Monthly Market Analytics & Technical Analysis: Sectional Report

Monthly Market Analytics & Technical Analysis
JUNE 2016 Edition
SECTIONAL REPORT
MATA- JUNE 2016
6/13/2016
1 JUNE 2016 Edition

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

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Monthly Market Analytics & Technical Analysis

JUNE 2016
HIGHLIGHTS - WHAT YOU NEED TO KNOW ................................................................................................................................. 13
SUMMARY ANALYSIS ............................................................................................................................................................................................ 13
Era of Delusional Distortions & the Super Cycle Pivot b .................................................................................................................................... 28
Defining Chart #1 - "Delusional Distortion" Expectations & the Log-Periodic Cycle ......................................................................................... 30
Defining Chart #2 - Finding the Longer Term Super Cycle Pivot b ................................................................................................................ 31
Defining Chart #3 - The Big M and Super Cycle b ....................................................................................................................................... 32
Defining Chart #4 Intermediate Term Topping Process ................................................................................................................................. 34
Boundary Conditions ......................................................................................................................................................................................... 35
Channels & Regressions ................................................................................................................................................................................... 36
OUR APPROACH - MACRO ANALYTICS ...................................................................................................................................... 44

JUNE 2016: Global Macro Drivers ........................................................................................................................................................................... 46
NEW-WEALTH .................................................................................................................................................................................................. 48
UPDATED-HARD ASSETS - Gold ................................................................................................................................................................ 48
UPDATED-HARD ASSETS Silver .............................................................................................................................................................. 51
NEW-UPDATED-HARD ASSETS Gold : Silver Ratio ................................................................................................................................ 54
UPDATED-HARD ASSETS - Commodities .................................................................................................................................................. 55
NEW-EXCHANGE ............................................................................................................................................................................................. 56
UPDATED-CURRENCIES - USD .................................................................................................................................................................. 56
UPDATED-CURRENCIES - EURO ............................................................................................................................................................... 58
UPDATED-CURRENCIES - YEN .................................................................................................................................................................. 59
UPDATED-CARRY TRADE - The : Cross ............................................................................................................................................... 60
UPDATED-CARRY TRADE - The $: Cross ............................................................................................................................................... 62
NEW-YIELD, CREDIT & SPREAD .................................................................................................................................................................... 62
NEW-EQUITIES - Global ................................................................................................................................................................................... 64
CHARTS & RESEARCH OF NOTE .................................................................................................................................................................. 66
CREDIT .......................................................................................................................................................................................................... 66
CREDIT EU Credit Ratings Could Be Cut If UK Leaves, Fitch Warns ................................................................................................... 67
CREDIT Moodys lowers credit ratings for Saudi Arabia and other Gulf oil producers ........................................................................... 68
CREDIT Current Gauge of US Credit Markets ....................................................................................................................................... 70
CREDIT Credit versus S&P versus Fed Actions .................................................................................................................................... 71
CREDIT US CLOs Down Significantly .................................................................................................................................................... 71
CREDIT US CLOs Issuances Falling Off ................................................................................................................................................ 72
CREDIT Gross Leverage for Typical IG/HY in Debt-to-EBITDA ............................................................................................................ 72
CREDIT Leveraged Loans and HY Corporate Bond Yields Point to Lower Equities ............................................................................. 73
YIELD ............................................................................................................................................................................................................. 74
NEW-YIELD Flattening Yield Curve ............................................................................................................................................................ 74
NEW-YIELD Yield Curve and Consensus 2016 GDP Growth Expectations v SPX .................................................................................. 74
NEW-YIELD Financial Stocks versus UST 2s-30s ...................................................................................................................................... 75
NEW-YIELD US Treasuries are Now Approaching 2 Standard Deviations Expensive .............................................................................. 75
NEW-YIELD US Bonds Approach $40T Up 60% Since 2000 .................................................................................................................. 75
NEW-YIELD Bond Duration and Maturity Increase To Capture Yield ........................................................................................................ 76
NEW-YIELD 10Y UST Treasury Yields versus US Nominal Growth Since 1960 ....................................................................................... 76
NEW-YIELD US Yield Curve Spread v World Industrial Production ........................................................................................................... 77
NEW-YIELD US Yield Curve Spread v World Export Volume .................................................................................................................... 78
NEW-YIELD US Yield Curve Spread v S&P Revenues .............................................................................................................................. 78
YIELD historic correlation between stock and bond prices is now very distorted .................................................................................. 79
YIELD US Corporate Bond Market - $1T in HY & $4.5T in IG ............................................................................................................... 79
YIELD Negative Interest Rates on 40% Of Outstanding European Government Bonds ....................................................................... 80
YIELD Global Bond Yields ...................................................................................................................................................................... 80
YIELD Less Than ZIRP Global Comparisons ......................................................................................................................................... 81
YIELD Flattening UST Yield Curve Moving Towards Inversion .......................................................................................................... 81
COMMODITIES ............................................................................................................................................................................................. 82
COMMODITIES YTD Commodity Result Comparisons ......................................................................................................................... 82
COMMODITIES YTD Commodity Result Comparisons ......................................................................................................................... 82
COMMODITIES WTI- Log Scale of Price and Percentage Change....................................................................................................... 83
COMMODITIES Real Oil and Average Oil Price Since 1861 ................................................................................................................. 83
COMMODITIES Copper Falls To Fresh 6 Years Low After $GS Says Metal "Poised To Move Even Lower" ...................................... 84
INFLATION .................................................................................................................................................................................................... 85
INFLATION Probability of March Fed Rate Hike = Zero = Weak Inflation ............................................................................................. 85
INFLATION March Rate Hike Odds Falling Rapidly ............................................................................................................................... 86
INFLATION Expected Inflation- One Year and Three Years Ahead ...................................................................................................... 86
PRECIOUS METALS ..................................................................................................................................................................................... 87
PRECIOUS METALS HARD ASSETS - Smart Money" Has Never Been More Bearish On Silver ....................................................... 87
PRECIOUS METALS HARD ASSETS - Classic Ending Diagonal in Gold ............................................................................................ 88
PRECIOUS METALS HARD ASSETS - Gold;Silver Ratio Long Term ............................................................................................... 90
PRECIOUS METALS HARD ASSETS - Gold;Silver Ratio Intermediate Term Term-1 ...................................................................... 90
PRECIOUS METALS HARD ASSETS - Gold;Silver Ratio Intermediate Term Term-2 ...................................................................... 91
PRECIOUS METALS Gold Breaking Out Deutsche Bank Driven? ..................................................................................................... 91
PRECIOUS METALS Gold Breaks Out At Exactly Year Beginning? ..................................................................................................... 91
JUNE 2016 Edition


PRECIOUS METALS Barrels of Oil per Ounce of Gold ......................................................................................................................... 92

