By Steve Blumenthal
November 6, 2019
S&P 500 Index — 3,076
Posted each Wednesday, Trade Signals looks at several of my favorite equity market, investor sentiment, fixed income, economic, recession and gold market indicators. Market trends persist over time and stem from changes in risk premiums or the amount of return investors demand to compensate them for the risks they take.
Risk premiums vary a great deal over time in response to new market information or changes in the economic environment or even changes in investor sentiment. When risk premiums increase or decrease, stocks and bonds and other assets have to be priced again. Investors react to the changes gradually and this creates trends.
Rules-based trend following strategies don’t predict, they react to what prices are telling us about supply and demand. More buyers than sellers, price moves higher and more sellers than buyers, price moves lower. Trend-following strategies seek growth opportunities while maintaining a level of protection in down markets.
Trade Signals is organized into three sections:
- Market Commentary
- Trade Signals — Dashboard of Indicators
- Charts with Explanations
For informational purposes only. Not a recommendation to buy or sell any security.
Notable this week:
The monthly recession watch charts are updated below. The equity market technical trend indicators remain bullish. Investor sentiment, both short-term and intermediate-term, is showing extreme investor optimism. Such readings are historically short-term bearish for equities and suggest caution. The Zweig Bond Model remains bullish, the CMG Managed HY Bond Indicator is bullish and the gold trend indicator is bullish.
The indicator dashboard section is next, followed by the updated charts with explanations.
Not a recommendation for you to buy or sell any security. For information purposes only. Please talk with your advisor about needs, goals, time horizon and risk tolerances.
Trade Signals — Dashboard of Indicators
(Green is Bullish, Orange is Neutral and Red is Bearish)
Equity Trade Signals
- Ned Davis Research CMG U.S. Large Cap Long/Flat Index: Buy Signal – 100% U.S. Large Cap Equity Exposure*
- Long-term Trend (13/34-Week EMA) on the S&P 500 Index: Buy Signal – Bullish for Equities
- Volume Demand (buyers) vs. Volume Supply (sellers): Buy Signal – Bullish for Equities*
- S&P 500 Index 200-day Moving Average Trend: Buy Signal – Bullish for Equities*
- S&P 500 Index 50-day vs. 200-day Moving Average Cross: Buy Signal – Bullish for Equities*
- NASDAQ Index 200-day Moving Average Trend: Buy Signal – Bullish for Equities*
- Don’t Fight the Tape or the Fed: Indicator Reading = 0 (Bullish Signal for Equities)
- Value vs. Growth Factor Model: The Model Favors Value
* Nearing a change in signal
Investor Sentiment Indicators
- NDR Crowd Sentiment Poll: Extreme Optimism (S/T Bearish for Equities)
- NDR Daily Trading Sentiment Composite: Extreme Optimism (S/T Bearish for Equities)
Fixed Income Trade Signals
- CMG Managed High Yield Bond Program: Buy Signal – Bullish High Yield Bond Market Trend
- Zweig Bond Model: Buy Signal – Bullish for High Grade Corporate and Long-Term Treasury Bond Market Trends
- Global Recession: High Recession Risk
- U.S. Recession: Rising U.S. Recession Risk (Next Six Months)
- Inflation Watch: Low Inflation Pressures
Select Recession Watch Indicators
- Global Recession Probability Indicator: High Recession Risk
- The Economy Based on the Stock Market Indicator: Low U.S. Recession Risk
- Recession Probability Based on Employment Trends: Low U.S. Recession Risk
- Credit Conditions – Recession Indicator: Low U.S. Recession Risk
- U.S. Economy vs. Yield Curve: High U.S. Recession Risk
- Trend Indicator – 13-week EMA vs. 34-week EMA: Buy Signal
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Charts with Explanations
Equity Market Charts
1. Ned Davis Research CMG U.S. Large Cap Long/Flat Index – Buy Signal – 100% U.S. Large Cap Equity Exposure
The Ned Davis Research CMG U.S. Large Cap Long/Flat Index measures “market breadth.” Market breadth is simply market activity, such as advances and declines, new highs and new lows, advancing and declining volume and price momentum and trend based upon the number of stocks in uptrends and downtrends. Technicians like “breadth” measurements for two main reasons:
- Breadth thrusts are often present at the start of major bull markets.
