By Steve Blumenthal
April 20, 2022
S&P 500 Index — 4,459
Market trends persist over time and stem from changes in risk premiums (the return investors demand to compensate them for the risks they take.) Risk premiums vary over time in response to new market information. Investors react to the changes gradually, and this creates trends.
Rules-based Trend following strategies don’t predict; they react to what price is signaling in terms of supply and demand. With more buyers than sellers, the price moves higher. More sellers than buyers, price moves lower. The long-term objective of trend-following is to participate in secular bull market gains while minimizing the losses associated with secular bear market declines.
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:
Adding fuel to the fire is the following chart that looks at the trading volume of buyers vs. sellers. NDR’s Volume Supply is the smoothed total volume of declining issues. NDR’s Volume Demand is the smoothed total volume of advancing issues. The data comes from the Broad Market Equity Series All-Cap Volume – data from 1981 to the present. The orange line is Volume Demand (buyers), and the dotted black line is Volume Supply (sellers). Returns are best when there are more buyers than sellers.The red date boxes with arrows indicate periods when Volumn Demand dropped below Volumn Supply (think of it as more sellers than buyers). Note the challenges that followed for the stock market when the sellers dominated market activity. Not all demand vs. supply crosses (where the black line rose above the orange line) signaled significant declines, but the picture sure is worth a thousand words. Also, note that the 2020 Covid signal was late and flip-flopped back from quick sell indication to quick buy. Late 2018, also missed. Fed intervention was the likely culprit. While not a perfect indicator, it is good to keep an eye on. The most recent cross occurred earlier this year. Buckle up.
Also, the green line marks the period from the 2000 Volumn Demand sell indicator to approximately 14-years later when the S&P 500 Index finally recovered and retook its prior high. Not saying it is going to happen. Just saying it can happen.
The Dashboard of Indicators follows next.
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, Red is Bearish)
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 most recent score is 62.36.
The Ned Davis Research (NDR) CMG U.S. Large Cap Long/Flat Index measures “market breadth.” Market breadth is simply a measurement of market activity, such as advances and declines, new highs and new lows, advancing and declining volume and price momentum, and Trends based on 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 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 of the market across 24 Industry Groups (GICS), as measured by three types of priced-based, industry-level indicators: trend-following, volatility, and mean-reversion. Trend-following primary indicators include momentum and moving average measures that evaluate the rate of change in price in each of the 24 Industry Groups (GICS) over short-term, intermediate, and long-term time frames to assess the current direction of the markets. Mean-reversion indicators are applied in each of the 24 Industry Groups (GICS), measuring the deviation in price movement above and below the historic long-term price trend. Mean-reversion is based on the theory that prices and returns eventually move back toward their historical mean (or average). The model applies these primary and secondary indicators across the S&P 500 industry groupings to ultimately produce trade signals that are either bullish (meaning prices increasing over time) or bearish (meaning prices decreasing over time). The final market breadth composite is the scaled aggregation of these indicators across the S&P 500 industries to determine the breadth composite score (between 0 and 100). A high score means that there is broad positive up-trending participation across the 24 Industry Groups. A low score means many sectors have broken down.
Generally, scores above 50 (bold red dotted line in the middle section of the chart) indicate a strong market environment, and scores below 50 indicate a weak market environment.
If you would like to see the long-term index history, we can share it with you on a one-on-one basis at your request. Please email me at firstname.lastname@example.org
2. S&P 500 Large Cap Index – 13/34–Week EMA Trend Chart: Buy Signal – Bullish for Equities
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 (“M.A.”) trend line rises above the 34-week smoothed M.A. 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 = a bullish signal for equities.
3. Volume Demand vs. Volume Supply: Sell Signal – Bearish for Equities
When there are more buyers than sellers, prices move higher. When there are more sellers than buyers, prices decline. Supply and demand dynamics work 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.
4. S&P 500 Index Monthly MACD: Sell Signal – Bearish for Equities
5. S&P 500 Index Daily MACD Indicator: Sell Signal – Short-term Bearish for U.S. Large Cap Equities
Focus on the MACD moving average lines at the bottom of the chart. Buy signals (green arrows) occur when the black line crosses above the red line. Sell signals (red arrows) occur when the black line crosses below the red line. You can learn more about MACD here.
