Weekly Market Update

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1 Weekly Market Update 8-17-17 2017 Phoenix Capital Research, Phoenix Capital Management Inc. All Rights Reserved. Protected by copyright laws of the United States and international treaties.

1 1 Weekly Market Update Phoenix Capital Research, Phoenix Capital Management Inc. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Phoenix Capital Management Inc. All Rights Reserved.

2 Disclaimer: The information contained on this newsletter is for marketing purposes only. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice by Phoenix Capital Research or any of its affiliates, nor is it to be relied upon in making any investment or other decision. Neither the information nor any opinion expressed on this newsletter constitutes and offer to buy or sell any security or instrument or participate in any particular trading strategy. The information in the newsletter is not a complete description of the securities, markets or developments discussed. Information and opinions regarding individual securities do not mean that a security is recommended or suitable for a particular investor. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Opinions and estimates expressed on this newsletter constitute Phoenix Capital Research's judgment as of the date appearing on the opinion or estimate and are subject to change without notice. This information may not reflect events occurring after the date or time of publication. Phoenix Capital Research is not obligated to continue to offer information or opinions regarding any security, instrument or service. Information has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. Phoenix Capital Research and its officers, directors, employees, agents and/or affiliates may have executed, or may in the future execute, transactions in any of the securities or derivatives of any securities discussed on this newsletter. Past performance is not necessarily a guide to future performance and is no guarantee of future results. Securities products are not FDIC insured, are not guaranteed by any bank and involve investment risk, including possible loss of entire value. Phoenix Capital Research, OmniSans Publishing LLC and Graham Summers shall not be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Phoenix Capital Research is not responsible for the content of other newsletters to which this one may be linked and reserves the right to remove such links. OmniSans Publishing LLC and the Phoenix Capital Research Logo are registered trademarks of Phoenix Capital Research. OmniSans Publishing LLC - PO BOX 2912, Alexandria, VA 22301

3 The Fed July FOMC minutes, that were released yesterday, were nothing short of extraordinary. However, to fully appreciate just what the Fed admitted, we first need a little background. From November 2016 until June 2017, the Fed was pushing a hawkish agenda. The running mantra at this time was that the Fed would raise rates 3-4 times in As the year progressed, the Fed also began talking about shrinking its balance sheet. The Fed s justification for these moves was that inflation was rising and the economy was strong enough to tolerate these moves. As a result the Fed hiked rates twice, first in March and then again in June Then, in late June, the Fed suddenly did a complete 180, stating that it was just about done with rate hikes. Moreover, the Fed stated that shrinking its balance sheet would not remove liquidity from the system. Put simply, the Fed switched from hawkish to completely dovish in the span of two weeks. This, in of itself, was bizarre. The Fed s entire purpose is to maintain financial stability. How it could possibly claim it is doing this by changing its entire strategy suddenly and without warning is beyond me. And then we get yesterday s release of the Fed July FOMC minutes. The minutes were complete insanity. I realize that many commentators are trying to argue that the Fed was hawkish. But it wasn t. The Fed was in total chaos. Let s take the example of inflation. According to the July FOMC statement Weekly Market Update ( ) 1. Most participants expect inflation to pick up over the next couple years. 2. Many Fed participants think inflation will remain below 2% longer than expected. 3. Many Fed participants believe that inflation measures dropped recently due to idiosyncratic factors. 4. A few Fed participants believe the Fed s framework for forecasting inflation is no longer valid. 3

4 !?!?!? 5. Some Fed participants noted their increase uncertainty about the outlook for inflation. Like I said, the Fed is in total chaos. There was a similar lack of unity of just about everything: the labor market, lending risks at banks, Federal Government policy, etc. However, there was one line in particular that stood out. However, most participants thought that the framework remained valid, notwithstanding the recent absence of a pickup in inflation in the face of a tightening labor market and real GDP growth in excess of their estimates of its potential rate." The Fed admits here that the labor market is tight, real GDP growth is stronger than Fed estimates, but inflation is failing to pick up. This is astonishing. According to the Fed s dual mandate, the Fed is supposed to seek maximum employment while stabilizing prices and moderating long-term interest rates. In plain English, the Fed is supposed to pursue solid economic growth, with maximum employment, while keeping inflation on an even keel. Today the Fed is finding that employment is very strong, the economy is relatively strong, and inflation is weak. According to all Fed models this is impossible. This is why the FOMC minutes claimed many members thought inflation had dropped due to idiosyncratic factors. The alternative reality (that the Fed has no idea what s going on) is too disturbing to admit publicly. However, unfortunately for the Fed, that alternative interpretation is in fact reality: the Fed is clueless, as its models have no connection to economic realities. The Fed believes that monetary policy steers growth. It doesn t. Entrepreneurs and business owners generate growth. At best the Fed simply creates conditions in which these sorts of individuals and their enterprises can thrive. At worst, the Fed creates bubbles that crash. 4