- Breadth nearly always weakens before prices do at a major peaks.
(Source: Ned Davis Research)
The NDR CMG U.S. Large Cap Long/Flat Index process measures market breadth by analyzing the overall technical strength across 24 Industry Groups (GICS). The process individually measures the trend of each of the industry groups, evaluating the rate of change in price momentum over short-term, intermediate and long-term time frames. A high score means that there is broad positive up-trending participation across the 24 Industry Groups. That tends to indicate a strong market environment. The Index process also measures mean-reversion as measured by something called a “Z-score.” A Z-score is the number of standard deviations or distance price has moved from its mean data point. Within the NDR CMG U.S. Large Cap Long/Flat Index, this helps the index identify extreme down-side market environments. We believe market tops are different than market bottoms. During major market sell-offs, margin calls kick in, investors tend to panic and would be buyers back away; thus, major market corrections tend to “V” bottom. The mean reversion indicator is designed to measure extreme selling and help the index get back into the market sooner in a systematic disciplined way.
The most important line to follow in the chart below is the blue “model equity line” in the middle section of the chart. It is the combined total score across the 24 sub-industry sectors. Think of model equity line as a rolling “market breadth” measurement. The model moves to short-term Treasury Bills when the reading drops below 50%. Such readings low readings signal the majority of stocks across the 24 sub-industry sectors are breaking down. When below the 50% line, and the trend has turned higher, the model moves to 50% invested U.S. Large Cap equity exposure if the model equity reading is higher than it was 21-days ago. At anytime the index reading is above the 50% line, the index is 100% invested.
Up Arrows with “B” Label = Buy Signal (100% long)
Down Arrows = Reduce Market Exposure to Model Target Weights
S&P Dow Jones Index Data, 1995 to present
Source: S&P Dow Jones Indices and Ned Davis Research.
Note: CMG Large Cap Long/Flat Strategy performance may differ
from index performance due to trade dates/times, types of U.S. ETF large cap exposures and costs.
Next is a Long/Short version of the Index. The model goes from 100% invested in U.S. Large Cap market exposure to 100% short U.S. Large Cap market exposure on readings below 50%. 50% long and 50% Treasury Bills when the trend reading is below 50% but rising above its reading 21-days prior. The model is fully invested on readings above 50%.
- Here’s the data (note in the lower left-hand chart the model returns – a several hundred basis point improvement in model return):
Source: Ned Davis Research (1992 to present).
Note: S&P Dow Jones Indices does not calculate the Long/Short Index.
2. 13/34–Week EMA Trend Chart: Buy Signal – Bullish for Stocks
The process measures the intermediate-term trend in the S&P 500 Index. A bullish trend is identified when the blue 13-week smoothed moving average (“MA”) trend line rises above the 34-week smoothed MA trend line. A bearish trend is signaled when the blue line drops below the red line. You can see that this trend process has done a pretty good job at identifying the major cyclical (short-term) bull and bear market trends (note small red and blue arrows). In terms of risk management, a good stop-loss level may be at the point when the 13-week drops below the 34-week EMA with re-entry at the point the 13-week crosses above.
Click here to see “How I think about the 13/34-Week Exponential Moving Average.”
Bottom line: The 13-week shorter-term trend line has crossed the 34-week longer-term trend line = bullish signal for equities.
3. Volume Demand vs. Volume Supply: Buy Signal – Bullish for Equities
When there are more buyers than sellers, prices move higher. When there are more sellers than buyers, prices decline. Supply and demand works that way in all things – real estate, oil, stock prices and all goods in a free market.