RISK: Risk-On versus Risk-Off ................................................................................................................................................................................ 93
CHARTS OF NOTE ........................................................................................................................................................................................... 94
NEW-RISK S&P 500 Death Cross Similar to 2001 and 2008 .................................................................................................................... 94
NEW-RISK S&P 500 versus UST 2-30s Spread and Consensus 2016 GDP Growth Forecast ................................................................ 94
NEW-RISK Margin Debt Rolling Over - Fast .............................................................................................................................................. 95
NEW-RISK Long Time Since the Last 1% Down Day ................................................................................................................................ 95
NEW-RISK Dumb Money Back At Extremes .............................................................................................................................................. 96
NEW-RISK Is the Fed Outright Buying Stocks/Futures to Prop Up the Markets? ..................................................................................... 96
NEW-RISK Selling Continues With $2.6 Billion In Equity Outflows, Stocks Sold In 10 Of Past 12 Weeks............................................... 98
NEW-RISK Rolling 5 Week Flows From Equity Funds ............................................................................................................................ 100
NEW-RISK 4 Week Net Buys - 2008-Present Plunging! ....................................................................................................................... 101
RISK The Bond Market is Screaming Economic Slowdown Equity Markets Hear Fed Stimulus! ................................................... 102
RISK Repeating August 2015 Yuan Devaluation Pattern ........................................................................................................................ 102
RISK Repeating One Year E-Mini Pattern ................................................................................................................................................ 103
RISK Lack of Volatility is a Very Worrying Sign........................................................................................................................................ 103
RISK Global Equity Indices Show Clear Trend Channel with Pre-US Election Turbulence .................................................................... 104
RISK A 5-15% Draw-down should be expected by or within Q3 2016 .................................................................................................... 104
RISK Investors Clearly Exiting US Equity Markets ................................................................................................................................... 105
RISK Investors Clearly Exiting US Equity Markets ................................................................................................................................... 105
RISK Minimizing Volatility The Five Most Popular Exchange Traded Funds This Year ....................................................................... 106
RISK Bracing for Volatility Investors Are Betting Volatility Will Rise ..................................................................................................... 106
RISK Determined Shorts Short Interest Remains Near Bull Market Highs ........................................................................................... 106
RISK Investors Flee Mutual Funds Money Has Left Mutual Funds the Last 8 Straight Weeks........................................................... 107
RISK Corporate Buybacks is the Lone Marlet Buyer ............................................................................................................................... 107
RISK 2016 Y-o-Y Flows By BoAML Client Type ...................................................................................................................................... 108
RISK BoAML Client Type Net Buys 4WMA v S&P 500 2008-Present ................................................................................................ 108
RISK BoAML Client Type Cumulative Flows Since January 2008-Present ........................................................................................... 109
RISK USDJPY Correlation to S&P 500 ..................................................................................................................................................... 109
RISK Breadth Has Turned Counter Rally Stalling .................................................................................................................................. 110
RISK Wall Street's recent rise is stretched relative to the real U.S. economy .......................................................................................... 111
RISK Diverging gap between stocks and corporate-profit expectation ..................................................................................................... 111
RISK historic correlation between stock and bond prices is now very distorted ....................................................................................... 111
RISK Nasdaq risk is dramatically higher than S&P risk ........................................................................................................................... 112
RISK Draghis ECB Announcement Triggers Bull Reversal To Evercore ................................................................................................ 113
RISK High Probability US Recession in 2016 .......................................................................................................................................... 114
RISK Price-to-Sales Presently Second Highest to the Dotcom Bubble Collapse .................................................................................... 114
RISK Industrial Production Is Rolling Over ............................................................................................................................................... 115
RISK NYSE Margin Debt at Record Levels .............................................................................................................................................. 116
RISK Margin Debt to GDP Higher then 2000 and 2007 ........................................................................................................................... 117
RISK Margin Debt to GDP and 3-Year Stock Returns ............................................................................................................................. 118
RISK Investors Sell Dividend Funds, MLPs, REITs and High Yield......................................................................................................... 120
RISK Bull to Bear Ratio Unprecedented Optimism ............................................................................................................................... 121
RISK Turmoil in High Yield Bonds ............................................................................................................................................................ 122
RISK New Global Risk US Growth European Financial Conditions ................................................................................................... 123
RISK Leveraged Loans and HY Corporate Bond Yields Warn of Possible SPX of 1100 ........................................................................ 123
RISK Global Financial Risk ....................................................................................................................................................................... 124
RISK US Financials Stocks versus Credit ............................................................................................................................................. 124
RISK Something Is Seriously Wrong Somewhere in Deutsche Bank 5Y Sub CDS ............................................................................. 125
RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Lehman Comparison ................................................................ 125
RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Ending Diagonal Goes Lower .................................................. 126
RISK Small Cap Stocks versus HY Bond Spread .................................................................................................................................... 126
RISK Net Cash Companies Scarce EBITDA Cash Flow ................................................................................................................... 127
RISK Falling Animal Spirits - Sinking CEO Confidence ........................................................................................................................... 127
RISK Bull-Bear Ratio Collapses ............................................................................................................................................................... 128
RISK SPX Percent off 2009 High ............................................................................................................................................................. 129
RISK SPX Price-Earnings-PE Ratio ......................................................................................................................................................... 129
RISK Stock market more Over-valued than prior to Previous Crashes! .................................................................................................. 130
RISK Coppock Signaling Problems Ahead ............................................................................................................................................... 130
RISK Junk Bond Movements Have Been Dependable Warning Indicators Since Dotcom Bubble Burst ............................................... 131
RISK Corporate Profits and Wages Diverge ............................................................................................................................................ 131
RISK Russell 1000 Equal Weight: Cap-Weight Ratio ........................................................................................................................... 132
RISK Long Term Monthly Reversal Signal ............................................................................................................................................... 132
RISK Markets Historically Fail after Three months of Falling Margin Debt We Have 2 Months ........................................................... 133
RISK Margin Debt Channel is Pretty Clear High Odds of Troubles Ahead........................................................................................... 133
RISK Goldman Joins the Chorus Warning on Bond Market Liquidity ...................................................................................................... 134
RISK So Goes Retail So Goes the US Economy .................................................................................................................................. 134
TECHNO-FUNDAMENTALS ................................................................................................................................................................................. 136
CHARTS OF NOTE ......................................................................................................................................................................................... 136
NEW-CHARTS The Long Term TBI & PPO Oscillators In Concert Identify Significant Market Turns .................................................... 136
NEW-CHARTS Divergence Doesnt Confirm Breakout nor New Market Highs ...................................................................................... 137
NEW-CHARTS As Goes January Doesnt Bode Well for 2016 .......................................................................................................... 138
NEW-CHARTS Major Equity Drawdowns Becoming More Frequent and Global Events ....................................................................... 138
NEW-CHARTS Markets Historically Dont React Well To Rate Hikes ..................................................................................................... 139
NEW-CHARTS S&P 500 Index Is Typically Range-Bound Prior to Election Day .................................................................................... 139
JUNE 2016 Edition


NEW-CHARTS NYSE Margin Debt Showing Clear Pattern Seen Prior to Most Major Market Drawdowns ........................................... 140
NEW-CHARTS Long Term Equity Earnings versus 10Y Bond Yields A Strong Indicator of Expected Future Equity Performance ...... 141
NEW-CHARTS US 10Y CDS Prices Rising In Concert with US Primary Debacle ............................................................................... 142
CHARTS Market Phases Methodology of Richard Wyckoff .................................................................................................................. 143
CHARTS Does Oil Suggest 2016 Markets Will Follow 2015? ................................................................................................................. 144
CHARTS Defensive Stocks Get Pricey PE In Safer Industries Climbing.............................................................................................. 145
CHARTS Sell Side Consensus Indicators Suggest Wall Street Doesnt Believe in this Rally ................................................................. 145
CHARTS Earnings Are The TellTail Between a Bullish Consolidaation & a Bear Market Top .............................................................. 146
CHARTS Warning Signal Setup of the 50DMA Cross of 200DMA .......................................................................................................... 146
CHARTS A Major Rounded Top Pattern .................................................................................................................................................. 147
CHARTS Nov 1994-March 2000 Internet Bubble Comparison to March 2009-Current .......................................................................... 147
CHARTS Is This Rally About Keeping Averages in the Green as We Enter IRA/RSP Tax Deposit Time? ............................................ 148
CHARTS An Established Downward Trend Channel Since High in June 2015 ...................................................................................... 148
CHARTS Divergence in DJ Industrial Average and Transportation Average .......................................................................................... 149
CHARTS SPX has returned into the area of congestion that contained it prior to the January sell-off ................................................... 150
CHARTS Analogy: DJIA, 1961 1962 ..................................................................................................................................................... 151
CHARTS Current Counter Rally Comparison to 2000 Tech Bubble Collapse ......................................................................................... 151
CHARTS Current Counter Rally Comparison to 2007 Financial Crisis .................................................................................................... 152
CHARTS Cumulative Flows by BoAML Client - January 2008-Present .................................................................................................. 152
CHARTS 2016 YTD Flows by BoAML Client Type .................................................................................................................................. 153
CHARTS Upside Break of 2010 => 2085, Downside Break => 1963-1931 and 1902-1891 ................................................................... 154
CHARTS 4 Week MA of Total Net Buys by BoAML Client - January 2008-Present .............................................................................. 155
CHARTS BoAML Corporate Clients 4 Wk Average Buybacks Y-o-Y % Change .................................................................................... 156
CHARTS S&P 500 versus Forward EPS .................................................................................................................................................. 157
CHARTS Clear Signs Of A Market Trying To Roll-Over Against Corporate Buybacks Mysterious Buying ............................................ 157
CHARTS Classic Ending Diagonal In Gold .............................................................................................................................................. 159
CHARTS Value Line Geometric Composite Short Term A 38.2% Retracement ............................................................................... 159
CHARTS Value Line Geometric Composite Long Term A 38.2% Retracement with 23.6% Bounce ............................................... 160
CHARTS MSCI World Index 7.5 Year Cycle ......................................................................................................................................... 161
CHARTS World Equity Markets Have Now Lost Over $16.8 Trillion ....................................................................................................... 161
CHARTS Global Bear Markets ................................................................................................................................................................. 162
CHARTS Possible Head & Shoulders in Play with a Target of 1600 ....................................................................................................... 163
CHARTS Possible Small Degree Head & Shoulders in Play with a Target of 1725 ................................................................................ 163
CHARTS Possible Corrective A-B-C Near Completion .......................................................................................................................... 164
CHARTS Cumulative Flows By Client Type January 2008-Present ..................................................................................................... 164
CHARTS Total World Index Fund versus Long Term Fund ..................................................................................................................... 165
CHARTS Global DOW Drops To Next Support Level .............................................................................................................................. 165
CHARTS VIM remains negative across the board since mid-Nov. .......................................................................................................... 166
CHARTS A falling VIGOR shows net distribution ..................................................................................................................................... 167
CHARTS The RRG reflects a defensive or risk off market....................................................................................................................... 168
CHARTS The average stock in the developed world is off 23% from its 1-year high .............................................................................. 169
CHARTS The average stock in the developed world is down 8% over the past year ............................................................................. 169
CHARTS 52% of all developed world stocks are in a bear market over the past 200-days .................................................................... 170
CHARTS The average energy company is down an astounding 40% of its 1-year high. ........................................................................ 170
CHARTS The average stock in DM Americas is down 14%in the last year ............................................................................................ 171
CHARTS International and Emerging Market Divergence ....................................................................................................................... 171
CHARTS US versus World Stocks ........................................................................................................................................................... 172
CHARTS S&P 500 With and Without FOMC Meeting Dates ................................................................................................................... 173
CHARTS The Median Stock In The World Is Flat YTD ............................................................................................................................ 174
CHARTS 70% of EM Stocks are Still Down More Than 20% from 200-Day Highs ................................................................................. 174
CHARTS Year End Overhead Resistance to Santa Claus Rally ............................................................................................................. 175
CHARTS Professionals Are Leaving the Party Early ............................................................................................................................... 175
CHARTS NYSE Advance-Decline Line versus S&P ................................................................................................................................ 176
CHARTS A month-long bearish divergence for the US 15 most active advance-decline line ................................................................. 177
CHARTS A-D line preceded or coincided with big breakdowns for the S&P 500 in 2000 and 2007 ....................................................... 177
CHARTS A major bearish divergence for global A-D line in US Dollars .................................................................................................. 178
CHARTS Be Alert to Oversold Pull Back Before Seasonal YE Strength ................................................................................................. 179
CHARTS Leading Indicators Support View The Current Weakness May Turn into a Buying Opportunity ............................................. 180
CHARTS Problem in US Retail Developing ............................................................................................................................................. 181
CHARTS Gold Reacted to Chinese Devaluation ..................................................................................................................................... 182
CHARTS The DOW Theory & DOW Transports ...................................................................................................................................... 183
CHARTS October- A Month for the History Books ................................................................................................................................... 184
CHARTS The Smart Money Has Never Been This Long the Long Bond ................................................................................................ 185
CHARTS Real S&P 500 Index Cycles with Recessions .......................................................................................................................... 186
CHARTS Quarterly Overbought Cycles ................................................................................................................................................... 186
CHARTS Monetary Velocity Declines as Excess Leverage Weights on Consumption ........................................................................... 186
CHARTS The Real Value of Cash ............................................................................................................................................................ 187
CHARTS Consumer Sentiment versus S&P 500 ..................................................................................................................................... 187
OUTLOOK - ANALYTICAL ANALYSIS .......................................................................................................................................... 189