5 Again, the Fed doesn t create growth. This is a total myth. And it needs to be put to bed. If you find this hard to believe, consider that over 50% of Fortune 500 companies were founded during recessions or bear markets. Put another way, the majority of the largest, most profitable companies in the world were created during environments that were negative or risk-off. The Fed had NOTHING to do with this growth or job creation. Of course the Fed cannot and will not admit this. But it s a fact. And it s a fact that is now so obvious that Fed officials are starting to notice it, though they re unwilling to admit it publicly. This is why we got that bizarre idiosyncratic factors comment in the Fed July FOMC minutes. Rather than come clean about its failure to understand the economy, Fed officials are simply stating that data that doesn t conform to their models is strange or idiosyncratic. Small wonder then that the markets whipsawed yesterday as traders attempted to decipher just what the heck had happened at the Fed meeting in July: bonds rallied then slid, stocks fell then bounce, Gold rallied then slid and Oil flatlined. 5

6 What does this mean? The market is smelling that the US economy is weakening (why bonds are rallying) and the 6

7 Fed is going to have to put any additional rate hikes/ balance sheet shrinking on hold for now. Today s action confirmed this. Bonds are ripping higher having bounced off of support. The next leg up will see TLT go to 130. Meanwhile stocks are FINALLY beginning to break down in a big way. The S&P 500 has taken out its bull market trendline (blue line). I think we ll hang around the green box for a few days here before we move down to the red box sometime towards the end of next week. 7

8 Here are the comparable line and boxes for the NASDAQ. 8

9 Put simply, as far as stocks are concerned, the deflation wave I ve been calling for has finally hit. And Tech stocks will be hit hardest. In contrast, Gold has now officially bottomed. As you can see in the chart below, the precious metal bounced off of support. The next leg up to $1,320 is here. After that we ll get a pullback to $1300 or so before moving to $1340+ to end the year. In contrast, Silver is now moving to $ After that we ll see a pullback to $17.00 before we move to $ to end the year. 9

Feel free to add to your precious metals positions or any of the precious metals miners. Currently we own: Open Positions Symbol Buy Price Gold $1,120 Silver $16.23 Gold Miners ETF GDX $22.

10 Feel free to add to your precious metals positions or any of the precious metals miners. Currently we own: Open Positions Symbol Buy Price Gold $1,120 Silver $16.23 Gold Miners ETF GDX $22.45 Gold Mining Juniors ETF GDXJ $34.72 Wheaton Precious Metals WPM Corp $22.59 New Gold NGD $3.88 Barrick Gold ABX $16.92 Silver Mining ETF SIL $34.44 Silver Standard SSRI $9.94 First Majestic Silver AG $8.70 Randgold Resources GOLD $93.25 Klondex Mines KLDX $2.94 Wesdome Gold Mines WDO.TO $

11 The only other area that is looking really interesting right now is Energy Companies. Obviously we were a little early with our plays here, but that is just fine. Oil is going to $60 in the next six months. So the fact that it s going to bottom at $45 or so instead of $49 where we began opening positions isn t really a big deal. I expect Oil to bottom early next week. When it does, we ll be increasing our exposure to the Oil space with some more plays. Regarding those plays we are already in and that are down. Pioneer Natural Resources (PXD) is going above $200 before the March

12 Helix Energy Solutions (HLX) is going to $18 or so. 12

13 Southwester Energy (SWN) is going to $20 or so. EOG Resources (EOG) is going to $115 or so. 13

14 And Energy Transfer Partners (ETP) is going to $35 or so. So again, do not be concerned about these positions. The gains we ll lock in down the road are well worth our patience. This concludes this week s Weekly Market Update. I m watching the markets closely and will issue updates as needed. Barring any new developments you ll next hear from me next Wednesday in our usual Weekly Market Update. Until then Best Regards, Graham Summers Chief Market Strategist Phoenix Capital Research 14

OPEN POSITIONS STOCKS PORTFOLIO CURRENT GAIN/ POSITION SYMBOL DATE LOSS RPX Corp RPXC 8/5/15 $15.48 $12.43-20% Agricultural -7% RJA 1/12/17 $6.46 Commodities ETF $6.00 Public Storage PSA 3/23/17 $225.