The Volume Demand vs. Volume Supply process looks at a smoothed total volume of declining issues versus a smoothed total volume of advancing issues using a broad market equity index. The performance, reflected in the chart below, is better when Vol Demand is better than Vol Supply. More buyers than sellers. This is a relatively slow-moving but important indicator.
The yellow highlights in the next two charts shows the current signal. Currently in a buy signal. Following is the model’s data 1981 to present (which includes the great bull market and the two bear markets since 2000, and model data from 1997 to present (which includes the tail end of the great bull market, the 2000-2002 and 2007-2009 bear markets and the bull market that started in March 2009):
4. S&P 500 Index 200-day Moving Average Trend: Buy Signal – Bullish for Equities
Here is how to read the chart:
- Focus in on the black dotted line (200-day moving average) and the two boxes at the bottom of the chart.
- Buy signals are when the 200-day moving average line is rising and sell signals are when the 200-day moving average is falling. Specifically, a sell signal occurs when the 200-day MA price line drops from a high point by 0.5% or more. A buy signal occurs when the 200-day MA price line rises from a low point by 0.5% or more.
- Current trend signal is shaded grey. Bottom line: Returns are best when the 200-day MA trend line is rising.
5. S&P 500 Index 50-day vs. 200-day Moving Average Cross: Buy Signal – Bullish for Equities
Next is a look at what is known as the “Golden Cross.” Sell signals occur when the 50-day shorter-term moving average trend line drops below the longer-term 200-day moving average trend line. This trend-following process is also in a buy signal.
6. NASDAQ Index 200-day Moving Average Trend: Buy Signal – Bullish for Equities
Read this chart in the same way as the S&P 500 200-day MA rule explained immediately above. 200-day MA line is dashed black line. Blue line is the NASDAQ Composite. Focus on upper right in chart and data box below. Current “mode regime” is shaded in the data boxes (bottom of chart). I’ve added the green horizontal line and large green arrow simply to indicate the potential down-side risk level (5,000 on the NASDAQ Composite Index). That would be an excellent buying point. There is good market support at the December 2018 low at 6,192.92.
7. Don’t Fight the Tape or the Fed – Indicator Reading = 0 (Neutral Signal for Equities)
Current readings highlighted in yellow below.
- The indicators that comprise this reading are a combination of NDR’s Big Mo and the 10-Year Treasury yield. It highlights just how important Fed activity is to market performance. Readings range from +2 to -2.
- Bottom line: when both the trend in interest rates (lower yields) and the trend in the overall market (the tape) are bullish, the market has historically performed best.
- +2 readings have occurred about 12% of the time since 1980.
- +1 readings have occurred approximately 25% of the time since 1980.
- -2 readings have occurred approximately 6% of the time since 1980 and the performance during those periods, as shown in the chart is poor. “Watch out for -2!”
- The chart on the left is from 1980 to present and the chart on the right is from 1999 to present.
8. Value vs. Growth Factor Model: The Model Favors Value
NDR Crowd Sentiment Poll: Extreme Optimism (S/T Bearish for Equities).
The current weekly sentiment reading is 66.8. It was 65.6 last week. The current regime is highlighted in yellow.
NDR measured 92 incidences of Crowd Sentiment extremes since 1996. There have been 92 extremes since 1996. The crowd was right just one time and wrong 91 times. Had one followed the crowd at the time at those extremes, one would have lost over 12,000 S&P 500 points (according to NDR). The last Extreme Pessimistic was reached on December 24, 2018 and the last Extreme Optimistic was reached in early April 2019.
It is important to note, the most attractive Extreme Pessimism buy signals have historically occurred with readings below 47. The most attractive sell signals have historically occurred with readings above 70. Call them super extreme “extremes.” These are the most important levels I am keeping my eye on when it comes to investor sentiment.
Here is how to read the next data box:
- Best buying opportunities occur at “Extreme Pessimism” readings below 57.
- Gain/Annum for the S&P 500 Index (data from December 1, 1995 to present).
