Spring Letter To Clients {Part IV}

Here's part IV of our Spring Letter.  {Bullet points are highlighted.}

We have developed a concept we call the Cone of Probability when discussing price ranges. It is a probabilistic assessment of an asset’s potential trading range over a certain time period..  Our Cone of Probability is based on many data inputs, which you can read more about here.  We have refined our current S&P 500 range between 1,700-2,000.  You will notice that we include in this revision the potential for a market decline a bit over 10%.  Based on our current economic expectations we think that 1,700 represents a level where investors would find value in a decline, although stocks could overshoot this level if sentiment becomes too pessimistic.    

We think this revision is prudent given our previous views and the way markets have been trending since January.  Our theory of market seasonality, suggests the most likely time period for a decline to occur would be between now and autumn.  Of course this is simply what we believe is prudent assessment.  Markets are not obligated to follow our logic.  Markets will do what they have to do to prove the greatest amount of investors wrong!  There have been many instances where markets have simply kept advancing after a strong year like 2013.  In situations like now we tend to defer to our money flow indicators to give us an idea when more caution is warranted.


*Long ETFs related to the S&P 500 in Client and personal accounts although positions can change at any time.

The conclusion to this letter will be published on Monday.