Extensions ......................................................................................................................................................... 316
Fibonacci - Controlling Price Extensions ......................................................................................................................................................... 318
Elliott Wave ...................................................................................................................................................................................................... 319
The Bottom Line............................................................................................................................................................................................... 321
BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT ........................................................................................................................... 324
A GRAPHIC HIGHLIGHT ................................................................................................................................................................................ 324
NEW-SENTIMENT - Consumer, Investor & Trader ............................................................................................................................................... 326
NEW-Consumer Confidence - Conference Board .......................................................................................................................................... 326
NEW-Consumer Sentiment - Michigan ........................................................................................................................................................... 329
NEW-Consumer Comfort - Bloomberg ............................................................................................................................................................ 330
NEW-American Association of Independent Investors ................................................................................................................................... 331
NEW-Investors Intelligence ............................................................................................................................................................................. 331
NEW-National Association of Active Investment Managers (NAAIM) ............................................................................................................ 332
NEW-Small Business Optimism ...................................................................................................................................................................... 333
NEW-Percentage Stocks above 50 & 200 DMA ............................................................................................................................................. 335
NEW-Margin Levels ......................................................................................................................................................................................... 336
Real Margin Debt as % of GDP ....................................................................................................................................................................... 341
Margin Debt versus S&P 500 .......................................................................................................................................................................... 341
Mutual Fund Cash Levels v S&P 500 .............................................................................................................................................................. 342
NEW-OSCILLATORS & BREADTH: Indicators of Importance ............................................................................................................................ 344
NEW-NYSE Overbought / Oversold ................................................................................................................................................................ 344
NEW-OEX Open Interest (Puts/Calls) ............................................................................................................................................................. 345
NEW-TRIN ....................................................................................................................................................................................................... 346


NEW-McClellan Oscillator ............................................................................................................................................................................... 347

CHARTS OF NOTE ............................................................................................................................................................................................... 348
NEW-CHARTS Nominal & Real Household Spending Expectations .......................................................................................................... 348
NEW-CHARTS Household Spending Expectations by Income Bucket ....................................................................................................... 348
NEW-CHARTS A Very Neutral (Highly Unusual) Bull Market ...................................................................................................................... 349
NEW-CHARTS Historical Swings in Sentiment ........................................................................................................................................... 349
CHARTS Investors Intelligence Bulls & Bears ............................................................................................................................................. 350
CHARTS A/D Line Diverging from Price, Suggesting Weakening Momentum ........................................................................................... 351
CHARTS Smart Money OEX Open Interest Put/Call Ratio Now Off the Charts! .................................................................................... 351
CHARTS UMich Consumer Sentiment Tumbles Most In 16 Months ........................................................................................................... 352
CHARTS Consumer Comfort Plunges Most In 10 Months .......................................................................................................................... 353
CHARTS Only 16% Think Future Employment Opportunities Will Be Better .............................................................................................. 354
CHARTS Inequality Eventually Leads to Economic Adjustments Often Precipitously ............................................................................. 354
CHARTS - NFIB Small Business Sentiment ................................................................................................................................................... 355
CHARTS - Orange Book .................................................................................................................................................................................. 355
CHARTS Asset Allocation Global Equities ................................................................................................................................................ 356
CHARTS Asset Allocation Global Bonds .................................................................................................................................................. 356
CHARTS Active versus Passive Funds Allocation ....................................................................................................................................... 357
CHARTS Investors Intelligence Survey of % Bears ..................................................................................................................................... 357
CHARTS Sentiment at Post 2008 Crisis Highs ............................................................................................................................................ 358
CHARTS CNBC Viewership Steadily Falling ............................................................................................................................................... 359
CHARTS Investor Allocation Trends for Stocks, Bonds and Cash .............................................................................................................. 360
CHARTS Uptick in Feds Financial Stress Index Composite ....................................................................................................................... 361
CHARTS Fear Barometer Diverges with VIX, CDS IG Index ...................................................................................................................... 362
CHARTS Extreme Complacency Seen Near End of Cycles ........................................................................................................................ 362
CHARTS Complacency Seen In PE/VIX ....................................................................................................................................................... 363
CHARTS Post Crisis Sentiment Profile Shows a Clear Ending Pattern ...................................................................................................... 363
CHARTS Smart Money Flows ...................................................................................................................................................................... 364
CHARTS Fed Assets versus Bullish Sentiment ........................................................................................................................................... 364
CHARTS Macro Support Has Technically Broken Down ............................................................................................................................. 365
CHARTS US Surprise Index Setting Up for Downturn ................................................................................................................................. 365
CHARTS The Public No Longer Trusts the Market Feel it is Manipulated and Ineffectively Regulated ............................................... 366
RESEARCH OF NOTE .......................................................................................................................................................................................... 367
NEW-SENTIMENT: This Wasn't Supposed To Happen: Household Spending Expectations Crash............................................................. 367
NEW-SENTIMENT: Something's Happened To Investor Sentiment Since The Financial Crisis ................................................................... 368
SENTIMENT: The "Smart Money" Has Never Been More Bearish ................................................................................................................ 370
SENTIMENT: US Economic Confidence Crashes Most Since July to Lowest Since December ................................................................... 373
SENTIMENT: We Are All Bulls Now ................................................................................................................................................................ 375
SENTIMENT: No More Greater Fools: Retail Traders Are "Pretty Fully Invested" In Stocks, TD CEO Says ................................................ 376
SENTIMENT: One Heckuva Bull Market but Momentum Weakening! ........................................................................................................... 377
SENTIMENT: Small Business Confidence is a Major Problem in America .................................................................................................... 379
SENTIMENT: Americas Crisis of Trust ........................................................................................................................................................... 381
SENTIMENT: "Everything Is Awesome" American Consumers Are The Happiest In 11 Years .................................................................... 382
SENTIMENT: For CNBC, 2014 Was The Worst Year. Ever. .......................................................................................................................... 383
SENTIMENT: An Astounding Number Of Americans Aren't Investing A Cent ............................................................................................... 385
SENTIMENT: US Households to Withdraw $430 Billion From Stocks In 2014 .............................................................................................. 390
SENTIMENT: Elliott Wave's View from the Top .............................................................................................................................................. 393
SITUATIONAL SUMMARY & ANALYSIS .................................................................................................................................................... 397
INTERMEDIATE TERM RISK ANALYSIS ................................................................................................................................. 401

