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This presentation is solely for informational purposes and not a solicitation to invest. Stonehenge Analytics offers and publishes forecasts of future likely price movements of various financial assets. These are opinions formulated from our cycles-based historical analytical research. They are not, nor are they represented to be investment advice. Individuals or institutions choosing to act on these opinions are doing so at their own risk. Stonehenge Analytics does not warrant or guarantee that acting upon its published opinions will produce financial gain. Past historical performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Individuals and institutions should consult a financial advisory professional before making any investment.Weekly Market Update AddendumAugust 16, 2017Cycles Analysis for Select Sector Basic Materials Stocks ETF (XLB) Featured in August 13 “Weekly Update” The August 13 “Weekly Update” featured a 2-year chart of the Select Sector Basic Materials Stocks ETF (XLB) with an accompanying technical analysis which concluded that over the near term this industry sector ETF had an unacceptably high risk of experiencing a price decline of as much as -9.0% from its most recently-made all-time price high from July 25 at $55.92/share to justify longer-term investment-oriented accounts buying the current “dip” in this sector ETF. Chart-based technical analysis came to a conclusion that standard technical indicators like RSI and MACD no longer confirmed the XLB rising intermediate-term price trend in place since January 20, 2016 and that longer-term oriented accounts would be better served by sticking with the many industry sector ETF’s like the Select Sector Health Care Stocks ETF (XLV) that was also featured in Sunday’s Weekly Update” that still had unambiguous confirmation from its RSI and MACD indicators of its intermediate-term up-trend since January 2016. Today’s cycles-based analysis of the XLB will attempt to either verify or refute the conclusion based upon technical analysis that longer-term investment-oriented accounts will be better-served by devoting their resources to lower-risk industry sectors and sector ETF’s than the XLB and Basic Materials sector for the time being. The Stonehenge Analytics team used price data for the XLB from November 21, 2008 through July 31, 2017 for its cycles-based analysis. Repeating price cycles of at least 30 trading days in length from price low to price low and price high to price high over that 8-year-plus time period were identified. Of the 30 price cycles identified 6 were chosen for their superior total return performance (both long and short) and percentage of winning trades. A 6-cycle composite line combining all 6 of these cycles was constructed. The top chart below shows this 6-cycle composite line compared to the actual $DAX Index price line from July 2014 through July 31, 2017 and the 6-cycle composite line forecast through February 2021. Cycle lengths used to construct the composite cycle line ranged from 41.3 trading days through 353 trading days and are listed in the upper left corner of the top chart. Below that chart is the 2-year chart of the XLB from the August 13 “Weekly Update”. The bottom chart shows individually the 6 cycles used to construct the 6-cycle composite line from July 2014 through February 2021. Dates on both the top and bottom chart are dates of inflection points for the 6-cycle composite line and the individual cycles. Our cycles-based analysis of the XLB ETF will start with the forward forecast 6-cycle composite line high and low for next year on September 5 and November 1, 2018 respectively that are highlighted in Red and Green on the top chart of the 6-cycle composite line. The 6-cycle composite forecast line shows a very sharp, straight-down drop between these forecast cycle high and low dates. A look at the bottom chart which shows the 6 cycles individually reveals the reason for the sharp drop. Between August 22 and September 10, 2018 four of the six cycles used to construct the 6-cycle composite line will have nearly-simultaneous cycle highs. Not long afterward between October 25 and December 24, 2018 all 6 cycles will have nearly simultaneous cycle lows. This “nesting” of cycle lows will include the three longest-term 102-day, 117-day and 353-day cycles. In the experience of the Stonehenge Analytics team “nestings” of nearly simultaneous cycle lows for all 6 cycles have had a historically highly successful track record of accurately forecasting price low points reached at the end of what have been at least intermediate-term dimension downward price corrections greater than -10.0% and have sometimes been price lows reached at the conclusion of multi-year bear markets where the price damage has exceeded -40.0%. Both the 6-cycle composite line chart and the individual cycles chart show a nearly identical “nesting” of cycle lows for all 6 cycles in January 2016 that quite accurately forecast a major intermediate-term price low point reached at the end of a multi-month price decline that began eight months earlier in May 2015 and which lowered the XLB ETF by -29.7%. To our eyes the time period between early September and early November of next year will be extremely susceptible to rapid downward price movement for the XLB ETF. Longer-term investment-oriented accounts most definitely do not wish to acquire the XLB immediately in advance of this well-advertised window of vulnerability. The 6-cycle composite line shows that the price decline expected to end in early November 2018 could begin as early as in the final week of March of next year. With a prospective forward holding period of just 6 to 7 months for any XLB shares bought today longer-term investment-oriented accounts might question the wisdom of buying the current “dip” in the XLB. The cycles-based analysis essentially agrees with the chart-based technical analysis from Sunday’s “Weekly Update” but for