NEW-BANKING & BONDS YIELDS ARE SUGGESTING SOMETHING IS BREWING ................................................................................... 189
CHARTS OF NOTE ......................................................................................................................................................................................... 191
NEW-BANKING & BONDS Flattening Yield Curve ................................................................................................................................... 191
NEW-BANKING & BONDS Yield Curve and Consensus 2016 GDP Growth Expectations v SPX ......................................................... 191
NEW-BANKING & BONDS Financial Stocks versus UST 2s-30s ............................................................................................................ 192
NEW-BANKING & BONDS US Treasuries are Now Approaching 2 Standard Deviations Expensive ..................................................... 192
JUNE 2016 Edition


NEW-BANKING & BONDS US Bonds Approach $40T Up 60% Since 2000 ........................................................................................ 192
NEW-BANKING & BONDS Bond Duration and Maturity Increase To Capture Yield ............................................................................... 194
NEW-BANKING & BONDS 10Y UST Treasury Yields versus US Nominal Growth Since 1960 .............................................................. 194
NEW-BANKING & BONDS A Flattening Yield Curve ................................................................................................................................ 195
NEW-BANKING & BONDS US Yield Curve Spread v World Industrial Production .................................................................................. 195
NEW-BANKING & BONDS US Yield Curve Spread v World Export Volume ........................................................................................... 195
NEW-BANKING & BONDS US Yield Curve Spread v S&P Revenues ..................................................................................................... 196
RESEARCH OF NOTE .................................................................................................................................................................................... 197
NEW-BANKING & BONDS Pricing And Valuation Of Bonds No Longer Reflects Fundamentals - Why This Matters ............................ 197
NEW-BANKING & BONDS Goldman Warns Of "Upward Shock" To Rates, Hints At Trillions In Losses ................................................ 199
NEW-BANKING & BONDS Signals from the U.S. Yield Curve: World Cant Handle Fed Rate Hikes ..................................................... 202
EARNINGS CONTINUING EARNINGS DETERIORATION .............................................................................................................................. 206
NEW-STUDY: Q2 EARNINGS Settting Expectations ........................................................................................................................................ 206
CHARTS OF NOTE ......................................................................................................................................................................................... 206
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NEW-Q2 EARNINGS Q2 To Be 5 Consecutive Quarter of Y-o-Y Earnings Decline ............................................................................. 206
NEW-Q2 EARNINGS Cutting Labor Costs to Absorb Inflation Pressures Due to Lack of Revenue Growth .......................................... 207
NEW-Q2 EARNINGS AAPL Largest Contributor to S&P Q2 Tech Sector Decline ................................................................................. 208
NEW-Q2 EARNINGS Q2 Earnings Season By the Numbers ............................................................................................................... 209
NEW-Q2 EARNINGS Sixth Consecutive Quarter of Y-o-Y Revenue Declines ....................................................................................... 210
NEW-Q2 EARNINGS Earnings Estimates By Sector and S&P 500 Overall ............................................................................................ 211
NEW-Q2 EARNINGS Revenue Estimates By Sector and S&P 500 Overall ........................................................................................... 211
NEW-Q2 EARNINGS Trailing 12 Month Net Margin Deterioration .......................................................................................................... 212
NEW-Q2 EARNINGS 12 Mo Forward PE Ratio ....................................................................................................................................... 212
RESEARCH OF NOTE .................................................................................................................................................................................... 213
NEW-Q2 EARNINGS Morgan Stanley Asked Analysts How Companies Were "Exceeding Estimates", The Answer Is Disturbing ..... 213
NEW-Q2 EARNINGS Heres how investors are duped each earnings season ....................................................................................... 217
NEW-Q2 EARNINGS XXX........................................................................................................................................................................ 222
STUDY: Q1 EARNINGS ..................................................................................................................................................................................... 223
CHARTS OF NOTE ......................................................................................................................................................................................... 223
NEW-Q1 EARNINGS Q1 Earnings Growth Final .................................................................................................................................. 223
NEW-Q1 EARNINGS Q1 Revenue Growth Final .................................................................................................................................. 224
Q1 EARNINGS Q1 Earnings Growth........................................................................................................................................................ 225
Q1 EARNINGS Q1 Revenue Growth ....................................................................................................................................................... 225
Q1 EARNINGS Q2 Earnings & Revenue Growth Projections ................................................................................................................. 226
Q1 EARNINGS Ongoing deterioration in Sales and Profits ..................................................................................................................... 228
Q1 EARNINGS LTM Quarterly S&P 500 GAAP and Non-GAAP EPS .................................................................................................... 229
Q1 EARNINGS S&P 500 Annual GAAP and Non-GAAP EPS ................................................................................................................. 230
Q1 EARNINGS S&P Forward Earnings Expectations versus S&P 500 .................................................................................................. 231
Q1 EARNINGS Falling Profits Now in Contraction Territory Lowest Levels Since 2008 ...................................................................... 232
Q1 EARNINGS Top Line Sales and Revenue Growth is Clearly Falling ................................................................................................. 232
Q1 EARNINGS Pro-Forma and GAAP Earnings Diverge Significantly ................................................................................................... 232
Q1 EARNINGS Profits Fall the Most Since 2008 ..................................................................................................................................... 233
Q1 EARNINGS Corporate Profits as a Percentage of GDP .................................................................................................................... 234
Q1 EARNINGS Peaks in Real Profit Margins versus S&P 500 ............................................................................................................... 234
Q1 EARNINGS Biggest Quarterly Drop in Profits Since 2009 ................................................................................................................. 234
Q1 EARNINGS Largest S&P Q1 EPS Drop in first 2 Mo of a Quarter Since Q1 2009............................................................................ 235
Q1 EARNINGS S&P 500 Earnings Growth Q1 2016 Down -8.3% .......................................................................................................... 236
Q1 EARNINGS S&P 500 EPS: GAAP vs. Non-GAAP ............................................................................................................................. 236
Q1 EARNINGS S&P 500 EPS: GAAP vs. Non-GAAP for FY 2015 vs. 2014 .......................................................................................... 237
Q1 EARNINGS Non-GAAP EPS Writeoffs ............................................................................................................................................... 238
Q1 EARNINGS 2015 Y-o-Y % Change in EPS GAAP vs Non-GAAP ..................................................................................................... 238
Q1 EARNINGS S&P Trailing 4-Quarter GAAP vs. Non-GAAP Net Margins ........................................................................................... 239
RESEARCH OF NOTE .................................................................................................................................................................................... 239
NEW-Q1 EARNINGS S&P 500 Q1 earnings declined for the 4th straight quarter, and more sharply than in any quarter since 2009 .. 239
Q1 EARNINGS The True State Of The US Consumer: All Six Retail Companies Reporting April Comp Sales Missed ........................ 241
Q1 EARNINGS This Tech Bubble Is Bursting .......................................................................................................................................... 242
Q1 EARNINGS Amazon Smashes Expectations On Surge In Cloud Profits........................................................................................... 244
Q1 EARNINGS Carl Icahn Dumps Entire Stake Of AAPL ....................................................................................................................... 247
Q1 EARNINGS JPM Summarizes Earnings Season So Far: At -8%, The S&P500 Q1 EPS Growth Is The Worst Since 09............. 249
Q1 EARNINGS S&P 500 EPS Divergence .............................................................................................................................................. 252
Q1 EARNINGS Apple Tumbles After Missing Sales And Earnings, Guides Below Lowest Estimate ..................................................... 253
Q1 EARNINGS Behind U.S. GDP Data - Weak Profits ........................................................................................................................... 259
Q1 EARNINGS When the "Mother's Milk" of Earnings Runs Dry ............................................................................................................ 260
Q1 EARNINGS Why Companies Don't Want You To Look At GAAP Earnings ...................................................................................... 262
Q1 EARNINGS Largest Drop in S&P 500 EPS Estimate Over First Two Months of a Quarter since Q1 2009 ...................................... 267
Q1 EARNINGS Non-GAAP Earnings Are About To Plunge The Most Since 2009; As For GAAP Don' Even Ask ................................ 268
SUPPORT & RESISTANCE .................................................................................................................................................................................. 274
Gann Analysis .................................................................................................................................................................................................. 274
Boundary Conditions ....................................................................................................................................................................................... 274
Channels & Regressions ................................................................................................................................................................................. 276
Fibonacci - Controlling Time Extensions ......................................................................................................................................................... 279
Fibonacci - Controlling Price Extensions ......................................................................................................................................................... 284
Elliott Wave ...................................................................................................................................................................................................... 284
The Bottom Line............................................................................................................................................................................................... 287
JUNE 2016 Edition


BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT ........................................................................................................................... 289

SENTIMENT & CONFIDENCE Shifting Trend ................................................................................................................................................... 289
NEW-SENTIMENT - Consumer, Investor & Trader ............................................................................................................................................... 290
NEW-Consumer Confidence - Conference Board .......................................................................................................................................... 290
NEW-Consumer Sentiment - Michigan ........................................................................................................................................................... 293
NEW-Consumer Comfort - Bloomberg ............................................................................................................................................................ 295
NEW-American Association of Independent Investors ................................................................................................................................... 297
NEW-Investors Intelligence ............................................................................................................................................................................. 297
NEW-National Association of Active Investment Managers (NAAIM) ............................................................................................................ 298
NEW-Small Business Optimism ...................................................................................................................................................................... 299
NEW-Percentage Stocks above 50 & 200 DMA ............................................................................................................................................. 301
NEW-Margin Levels ......................................................................................................................................................................................... 302
NEW-Margin Debt Levels versus S&P 500 ..................................................................................................................................................... 304
NEW-NYSE Investor Credit versus Market ..................................................................................................................................................... 305
Mutual Fund Cash Levels v S&P 500 .............................................................................................................................................................. 305
NEW-OSCILLATORS & BREADTH: Indicators of Importance ............................................................................................................................ 308
NEW-NYSE Overbought / Oversold ................................................................................................................................................................ 308
NEW-OEX Open Interest (Puts/Calls) ............................................................................................................................................................. 309
NEW-TRIN ....................................................................................................................................................................................................... 310
NEW-McClellan Oscillator ............................................................................................................................................................................... 311
CHARTS OF NOTE ............................................................................................................................................................................................... 312
NEW-CHARTS Small Business Sentiment Trending Down Strongly .......................................................................................................... 312
CHARTS Small Business Sentiment Trending Down Strongly .................................................................................................................... 312
CHARTS Small Business Sentiment Margin Squeeze ............................................................................................................................. 313
CHARTS Bloomberg Consumer Comfort versus Nasdaq ........................................................................................................................... 313
CHARTS Goldmans Short Term Sentiment Indicator Shows Low Suggests Near Term Counter Rally Likely ...................................... 315
CHARTS Global Consumer Confidence Begins Reversal from Trend Resistance ..................................................................................... 316
CHARTS US Economic Index Steadily Eroding ........................................................................................................................................... 317
CHARTS UMich Consumer Confidence with Biggest Miss on Record ........................................................................................................ 317
CHARTS Economic Surprise Index lower highs, lower lows and a reluctant bounce .............................................................................. 317
CHARTS Cumulative Flows by Client Type - YTD ....................................................................................................................................... 319
CHARTS Historical Risk versus Returns ...................................................................................................................................................... 319
CHARTS Cumulative Flows by Client Type January 2008-Present ......................................................................................................... 320
CHARTS Q Ratio Since 1900 ....................................................................................................................................................................... 320
CHARTS Nominal & Real Household Spending Expectations .................................................................................................................... 321
CHARTS Household Spending Expectations by Income Bucket ................................................................................................................ 321
CHARTS A Very Neutral (Highly Unusual) Bull Market ............................................................................................................................... 322
CHARTS Historical Swings in Sentiment ..................................................................................................................................................... 322
CHARTS Investors Intelligence Bulls & Bears ............................................................................................................................................. 323
CHARTS A/D Line Diverging from Price, Suggesting Weakening Momentum ........................................................................................... 324
CHARTS Smart Money OEX Open Interest Put/Call Ratio Now Off the Charts! .................................................................................... 324
CHARTS UMich Consumer Sentiment Tumbles Most In 16 Months ........................................................................................................... 325
CHARTS Consumer Comfort Plunges Most In 10 Months .......................................................................................................................... 326
CHARTS Only 16% Think Future Employment Opportunities Will Be Better .............................................................................................. 327
CHARTS Inequality Eventually Leads to Economic Adjustments Often Precipitously ............................................................................. 327
CHARTS - NFIB Small Business Sentiment ................................................................................................................................................... 328
CHARTS - Orange Book .................................................................................................................................................................................. 328
CHARTS Asset Allocation Global Equities ................................................................................................................................................ 329
CHARTS Asset Allocation Global Bonds .................................................................................................................................................. 329
CHARTS Active versus Passive Funds Allocation ....................................................................................................................................... 330
CHARTS Investors Intelligence Survey of % Bears ..................................................................................................................................... 330
CHARTS Sentiment at Post 2008 Crisis Highs ............................................................................................................................................ 331
CHARTS CNBC Viewership Steadily Falling ............................................................................................................................................... 332
CHARTS Investor Allocation Trends for Stocks, Bonds and Cash .............................................................................................................. 333
CHARTS Uptick in Feds Financial Stress Index Composite ....................................................................................................................... 334
CHARTS Fear Barometer Diverges with VIX, CDS IG Index ...................................................................................................................... 335
CHARTS Extreme Complacency Seen Near End of Cycles ........................................................................................................................ 335
CHARTS Complacency Seen In PE/VIX ....................................................................................................................................................... 336
CHARTS Post Crisis Sentiment Profile Shows a Clear Ending Pattern ...................................................................................................... 336
CHARTS Smart Money Flows ...................................................................................................................................................................... 337
CHARTS Fed Assets versus Bullish Sentiment ........................................................................................................................................... 337
CHARTS Macro Support Has Technically Broken Down ............................................................................................................................. 338
CHARTS US Surprise Index Setting Up for Downturn ................................................................................................................................. 338
CHARTS The Public No Longer Trusts the Market Feel it is Manipulated and Ineffectively Regulated ............................................... 339
RESEARCH OF NOTE .......................................................................................................................................................................................... 340
NEW-SENTIMENT: NYSE Margin Debt Increased Again in April .................................................................................................................. 340
NEW-SENTIMENT: Economic Confidence Tumbles To 2 Year Lows As Democrats Lose Faith.................................................................. 344
NEW-SENTIMENT: NFIB Slams Fed, Obama As Small Business Optimism Crashes To 2 Year Lows ....................................................... 345
INTERMEDIATE TERM RISK ANALYSIS ................................................................................................................................. 348

UPDATED-AGGREGATED GLOBAL FINANCIAL RISK INDEX .......................................................................................................................... 348
NEW-BANKING RISK - LIBOR-OIS SPREAD ................................................................................................................................................ 349
NEW-BANKING RISK - TED SPREAD ........................................................................................................................................................... 349
NEW-CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS ....................................................................................................................... 350
NEW-CREDIT RISK - EU CREDIT DEFAULT SWAPS .................................................................................................................................. 350
JUNE 2016 Edition


NEW-CONSUMER RISK - HOUSING - RATE OF CHANGE ......................................................................................................................... 351