- Current indicator score highlighted in yellow:
NDR Daily Trading Sentiment Composite: Extreme Optimism (S/T Bearish for Equities).
Current regime is highlighted in yellow below.
- Current daily sentiment reading is 73.33. It was 64.44 last week.
- Buying opportunities occur at “Extreme Pessimism” readings below 41.5. Selling opportunities occur at “Extreme Optimism” readings above 62.5.
- Note: The most attractive buying opportunities have historically occurred with readings occur when Daily Trading Sentiment Composite is below 25. While the strongest sell signals have occurred with readings above 75. The super extreme “extremes.”
- 1994 to Present and 2006 to Present below (current indicator score shaded below):
The Zweig Bond Model: Buy Signal– a bullish signal for high quality fixed income bond funds and ETF exposure.
Current indicator score highlighted in yellow (bottom right section):
- The bottom section of the above chart details the drawdown (“Max DD %”) history and a few other statistics. For example, if your $100,000 investment declines 10% to $90,000 before it again moves higher, your drawdown is 10%.
- Barclays Aggregate Bond Total Return has a max drawdown of -14.12% vs. a max drawdown for the Zweig Bond Model of -5.06%.
- You can compare the Barclays Aggregate Bond Index Total Return Max DD to the Model’s Max DD. Hoped for is a higher return and a lower DD. Also listed is the hypothetical growth of $1,000.
- GPA% shows the hypothetical comparison of the Zweig Bond Model and the Barclays Agg Total Return index. The Model outperformed buying and holding the index by a wide margin.
- Finally, you can calculate the model on your own – detailed in the upper left section of the chart. How to Track the Zweig Bond Model.
- Click here for more info about the Zweig Bond Model.
- Global Recession – High Recession Risk
- U.S. Recession – Moderate U.S. Recession Risk (Next Six Months) – Risk is Rising
- Inflation Watch – Low Inflation Pressures
Select Recession Watch Indicators:
The average decline in the S&P 500 is approximately 37% during recessions. The last two recessions have given us greater than -50% each. I believe, given the fact that we have tripled up on the very same thing that caused the last recession (debt/leverage/Fed policy), the next recession will be equally or more challenging than the last two. Thus, my recession obsession. Following are my favorite recession watch indicators.
Bottom line: We are likely in a global recession. There is no current sign of recession in the U.S. in the coming six months. I remain data dependent.
Global Recession Probability Indicator – High Global Recession Risk
- First, focus in on the blue model line. It plots the probability of recession based on leading indicators from 35 different countries (non-U.S.). The current reading is 93.75, meaning there is an 93.75% probability that we are in a global recession. Bottom line: High Global Recession Risk.
- Note the red dotted line. Note the grey shaded bars that show periods in which the OECD said there was global recession (something known more than six months after the fact).
- Bottom line: When the blue line rises above the red dotted line, the global economy was heading into or already likely in recession. A global recession has likely started,which is unfavorable for global equities.
- Finally, focus in on the data box in the lower right section of the chart. When the reading is ‘Above 70’ recession has occurred 92.64% of the time.
The Economy Based on the Stock Market Indicator – Low U.S. Recession Risk
- Focus on the up and down arrows. Economic expansion signals (up arrows) are generated when the S&P 500 Index rises by 3.8% above its five-month smoothed moving average line. Economic contraction signals are generated when the S&P 500 Index falls by 4.8% below its five-month smoothed moving average line.
- Current signal = Expansion. The most recent recession signal occurred in February 2019.
- Note the 77% “Correct Signals” in the top left corner of the chart. This this process has done a good job at signaling prior to recessions. Not perfect but pretty good.
Recession Probability Based on Employment Trends – Low U.S. Recession Risk
- Focus in on the up and down arrows. Down is a recession signal. Up is an expansion signal.
- Expansion signals are generated when the Employment Trends Index rises by 0.4% from a low point.
- Contraction signals are generated when the index falls by 4.8% from a high point.