UPDATED-AGGREGATED GLOBAL FINANCIAL RISK INDEX .......................................................................................................................... 401
NEW-BANKING RISK - LIBOR-OIS SPREAD ................................................................................................................................................ 402
NEW-BANKING RISK - TED SPREAD ........................................................................................................................................................... 402
NEW-CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS ....................................................................................................................... 403
NEW-CREDIT RISK - EU CREDIT DEFAULT SWAPS .................................................................................................................................. 403
NEW-CONSUMER RISK - HOUSING - RATE OF CHANGE ......................................................................................................................... 404
NEW-ECONOMIC RISK - ECRI LEADING INDEX ......................................................................................................................................... 404
NEW-INFLATION RISK - MONEY SUPPLY GROWTH - M3 ......................................................................................................................... 406
NEW-INFLATION RISK - MONEY VELOCITY ............................................................................................................................................... 406
MONETARY RISK - BANK LIABILITIES ......................................................................................................................................................... 407
NEW-COST OF MONEY RISK - INTEREST RATES .................................................................................................................................... 407
AGGREGATED RISK LEVEL ................................................................................................................................................................................ 408
CHARTS OF NOTE ............................................................................................................................................................................................... 410
NEW-RISK: Leutholds High/Lpw Logic Index Warns ..................................................................................................................................... 410
NEW-RISK: Megaphone Top with Confirming Oscillator ................................................................................................................................ 410
NEW-RISK: We Have Confirmed and Unusual Hindenburg Omens .............................................................................................................. 411
NEW-RISK: It's been a while since we corrected! .......................................................................................................................................... 412
NEW-RISK: "Seven Signs" Flash Red ............................................................................................................................................................ 414
RISK: When these Two Charts Appear Simultaneously, Bad Things Normally Follow!................................................................................. 415
RISK: Well That's Never Happened Before - Exhibit 1 US Macro versus S&P 500 .................................................................................... 415
RISK: Well That's Never Happened Before - Exhibit 2 Long- and Short-end of the Treasury yield curve so anti-correlated. ................... 416
RISK: Well That's Never Happened Before - Exhibit 3 Fed-Fueled, Mal-Investment Boom ....................................................................... 417
RISK: Well That's Never Happened Before - Exhibit 4 Market breadth diverge from performance for such an extended period.............. 418
RISK: Well That's Never Happened Before - Exhibit 5 More trades per second in stocks ......................................................................... 420
RISK: Well That's Never Happened Before - Exhibit 6 The "Smart Money" Has Never Been More Bearish .............................................. 421