6. Don’t Fight the Tape or the Fed – Indicator Reading = -1 (Bearish Signal for Equities)
Current readings are highlighted 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!”
- Data from 1980 to present and 1999 to present.
7. S&P 500 Index vs. 200-Day Moving Average Trend: Buy Signal – Bullish for US Large Cap Equities
Here is how to read the chart:
- Focus on the 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 M.A. price line drops from a high point by 0.5% or more. A buy signal occurs when the 200-day M.A. price line rises from a low point by 0.5% or more.
- The current trend signal is shaded grey.
- Bottom line: Returns are best when the 200-day M.A. trend line is rising.
8. S&P 500 Index vs. 50-Day & 200-Day Moving Average Cross: Sell Signal – Bearish for US Large Cap 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. Please refer to the circles in the lower part of the chart. This trend-following process is also in a buy signal.
9. NASDAQ Composite vs. 200-Day Moving Average Trend: Buy Signal – Bullish for Equities
Read this chart in the same way as the S&P 500 200-day M.A. rule explained immediately above. 200-day M.A. line is the dashed yellow line. The solid blue line is the NASDAQ Composite. Focus on the upper right in the chart and data box below. The current “mode regime” is shaded in the data boxes (bottom of the chart).
10. Value vs. Growth Factor Model: Favors Value over Growth
The middle section of the next chart plots a relative strength ratio comparing the S&P 500-Citigroup Growth Index to the Citigroup Value Index. When the line is rising, growth is outperforming value. When falling, value is outperforming growth. Note the longer-term uptrends and downtrends. The bottom section features the NDR Asset Allocation model (scaled 0-100). When the model is between the two brackets, the model is considered neutral (i.e., no clear tendency for outperformance by either market). The data box in the top left corner shows the annualized performance based on the signal. Grey shades the current signal. The long-term model tends to produce one trade per year to one trade every few years.
NDR Crowd Sentiment Poll: Extreme Pessimism (S/T Bullish for Equities)
The current weekly sentiment reading is 53.2. It was 56.2 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, that 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 the present).
- The current indicator score is highlighted in yellow:
NDR Daily Trading Sentiment Composite: Extreme Pessimism (S/T Bullish for Equities)
The current regime is highlighted in yellow below.
- The current daily sentiment reading is 51.11. It was 41.11 last week.
- Buying opportunities occur at “Extreme Pessimism” readings below 41.5. Selling/trading opportunities occur at “Extreme Optimism” readings above 62.5.
- Note: The most attractive buying opportunities have historically occurred with readings below 25 (faded red arrow). While the strongest sell signals have occurred with readings above 75.
- 1994-to-Present and 2006-to-Present. Data boxes in the bottom section of the chart (current indicator zone shaded grey below):
Fixed Income Trade Signals
The Zweig Bond Model: -1 Sell Signal – Bearish on Bonds
Model Trend Indicators:
- Buy when the Dow 20 price index rises from a bottom by 0.6%. Sell when the index falls from a peak by 0.6%.
- Buy when the Doe 20 price index rises from a bottom by 1.8%. Sell when the index falls from a peak by 1.8%.
- Buy when the Doe 20 price index exceeds its 50day moving average by 1%. Sell when the index crosses below the 50-day by 1%
- Buy when the Fed Funds Target Rate drops by at least 1/2 point. Sell when the rate rises by at least 1/2 point.
- Buy when the yield curve (AAA corporate yield minus the 90-day commercial paper yield) exceeds 0.6. Sell when the yield curve falls below -0.2. Go neutral between -0.2 and 0.6.
Add up the total score. Scores can range from +5 to -5. Positive scores of +1 or higher equal a buy signal. Negative scores of -1 or lower equal a sell signal. Historically, bond market returns are meaningfully better when the model is in a buy signal.
- If you’d like a copy of the chart, please email email@example.com.