- Current signal indicates expansion. Last signal date occurred in 2009.
Credit Conditions – Recession Indicator – Low U.S. Recession Risk
- Focus in on the lower section of the chart. A drop below the green dotted line has preceded the last three recessions (yellow circles). When lending tightens up “Credit Conditions Unfavorable,” companies have a hard time funding. Recession tends to follow with lending conditions become unfavorable.
- The vertical grey bars indicate past recessions.
- Bottom line: Lending conditions are currently favorable.
U.S. Economy vs. Yield Curve – High U.S. Recession Risk
- Watch for a drop below the green dotted line.
- Such drops below 0 is what is known as an inverted yield curve. It is when the 6-month Treasury Bill yield is higher than the longer-duration 10-year Treasury Note yield.
- An inverted yield curve has preceded every recession since 1958 (lower section of chart) with a “mean lead time” of 14 months prior to recession start.
- Since recessions are only known in hindsight, it is important to have a high probability to know in advance. All the bad stuff happens in recessions.
- Note May 2019 yield curve inversion.
- Bottom line: Once the yield curve inverts, recession follows about a year later. Most recent inversion occurred in April 2019. Signaling high probability of recession by July 2020.
13-week EMA vs. 34-week EMA: Buy Signal
Buy signals occur when the 13-week moving average trend line (blue line) crosses above the 34-week moving average trend line (red line). Sell signals occur when the 13-week moving average trend line (blue line) crosses below the slower moving 34-week moving average trend line (red line).
Green arrows indicate buy signals, red arrows sell signals.
As a general rule, I generally favor up to 5% in gold with an increase to 10% for more aggressive investors. 0% exposure indicator is bearish.
Why risk management?
Asset Classes Move Through Periods of Bull and Bear Market Cycles Over Time: This next chart shows the BULL market Secular Trend for Stocks (top section), the direction in Long-Term Government Bond Yields (middle section) and Commodities (bottom section). The best gains are made in Secular Bull market cycles.
Investing is a probability game. Limit downside: In the long run, it’s about the math. This next chart shows the “The Merciless Mathematics of Loss”. A 10% decline only requires an 11% subsequent return to get back to even. A 30% decline requires a 43% subsequent return to get back to even. A 50% decline requires a 100% subsequent return to get back to even. You can read more about it here.
I hope you find this information helpful. Thank you for your interest. It is appreciated.
♦ To receive Steve’s free weekly On My Radar e-newsletter, subscribe here. ♦
With kind regards,
Stephen B. Blumenthal
Executive Chairman & CIO
CMG Capital Management Group, Inc.
Philadelphia – King of Prussia, PA
Advisor/Investor Education Materials and White Papers
Several client educational pieces:
- When Beating the Market Isn’t the Point
- Trend Following Works!
- Correlation, Diversification and Investment Success
- The Merciless Math of Loss (this is about how compound interest works for you and significant loss against you)
CMG is committed to setting a high standard for ETF strategists. And we’re passionate about educating advisors and investors about tactical investing. If you’re looking for the CMG white paper, Understanding Tactical Investment Strategies, you can find that here.
Ned Davis Research:
For years, I have subscribed to Ned Davis Research. They are an independent research firm. Their clients are institutional (professional) investor clients like CMG. They are one of the most respected research firms in the business.
They offer several levels of subscription. You can contact them directly at Ned Davis Research at 617-279-4878 to learn more. Please know that neither I nor CMG are compensated in any form. I’m just a big fan of their research and their way of thinking. As a side, Ned Davis authored one of my favorite books, Being Right or Making Money. A great book full of sound, practical advice.
Trade Signals History:
Trade Signals started after a colleague asked me if I could share my thoughts (trade signals) with him. A number of years ago, I found that putting pen to paper has really helped me in my investment management process and I hope that this research is of value to you in your investment process.