RISK: Well That's Never Happened Before - Exhibit 7 Big decoupling in recent weeks between US equity flows and prices ................... 421
RISK: Well That's Never Happened Before - Exhibit 8 Cumulative 3 Mo net flows out of equities, is now the largest on record ............... 422
RISK: World Stocks versus World 2015 GDP Estimate.................................................................................................................................. 424
RISK: World Stocks versus World 2014 & 2015 GDP Estimates ................................................................................................................... 424
RISK: World Stocks versus 10Y UST Yield, WTI Crude 2015 GDP Estimates .............................................................................................. 425
RISK: Fat Tails Have Disproportionately Large Impact on Returns................................................................................................................ 426
RISK: Statistically We Are Due for a Drawdown ............................................................................................................................................. 427
RISK: The Buffett Indicator .............................................................................................................................................................................. 428
RISK: Speculation Has Taken Control of the Markets .................................................................................................................................... 429
RISK: MSCI versus World GDP Divergence - Unsustainable ........................................................................................................................ 429
RISK: High Yield Credit Risk At Elevated Levels ............................................................................................................................................ 429
RISK: Active Hindenburg Omen ...................................................................................................................................................................... 430
RISK: An Over-Levered Hedge Fund Index Ending ABC Consolidation Pattern ........................................................................................... 430
RESEARCH OF NOTE .......................................................................................................................................................................................... 432
NEW- RISK: 12 Signs That An Imminent Global Financial Crash Has Become Even More Likely ............................................................... 432
NEW- RISK: World's Largest Sovereign Wealth Fund Is About To Become A Seller .................................................................................... 433
NEW- RISK: When Hindenburg Omens Are Ominous ................................................................................................................................... 436
NEW- RISK: The Canaries Continue To Drop like Flies ................................................................................................................................. 438
NEW- RISK: Deutsche Suggests 'Caution' As "Seven Signs" Flash Red ...................................................................................................... 440
NEW- RISK: "The Top's In" David Stockman Warns Of "Epochal Deflation" ................................................................................................. 441
NEW- RISK: When Hindenburg Omens Are Ominous ................................................................................................................................... 442
RISK: Two Point Three Sigmas Above the Norm ........................................................................................................................................... 444
RISK: No Really, Who is Buying? ................................................................................................................................................................... 452
RISK: Curious Sightings .................................................................................................................................................................................. 453
RISK: Even the BIS Is Shocked At How Broken Markets Have Become ....................................................................................................... 460
RISK: The Line between Rational Speculation and Market Collapse ............................................................................................................. 464
RISK: Global Economy Will Shrink By $2.3 Trillion In 2015 ........................................................................................................................... 469
RISK: Market Action Suggests Abrupt Slowing in Global Economic Activity.................................................................................................. 469
RISK: Warnings Signs Are Everywhere .......................................................................................................................................................... 473
RISK: Hindenburg Signals a Warning ............................................................................................................................................................. 474
RISK: Americans say they're too broke to invest ............................................................................................................................................ 476
RISK: The Biology of Risk ............................................................................................................................................................................... 480
RISK: More Signs Of Bullish Excess ............................................................................................................................................................... 484
RISK: Markets Have Left the "Complacency" Phase, Have Entered Full Blown "Mania" .............................................................................. 486
RISK: VIX Sends Message of Complacency ................................................................................................................................................... 487
RISK: CS Warns Volume & DeMark Raise "Topping Threat" In Stocks ......................................................................................................... 488
