M PrIng InterMarket revIew

1 InterMarket revIew / Volume 33 No. 9 11. Rising trend favoring US equities over the rest of the world is starting to look Gold is still classified as bearish, but some green shoots are Sector watch continues to favor earnings driven over The Dollar Index is still bullish, but very delicately balanced. Can t afford a month-end close under revIewMartIn PrIng sCommodities: CRB Spot RM Monthly close below 462 for a negative 12-month MA crossover or below 464 for a negative 65-week EMA crossover. Currencies: Dollar Index Month-end close below for a negative 12-month MA crossover; below for a negative 65-week EMA cross. Credit Markets: Bonds Above $ for a positive 12-month MA cross Friday close for Barclays 20-year Trust; above $ for a positive 65-week EMA Equities: MSCI World ETF Below $ for a negative 12-month MA crossover and below $ for a negative 65-week EMA cross.

2 Precious Metals: Gold A month-end close above $1262 for a positive 12-month MA crossover; a Friday close above $1234 for a positive 65-week EMA crossover. US Equities: S&P Composite Month-end below 2128 for a negative 12-month MA crossover; a Friday close below 2125 for a negative 65-week EMA crossover. PublIshIng a synoPsIs of the world s InterMarket analysIs for over 35 approaching important benchmarks. (These are not predictions, merely important chart points.)Market suMMaryMarkets requIrIng actIon6208 93rd St Cir E, Bradenton, FL 34202941-926-9664 Chart of the Month ..2 Guidelines for IMR Asset Allocations .. Dollar-Based Asset Turner Stages and Sector Analysis ..5 Overview and Global Financial Markets .. Stock Credit Markets ..17 Commodity Markets ..26 Currencies ..33 Precious Metals ..39contentsFebruary, 2017 VOL. 33, NO. 9 Published and all rights reserved by PrIng Research.

3 In addition to publishing the InterMarket revIew , the International Institute for Economic Research, d/b/a PrIng Research, also acts as a consultant on financial markets and operates as an investment making specific investments, further investigation is recom-mended. Although information contained in this publication has been derived from sources which are believed to be reliable, they are not always necessarily complete and cannot be guaranteed. Neither PrIng Research, Inc. nor any of its employees, or any person(s) or firm who is represented within this publication shall have any liability for any loss sustained by anyone who has relied on the information contained in this publication. Employees of this company may at times have positions in the securities referred to in this publication and may make purchases or sales of these securities while the publication is in circulation. The views expressed in this publication are those of the author and do not necessarily reflect the position or opinion of PrIng Turner Capital Group or its affiliates.

4 The InterMarket revIew is published monthly by PrIng Research, Inc., at 6208 93rd St. Cir. E., Bradenton, FL 34202. InterMarket revIew . Address all subscription querries to Circulation Dept., InterMarket revIew , phone 941-926-9664, Monday - Friday, 9:00 to 4:30 EST. 2015 SUBSCRIPTION RATES: E-mail - $ introductory quarter, $ quarterly renewal, (12 issues). All payments in currency only, please. Cancelations MUST be made in writ-ing via email to respectively. Unused months will not be refunded unless InterMarket revIew / February, 2017 Chart 1 They say that a bull market climbs a wall of worry. That wall currently facing US equity market participants has its roots in excessive levels of valuation. One of these measures, which has stood the test of 116 years of time, is the Shiller Cyclically Adjusted Price Earnings Ratio. We think of it, not so much as a valuation measure, but as a gauge of sentiment.

5 Extremely high readings indicate investors are expecting rapid growth, otherwise why would they pay such a high price for $1 worth of earnings? By the same token, low readings reflect fear and pessimism, as investors demand to be compensated for what they perceive as huge risks. Chart 1 displays the ratio from a historical perspective, whereas Chart 8 limits itself to the most recent couple of decades. Since extreme levels in the P/E are important in that they provide a clue as to the degree of optimism or pessimism amongst market participants, the current high reading, on the surface, looks pretty scary. However, we believe the trend to be equally if not more important. For example, in 1996 the P/E stood at 29. Anyone using that historically high reading to sell would have sat out several years of a rising market. Only when the ratio reversed did the stock market follow suit. It is never possible to consistently identify such turning points as they are developing, but pretty well all of the secular trend reversals since the 1920 s have been confirmed by long-term trendline breaks.