different reasons. The cycles-based analysis can see a very dangerous holding period for this particular ETF coming up that will begin in late March of next year and last through early November. Longer-term investment-oriented accounts will wish to avoid incurring the price loss likely to be associated with this dangerous holding period. The best way to do that is to avoid acquiring the asset in question, the XLB ETF in this case, at an entry price level that is highly likely to prove to have produce a significantly large capital loss 15 months down the road. Both the 6-cycle composite line and the chart of the individual cycles rather strongly suggest that long-term investment-oriented accounts will be much better served by preparing today to begin to reduce their holdings of XLB and its component stocks between March 30 and September 5 of next year. Current holdings of XLB can be held a while longer, but it makes very little sense for a long-term investor to add to those holdings at the current time. Shorter-term trading-oriented accounts whose forward time horizon is less than three months may continue to trade the XLB primarily from the long side through late March of next year. The Stonehenge Analytics team cautions however that the bottom chart of the 6 individual cycles shows that the current downward price move in place since July 25 might continue through September 12. We therefore emphatically reiterate our usual statement that much more precise technical trading tools than the 6-cycle composite line be employed for determining exact price and date entry points. Short-term trades entered on the long side between today and September 12 should probably not be held beyond the October 16 price high forecast by the 6-cycle composite line. A secondary price low is forecast by the 6-cycle composite line for the very first week of 2018 and the Stonehenge Analytics team’s experience with 6-cycle composite lines tells us that the forecast secondary price low could be at or below the lowest price point that the XLB ETF reaches between today and September 12. Shorter-term trading oriented accounts should expect that another favorable entry point on the long side of the XLB will present itself early in January for a forward holding period of almost 3 months through March 30. As we outlined earlier, the big opportunity for shorter-term trading-oriented accounts to profit from a short sale of XLB will be between the 6-cycle composite line forecast high for September 5, 2018 and its forecast low for November 1, 2018. Both shorter-term trading-oriented accounts and longer-term investment-oriented accounts will prospectively be offered very low-risk entry points for purchase of XLB and its component stocks in November of next year. The 6-cycle composite line strongly suggests that there will be a strong “bounce” rally through mid-January 2019 followed by a decline to an April 2019 re-test of the expected deep intermediate-term price low forecast for November 2018. This decline is expected to reach its low point on or about April 12, 2019. Shorter-term trading-oriented accounts should be able to profit on both the long side and short side of the XLB during this “bounce and re-test” period between November 2018 and April 2019. Longer-term investment-oriented accounts may wish to divide their purchases of XLB between the November 1, 2018 and April 12, 2019 expected price lows. The Stonehenge Analytics team cautions both types of accounts that another rapid, straight-down drop into a “nesting” of cycle lows is forecast for the November 2019 through May 2020 time period. Though the 6-cycle composite line shows the expected low for May 2020 to be higher than the expected low for November 2018 it could easily turn out that it will be significantly lower price. We will all have to see what the actual price behavior turns out to be subsequent to the expected deep intermediate-term low forecast for November of next year before making that judgement. Thomas J. DruittFinancial Markets Research and AnalysisStonehenge Analytics10247894784728Feb. 8, 2021Feb. 8, 20219444990741045Dec. 11, 202000Dec. 11, 202091437122967211May 12, 2020May 12, 202083756502854325Jan. 21, 2020Jan. 21, 20208263255715010Nov. 15, 20190Nov. 15, 201979349602060575Oct. 4, 2019Oct. 4, 20197608211827860July 15, 2019July 15, 201973056752569845Apr. 12, 2019Apr. 12, 201969784821759513Jan. 16, 2019Jan. 16, 201965462153372485Nov. 1, 20180Nov. 1, 20186494780904875Sept. 5, 20180Sept. 5, 201861158412259845July 6, 2018July 6, 20185796663715717Mar. 30, 2018Mar. 30, 201855896292380615Jan. 5, 2018Jan. 5, 201850289131578358Oct. 16, 201700Oct. 16, 201747002703105150Aug. 3, 2017Aug. 3, 201742862502578100May 8, 2017May 8, 20174131765853740Feb. 24, 2017Feb. 24, 20172251207922751Nov. 12, 20150Nov. 12, 201526221433372653Jan. 28, 2016Jan. 28, 201619399253173095Sept. 30, 201500Sept. 30, 20151707743586321June 24, 2015June 24, 20156035623355400Oct. 15, 2014Oct. 15, 201486778863502468Apr. 14 to June 2, 2020 “nesting” of cycle lows for 5 of 6 cyclesApr. 14 to June 2, 2020 “nesting” of cycle lows for 5 of 6 cycles916959218030647634090560861Oct. 30 to Dec. 31, 2019 “nesting” of cycle highs for 5 of 6 cycles00Oct. 30 to Dec. 31, 2019 “nesting” of cycle highs for 5 of 6 cycles848810576789542611623519721July 27 to Sept. 12, 2017 “nesting” of cycle lows for 5 of 6 cyclesJuly 27 to Sept. 12, 2017 “nesting” of cycle lows for 5 of 6 cycles503753917944385934686509102Aug. 22 to Sept. 10. 2018 “nesting” of cycle highs for 4 of 6 cycles00Aug. 22 to Sept. 10. 2018 “nesting” of cycle highs for 4 of 6 cycles662479984553218888973493842Jan. 19 to Mar. 22, 2016 “nesting” of cycle lows for all 6 cycles0Jan. 19 to Mar. 22, 2016 “nesting” of cycle lows for all 6 cycles2768792179443860036973467963Oct. 25 to Dec. 24, 2018 “nesting” of cycle lows for all 6 cycles00Oct. 25 to Dec. 24, 2018 “nesting” of cycle lows for all 6 cycles68749651785812 ................
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