RISK: No One Will Ring the Bell at the Top .................................................................................................................................................... 492
Cassandra's - New Additions to the List ................................................................................................................................................................ 499
NEW-CASSANDRA: "Severe Correction Or Cyclical Bear" Ahead: Leuthold Major Trend Index Turns Negative ........................................ 500
NEW-CASSANDRA: CANARIES - Warnings Everywhere! ............................................................................................................................ 501
NEW-CASSANDRA: Stephen Schork: The Commodity Crash Is "A Canary In The Coal Mine For The Global Economy" ......................... 503
NEW-CASSANDRA: Emerging Market Mayhem: Gross Warns Of "Debacle" As Currencies, Bonds Collapse............................................ 505
CASSANDRA: "Another Crisis Is Coming": Jamie Dimon Warns Of the Next Market Crash ........................................................................ 512
CASSANDRA: Steen Jakobsen: Get Ready For The Biggest Margin Call In History .................................................................................... 513
CASSANDRA: Wynn Calls "Big" Recovery "Complete Dream" As Gaming Revenues Collapse .................................................................. 515
CASSANDRA: Stan Druckenmiller's "Horrific Sense" Of Deja Vu: "This Will End Very Badly" ..................................................................... 517
CASSANDRA: Hedge Fund Legend Julian Robertson Warns Of A "Complete Explosion" Unless Fed Contains "Boiling, Bubble" ............ 522
CASSANDRA: Kyle Bass Warns "The Fed Is Backed Into A Corner... Equities Are My Biggest Liquidity Worry" ........................................ 523
CASSANDRA: Paul Tudor Jones Warns "Disastrous Market Mania" Will End In "Revolution, Taxes, or War" ............................................ 524
CASSANDRA: John Hussman - A Who's Who Of Awful Times To Invest ..................................................................................................... 526
CASSANDRA: Carl Icahn - One Day You'll See A Break Like A Few Weeks Ago But The Market Won't Come Back ................................ 529
CASSANDRA: Sam Zell Warns Of Stock Market Correction On CNBC ........................................................................................................ 530
CASSANDRA: Billionaire Carl Icahn warns on US stock prices ..................................................................................................................... 530
CASSANDRA: Soros Bets $2 Billion on Stock Market Collapse .................................................................................................................... 531
CASSANDRA: Dont Ignore Janet Yellens Stock Market Warnings 07-21-14 Fiscal Times ......................................................................... 532
CASSANDRA: Doug Kass: We're Heading for a Bear Market So Plan Accordingly ...................................................................................... 535
CASSANDRA: Comstock Funds Weighs In .................................................................................................................................................... 537
CASSANDRA: Michael Lombardi Weighs In ................................................................................................................................................... 539
CASSANDRA: Ron Paul Portfolio, 'Craziest' we've ever seen? ..................................................................................................................... 541
CASSANDRA: John Mauldin Goes Negative .................................................................................................................................................. 542
CASSANDRA: Hayman Capital Dramatically Reduces Risk .......................................................................................................................... 550
CASSANDRA: Byron Wien Warns "Oblivious Markets" Of 20% Correction ................................................................................................... 551
CASSANDRA: Harry Dent Warns Stocks to Sink More than 60% by End of 2014 ........................................................................................ 551
CASSANDRA: Stanley Druckenmiller: "When You Get This Kind Of Rigging, It Will End Badly".................................................................. 552
CASSANDRA: Mohamed El-Erian: "Prices Are Artificially High - Its Time to Take Profits" .......................................................................... 553
CASSANDRA: Felix Zulauf: World Headed Toward 1987 Style Market Collapse .......................................................................................... 554
CASSANDRA: Doug Kass: 'I'm Getting The Summer Of 1987 Feeling' In The Market Right Now ............................................................... 554
CORRELATION & COMPLACENCY A PROBLEM .............................................................................................................................................. 556
EVENT RISK A PROBLEM .................................................................................................................................................................................... 559
Q2 EARNINGS & THE R WORD .............................................................................................................................................................. 559
POLITICAL-ECONOMIC TENSIONS .......................................................................................................................................................... 559
CENTRAL BANK POLICY MISCUES.......................................................................................................................................................... 559
ASIAN ECONOMIC SLOWDOWN SPILLAGE ............................................................................................................................................ 559
PETRO$ CRISIS BREWING IN BRIICS...................................................................................................................................................... 559


