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 UpdateWeek of May 1-5, 2017

S&P, NASDAQ Score New All-Time HighsDow Transports, Small-Cap Stocks Lag Behind

Crude Oil Price Collapses to $46.22/bbl., Down -13.4% from April 11

In-House Indicators Warn of Significant Downward Correction Soon---Next Week’s Market

The so-called “Trump Rally” appeared to breathe new life this past week as two of the major U.S. stock indices rode an upward price surge late on Friday afternoon to new all-time daily and weekly-close price highs. For the NASDAQ Composite Index setting new all-time highs was nothing new. It had been regularly doing so since Monday of the prior week, April 24 . For the S&P 500 however Friday’s new all-time daily and weekly-close price high at 2,399.29 was its first venture into new high territory since March 1. And as its 5-year chart below shows, it has not yet achieved a definitive upside “breakout” through and above that March 1 previous daily-close high at 2,395.96. The chart shows the boundaries of the recent trading range for the S&P 500 since that March 1 high was made as the two dashed horizontal blue lines. Should it achieve a definitive upside “breakout” then a “measured move “projection using the 78-point width of the trading range will call for the S&P to rise to approximately the 2,475 price level. But, there are many reasons to remain skeptical that the S&P will succeed in achieving that upside “breakout” starting with the fact that both technical indicators have been falling since March 1 and continued to do so this past week. The MACD indicator is on the verge of breaking down and through its own intermediate-term up-trend line of rising lows made in January and November 2016. In technical chart analysis parlance these are negative divergences with the S&P price behavior since March 1 and are good reasons to doubt the staying power of the S&P’s most recent short-term price run-up since its March 27 short-term low was made at the 2,322 price level. The chart below also shows that the S&P has established a very well-defined long-term up-trend channel of parallel lines of rising highs and lows since November 16, 2012. He top channel line of rising highs made December 29, 2014, February 25, 2015 and March 1, 2017 is currently at approximately the 2,425 to 2,430 price range. Even if the S&P does achieve an upside “breakout” this well-established trend line will be a roadblock in its way of achieving the “measured move’ projected target price. In short, upside potential from here is very limited over the relatively short run of the next 8 to 12 weeks. The lower channel line of the long-term up-trend channel is all the way down at approximately the 2,000 price level that is -16.7% below the Friday closing price. Forward risk/reward potential is heavily tilted toward risk at its current price level.

Another issue with Friday’s new all-time price highs made by the NASDAQ Composite and the S&P 500 was the absence of confirmation by any other major Index. The Dow Industrial Average finished on Friday about 100 points shy of matching its March 1 daily-close high of 20,115. Its companion Dow Transportation Stocks Average finished on Friday at 9,189 and down by -4.2% from its March 1 daily close high at 9,593. In addition, if the Dow Industrial Average were to make a new daily-close high in the coming week it would not be confirmed by

the Dow Transports Average, producing a “Dow Theory” non-confirmation. The 5-year comparison chart below of the Dow Industrial (blue line on chart) and Dow Transportation (green line on chart) Stocks Averages shows that any such non-confirmation will be a repeat performance of the May 2015 non-confirmation that correctly signaled that a major intermediate-term downward price correction lay just around the corner.

In addition, the small capitalization stock Russell 2000 Index ($RUT), failed to match the new all-time price highs made by the S&P 500 Index. The 2-year chart of the $RUT Index below shows that at its Friday closing price level of 1,397 it was below its recent April 26 daily-close high of 1,419 by -1.55%. The $RUT chart below shows an even more glaring set of negative divergences between its two technical indicators and its price behavior since December of last year that that for the S&P 500. Both technical indicators are in confirmed downward trends of falling highs and lows since December 9 of last year. The chart shows that the $RUT Index has a very well-defined technical price support boundary at the lower horizontal line drawn across its shot-term price lows made on January 19, January 30, March 27 and most recently on April 17 that are all on either side of the 1,340 price level. Should the $RUT Index break through and below this well-defined support range then it is certain to continue down at least to re-test its currently operative intermediate-term up-trend line of rising lows made on February 11 and November 4, 2016. This up-trend line is currently at approximately the 1,300 price level that is down by -6.94% from its Friday closing price. Over the relatively near term of the next 8 weeks or so the risk/reward profile for the $RUT Index is also tilted heavily toward the risk side.