NEW-ECONOMIC RISK - ECRI LEADING INDEX ......................................................................................................................................... 352
NEW-INFLATION RISK - MONEY SUPPLY GROWTH - M3 ......................................................................................................................... 354
NEW-INFLATION RISK - MONEY VELOCITY ............................................................................................................................................... 354
MONETARY RISK - BANK LIABILITIES ......................................................................................................................................................... 355
NEW-COST OF MONEY RISK - INTEREST RATES .................................................................................................................................... 356
AGGREGATED RISK LEVEL ................................................................................................................................................................................ 357
NEW-STUDY - It's 2000 All Over Again! ............................................................................................................................................................... 358
STUDY - The Killer Wave Confirms a Big Bear Market Lies Ahead ........................................................................................................... 362
CHARTS OF NOTE ............................................................................................................................................................................................... 368
NEW-RISK US 10Y CDS Prices Rising In Concert with US Primary Debacle ...................................................................................... 368
NEW-RISK S&P 500 Death Cross Similar to 2001 and 2008 .................................................................................................................. 368
NEW-RISK S&P 500 versus UST 2-30s Spread and Consensus 2016 GDP Growth Forecast .............................................................. 369
NEW-RISK Margin Debt Rolling Over - Fast ............................................................................................................................................ 369
NEW-RISK Long Time since the Last 1% Down Day .............................................................................................................................. 370
NEW-RISK Dumb Money Back At Extremes ............................................................................................................................................ 370
NEW-RISK The Bond Market is Screaming Economic Slowdown Equity Markets Hear Fed Stimulus! ......................................... 372
NEW-RISK Repeating August 2015 Yuan Devaluation Pattern ............................................................................................................... 372
NEW-RISK Repeating One Year E-Mini Pattern ...................................................................................................................................... 373
NEW-RISK Lack of Volatility is a Very Worrying Sign .............................................................................................................................. 373
NEW-RISK Global Equity Indices Show Clear Trend Channel with Pre-US Election Turbulence .......................................................... 374
NEW-RISK A 5-15% Draw-down should be expected by or within Q3 2016 ........................................................................................... 374
NEW-RISK Investors Clearly Exiting US Equity Markets ......................................................................................................................... 375
NEW-RISK Investors Clearly Exiting US Equity Markets ......................................................................................................................... 375
NEW-RISK Minimizing Volatility The Five Most Popular Exchange Traded Funds This Year ............................................................. 376
NEW-RISK Bracing for Volatility Investors Are Betting Volatility Will Rise ........................................................................................... 376
NEW-RISK Determined Shorts Short Interest Remains Near Bull Market Highs ................................................................................. 376
NEW-RISK Investors Flee Mutual Funds Money Has Left Mutual Funds the Last 8 Straight Weeks ................................................. 377
NEW-RISK Corporate Buybacks is the Lone Marlet Buyer ...................................................................................................................... 377
NEW-RISK 2016 Y-o-Y Flows By BoAML Client Type ............................................................................................................................. 378
NEW-RISK BoAML Client Type Net Buys 4WMA v S&P 500 2008-Present ...................................................................................... 378
NEW-RISK BoAML Client Type Cumulative Flows Since January 2008-Present ................................................................................. 379
NEW-RISK USDJPY Correlation to S&P 500 ............................................................................................................................................ 379
NEW-RISK Breadth Has Turned Counter Rally Stalling ........................................................................................................................ 380
NEW-RISK Wall Street's recent rise is stretched relative to the real U.S. economy ................................................................................ 381
NEW-RISK Diverging gap between stocks and corporate-profit expectation ........................................................................................... 381
NEW-RISK historic correlation between stock and bond prices is now very distorted ............................................................................. 382
NEW-RISK Nasdaq risk is dramatically higher than S&P risk .................................................................................................................. 382
NEW-RISK Draghis ECB Announcement Triggers Bull Reversal To Evercore ...................................................................................... 383
NEW-RISK High Probability US Recession in 2016 ................................................................................................................................. 384
NEW-RISK Price-to-Sales Presently Second Highest to the Dotcom Bubble Collapse .......................................................................... 384
NEW-RISK Industrial Production Is Rolling Over ..................................................................................................................................... 385
NEW-RISK NYSE Margin Debt at Record Levels .................................................................................................................................... 386
NEW-RISK Margin Debt to GDP Higher then 2000 and 2007 ................................................................................................................. 387
NEW-RISK Margin Debt to GDP and 3-Year Stock Returns ................................................................................................................... 388
NEW-RISK Margin Debt to GDP and 3-Year Stock Returns ................................................................................................................... 389
NEW-RISK Investors Sell Dividend Funds, MLPs, REITs and High Yield ............................................................................................... 390
NEW-RISK Bull to Bear Ratio Unprecedented Optimism ..................................................................................................................... 391
NEW-RISK Turmoil in High Yield Bonds .................................................................................................................................................. 392
NEW-RISK New Global Risk US Growth European Financial Conditions .......................................................................................... 393
NEW-RISK Leveraged Loans and HY Corporate Bond Yields Warn of Possible SPX of 1100 .............................................................. 393
NEW-RISK Global Financial Risk ............................................................................................................................................................. 394
NEW-RISK US Financials Stocks versus Credit ................................................................................................................................... 394
NEW-RISK Something Is Seriously Wrong Somewhere in Deutsche Bank 5Y Sub CDS ................................................................... 395
NEW-RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Lehman Comparison ...................................................... 395
NEW-RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Ending Diagonal Goes Lower ......................................... 396
NEW-RISK Small Cap Stocks versus HY Bond Spread .......................................................................................................................... 396
NEW-RISK Net Cash Companies Scarce EBITDA Cash Flow .......................................................................................................... 397
NEW-RISK Falling Animal Spirits - Sinking CEO Confidence .................................................................................................................. 397
NEW-RISK Bull-Bear Ratio Collapses ...................................................................................................................................................... 398
NEW-RISK SPX Percent off 2009 High .................................................................................................................................................... 399
NEW-RISK SPX Price-Earnings-PE Ratio ............................................................................................................................................... 399
NEW-RISK Stock market more Over-valued than prior to Previous Crashes!......................................................................................... 400
NEW-RISK Coppock Signaling Problems Ahead ..................................................................................................................................... 400
NEW-RISK Junk Bond Movements Have Been Dependable Warning Indicators Since Dotcom Bubble Burst ..................................... 401
NEW-RISK Corporate Profits and Wages Diverge ................................................................................................................................... 401
NEW-RISK Russell 1000 Equal Weight: Cap-Weight Ratio .................................................................................................................. 402
NEW-RISK Long Term Monthly Reversal Signal ..................................................................................................................................... 402
NEW-RISK Markets Historically Fail after Three months of Falling Margin Debt We Have 2 Months ................................................. 403
NEW-RISK Margin Debt Channel is Pretty Clear High Odds of Troubles Ahead ................................................................................. 403
NEW-RISK Goldman Joins the Chorus Warning on Bond Market Liquidity ............................................................................................ 404
NEW-RISK So Goes Retail So Goes the US Economy ........................................................................................................................ 404
NEW-RISK Consumer Discretionary Sending Signals ............................................................................................................................. 405
NEW-RISK Net EBITDA 2x Highest since 2006 % of companies with net cash Lowest since 2006 ...................................................... 407
NEW-RISK US Corporate Net Debt Has Exploded & Now Massively Exceeds EBITDA ........................................................................ 407
NEW-RISK CBOE Skew Index ................................................................................................................................................................. 408
JUNE 2016 Edition