LONGER TERM - FUNDAMENTAL ANALYSIS .............................................................................................................................. 560

HIGHLIGHTS ......................................................................................................................................................................................................... 560
ASSET & LIABILITY OWNERSHIP ................................................................................................................................................................. 560
PANIC TOTAL RETURN DISTRIBUTION SINCE 1974 ................................................................................................................................. 560
PANIC CHASE FOR YIELD ............................................................................................................................................................................ 561
REAL S&P MARKET CAP / REAL GDP ......................................................................................................................................................... 561
UNSUSTAINABLE GAP BETWEEN PROFITS AND INCOME ...................................................................................................................... 562
ADJUSTED CORPORATE PROFITS FROM DOMESTIC OPERATIONS .................................................................................................... 562
TRAILING 10Y 12 MONTH NET MARGINS ................................................................................................................................................... 563
INVESTMENT CLASS PERFORMANCE ....................................................................................................................................................... 564
NEW-VALUATION SUMMARY ....................................................................................................................................................................... 565
VALUATION: Alternative Methodologies ............................................................................................................................................................... 570
NEW-FOUR SET CONSOLIDATED MARKET VALUATION INDICATORS .................................................................................................. 570
NEW-Crestmont from the Arithmetic ............................................................................................................................................................... 574
NEW-Cyclical PE 10 Ratio............................................................................................................................................................................... 578
NEW-Q Ratio ................................................................................................................................................................................................... 585
NEW-S&P Composite Regression-to-the-Trend ............................................................................................................................................. 590
NEW-Reference Methodologies Analysis ....................................................................................................................................................... 592
CHARTS OF NOTE ......................................................................................................................................................................................... 598
NEW-VALUATIONS XXXX ....................................................................................................................................................................... 598
VALUATIONS Forward 12-Month P/E Ratio 10 Years.......................................................................................................................... 599
VALUATIONS Forward 12-Month EPS versus Change in Price 10 Years ........................................................................................... 599
VALUATIONS Net Margin Growth ............................................................................................................................................................ 600
VALUATIONS 10 Year Trailing 12 Mo Net Margin Growth Historically High ........................................................................................ 600
VALUATIONS Record Profits Yet Historically Low Capital Asset Growth ............................................................................................... 601
VALUATIONS Historical Ranking of PE Values ....................................................................................................................................... 602
VALUATIONS Median Price/Cash Flow Multiple for US Stocks .............................................................................................................. 603
VALUATIONS Median Price/Earnings Multiple for US Stocks ................................................................................................................. 604
VALUATIONS Median Price to Book Multiple for US Stocks ................................................................................................................... 605
VALUATIONS Price/Book; Price/Cash flow; Price/Sales ......................................................................................................................... 606
VALUATIONS Global Equities Reported PE, PE before XO & Fwd PE ............................................................................................... 607
YE EARNINGS 2015 Forecasts.......................................................................................................................................................................... 608
CHARTS OF NOTE ......................................................................................................................................................................................... 608
NEW-2015 EARNINGS 2015 & 2016 Annual Earnings EPS Estimate v Historical ................................................................................. 608
NEW-2015 EARNINGS Q3 Earnings Estimate Revisions v Change in Price ......................................................................................... 609
NEW-2015 EARNINGS Consumer Staples & Discretionary are sending a Pretty Clear ( Worsening Since Q1) Message ................... 610
2015 EARNINGS Consensus Long-Term Growth versus Forward PE ................................................................................................... 611
2015 EARNINGS Consensus Analysts Estimates 1979-1995 ............................................................................................................. 612
2015 EARNINGS Consensus Analysts Estimates 1995-2014 ............................................................................................................. 612
NEW-2015 EARNINGS CY 2015 Earnings Growth ................................................................................................................................. 613
NEW-2015 EARNINGS CY 2015 Revenue Growth ................................................................................................................................. 613
NEW-2015 EARNINGS Q2 Forward 12 Mo EPS versus Change in Price ........................................................................................... 614
2015 EARNINGS Q1 Forward 12 PE Ratio ........................................................................................................................................... 615
RESEARCH OF NOTE .................................................................................................................................................................................... 616
2015 EARNINGS Q1 Earnings Guidance: Negative Guidance (84%) Above Average ........................................................................... 616
NEW-Q2 EARNINGS Reported Results ............................................................................................................................................................. 617
CHARTS OF NOTE ......................................................................................................................................................................................... 617
NEW-Q2 EARNINGS Q2 Earnings Growth by Sector ............................................................................................................................. 617
NEW-Q2 EARNINGS Q2 Revenue Growth by Sector ............................................................................................................................. 617
NEW-Q2 EARNINGS Q2 Earnings Growth by Sector - Estimates .......................................................................................................... 618
NEW-Q2 EARNINGS Q2 Revenue Growth by Sector Estimates ......................................................................................................... 618
RESEARCH OF NOTE .................................................................................................................................................................................... 620
NEW-Q2 EARNINGS Q2 Summary ......................................................................................................................................................... 620
NEW-Q2 EARNINGS Percentage of Companies Beating Revenue Estimates (52%) is Below 5 Year Average ................................... 621
NEW-Q2 EARNINGS Forward Earnings, Revenue and Margins ............................................................................................................ 622
NEW-Q2 EARNINGS First Decline in Earnings (-1.3%) Since Q3 2012 (-1.06%) .................................................................................. 623
NEW-Q2 EARNINGS First Back-to-Back Declines in Revenue Since Q2 2009 and Q3 2009 ............................................................... 624
Q1 EARNINGS Reported Results....................................................................................................................................................................... 625
CHARTS OF NOTE ......................................................................................................................................................................................... 625
Q1 EARNINGS Q1 Earnings Growth by Sector ....................................................................................................................................... 625
Q1 EARNINGS Q1 Revenue Growth by Sector ....................................................................................................................................... 625
Q1 EARNINGS Q1 Earnings Growth by Sector - Estimates .................................................................................................................... 626
Q1 EARNINGS Q1 Reveue Growth by Sector - Estimates ...................................................................................................................... 626
RESEARCH OF NOTE .................................................................................................................................................................................... 627
Q1 EARNINGS Q1 Summary ................................................................................................................................................................... 627
Q1 EARNINGS Fewer Companies Beating Estimates and Sales Estimates Than Average .................................................................. 627
Q1 EARNINGS Forward Earnings, Revenue and Margins ...................................................................................................................... 629
Q1 EARNINGS First Decline in Earnings (-0.4%) Since Q3 2012 (-1.06%) ............................................................................................ 630
Q1 EARNINGS First Decline in Revenues (-2.6%) Since Q3 2012 (-11.5%) .......................................................................................... 631
BUYBACKS Situational Assessment .................................................................................................................................................................. 632
CHARTS OF NOTE ......................................................................................................................................................................................... 632
NEW-BUYBACKS 94% of total S&P in 2015 will go back to shareholders, as dividends and buybacks................................................ 632
NEW-BUYBACKS CEO Pay Boosted from Giving Shareholders Cash .................................................................................................. 633
NEW-BUYBACKS Investor-CEO Feedback Loop .................................................................................................................................... 634