Though none of the three charts we have shown preclude or eliminate the possibility that the Dow Industrial Average and Russell 2000 Index could continue up to post new all-time daily-close price highs and the S&P 500 continue rising to about the 2,425 price level, all three charts show that potential upside reward over the relative near term of the next 8 weeks or so is small and potential downside risk over the next 3 months or longer is huge by comparison. For long-term investment-oriented accounts the decision here should be both obvious and easily reached. Current prices are not good price entry points for longer-term holding periods of 12 months and longer. A decision to forego the purchase of stocks or stock mutual funds is not the same as a decision to sell them. No one here is advocating selling stocks out of long-term portfolio accounts. We are expressing a strong opinion that stock positions should not be increased at the current time and cash conserved in the expectation that a substantially lower-priced and less risky entry point will be offered later in 2017. For the next two to three weeks it also should be obvious that the key stock index to monitor will be the Dow Transportation Stocks Average. If it continues to languish while the Dow Industrial Average advances to a new all-time daily-close price high then our strong opinion just expressed will likely turn into accurate prophecy.

Crude Oil Price Collapses to $46.22/bbl., Down -13.4% from April 11

Other than the new all-time price highs scored by the NASDAQ Composite Index and S&P 500 Index this week the other major financial markets story was the collapse of the price of crude oil. The 3-year chart below of West Texas Intermediate Crude Oil ($WTIC), the benchmark U.S. grade of oil, fell by -$3.11/bbl. last week along to close at $46.22/bbl. Its Thursday daily-close price at $45.52/bbl. was its lowest daily closing price since November 29 of last year. Since its most recently-made short-term daily-close price high at $53.40/bbl. that it posted on April 11 $WTIC has fallen by -13.4%. The 3-year chart of $WTIC below shows that the April 11 short-term price high was in fact a failure by it to even reach the major technical price resistance at the top horizontal line drawn across the series of short-term price highs made between December 28 of last year and February 1 of this year on either side of the $54.00/bbl. mark. The chart also shows that on an intraday basis $WTIC re-tested its short-term daily-close low made on November 14 of last year at $43.32/bbl. If this technical price support fails to halt its decline then we can expect that $WTIC will continue down to test the lowest horizontal line drawn from its August 2, 2016 daily-close low at $39.51/bbl. As far as chart-based technical analysis goes this August 2, 2016 price low is the next logical price point from which we might expect a successful test and a reversal of the current downward price trend. That is because it is also at the point where the dashed red and long-broken down-trend line of June 24, 2014 and October 19, 2016 successively falling price highs is located. Since reaching its major long-term price low at $26.05/bbl. on February 11, 2016 $WTIC has broken a series of progressively less steeply-sloped down-trend lines of successively falling highs that all originate at its major intermediate to long-term price high of $107.50/bbl. it recorded on June 24, 2014. Having just been stymied at the newly formed June 24, 2014 and February 1, 2016 newly-formed down-trend line the $WTIC price is most likely headed to re-test from above the last down-trend line that it successfully broke to the upside. That former down-trend line is located at approximately the same price as the short-term price low from August 2, 2016 at $39.51/bbl. The basic reason behind the relatively sudden collapse of $WTIC is that the oil trading world has only now discovered that the OPEC cartel no longer controls the marginal price of crude oil. In spite of the fact that the OPEC member states imposed production cut-backs on themselves and have surprisingly been honoring those commitments, inventories of crude oil in the U.S. and abroad have swelled. This is because U.S. shale oil producers that OPEC has no control over can cover their costs of production from shale fields when $WTIC is in the $40 to $50/bbl. price range. When the $WTIC price rose above the $40.00/bbl. mark these U.S. producers began to put back into production wells that they had shut in when the $WTIC price collapsed below that price level in the final quarter of 2015. It turns out that shale wells can be brought back into production much more quickly than had previously been thought and more quickly than more

traditional liquid crude oil wells. OPEC no longer sets the marginal price of global crude oil. U.S. shale producers do that, and it is quite unlikely that any of them will apply for membership in OPEC anytime soon.