NEW-RISK Gap Between Uncertainties Priced in the Debt & Equity Markets ........................................................................................ 408
NEW-RISK Beware of EPS manipulation ................................................................................................................................................. 409
NEW-RISK Total NYSE Short Interest & Monthly Change ...................................................................................................................... 410
NEW-RISK Contrasting Post October Market Drawdowns 1973s Slow Pain versus 1987 Crash ..................................................... 410
NEW-RISK Historical Post-Crash Price Actions 1950 to 2015 ............................................................................................................. 411
RISK Nasdaq risk is dramatically higher than S&P risk ........................................................................................................................... 411
RISK Draghis ECB Announcement Triggers Bull Reversal To Evercore ................................................................................................ 413
RISK High Probability US Recession in 2016 .......................................................................................................................................... 414
RISK Price-to-Sales Presently Second Highest to the Dotcom Bubble Collapse .................................................................................... 414
RISK Industrial Production Is Rolling Over ............................................................................................................................................... 415
RISK NYSE Margin Debt at Record Levels .............................................................................................................................................. 416
RISK Margin Debt to GDP Higher then 2000 and 2007 ........................................................................................................................... 417
RISK Investors Sell Dividend Funds, MLPs, REITs and High Yield......................................................................................................... 420
RISK Bull to Bear Ratio Unprecedented Optimism ............................................................................................................................... 421
RISK Turmoil in High Yield Bonds ............................................................................................................................................................ 422
RISK New Global Risk US Growth European Financial Conditions ................................................................................................... 423
RISK Leveraged Loans and HY Corporate Bond Yields Warn of Possible SPX of 1100 ........................................................................ 423
RISK Global Financial Risk ....................................................................................................................................................................... 424
RISK US Financials Stocks versus Credit ............................................................................................................................................. 424
RISK Something Is Seriously Wrong Somewhere in Deutsche Bank 5Y Sub CDS ............................................................................. 425
RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Lehman Comparison ................................................................ 425
RISK Something Is Seriously Wrong Somewhere in Deutsche Bank Ending Diagonal Goes Lower .................................................. 426
RISK Small Cap Stocks versus HY Bond Spread .................................................................................................................................... 426
RISK Net Cash Companies Scarce EBITDA Cash Flow ................................................................................................................... 427
RISK Falling Animal Spirits - Sinking CEO Confidence ........................................................................................................................... 427
RISK Bull-Bear Ratio Collapses ............................................................................................................................................................... 428
RISK SPX Percent off 2009 High ............................................................................................................................................................. 429
RISK SPX Price-Earnings-PE Ratio ......................................................................................................................................................... 429
RISK Stock market more Over-valued than prior to Previous Crashes! .................................................................................................. 430
RISK Coppock Signaling Problems Ahead ............................................................................................................................................... 430
RISK Junk Bond Movements Have Been Dependable Warning Indicators Since Dotcom Bubble Burst ............................................... 431
RISK Corporate Profits and Wages Diverge ............................................................................................................................................ 431
RISK Russell 1000 Equal Weight: Cap-Weight Ratio ........................................................................................................................... 432
RISK Long Term Monthly Reversal Signal ............................................................................................................................................... 432
RISK Markets Historically Fail after Three months of Falling Margin Debt We Have 2 Months ........................................................... 433
RISK Margin Debt Channel is Pretty Clear High Odds of Troubles Ahead........................................................................................... 433
RISK Goldman Joins the Chorus Warning on Bond Market Liquidity ...................................................................................................... 434
RISK So Goes Retail So Goes the US Economy .................................................................................................................................. 434
RISK Consumer Discretionary Sending Signals....................................................................................................................................... 435
RISK Net EBITDA 2x Highest since 2006 % of companies with net cash Lowest since 2006 ................................................................ 437
RISK US Corporate Net Debt Has Exploded & Now Massively Exceeds EBITDA .................................................................................. 437
RISK CBOE Skew Index ........................................................................................................................................................................... 438
RISK Gap Between Uncertainties Priced in the Debt & Equity Markets .................................................................................................. 438
RISK Beware of EPS manipulation........................................................................................................................................................... 439
RISK Total NYSE Short Interest & Monthly Change ................................................................................................................................ 440
RISK Contrasting Post October Market Drawdowns 1973s Slow Pain versus 1987 Crash............................................................... 440
RISK Historical Post-Crash Price Actions 1950 to 2015 ....................................................................................................................... 441
RISK Historical Post-Crash Price Pattern Has Taken an Average of 27 days to Double Bottom ........................................................... 441
RISK Credit Fleeing IG,HY & EM ............................................................................................................................................................. 442
RISK Credit Fleeing IG,HY & EM ............................................................................................................................................................. 442
RISK Margin Debt in NYSE Accounts versus S&P 500 ........................................................................................................................... 443
RISK Credit Risk Increasing ..................................................................................................................................................................... 444
RISK TED Spread Increasing ................................................................................................................................................................... 444
RISK VIX Pricing in Credit Problems ........................................................................................................................................................ 445
RISK Credit Always Leads Markets Its the Life Blood! ...................................................................................................................... 445
RISK The Pattern is Clear QE the Market Driver .................................................................................................................................. 446
RISK Internal deterioration in the market is more consistent with the development of more major bull market peaks ........................ 447
RISK A huge gap has opened up between reality and perceptions ......................................................................................................... 448
RISK Economic Surprise Index lower highs, lower lows and a reluctant bounce ................................................................................. 449
RISK Weekly Equity Outflows ................................................................................................................................................................... 449
RISK Weekly EM Fund Outflows .............................................................................................................................................................. 450
RISK Net Outflows as a % of AUM by Year ............................................................................................................................................. 451
RISK HG Spread Per Point of Equity Volume .......................................................................................................................................... 452
RISK Widening Gap between Debt & Equity ............................................................................................................................................ 452
RISK HY Bond ETF (HYG) versus S&P 500 ............................................................................................................................................ 453
RISK HY Credit versus 2007-2008 Credit Always Leads Equity ........................................................................................................ 453
RISK Leutholds High/Low Logic Index Sending a Clear Signal .............................................................................................................. 454
CASSANDRAS NEW ADDITIONS TO THE LIST ............................................................................................................................................. 455
CASSANDRA: "Severe Correction Or Cyclical Bear" Ahead: Leuthold Major Trend Index Turns Negative ................................................. 456
CASSANDRA: CANARIES - Warnings Everywhere! ...................................................................................................................................... 457
CASSANDRA: Stephen Schork: The Commodity Crash Is "A Canary In The Coal Mine For The Global Economy" ................................... 459
CASSANDRA: Emerging Market Mayhem: Gross Warns Of "Debacle" As Currencies, Bonds Collapse ..................................................... 461
CASSANDRA: "Another Crisis Is Coming": Jamie Dimon Warns Of the Next Market Crash ........................................................................ 468
CASSANDRA: Steen Jakobsen: Get Ready For The Biggest Margin Call In History .................................................................................... 469
JUNE 2016 Edition


CASSANDRA: Wynn Calls "Big" Recovery "Complete Dream" As Gaming Revenues Collapse .................................................................. 471
CASSANDRA: Stan Druckenmiller's "Horrific Sense" Of Deja Vu: "This Will End Very Badly" ..................................................................... 473
CASSANDRA: Hedge Fund Legend Julian Robertson Warns Of A "Complete Explosion" Unless Fed Contains "Boiling, Bubble" ............ 478
CASSANDRA: Kyle Bass Warns "The Fed Is Backed Into A Corner... Equities Are My Biggest Liquidity Worry" ........................................ 479
CASSANDRA: Paul Tudor Jones Warns "Disastrous Market Mania" Will End In "Revolution, Taxes, or War" ............................................ 480
CASSANDRA: John Hussman - A Who's Who Of Awful Times To Invest ..................................................................................................... 482
CASSANDRA: Carl Icahn - One Day You'll See A Break Like A Few Weeks Ago But The Market Won't Come Back ................................ 485
CASSANDRA: Sam Zell Warns Of Stock Market Correction On CNBC ........................................................................................................ 486
CASSANDRA: Billionaire Carl Icahn warns on US stock prices ..................................................................................................................... 486
CASSANDRA: Soros Bets $2 Billion on Stock Market Collapse .................................................................................................................... 487
CASSANDRA: Dont Ignore Janet Yellens Stock Market Warnings 07-21-14 Fiscal Times ......................................................................... 488
CASSANDRA: Doug Kass: We're Heading for a Bear Market So Plan Accordingly ...................................................................................... 491
CASSANDRA: Comstock Funds Weighs In .................................................................................................................................................... 493
CASSANDRA: Michael Lombardi Weighs In ................................................................................................................................................... 495
CASSANDRA: Ron Paul Portfolio, 'Craziest' we've ever seen? ..................................................................................................................... 497
CASSANDRA: John Mauldin Goes Negative .................................................................................................................................................. 498
CASSANDRA: Hayman Capital Dramatically Reduces Risk .......................................................................................................................... 506
CASSANDRA: Byron Wien Warns "Oblivious Markets" Of 20% Correction ................................................................................................... 507
CASSANDRA: Harry Dent Warns Stocks to Sink More than 60% by End of 2014 ........................................................................................ 507
CASSANDRA: Stanley Druckenmiller: "When You Get This Kind Of Rigging, It Will End Badly".................................................................. 508
CASSANDRA: Mohamed El-Erian: "Prices Are Artificially High - Its Time to Take Profits" .......................................................................... 509
CASSANDRA: Felix Zulauf: World Headed Toward 1987 Style Market Collapse .......................................................................................... 510
CASSANDRA: Doug Kass: 'I'm Getting The Summer Of 1987 Feeling' In The Market Right Now ............................................................... 510
CORRELATION & COMPLACENCY A PROBLEM .............................................................................................................................................. 512
EVENT RISK A PROBLEM .................................................................................................................................................................................... 515
Q2 EARNINGS & THE R WORD .............................................................................................................................................................. 515
POLITICAL-ECONOMIC TENSIONS .......................................................................................................................................................... 515
CENTRAL BANK POLICY MISCUES.......................................................................................................................................................... 515
ASIAN ECONOMIC SLOWDOWN SPILLAGE ............................................................................................................................................ 515
PETRO$ CRISIS BREWING IN BRIICS...................................................................................................................................................... 515
LONGER TERM - FUNDAMENTAL ANALYSIS .............................................................................................................................. 516