NEW-BUYBACKS Buybacks Account for Substantial Share of Corporate Profits .................................................................................. 635
NEW-BUYBACKS Quarterly History of Buyback Announcments ............................................................................................................ 635
NEW-BUYBACKS Buybacks as a Percentage of Total Cash Use at the Highest Level Since 2007 ...................................................... 636
NEW-BUYBACKS Weekly Buybacks and Rolling 3 Month Sum ............................................................................................................. 636
NEW-BUYBACKS What Sustained Buybacks Look Like To Rating Agencies IBM Example .............................................................. 637
NEW-BUYBACKS Dollar Volume of Share Buybacks and Dividends at Record Levels ......................................................................... 637
NEW-BUYBACKS Buybacks & Dividends Hurdle $900B in 2014 ........................................................................................................... 637
NEW-BUYBACKS The Growth of Stock Buybacks .................................................................................................................................. 638
NEW-BUYBACKS Buybacks & Dividends as a Percentage of Operating Earnings ................................................................................ 638
NEW-BUYBACKS Executive Compensation Structure ............................................................................................................................ 639
BUYBACKS During 2014 virtually 100% of S&P 500s reported profits of $1T were disgorged as shareholder distributions ................ 640
BUYBACKS 2015 US Equity Flows Forecast ........................................................................................................................................... 640
BUYBACKS Announced Gross Share Buybacks ..................................................................................................................................... 641
BUYBACKS Global IPO /Secondary Offerings versus Announced Gross Share Buybacks ................................................................... 641
BUYBACKS Actual Net Share Buybacks ................................................................................................................................................. 642
BUYBACKS US IPOs-Actual Buybacks and LBO .................................................................................................................................... 642
BUYBACKS Cash to Stockholders Exceeds 90% of Profits .................................................................................................................... 643
BUYBACKS Stock Repurchases Surge 30% in Q3 ................................................................................................................................. 643
nd
BUYBACKS Stock Repurchases 2 Highest on Record at $145B.......................................................................................................... 643
BUYBACKS 2914 YTD Stock Repurchases By Corporation 20 Corporations Over $4B ..................................................................... 644
BUYBACKS Operating EPS With / Without Buybacks ............................................................................................................................. 644
BUYBACKS Sales & Revenue Doesnt Support Reported EPS Due to Buyback Distortion ................................................................... 645
BUYBACKS S&P 500 Buyback Index versus S&P 500 ........................................................................................................................... 646
BUYBACKS The New S&P 500 Buyback Index TR ................................................................................................................................. 646
BUYBACKS The New S&P 500 Buyback Index Since Start of QE ......................................................................................................... 647
BUYBACKS IBM Total Debt to Equity (to Fund Buybacks) ..................................................................................................................... 647
BUYBACKS IBM Debt Issuance v Buybacks ........................................................................................................................................... 648
BUYBACKS Global FDI into Finance versus Productive Assets ............................................................................................................. 649
BUYBACKS Total Corporate Debt 35% Higher than 2008 Peak Used for Buybacks .......................................................................... 649
BUYBACKS Buyback Bonanza ................................................................................................................................................................ 650
BUYBACKS Buybacks Have Made a 1% Earnings Growth Distortion to Median S&P 500 Company ................................................... 650
BUYBACKS Top 10 Buyback Companies ................................................................................................................................................ 651
BUYBACKS Intel Buybacks ...................................................................................................................................................................... 651
BUYBACKS Shares Outstanding Back at 2000 Level ............................................................................................................................. 652
BUYBACKS Largest Volumes of Buybacks by US Listed Corporation in Last Year ............................................................................... 652
BUYBACKS Corporations Are No Longer Investing But Rather Financial Engineering Stock Prices ..................................................... 653
BUYBACKS Q2 Drop-Off Closer to Normal .......................................................................................................................................... 654
BUYBACKS Borrowing to Buy back Shares ............................................................................................................................................. 654
BUYBACKS Cyclical Nature of Buybacks Evident ................................................................................................................................... 654
BUYBACKS Major Q2 Repurchases ........................................................................................................................................................ 655
BUYBACKS Major Q1 Repurchases ........................................................................................................................................................ 655
BUYBACKS Quarterly Repurchase & Buyback Yield ............................................................................................................................... 656
BUYBACKS US Corporate Cash versus Buybacks .................................................................................................................................. 657
BUYBACKS Net Debt/EBITDA of American Non-Financial Corporations ............................................................................................... 657
RESEARCH OF NOTE .................................................................................................................................................................................... 658
NEW-BUYBACKS Stock Buybacks To Grind To A Halt Following Massive Credit Fund Outflows, "Bond Carnage" ............................. 658
NEW-BUYBACKS"The End Of The Road" - Debt-Funded Buyback Boosts Are Finite ........................................................................... 660
NEW-BUYBACKS Why There Is No Growth: The Entire S&P 500 Free Cash Flow Is Going Back To Shareholders ............................ 663
NEW-BUYBACKS Do Share Buybacks Create Value? (Spoiler Alert: No) .............................................................................................. 664
NEW-BUYBACKS Surprise! CEOs Are Getting Rich by Buying Back Stock............................................................................................ 666
NEW-BUYBACKSThe End of Buybacks? Goldman Warns Political Pressure On Share Repurchases Is Rising................................... 671
NEW-BUYBACKSCorporate Buybacks: Connecting the Dots to the F-Word........................................................................................... 673
NEW-BUYBACKS Capex Recovery Is Worst In History, BoAML Says .................................................................................................... 678
NEW-BUYBACKS Stock Buybacks Move to the "Terminal" Next Stage .................................................................................................. 681
NEW-BUYBACKSOne Heckuva Bull Market ............................................................................................................................................. 683
BUYBACKS - The US Equity Bubble Depends On Corporate Buybacks; Here's the Proof ....................................................................... 684
BUYBACKS - Why Markets Are Manic - The Fed Is Addicted To the "Easy Button" ................................................................................. 688
BUYBACKS - When $140 Billion In Buybacks Isn't Enough... .................................................................................................................... 690
BUYBACKS - "Obsessive" Buybacks Could Be Big Mistake, "Serious" People Tell Unserious People .................................................... 690
BUYBACKS - Q3 Buybacks Surging, These Are The Top 20 Repurchasers Of Their Own Stock ............................................................ 694
BUYBACKS - Accounting Magic .................................................................................................................................................................. 696
BUYBACKS - The largest source of overall US equity demand in recent years......................................................................................... 698
BUYBACKS - Has Boosted Median Earnings Growth by 100 bps for S&P 500 ......................................................................................... 701
BUYBACKS - Companies Spend Almost All Profits On Buybacks ............................................................................................................. 706
BUYBACKS - Buyback At Biggest Pace Since 2007 .................................................................................................................................. 711
BUYBACKS - Buyback Party Slowing ......................................................................................................................................................... 713
BUYBACKS - Buyback Party Slowing ......................................................................................................................................................... 718
THE $2T TAX RUSE Its a Free Ride for US Corporations ......................................................................................................................... 723
UNPRECEDENTED BUYBACKS LEVELS ................................................................................................................................................. 723
A FREE TAX RIDE....................................................................................................................................................................................... 725
GENERIC TAX EXAMPLE ........................................................................................................................................................................... 725
CHARTS OF NOTE ............................................................................................................................................................................................... 730
CHARTS Finance the Biggest Source of Corporate Funds rising from 19% to 30% .................................................................................. 730
CHARTS Average Age of Private Fixed Assets ........................................................................................................................................... 731
CHARTS Percent of Families With Business Equity .................................................................................................................................... 731
CHARTS Percent of Families With Business Equity .................................................................................................................................... 732


