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Prepared by Sy Harding
Asset Management Research Corp.

Indicator Summary

(March 26, 2015) Our long-term Bull/Bear Indicator says the bull market remains in place. Our Seasonal Timing Strategy remains bullish and in its favorable season. Our intermediate-term Market-Timing Strategy remains on the buy signal of Oct. 28. We are on a buy signal for gold, and a new buy signal for U.S. Treasury Bonds.

March 26, 2015. DJIA: 17678 S&P 500: 2,056 NASDAQ: 4,863 (Mar. 26 close).

We remain bullish--but watchful.

The market received a brief lift from the Fed's FOMC meeting last week, but it didn't have legs for follow though. Short-term volatility returned.

However, the market remains in its favorable season, our indicators remain on buy signals.

The economy has been slowing and earnings growth has stalled since the Fed ended its QE program last fall.

But the Fed seems convinced it's only a temporary blip, and Fed officials have been out with speeches and press conferences trying to walk markets back from their initial response to last week's FOMC statement that rate hikes are not in the picture anytime soon.

Fed vice chair Stanley Fischer said in New York on Monday, that it will be appropriate for the Fed to begin raising rates this year.

San Francisco Fed president John Williams said on Mondu that economic conditions are "downright good" and the Fed should begin raising rates mid-year.

St. Louis Fed president James Bullard said in a speech in London yesterday that "Zero is no longer the appropriate interest rate for the U.S. economy."

He also pretty much explained why Fed officials are getting out on the talk circuit. He said he is concerned that the mismatch between the market's benign interpretation of the FOMC statement and the fed's intentions, could result in a "violent reaction" in financial markets "if we get all the way to the day of the decision and end up surprising the markets that day".

The market seems to be listening, turning back down this week.

As for the market, almost all the gains were made between Oct. and Dec. It has been volatile with little progress since, with the S&P 500 up only 2% year-to-date.

Some areas have performed better.

However, other market indexes are struggling.

The market made most of its gains from the October low to the December peak, and has gone virtually no-where since, in spite of numerous triple-digit gains by the Dow.

Another rally attempt is potentially failing this week.

That has us concerned as the market approaches the end of its annual favorable season.

What's so important about the end of the favorable season this year?

The market has a very long history of making most of its gains in its favorable season each year, while if there is a substantial correction it most often takes place in the unfavorable season of May to October.

It is so consistent that investing only for the favorable season and being in cash for the unfavorable season, significantly outperforms the market over the long-term.

Like any strategy (particularly buy and hold) it does not work every year. Sometimes the decline in the unfavorable season is only minor, and sometimes the market makes further gains in the unfavorable season.

However, over the long-term it works out quite dramatically, doubling the market's long-term performance by avoiding serious corrections and most of the down-legs in bear markets.

In addition, when it does not work out for several years, it almost always comes back quite dramatically, making up for its absence. (Otherwise, it would not have its history of so dramatically outperforming the market over the long term).

Since this market has gone for an unusual length of time, since 2011, without even a normal 10% correction, seasonality has lost its importance the last several years, pretty much ridiculed by perhaps short-sighted analysis.

That is understandable, since in each of the last three years, the market has had only minor summer pullbacks and standing aside for them was non-productive.

However, can we depend on the unfavorable season in 2015 being as benign?

We are in a situation where the economy is slowing after the Fed allowed a QE stimulus program to expire. The last time that happened was in 2011.

Here is what happened in 2011 when the economy was similarly slowing. The S&P 500 plunged

21% from May to October.

Even though at that time investors were also confident the Fed had its back via the 'Bernanke Put', and would not allow the market to decline, the Fed did allow it, and did not come to the rescue with another round of QE until the S&P 500 was down 21% in October, on the edge of entering a bear market.

In 2011, like this year, the market was also down in February and to mid-March. That time it recovered to a new high on May 1 before collapsing.

Is that also the best we can hope for this time?

@HEAD2 = Other Similarities To 2011

In March 2011, the Fed believed the economy was looking good and had no concerns that its QE2 stimulus program was due to expire in June.

That was even though, as in 2015, the recovering economy had stalled, evidenced by reversals in the Fed's regional businesses and manufacturing indexes, and in consumer confidence.

In 2011, there was concern that the strength in commodity prices had been artificially produced by the QE2 stimulus, and with QE2 due to expire in June, commodity prices, particularly oil, began to sell off sharply in April.

And here we are with oil plunging again.

In 2015, with 'QE to infinity' having ended last October, commodity prices are also plunging.

Then there was the eurozone debt crisis in which Greece was the major problem.

In April 2011, the Prime Minister of Greece ruled out restructuring and expressed hope the other eurozone nations and the IMF would extend the existing bailout package. After agonized political debate, the extension was granted. The crisis worsened during the summer, resulting in a larger rescue plan in October.

In 2015, with Greece again unable to meet its debt payments, the new Prime Minister ruled out restructuring its austerity measures and fought for an extension of the existing bailout package. A four-month extension was recently granted, which no one expects will do more than kick the problem down the road again.

So, we remain bullish because our technical indicators remain on buy signals, and the market is in its favorable season, but watchful be-cause the situation is abnormal and probably not sustainable.

March 26, 2015
Sy Harding
Street Smart Report
Asset Management Research Corp.
505 East New York Ave., Ste 3, DeLand, FL

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