HIGHLIGHTS ......................................................................................................................................................................................................... 516
NEW-VALUATION SUMMARY ....................................................................................................................................................................... 516
VALUATION: Alternative Methodologies ............................................................................................................................................................... 518
NEW-FOUR SET CONSOLIDATED MARKET VALUATION INDICATORS .................................................................................................. 518
NEW-Crestmont from the Arithmetic ............................................................................................................................................................... 522
NEW-Cyclical PE 10 Ratio............................................................................................................................................................................... 526
NEW-Q Ratio ................................................................................................................................................................................................... 533
NEW-S&P Composite Regression-to-the-Trend ............................................................................................................................................. 538
NEW-Reference Methodologies Analysis ....................................................................................................................................................... 540
CHARTS OF NOTE ......................................................................................................................................................................................... 546
NEW-VALUATIONS Declining Profits Heighten Risk of Corporate Margin Defense Via Lower Labor Input .......................................... 546
NEW-VALUATIONS Tobin Q Ratio Suggests a Possible 80% Market Re-pricing over Next 3 Years .................................................... 546
NEW-VALUATIONS Forecast Returns in USD Terms Appear Poor .................................................................................................... 548
NEW-VALUATIONS Equity / FX Correlations Have Turned on EURUSD & JPYUSD ............................................................................ 548
NEW-VALUATIONS Growth of the S&P 500 and Components Since 2011 Has Been PE Expansion .................................................. 549
NEW-VALUATIONS US Non-Financials Y-o-Y Change in Net Debt v Operating Cash Flows ............................................................... 549
NEW-VALUATIONS US Equities versus Real Yields 2015-2016 ......................................................................................................... 550
NEW-VALUATIONS World Stock Index v World Bond Yield ................................................................................................................... 551
NEW-VALUATIONS US Corporate Leverage Surges .............................................................................................................................. 551
NEW-VALUATIONS Dividend Cuts On the Rise to Preserve Cash ........................................................................................................ 552
VALUATIONS Price-to-Sales Presently Second Highest to the Dotcom Bubble Collapse ..................................................................... 553
VALUATIONS Cumulative Flows .............................................................................................................................................................. 553
VALUATIONS GAAP versus Non-GAAP Net Margins ............................................................................................................................. 554
VALUATIONS Forward 12-Month P/E Ratio 10 Years.......................................................................................................................... 554
VALUATIONS Forward 12-Month EPS versus Change in Price 10 Years ........................................................................................... 555
VALUATIONS Net Margin Growth ............................................................................................................................................................ 556
VALUATIONS 10 Year Trailing 12 Mo Net Margin Growth Historically High ........................................................................................ 556
VALUATIONS Record Profits Yet Historically Low Capital Asset Growth ............................................................................................... 557
VALUATIONS Historical Ranking of PE Values ....................................................................................................................................... 558
VALUATIONS Median Price/Cash Flow Multiple for US Stocks .............................................................................................................. 559
VALUATIONS Median Price/Earnings Multiple for US Stocks ................................................................................................................. 560
VALUATIONS Median Price to Book Multiple for US Stocks ................................................................................................................... 561
VALUATIONS Price/Book; Price/Cash flow; Price/Sales ......................................................................................................................... 562
VALUATIONS Global Equities Reported PE, PE before XO & Fwd PE ............................................................................................... 563
2016 EARNINGS Earnings Projections .............................................................................................................................................................. 564
STUDY: 2016 EARNINGS - ................................................................................................................................................................................... 564
CHARTS OF NOTE ......................................................................................................................................................................................... 564
NEW-2016 EARNINGS Y-o-Y Change in Net Debt versus Operating Cash Flow (%)............................................................................ 564
2016 EARNINGS Historical Global Consensus Earnings Estimates ....................................................................................................... 565
2016 EARNINGS 12 Month Forward EPS Consensus ............................................................................................................................ 565
2016 EARNINGS SPX Earnings CY 2016 ............................................................................................................................................ 566
2016 EARNINGS A 2016 Hockey Stick Forecast Only the Nave Would Believe ................................................................................. 566
2016 EARNINGS US Forward PE versus Fed Funds Rate ..................................................................................................................... 567
JUNE 2016 Edition


2016 EARNINGS US Operating Profit Margin versus US Monetary Indicators ....................................................................................... 567
RESEARCH OF NOTE .................................................................................................................................................................................... 568
2016 EARNINGS 2016 EPS Growth Estimates Slashed By 50% Just One Month Into The Year ......................................................... 568
2016 EARNINGS Another Data Point To Ignore: Dividend Cuts Have Surpassed 2008 ........................................................................ 570
2016 EARNINGS Profit, Multiple & Margin Trouble Are In Store For Global Equities In 2016 ................................................................ 572
STUDY: Q2 2016 EARNINGS ............................................................................................................................................................................... 574
CHARTS OF NOTE ......................................................................................................................................................................................... 574
NEW-Q2 EARNINGS Slowing Earnings Correlate to Recessions ........................................................................................................... 574
NEW-Q2 EARNINGS SPX versus GAAP Earnings ................................................................................................................................. 574
NEW-Q2 EARNINGS SPX versus 12Mo Forward Earnings Expectations .............................................................................................. 575
STUDY: Q1 2016 EARNINGS ............................................................................................................................................................................... 576
CHARTS OF NOTE ......................................................................................................................................................................................... 576
NEW-Q1 EARNINGS Q1 Earnings Growth .............................................................................................................................................. 576
NEW-Q1 EARNINGS Q1 Revenue Growth .............................................................................................................................................. 577
NEW-Q1 EARNINGS Q2 Earnings & Revenue Growth Projections ........................................................................................................ 577
NEW-Q1 EARNINGS Ongoing deterioration in Sales and Profits ........................................................................................................... 579
NEW-Q1 EARNINGS LTM Quarterly S&P 500 GAAP and Non-GAAP EPS........................................................................................... 580
NEW-Q1 EARNINGS S&P 500 Annual GAAP and Non-GAAP EPS ....................................................................................................... 581
Q1 EARNINGS S&P Forward Earnings Expectations versus S&P 500 .................................................................................................. 582
Q1 EARNINGS Falling Profits Now in Contraction Territory Lowest Levels Since 2008 ...................................................................... 583
Q1 EARNINGS Top Line Sales and Revenue Growth is Clearly Falling ................................................................................................. 583
Q1 EARNINGS Pro-Forma and GAAP Earnings Diverge Significantly ................................................................................................... 583
Q1 EARNINGS Profits Fall the Most Since 2008 ..................................................................................................................................... 584
Q1 EARNINGS Corporate Profits as a Percentage of GDP .................................................................................................................... 585
Q1 EARNINGS Peaks in Real Profit Margins versus S&P 500 ............................................................................................................... 585
Q1 EARNINGS Biggest Quarterly Drop in Profits Since 2009 ................................................................................................................. 585
Q1 EARNINGS Largest S&P Q1 EPS Drop in first 2 Mo of a Quarter Since Q1 2009............................................................................ 586
Q1 EARNINGS S&P 500 Earnings Growth Q1 2016 Down -8.3% .......................................................................................................... 587
Q1 EARNINGS S&P 500 EPS: GAAP vs. Non-GAAP ............................................................................................................................. 587
Q1 EARNINGS S&P 500 EPS: GAAP vs. Non-GAAP for FY 2015 vs. 2014 .......................................................................................... 588
Q1 EARNINGS Non-GAAP EPS Writeoffs ............................................................................................................................................... 589
Q1 EARNINGS 2015 Y-o-Y % Change in EPS GAAP vs Non-GAAP ..................................................................................................... 589
Q1 EARNINGS S&P Trailing 4-Quarter GAAP vs. Non-GAAP Net Margins ........................................................................................... 590
RESEARCH OF NOTE .................................................................................................................................................................................... 590
NEW-Q1 EARNINGS The True State Of The US Consumer: All Six Retail Companies Reporting April Comp Sales Missed .............. 590
NEW-Q1 EARNINGS This Tech Bubble Is Bursting ................................................................................................................................ 592
NEW-Q1 EARNINGS Amazon Smashes Expectations On Surge In Cloud Profits ................................................................................. 594
NEW-Q1 EARNINGS Carl Icahn Dumps Entire Stake Of AAPL .............................................................................................................. 597
NEW-Q1 EARNINGS JPM Summarizes Earnings Season So Far: At -8%, The S&P500 Q1 EPS Growth Is The Worst Since 09 ... 599
NEW-Q1 EARNINGS S&P 500 EPS Divergence ..................................................................................................................................... 602
NEW-Q1 EARNINGS Apple Tumbles After Missing Sales And Earnings, Guides Below Lowest Estimate ........................................... 602
Q1 EARNINGS Behind U.S. GDP Data - Weak Profits ........................................................................................................................... 609
Q1 EARNINGS When the "Mother's Milk" of Earnings Runs Dry ............................................................................................................ 610
Q1 EARNINGS Why Companies Don't Want You To Look At GAAP Earnings ...................................................................................... 612
Q1 EARNINGS Largest Drop in S&P 500 EPS Estimate Over First Two Months of a Quarter since Q1 2009 ...................................... 617
Q1 EARNINGS Non-GAAP Earnings Are About To Plunge The Most Since 2009; As For GAAP Don' Even Ask ................................ 618
BUYBACKS Widening Credit Spreads Become A Problem ............................................................................................................................... 624
CHARTS OF NOTE ......................................................................................................................................................................................... 624
NEW-BUYBACKS Y-o-Y Change in Corporate Net Debt versus Cash Flow (%) .................................................................................... 624
BUYBACKS Buybacks Tend to be Absent During Earnings Season Window ........................................................................................ 625
BUYBACKS Shrinking Monetary Base Will Put Pressures on Buybacks ................................................................................................ 625
BUYBACKS Buybacks to Net Income ...................................................................................................................................................... 625
BUYBACKS Top 10 Buyback Queens versus Stock Performance .......................................................................................................... 627
BUYBACKS Underwhelming Performance of Buyback Queens.............................................................................................................. 627
BUYBACKS Seasonal Slowdown in Buybacks ........................................................................................................................................ 628
BUYBACKS Buyback Activity at Two-Year High ...................................................................................................................................... 628
BUYBACKS Cost of Buybacks In Increasing ........................................................................................................................................... 629
BUYBACKS BoAML Corporate Clients Buybacks in the First 9 Weeks of Each Year ......................................................................... 629
BUYBACKS BoAML Corporate Clients 4 Wk Average Buybacks Y-o-Y % Change ............................................................................... 629
BUYBACKS Buybacks Have Accounted for Around 1/3 of EPS Growth Since Q3 2011 ........................................................................ 630
BUYBACKS Net Cash Companies Are Increasingly Scarce .................................................................................................................. 631
BUYBACKS EBITDA Growth Is the Worst Since 2000 ............................................................................................................................ 631
BUYBACKS Buybacks v SPX Total Return Indices ................................................................................................................................. 632
BUYBACKS Proof that Buybacks Mainly Funded By Debt ...................................................................................................................... 632
BUYBACKS US Companies Continuing to Borrow To Buyback Stock .................................................................................................... 633
BUYBACKS Debt/EBITDA v FCF-Cost of Debt - 2013 ............................................................................................................................ 633
BUYBACKS Debt/EBITDA v FCF-Cost of Debt 2015 ........................................................................................................................... 634
BUYBACKS Buybacks & Dividends as a Percentage of Net Income ...................................................................................................... 635
BUYBACKS After Historic Buybacks the Y-o-Y Change in 12 Month Profits Per Share Still Shrinks! .................................................... 635
BUYBACKS Buybacks & Dividends as a Percentage of Net Income Against Spending on Buybacks................................................... 636
BUYBACKS Outperformance of Stocks with Large Buybacks Programs vs S&P 500 ............................................................................ 636
BUYBACKS Gross Leverage for Typical IG/HY Non-Financial Debt-EBITDA ..................................................................................... 637
BUYBACKS Equity Market Performance v S&P 500 Uses of Cash ........................................................................................................ 638
BUYBACKS Default Rate v Net Equity Buybacks .................................................................................................................................... 638
BUYBACKS S&P 500 Buyback Index 200 DMA ................................................................................................................................... 639
BUYBACKS S&P 500 v Buyback Index Performance.............................................................................................................................. 639
10
JUNE 2016 Edition