In-House Indicators Warn of Significant Downward Correction Soon---Next Week’s Market

The chart immediately below compares intermediate to long-term 50-day through 200-day moving averages of the daily ratio of new 52-week highs on the NYSE divided by that day’s total of both new highs and new lows using daily-close data since January 2015. As of this week the shortest-term 50-day moving average has crossed below all three longer-term moving averages. The chart shows that this feat was also accomplished on October 27, 2016 and June 19, 2015. In October of last year a multi-week price decline by all major U.S. stock indices was already underway. For the S&P 500 Index it started from an August 23, 2016 price high at 2,193 and ended on November 4, 2016 at 2,083 for a decline of -5.0%.In June 2015 the multi-week price decline had yet to commence. For the S&P 500 it began from a July 20, 2015 price high at 2,132 and did not end and concluded on September 29, 2015 at a low of 1,870 for a decline of -12.4%. The chart below begins in January 2015 and so does not show the other five exactly similar bearish crossings made by the 50-day moving average of daily new high/new low ratios on the NYSE below all three longer-term moving averages on the chart. The table below the chart lists all seven of those bearish crossings that have been made since the end of the last bear market on March 9, 2009. There has never been an instance on that list that the major U.S. stock indices escaped with less than a -5.0% price decline. In fact, the average price decline has been -11.95%. Some of these multi-week declines were already underway when the bearish crossing by the 50-day moving average took place. In others the bearish crossing preceded the commencement of sustained price decline by several weeks. There were exactly ZERO INSTANCES that the major U.S. stock indices escaped completely unscathed. The caution we have espoused based on chart analysis this week is backed up by rock solid statistical data that does not lie. The historical probability that the major U.S. stock indices will experience a significant and sustained multi-week downward price movement between today and five months from today is a 100% historical certainty. That being the historical odds it makes little to no sense for long-term oriented investors to purchase stocks at today’s prices. Cheaper prices are coming later this year.

1/2/2015

1/17/2015

2/1/2015

2/16/2015

3/3/2015

3/18/2015

4/2/2015

4/17/2015

5/2/2015

5/17/2015

6/1/2015

6/16/2015

7/1/2015

7/16/2015

7/31/2015

8/15/2015

8/30/2015

9/14/2015

9/29/2015

10/14/2015

10/29/2015

11/13/2015

11/28/2015

12/13/2015

12/28/2015

1/12/2016

1/27/2016

2/11/2016

2/26/2016

3/12/2016

3/27/2016

4/11/2016

4/26/2016

5/11/2016

5/26/2016

6/10/2016

6/25/2016

7/10/2016

7/25/2016

8/9/2016

8/24/2016

9/8/2016

9/23/2016

10/8/2016

10/23/2016

11/7/2016

11/22/2016

12/7/2016

12/22/2016

1/6/2017

1/21/2017

2/5/2017

2/20/2017

3/7/2017

3/22/2017

4/6/2017

4/21/2017

5/6/20170

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60

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90

10050, 100, 150, 200-Day M.A's, New H/L Ratios, 2-Year Rolling

50-Day M.A., New H/L Ratio 100-Day M.A., New H/L Ratio 150-Day M.A., New H/L Ratio 200-Day M.A., New H/L Ratio

Apr. 27, 2015

June 19, 2015 crossing

Oct. 2, 2015 Feb. 16, 2016

May 12, 2016 Sept. 8, 2016

July 8, 2016

Mar. 4, 2015

May 14, 2015

Oct. 27, 2016 crossing Nov. 17, 2016

Mar. 2, 2017

Feb. 1, 2017May 2, 2017 crossing

Date of Bearish Crossing Dates of S&P Price Decline Price Damage

May 26, 2010 April 26 to July 2, 2010 -17.1%

April 15, 2011 May 2 to October 5, 2011 -21.5%

May 23, 2012 May 1 to June 4, 2012 -10.5%

May 31, 2013 May 22 to June 24, 2013 -7.5%

Sept. 25, 2014 September 19 to October 15, 2014 -9.85%

June 19, 2015 July 20 to September 29, 2015 -12.4%

Oct. 26, 2016 August 23 to November 4, 2016 -5.0%

Our current best guess for the commencement of the downward correction strongly indicated by the historical data is that it is probably likely to start between today and approximately June 20. It could start as soon as the coming week, but we doubt it. Our call for the week ahead does anticipate a weekly price decline however. We expect that the S&P 500 will start the week attempting to follow through on this past Friday’s new high. Our upside target as previously stated is in the 2,425 to 2,430 price range. We anticipate that a mid-week trend reversal will take place, most likely on Tuesday. By week’s end we expect that the S&P will be back below the 2,400 mark and re-testing its intraday lows from May 3 and 4 of last week at 2,380.

Thomas J. DruittFinancial Markets Research and AnalysisStonehenge Analytics