CHARTS New England Patriots NFL Franchise Valuation ......................................................................................................................... 733

CHARTS US Equity Market is Not Outgrowing the Economy AS Measured by the Coincident Indicator .................................................. 734
CHARTS Deviation of Earnings Above / Below Long Term Growth Trend ................................................................................................. 735
CHARTS S&P 500, Moodys Baa Corporate & 30Y UST Yields ................................................................................................................. 735
CHARTS Corporations Carrying Higher Levels of Leverage than a Few Years Ago .................................................................................. 736
CHARTS US Corporate CFROI (Cash Flow ROI) ....................................................................................................................................... 737
CHARTS Weakening Sector Retunrs ........................................................................................................................................................... 737
CHARTS SPX, Corporate Profits versus Employed Population % .............................................................................................................. 738
CHARTS Executive Incentives Distort Earnings .......................................................................................................................................... 738
CAPITALIZATION Market Capitalization as a % of Nominal GDP .............................................................................................................. 739
CAPITALIZATION Market Capitalization Adjusted by Gold and CPI ........................................................................................................... 740
CAPITALIZATION Market Capitalization versus Total Federal Reserve Assets ......................................................................................... 741
CAPITALIZATION Total Market Capitalization versus M2 ........................................................................................................................... 742
CAPITALIZATION Total Market Capitalization versus Monetary Base ....................................................................................................... 743
CAPITALIZATION Total Market Capitalization versus Gross Federal Debt ................................................................................................ 744
CAPITALIZATION Market Capitalization Ratios .......................................................................................................................................... 745
CAPITALIZATION Regional Corporate Loss Comparisons Problems in Japan....................................................................................... 745
CHARTS 7 Year Total Return Cycle ............................................................................................................................................................ 746
CHARTS Profit Margins Shrink as Proportion of GDP ................................................................................................................................. 746
CHARTS Q1 Earnings Pre-Announcements ................................................................................................................................................ 747
CHARTS Q1 Earnings Taken Down Dramatically ....................................................................................................................................... 747
CHARTS Q1 Earnings Already Taken Down By 5% since January ............................................................................................................ 748
CHARTS Positive & Negative Q1 Pre-Announcements .............................................................................................................................. 748
CHARTS Q1 Revenue Slippage in Last 60 Days ........................................................................................................................................ 749
CHARTS Forward 12 Month EPS vs Price: 10-Year ................................................................................................................................... 750
CHARTS Forward 12 Month EPS vs Price: 10-Year ................................................................................................................................... 750
RESEARCH OF NOTE .......................................................................................................................................................................................... 752
NEW-FUNDAMENTALS A Bad Equilibrium & How Speculative Distortion Ends ....................................................................................... 752
NEW-FUNDAMENTALS Valuations ............................................................................................................................................................. 760
FUNDAMENTALS Corporate Profits Vaporizing .......................................................................................................................................... 765
FUNDAMENTALS Fundamentals No Longer Currently Matter - Proof ....................................................................................................... 769
FUNDAMENTALS Profit Margins - Is the Ladder Starting to Snap? ........................................................................................................... 770
FUNDAMENTALS The Great PE Multiple Expansion of 2011-2014 ........................................................................................................... 777
FUNDAMENTALS Stocks Have Never Been More Expensive Based On Long-Term Growth Forecasts .................................................. 781
FUNDAMENTALS Long Term Return Trends ............................................................................................................................................. 783
FUNDAMENTALS Profit Margins Contract as a Percentage of GDP .......................................................................................................... 785
FUNDAMENTALS Stagnant Wages a Major Contributor to Profits ............................................................................................................. 787
FUNDAMENTALS Worsening risk/reward fundamentals in US corporate credit ........................................................................................ 789
TARGETS ................................................................................................................................................................................ 793