Every week, I share with you research I find valuable. No one indicator is perfect, but we believe risk can be assessed and should be managed. Some of this research helps to shape our thinking around risk management and it helps us think about how we might size various risks within the construct of a total portfolio. For example, overweight or underweight equities/fixed income and how much one should consider allocating to tactical/liquid alternative exposures (such as managed futures, global macro, long/short equity). When and what to hedge? Shorten or lengthen bond maturity exposure? We believe such risks can be managed and, to us, broad portfolio diversification is important. If you’d like to talk to us about how we use some of these indicators within our various investment strategies, please email me or email our sales team.
From an investment management perspective, I’ve followed, managed and written about trend following and investor sentiment for many years. I find that reviewing various sentiment, trend and other historically valuable rules-based indicators each week helps me to stay balanced and disciplined in allocating to the various risk sets that are included within a broadly diversified total portfolio solution.
My objective is to position in-line with the equity and fixed income market’s primary trends. I believe risk management is paramount in a long-term investment process. When to hedge, when to become more aggressive, etc.
For hedging, I favor a collared option approach (writing out-of-the-money covered calls and buying out-of-the-money put options) as a relatively inexpensive way to risk protect your long-term focused equity portfolio exposure. Also, consider buying deep out-of-the-money put options for risk protection.
Please note the comments at the bottom of this Trade Signals discussing a collared option strategy to hedge equity exposure using investor sentiment extremes is a guide to entry and exit. Go to www.cboe.com to learn more. Hire an experienced advisor to help you. Never write naked option positions. We do not offer options strategies at CMG.
Visit http://www.theoptionsguide.com/the-collar-strategy.aspx for more information.
Diversification – Suggested Client Talking Points:
A diversified investment portfolio is designed to meet pre-defined investment goals. It is often hard to stay the course when stress presents. That is when many investors make mistakes. Diversification means that not all investment risks perform at the same time. For example, managed futures and long/short funds have underperformed the last several years but are outperforming recently. We’d all like to be in the best performing areas all the time, but that is just not possible.
Major market events tend to present one or two times per decade. It is for this reason that a longer-term view can provide a useful perspective. We know that many investors incorrectly sold out of the markets during the tech bubble in 2000-2002 and again with record selling at the height of the 2008 great financial crisis. No one knows exactly how the current distress will play out.
For some time, I’ve been talking about the following: the issues in the high yield bond market, issues that can present post-QE and zero interest rate policy, issues with unmanageable debt in Europe, Japan and China and the issues a rising dollar may trigger as it relates to the $9 trillion in EM debt that was borrowed in dollars. As much as I’d like to think I do, I don’t know for sure which or how and when any of the above risks present and the degree to which they might play out.
What we can do is build portfolios that are diversified across a number of risk factors and market environments. We can identify periods in time to become more or less aggressively positioned (overweight when valuations are cheap and underweight when they are expensive). We can manage risk not only by the collections of ETFs and funds selected but also how we combine them together. Diversification brings meaningful improvement to portfolios designed to achieve a return objective over a long-term period of time.
I see the world of investing through a lens of risk and reward. Ultimately, it is far more important to minimize losses than to capture the best gains. Find me someone or some way to always capture the best gains – impossible, doesn’t exist. I’m friendly with some of the world’s greatest investors and none of them see themselves as perfect.
Over time, it’s really about understanding the power of compound interest. To this end, I wrote a paper entitled, The Merciless Math of Loss.
IMPORTANT DISCLOSURE INFORMATION
Investing involves risk. Past performance does not guarantee or indicate future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended and/or undertaken by CMG Capital Management Group, Inc. or any of its related entities (collectively, “CMG”) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. No portion of the content should be construed as an offer or solicitation for the purchase or sale of any security. References to specific securities, investment programs or funds are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations to purchase or sell such securities.