27 Resources Helix Energy HLX $6.16 $5.74-7% 7/19/17 Solutions Southwestern SWN $6.17 $5.13-17% 7/19/17 Energy EOG Resources EOG 7/19/17 $95.00 $83.38-12% Natural Gas ETF UNG 8/2/17 $6.30 $6.

15 OPEN POSITIONS STOCKS PORTFOLIO CURRENT GAIN/ POSITION SYMBOL DATE LOSS RPX Corp RPXC 8/5/15 $15.48 $ % Agricultural -7% RJA 1/12/17 $6.46 Commodities ETF $6.00 Public Storage PSA 3/23/17 $ $ % Verizon VZ 4/26/17 $47.17 $ % Vietnam ETF VNM 6/7/17 $14.64 $ % Transocean RIG 6/15/17 $8.56 $ % Pioneer Natural -17% PXD 6/15/17 $ $ Resources Helix Energy HLX $6.16 $5.74-7% 7/19/17 Solutions Southwestern SWN $6.17 $ % 7/19/17 Energy EOG Resources EOG 7/19/17 $95.00 $ % Natural Gas ETF UNG 8/2/17 $6.30 $6.55 3% Energy Transfer ETP $ % 8/2/17 $18.50 Partners Enterprise Products EPD $ % 8/9/17 $24.98 Partners BONDS PORTFOLIO CURRENT GAIN/ POSITION SYMBOL DATE LOSS Long Treasury ETF TLT 7/27/17 $ $ % Emerging Market Bonds ETF EMB 7/27/17 $ $ % Prices as of market s close on 8/17/17. Gains include dividends 15

PRECIOUS METALS/ MINERS PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS Gold 3/17/10 $1,120 $1,293.00 15% Silver* 3/17/10 $16.23 $17.02 5% Gold Miners ETF** GDX 10/5/16 $22.45 $23.

16 PRECIOUS METALS/ MINERS PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS Gold 3/17/10 $1,120 $1, % Silver* 3/17/10 $16.23 $ % Gold Miners ETF** GDX 10/5/16 $22.45 $ % Gold Mining Juniors 1% GDXJ ETF*** 10/5/16 $34.72 $33.40 Wheaton Precious -16% WPM Metals Corp 10/5/16 $22.59 $18.91 New Gold NGD 10/5/16 $3.88 $3.44-9% Barrick Gold ABX 4/26/17 $16.92 $ % Silver Mining ETF SIL 4/26/17 $34.44 $ % Silver Standard SSRI 4/26/17 $9.94 $9.99 1% First Majestic Silver AG 5/12/17 $8.70 $ % Randgold 3% GOLD 5/12/17 $95.67 Resources $93.25 Klondex Miners KLDX 8/9/17 $2.94 $3.21 9% Wesdome Gold Mines WDO.TO 8/9/17 $2.18 $2.12-3% Prices as of market s close on 8/17/17. Gains include dividends *Average price of $17.50 and $14.97 ** Average price of $22.83 and $22.07 *** Average price of $37.52 and $

SPECIAL SITUATIONS/HEDGES/SHORTS PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS France ETF (SHORT) EWQ 9/16/16 $23.38 $29.

92 $157.86-12% Facebook FB 5/31/17 $151.63 $166.91-10% Alphabet GOOGL 5/31/17 $987.72 $927.66 6% Homebuilders ETF XHB 8/9/17 $37.94 $37.

17 SPECIAL SITUATIONS/HEDGES/SHORTS PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS France ETF (SHORT) EWQ 9/16/16 $23.38 $ % Italy ETF (SHORT) EWI 9/16/16 $21.56 $ % Russell 2000 ETF (SHORT) IWM 12/14/16 $ $ % Apple (SHORT) AAPL 3/23/17 $ $ % Facebook FB 5/31/17 $ $ % Alphabet GOOGL 5/31/17 $ $ % Homebuilders ETF XHB 8/9/17 $37.94 $ % CASH/ CURRENCIES PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS US Dollar ETF UUP 8/2/17 $24.08 $ % Prices as of market s close on 8/17/17. Gains include dividends 17

RECENTLY CLOSED POSITIONS POSITION SYMBOL DATE SELL DATE SELL GAIN/ LOSS American Eagle AEO 5/26/16 $15.36 Outfitters (SHORT) 1/31/17 $14.59 5% Cliffs Nat Resources 19% CLF 2/8/17 $10.15 $12.