6 Fast forward to the preliminary reading for January was significant from a trend point of view, due to the fact that the ratio experienced a tentative breakout from an almost 15-year reverse head and shoulders pattern. The long-term KST also went bullish (see Chart 8). We do not know how long the implied rally in sentiment will play out. However, as long as the P/E is able to maintain a position above its 48-month MA and red (2009-17) up trendline, historically high valuations will remain a wall of worry. That means that normal valuations will be set aside, as the forces of irrationality temporarily obtain the upper hand. For the record, the 48-month MA and up trendline are at 25, and the upside objec-tive called for by the inverse head and shoulders is for a P/E just shy of 60. That is certainly not a forecast. What we can say though, is that when the psychological elastic finally breaks, as in always does, that will be the time to adopt a very cautious stance.

7 Chart of the Month: The Shiller P/E RatioInterMarket revIew / Volume 33 No. 9 3 Asset AllocAtion RecommendAtions * Dependent on market action. ** Stop is based on Friday close. ** Buy on Friday close portfolio allocations presented above for the Inter-market revIew (IMR) have two functions. First, they are intended as a guide for a neutral investor; , one who lies between conservative and aggressive. For example, we may recommend a 40% allocation to US stocks. An older more conservative subscriber looking for income and safety may conclude that such an allotment may be too aggressive. On the other hand, a younger investor, who has time and cash flow on their side, could find the 40% overly conservative. The basic point is that these allocations should only be taken at face value if you consider yourself to be a neutral second purpose of our allocations is to summarize our thinking about the markets in a practical, executable way.

8 For example, we might conclude from the position of our indicators that inflation hedge stocks and commodities are headed higher. In that instance, the allocation page would be used to emphasize those views by recommending inflation driven sectors, resource based country ETF s, such as Canada and Australia, as well as commodity index ETFs or individual commodity ETF s. We might even include an inverse bond ETF to undermine our inflationary expecta-tions. By the same token, if our indicators suggest a global bear market for equities, that portion of the portfolio would be greatly reduced. This equity exposure would most likely comprise defensive sectors such as utilities and consumer staples. Greater exposure to long-term bonds and cash would round out the for IMR Asset AllocationsVarious asset classes and sectors perform differently in different parts of the business cycle. Our recommendations are usually consistent with the prevailing stage as flagged by our models.

9 Technical factors that we take into consideration are long-term moving averages, such as the 12- month or 65-week time span, the absolute long-term KST, relative action and the long-term KST for relative action. Individual US equity sectors are compared to the S&P Composite and country ETF s to the MSCI World Stock ETF (ACWI). Since there is always a bull market somewhere and some investors have an insatiable appetite to be constantly active, we do, from time-to-time, recommend spreads where it s possible to take advantage of a trend in a relationship that can benefit regardless of the market s direction. For example, transports tend to be an early cycle leader and energy a laggard. If the technicals were consistent, a long transports/short energy ETF trade might be most instances, risk management stop losses are rec-ommended. The stop will typically be placed below a previous short-term low or more commonly under a 65-week EMA.

10 Each month the stop levels are reviewed and where possible are raised. When a market or sector is considered vulner-able, stops will be tightened aggressively. Because markets can move strongly between issues, new subscribers should always assess the risk between current prices and stop levels to make sure that the difference is manageable. If it is not, it probably means the security in question is overstretched and you are better advised to wait for a Stocks 70%International Stocks 13%Recommended Sector ETF sGuggenheim S&P 500 Equal Weight Materials ETF (RTM)**$87iShares Dow Jones US Oil Equipment ETF (IEZ)**$ North American Tech-Multimedia Networking ETF (IGN)**$39iShares Dow Jones US Reg Banks Industries ETF (IAT)**$ S&P 500 HI Beta (SPHB)**$31 PowerShares S&P Small Cap Financials Portfolio (PSCF)**$43 First Trust ISE Cloud Computing (SKYY)** $ Trust ISE Water Index Fund ETF (FIW)**$ X Copper Miners ETF (COPX)**$ X Fertilizer (SOIL)**$ S&P 500 Equal Weight Industrials ETF (RGI)**$88iShares Dow Jones Transport.