Certain portions of the content may contain a discussion of, and/or provide access to, opinions and/or recommendations of CMG (and those of other investment and non-investment professionals) as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current recommendations or opinions. Derivatives and options strategies are not suitable for every investor, may involve a high degree of risk, and may be appropriate investments only for sophisticated investors who are capable of understanding and assuming the risks involved. Moreover, you should not assume that any discussion or information contained herein serves as the receipt of, or as a substitute for, personalized investment advice from CMG or the professional advisors of your choosing. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisors of his/her choosing. CMG is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.
This presentation does not discuss, directly or indirectly, the amount of the profits or losses, realized or unrealized, by any CMG client from any specific funds or securities. Please note: In the event that CMG references performance results for an actual CMG portfolio, the results are reported net of advisory fees and inclusive of dividends. The performance referenced is that as determined and/or provided directly by the referenced funds and/or publishers, have not been independently verified, and do not reflect the performance of any specific CMG client. CMG clients may have experienced materially different performance based upon various factors during the corresponding time periods.
The CMG Tactical Fixed Income Index, CMG Tactical All Asset Index, CMG Tactical Equity Index and CMG Beta Rotation Index (the “Indexes”) are rules-based indexes that reﬂect the theoretical performance an investor would have obtained had it invested in the manner shown and do not represent actual returns, as investors cannot invest directly in the Indexes. The Indexes’ returns represented do not reﬂect the actual trading of any client account. No representation is being made that any client will or is likely to achieve results similar to those presented herein. Index returns are provided for informational purposes only; they are not meant to be applied as benchmarks since the statistical risk and volatility of client portfolios may materially differ from the indexes displayed. Unless specifically noted, performance results are presented net of a 2.25% maximum annual fee deducted from the account balance quarterly, in arrears.
The Ned Davis Research CMG U.S. Large Cap Long/Flat Index is not sponsored by S&P Dow Jones Indices or its affiliates or third party licensors (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices will not be liable for any errors or omissions in calculating the Ned Davis Research CMG U.S. Large Cap Long/Flat Index. “Calculated by S&P Dow Jones Indices” and the related stylized mark(s) are service marks of S&P Dow Jones Indices. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC.
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HYPOTHETICAL PRESENTATIONS: To the extent that any portion of the content reflects hypothetical results that were achieved by means of the retroactive application of a back-tested model, such results have inherent limitations, including: (1) the model results do not reflect the results of actual trading using client assets, but were achieved by means of the retroactive application of the referenced models, certain aspects of which may have been designed with the benefit of hindsight; (2) back-tested performance may not reflect the impact that any material market or economic factors might have had on the advisor’s use of the model if the model had been used during the period to actually manage client assets; and, (3) CMG’s clients may have experienced investment results during the corresponding time periods that were materially different from those portrayed in the model. Please Also Note: Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance will be profitable, or equal to any corresponding historical index (e.g., S&P 500 Total Return or Dow Jones Wilshire U.S. 5000 Total Market IndexSM) is also disclosed. For example, the S&P 500 Total Return Index (the “S&P”) is a market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. S&P Dow Jones chooses the member companies for the S&P based on market size, liquidity, and industry group representation. Included are the common stocks of industrial, financial, utility, and transportation companies. The historical performance results of the S&P (and those of or all indices) and the model results do not reflect the deduction of transaction and custodial charges, nor the deduction of an investment management fee, the incurrence of which would have the effect of decreasing indicated historical performance results. For example, the deduction combined annual advisory and transaction fees of 1.00% over a 10-year period would decrease a 10% gross return to an 8.9% net return. The S&P is not an index into which an investor can directly invest. The historical S&P performance results (and those of all other indices) are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual in determining whether the performance of a specific portfolio or model meets, or continues to meet, his/her investment objective(s). A corresponding description of the other comparative indices, are available from CMG upon request. It should not be assumed that any CMG holdings will correspond directly to any such comparative index. The model and indices performance results do not reflect the impact of taxes. CMG portfolios may be more or less volatile than the reflective indices and/or models.In the event that there has been a change in an individual’s investment objective or financial situation, he/she is encouraged to consult with his/her investment professionals.