- The Model index performance history vs. buying and holding the is available at your request.
- 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.
- NDR Disclosure; CMG Disclosure
If you would like to see the long-term index history, we can share it with you on a one-on-one basis at your request. Please email me at firstname.lastname@example.org
10-Year Treasury Weekly MACD: Sell Signal – Rising Rates: Bearish on Bonds
Extended Duration Treasury ETF: Sell Signal – Rising Rates: Bearish on Bonds (1-5-22)
Economic and Select Recession Watch Indicators:
- Global Recession – High Probability of a Global Recession
- U.S. Recession – Low Probability of U.S. Recession Risk (Next Six Months)
- Inflation Watch – High Inflationary Pressures
- Dr. Copper – Long-term Bearish Sell Signal
- U.S. Dollar Price Trend – Short-term (Daily MACD) Sell Signal
- U.S. Dollar Price Trend – Medium-term (Weekly MACD) Buy Signal
Dr. Copper: Long-term Bearish Sell Signal
“Dr. Copper” is insider lingo used in the commodities markets to explain price trends in copper’s ability to predict the overall health of the economy. When copper prices decline it may indicate sluggish demand and an imminent economic slowdown. The following chart looks at monthly price data.
U.S. Dollar Price Trend: Short-term (Daily MACD) Buy Signal
U.S. Dollar Price Trend: Medium-term (Weekly MACD) Buy Signal
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.
Global Recession Probability Indicator – High Probability of a Global Recession
- First, focus 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 4.89, meaning there is a 4.89% probability that we are in a global recession. Bottom line: High Global Recession Risk.
- Note the dotted lines that market three zones: High Recession Risk to Low Recession Risk. The grey shaded bars that show periods in which the OECD said there was a global recession (something that is only known more than six months after the fact).
- The model line crossed above 70 in mid-2018. About six months later, the OECD confirmed the global recession. You can see that this indicator is not perfect as recessions sometimes started before the cross above the 70 line or after the cross. For U.S. investors, since business is global, this model can be an early warning indicator for U.S. recession.
- Finally, focus on the data box in the lower right section of the chart. When the reading is ‘Above 70’ recession has occurred 93.02% of the time. When the reading is ‘Below 30’ recession has occurred just 17.65% 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 = Contraction
- Note the 77% “Correct Signals” in the top left corner of the chart. This process has done a good job at signaling prior to recessions. Not perfect but pretty good.
- SIGNAL ALERT – MOVED TO AN “EXPANSION” SIGNAL ON 7-31-2020
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.
- SIGNAL ALERT – MOVED TO AN “EXPANSION” SIGNAL ON 7-31-2020
Credit Conditions – Favorable, Low U.S. Recession Risk
- Focus on the lower section of the chart. A drop below the green dotted line has preceded the last three recessions. When lending tightens up “Credit Conditions Unfavorable,” companies have a hard time funding. Recession tends to follow when lending conditions become unfavorable.
- The vertical grey bars indicate past recessions.
- Updates monthly by the 15th.
- Bottom line: Lending conditions are currently favorable.
U.S. Economy vs. Yield Curve – Low U.S. Recession Risk
- Watch for a drop below the green dotted line (red rectangles). Recessions are identified in grey (horizontal bars).
- Such drops below 0 are what is known as an inverted yield curve. Inversion happens when the 6-month Treasury Bill yield is higher than the 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 the recession’s 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.
- Bottom line: Once the yield curve inverts, recession follows about a year later.
13-week EMA vs. 34-week EMA: Buy Signal
Buy signals occur when the 13-week moving average trendline (blue line) crosses above the 34-week moving average trendline (red line). Sell signals occur when the 13-week moving average trendline (blue line) crosses below the slower moving 34-week moving average trendline (red line).
Green arrows indicate buy signals, red arrows sell signals.
Intermediate-Term MACD: Buy Signal
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.
10 Valley Stream Parkway, Suite 202
Malvern, PA 19355
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 E.M. 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. Portfolio positions are subject to change at any time without notice. Please contact your CMG representative if you have any questions about your account.
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 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.
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
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.