BUYBACKS S&P 500 Annualized Share Buybacks, Dividends and Earnings ........................................................................................ 640
BUYBACKS Falling Investment Grade Spreads Hurting Buybacks ......................................................................................................... 640
BUYBACKS Quarterly Share Repurchases & No. of Companies Repurchasing Shares Slows ............................................................. 640
BUYBACKS Dollar-Value Buybacks to Free Cash Flow Trailing Twelve Month Basis ........................................................................ 641
BUYBACKS Nearly 25% of Annual Buybacks Occur in November & December .................................................................................... 642
BUYBACKS Outperformance of Stocks with Large Buybacks Programs vs S&P 500 ............................................................................ 643
BUYBACKS Gross Leverage for Typical IG/HY Non-Financial Debt-EBITDA ..................................................................................... 643
BUYBACKS Equity Market Performance v S&P 500 Uses of Cash ........................................................................................................ 644
BUYBACKS Default Rate v Net Equity Buybacks .................................................................................................................................... 644
BUYBACKS S&P 500 Buyback Index 200 DMA ................................................................................................................................... 645
BUYBACKS S&P 500 v Buyback Index Performance.............................................................................................................................. 645
BUYBACKS S&P 500 Annualized Share Buybacks, Dividends and Earnings ........................................................................................ 646
BUYBACKS The real reason for the slowdown has to do with the spread on investment grade debt .................................................... 646
BUYBACKS Falling Investment Grade Spreads Hurting Buybacks ......................................................................................................... 647
BUYBACKS Quarterly Share Repurchases & No. of Companies Repurchasing Shares Slows ............................................................. 647
BUYBACKS Dollar-Value Buybacks to Free Cash Flow Trailing Twelve Month Basis ........................................................................ 648
BUYBACKS Nearly 25% of Annual Buybacks Occur in November & December .................................................................................... 648
TARGETS ................................................................................................................................................................................ 650

CONCLUSIONS....................................................................................................................................................................... 653
MARKET MESSAGE ............................................................................................................................................................................................. 653
I DEFINING CHARTS ......................................................................................................................................................................................... 658
Defining Chart #3 - The Big M and Super Cycle b ..................................................................................................................................... 659
Defining Chart #4 Intermediate Term Topping Process ............................................................................................................................... 660
Boundary Conditions ....................................................................................................................................................................................... 661
Channels & Regressions ................................................................................................................................................................................. 662
II TARGETS ........................................................................................................................................................................................................ 670
III QUARTERLY SENTIMENT RISK AND FUNDAMENTALS ........................................................................................................................... 673
NEW-SENTIMENT .......................................................................................................................................................................................... 673
NEW-RISK ANALYSIS - Complacency .......................................................................................................................................................... 680
NEW-FUNDAMENTAL ANALYSIS Valuation Summary.............................................................................................................................. 681
IV STUDIES ........................................................................................................................................................................................................ 682
NEW-BANKING & BONDS YIELDS ARE SUGGESTING SOMETHING IS BREWING ................................................................................... 682
CHARTS OF NOTE ......................................................................................................................................................................................... 684
NEW-BANKING & BONDS Flattening Yield Curve ................................................................................................................................... 684
NEW-BANKING & BONDS Yield Curve and Consensus 2016 GDP Growth Expectations v SPX ......................................................... 684
NEW-BANKING & BONDS Financial Stocks versus UST 2s-30s ............................................................................................................ 685
NEW-BANKING & BONDS US Treasuries are Now Approaching 2 Standard Deviations Expensive ..................................................... 685
NEW-BANKING & BONDS US Bonds Approach $40T Up 60% Since 2000 ........................................................................................ 685
NEW-BANKING & BONDS Bond Duration and Maturity Increase To Capture Yield ............................................................................... 687
NEW-BANKING & BONDS 10Y UST Treasury Yields versus US Nominal Growth Since 1960 .............................................................. 687
NEW-BANKING & BONDS A Flattening Yield Curve ................................................................................................................................ 688
NEW-BANKING & BONDS US Yield Curve Spread v World Industrial Production .................................................................................. 688
NEW-BANKING & BONDS US Yield Curve Spread v S&P Revenues ..................................................................................................... 689
EARNINGS CONTINUING EARNINGS DETERIORATION .............................................................................................................................. 690
NEW-STUDY: Q2 EARNINGS Settting Expectations ........................................................................................................................................ 690
CHARTS OF NOTE ......................................................................................................................................................................................... 690
NEW-Q2 EARNINGS Q2 To Be 5th Consecutive Quarter of Y-o-Y Earnings Decline ............................................................................. 690
NEW-Q2 EARNINGS Cutting Labor Costs to Absorb Inflation Pressures Due to Lack of Revenue Growth .......................................... 691
NEW-Q2 EARNINGS AAPL Largest Contributor to S&P Q2 Tech Sector Decline ................................................................................. 692
NEW-Q2 EARNINGS Q2 Earnings Season By the Numbers ............................................................................................................... 693
NEW-Q2 EARNINGS Sixth Consecutive Quarter of Y-o-Y Revenue Declines ....................................................................................... 694
NEW-Q2 EARNINGS Earnings Estimates By Sector and S&P 500 Overall ............................................................................................ 695
NEW-Q2 EARNINGS Revenue Estimates By Sector and S&P 500 Overall ........................................................................................... 695
NEW-Q2 EARNINGS Trailing 12 Month Net Margin Deterioration .......................................................................................................... 696
NEW-Q2 EARNINGS 12 Mo Forward PE Ratio ....................................................................................................................................... 696
STUDY: Q1 EARNINGS ..................................................................................................................................................................................... 697
CHARTS OF NOTE ......................................................................................................................................................................................... 697
NEW-Q1 EARNINGS Q1 Earnings Growth Final .................................................................................................................................. 697
NEW-Q1 EARNINGS Q1 Revenue Growth Final .................................................................................................................................. 698
V - TRIGGER$ ZONES .......................................................................................................................................................................................... 699
VI - DRIVER$ & BIA$ ............................................................................................................................................................................................. 700
11
JUNE 2016 Edition


MONTHLY PROCESS OF ABSTRACTION

The Monthly Market Analytics & Technical Analysis Report is an integral part of our monthly Process of Abstraction
research methodology. The process starts monthly from the Tipping Points and completes with a final Synthesis.
The sequence is optimized to align with the established Macro Economic Data releases.
Plan
III.
IV.
II.
Release
Date
4th Week of the
Month
2nd Week of the

month No later
than the 17th
Third Tuesday of
the Month
Service
Focus
Coverage
Tipping Points
Tipping Points
Abstraction
Global Macro
Abstraction
US Economy
Technical Analysis
Technical Analysis
Market Analytics
Fundamental Analysis
Market Analytics
Risk Analysis
Synthesis
Commentary
Thesis
Conclusions
Global Macro Tipping Points

(GMTP)
Market Analytics & Technical

Analysis (MTA)
Monthly Market Commentary

(MMC)
RISK LEVELS: HIGHLY ELEVATED
12
JUNE 2016 Edition



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