CONCLUSIONS....................................................................................................................................................................... 796
MARKET MESSAGE ............................................................................................................................................................................................. 796
I-
DEFINING CHARTS .................................................................................................................................................................................... 803

Defining Chart #3 - The Big M and Super Cycle b ..................................................................................................................................... 805
Defining Chart #4 Intermediate Term Topping Process ............................................................................................................................... 806
The Bottom Line............................................................................................................................................................................................... 809
II TARGETS ........................................................................................................................................................................................................ 812

III QUARTERLY SENTIMENT RISK AND FUNDAMENTALS ........................................................................................................................... 815
SENTIMENT .................................................................................................................................................................................................... 815
NEW-FUNDAMENTAL ANALYSIS ................................................................................................................................................................. 818
IV STUDIES ........................................................................................................................................................................................................ 820
RECESSION SIGNALS Revenue, Earnings & Economic .................................................................................................................................. 820
NEW-STUDY: RECESSION SIGNALS ................................................................................................................................................................. 820
NEW-CHARTS OF NOTE ............................................................................................................................................................................... 820
NEW-RECESSION CT 2015 Revenue Recession ................................................................................................................................... 820
NEW-RECESSION Q2 2015 Revenue Recession ................................................................................................................................... 820
NEW-RECESSION 4 Consecutive months of y/y Spending Declines ..................................................................................................... 821
NEW-RECESSION BOA: Retail sales ex-autos, plunged 0.8% mom seasonally adjusted .................................................................. 822
NEW-RECESSION Top 10 US Market Areas Signal Retail Problem Underway ..................................................................................... 822
NEW-RECESSION Wholesale Inventories to Sales Spiking To Areas Seen During Recession Trends ................................................ 823
NEW-RECESSION Wholesale Inventories Less Wholesale Sales ......................................................................................................... 824
NEW-RECESSION Wholesale Inventories vs GDP Trends .................................................................................................................... 824
NEW-RECESSION Auto Inventories to Sales .......................................................................................................................................... 825
NEW-RECESSION Falling Collateral and Residuals Undermine Real Growth .................................................................................... 825
NEW-RECESSION Coincident / Lagging Indicator Ratio versus Recessions ......................................................................................... 826
STUDY: SENTIMENT ............................................................................................................................................................................................ 826
SENTIMENT & CONFIDENCE Shifting Trend ................................................................................................................................................... 826
CHARTS OF NOTE ......................................................................................................................................................................................... 827
NEW-SENTIMENT Global Consumer Confidence Begins Reversal from Trend Resistance ................................................................. 827
NEW-SENTIMENT US Economic Index Steadily Eroding ....................................................................................................................... 828
NEW-SENTIMENT UMich Consumer Confidence with Biggest Miss on Record .................................................................................... 828
NEW-SENTIMENT Economic Surprise Index lower highs, lower lows and a reluctant bounce .......................................................... 828
10


V - TRIGGER$ ZONES .......................................................................................................................................................................................... 830

VI - DRIVER$ & BIA$ ............................................................................................................................................................................................. 831
11



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Monthly Market Analytics & Technical Analysis

SEPTEMBER 2015 Edition

MATA- SEPTEMBER 2015

1 SEPTEMBER 2015 Edition

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