18 RECENTLY CLOSED POSITIONS POSITION SYMBOL DATE SELL DATE SELL GAIN/ LOSS American Eagle AEO 5/26/16 $15.36 Outfitters (SHORT) 1/31/17 $ % Cliffs Nat Resources 19% CLF 2/8/17 $10.15 $12.10 (FIRST HALF) 2/13/17 Ambev ABEV 11/25/16 $4.96 2/23/17 $ % Cemex CX 11/25/16 $8.07 2/23/17 $8.69 8% Cliffs Nat Resources 10% CLF 2/8/17 $10.15 $11.13 (SECOND HALF) 2/23/17 Exxon XOM 9/24/14 $ /8/17 $ % Enterprise Products 9% EPD 11/31/16 $25.93 Partners 3/8/17 $27.83 Natural Gas ETF UNG 2/22/17 $6.57 3/8/17 $7.11 8% Emerging markets ETF EEM 1/12/17 $ /10/17 $ % Barrick Gold ABX 10/5/16 $ /10/17 $ % Uranium ETF URA 6/8/16 $ /12/17 $ % Cameco CCJ 1/4/17 $ /12/17 $ % Coal ETF KOL 1/4/17 $ /12/17 $ % Silver Standard 10% SSRI Resources 10/5/16 $ /12/17 $11.32 Royal Gold RGLD 2/8/17 $ /12/17 $ % Silver Miners SIL 3/15/17 $ /12/17 $ % US Steel (SHORT) X 2/1/17 $ /13/17 $ % Copper Miners ETF COPX 3/23/17 $22.64 (SHORT) 4/18/17 $ % Financials ETF (SHORT) XLF 12/21/16 $ /26/17 $ % 18

RECENTLY CLOSED POSITIONS CONTINUED POSITION SYMBOL DATE SELL DATE SELL GAIN/ LOSS 5% EPU 12/7/16 $33.23 Peru ETF 5/17/17 $34.77 Brazil ETF EWZ 2/8/17 $37.53 5/17/17 $39.

19 RECENTLY CLOSED POSITIONS CONTINUED POSITION SYMBOL DATE SELL DATE SELL GAIN/ LOSS 5% EPU 12/7/16 $33.23 Peru ETF 5/17/17 $34.77 Brazil ETF EWZ 2/8/17 $ /17/17 $ % Utilities ETF XLU 2/8/17 $ /17/17 $ % Solar Energy ETF TAN 4/19/17 $ /17/17 $ % Royal Gold RGLD 4/26/17 $ /17/17 $ % Southwestern Energy SWN 3/30/17 $8.15 5/24/17 $ % Gulfport Energy GPOR 3/30/17 $ /24/17 $ % US Oil Fund USO 4/26/17 $ /24/17 $ % Exxon Mobil XOM 5/3/17 $ /24/17 $ % Energy ETF (SHORT) XLE 5/24/17 $ /5/17 $ % Emerging Mkts Bond ETF EMB 11/21/16 $ /7/17 $ % Long US Treasuries TLT 11/21/16 $ /15/17 $ % Nuveen Enhanced Free $13.12 Muni Credit Fund NVG 1/2/14 6/22/17 $ % Rio Tinto RIO 6/19/17 $ /10/17 $ % Clear Energy ETF PBW 4/19/17 $4.06 7/10/17 $ % Enterprise Products EPD $26.00 $ % 6/22/17 Partners 7/17/17 US oil Fund USO 6/28/17 $9.20 7/17/17 $9.57 4% China ETF ASHR 2/1/17 $ /24/17 $ % Uranium URA 6/15/17 $ /24/17 $ % Cameco CCJ 6/15/17 $9.14 7/24/17 $ % US Steel X 6/19/17 $ /24/17 $ % Freeport McMoran FCX 6/19/17 $ /25/17 $ % Biotech ETF IBB 4/26/17 $ /25/17 $ % Baidu BIDU 6/7/17 $ /27/17 $ % Peru ETF EPU 6/22/17 $ /27/17 $ % Chevron CVX 6/22/17 $ /2/17 $ % Euro Trust FXE 10/5/16 $ /2/17 $ % 19

Weekly Market Update Part 2

Weekly Market Update Part 2 1 Weekly Market Update 6-22-17 Part 2 2017 Phoenix Capital Research, Phoenix Capital Management Inc. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This