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Alban Park
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1 Factor Update, July 3, 2016 This Update is being released during market hours on Friday, July 1. Happy July 4 th weekend to U.S. citizens! Due to the July 4 th Holiday this is an abbreviated Update. Market Review Candidate Factor Moves are currently ongoing in: Nifty 50 (SGX) Medtronic (MDT) British Pound FTSE 100 A Factor Move was completed in Silver. A candidate Factor moves was terminated in Dow futures. Candidate Factor Moves are developing in Soybean Oil, Cotton and AUD/NZD. This issue of the Factor also comments on U.S. Dollar Index, EUR/USD futures, Natural Gas, Energy markets, Gold, Coffee and the price relationship between Wheat and Corn. The focus of my attention This issue of the Factor Update may contain charts for some markets that are of charting interest only and not subject to trading pursuit. A trader can have all the opinions he or she wants but what matters are the order that are entered. A trader has NO control over the outcome of a trade. A trader s only control is over the processes of analysis and the subsequent entry of orders. A trader is nothing more than a glorified order enterer. Markets in which I am holding or considering orders include: Existing positions Natural Gas protective stops and target U.S. Dollar Index protective stop Medtronics protective stop Nifty 50 protective stop FTSE protective stop New positions AUD/NZD entry order with protective stop Gold entry order with protective stop The Factor Tracking Account is currently leveraged at 1.2 to 1. The margin-to-equity use for futures and forex positions is 8.6%. Candidate Factor Moves in Progress FTSE 100 In the Jun 26 Factor Update I expressed significant skepticism about event- or news-driven market moves such as the downside breakouts on Friday, Jun 24 in the U.S. stock indexes following the Brexit vote. The advance by the FTSE on Thursday completed a massive inverted H&S bottom and was contrary to all the doomsayer predictions about Briton and, therefore, a breakout I believe can be trusted. Some of the advance in U.K. equities is, no doubt, an adjustment to lower Sterling crossrates. Nevertheless, a rally when the world is focused on anticipated bearish developments in England is impressive. The quarterly graph shows that the FTSE could be forming a 17-year consolidation. Given the leverage nature of futures I do not feel compelled to hedge the currency risk of a GBP- denominated margin deposit. However, if I was trading a nonmargined GBP-denominated ETF I would hedge the Cable exposure. See charts, next page. 1

2 Richard Donchian s Weekend Rule The U.S. is coming into a three-day weekend thus, some markets may generate what is called the Donchian Weekend Rul. Richard Donchian is recognized as an early pioneer of technical analysis and trend following in the commodity markets [ He is also the father of managed futures. One of his little known techniques is called the Weekend Rule. When a market makes a substantial new 12-month high or low close entering a three-day weekend there is a significant chance of an immediate follow through for at least a day or two when trading reconvenes. Importantly, I have noted that many large sustained trends have begun with a Weekend Rule advance or decline. 2

GBP/USD futures (daily graph) The Brexit decline this past week solidly penetrated the lower boundary of a 30-year rectangle on the quarterly graph.

3 GBP/USD futures (daily graph) The Brexit decline this past week solidly penetrated the lower boundary of a 30-year rectangle on the quarterly graph. The completion of this rectangle would indicate a downside target at the Mar 1985 low of There is a further measured target of 78 cents. This target is determined by projecting downward the width of the rectangle. Candlestick chartists should note that a Hikkake sell signal (June 28 and 29) is possible on the daily graph pending a move and close below Hikkake signals need to occur within a few days or the signal is nullified. 3

India SGX Nifty 50 (daily chart) The dominant chart construction in this stock index remains the 6+ year ascending triangle on the monthly graph (not shown) and the 12-month channel completed on the

4 India SGX Nifty 50 (daily chart) The dominant chart construction in this stock index remains the 6+ year ascending triangle on the monthly graph (not shown) and the 12-month channel completed on the daily graph on Apr 13 (launched by a 4-week pennant). The targets in the Nifty are 9,144 (the high of the channel) and 10,248 (monthly graph objective). I was stopped out of my position at two levels under the June 23 and June 14 lows. On Tuesday I realized I had jammed my stops too closely that the price purge of Jun 24 th was a bear trap. I reestablished my long position (see Jun 28 Tweet). The stairstep nature of the rally beginning at the Mar high is NOT impulsive and gives me some cause that the entire advance from the Feb low could experience more severe retesting. For now my stop is below the Jun 27 low. RealVisionTV On Tuesday RealVisionTV posted a video of me discussing possible outcomes of Brexit. The link for all Factor members is I have a terrible smile! 4

Medtronic (MDT) weekly and daily charts The dominant chart construction remains the completed 14- month continuation H&S pattern on the weekly graph with a target of 92.73.

5 Medtronic (MDT) weekly and daily charts The dominant chart construction remains the completed 14- month continuation H&S pattern on the weekly graph with a target of The sharp price decline on the open of Jun 27 has made this bull trend much healthier the weak longs have been washed out. As a general rule I give stocks more room to back and fill. Had MDT been a futures contract I would have exited the market on Jun 24. Factor is long a 50% position. I have raised my stop to below the Jun 28 low. Other Markets Cotton (weekly graph) The monthly graph in Cotton continues to form a possible 23-month double bottom. I believe Cotton is an emerging bull market at this point I have no exact idea how I would enter the long side. My career-long experience with trading major breakouts in NY-traded markets that begin with the letter C has not been favorable. Factor is flat 5

6 True Range candlestick charts Contrary to their claims, High Frequency Trading operations (HFTs) do NOT provide liquidity to markets. In fact, HFTs have a singular aim of creating volatility and wide price ranges. As a result, my experience is that the closing price (reflected by a closing price chart) is the most reliable price of the day since HFTs and day traders have liquidated their positions. Another accurate depiction of price is the True Range chart a candlestick representation of price action without the spindles. Large spindles typically represent thinly traded price action engineered by HFTs or the result of mini market panics. Trade Navigator (Genesis Financial) has been a close partner in my trading for years. Recently they custom created a True Range candlestick charting capability for Factor LLC. This Factor Update includes a number of True Range charts, as noted. AUD/NZD (weekly and daily graphs) The dominant chart construction in this market remains the possible 31-month H&S failure pattern on the weekly chart. Under this interpretation, the small 4-week pennant presently forming on the daily graph (red box) would be the launching pattern to complete the massive H&S failure. 6

Dollar Index (monthly and daily charts) Same song 97 th verse (that s the number of consecutive weeks I have been a long-term super bull on the U.S. Dollar, and super bear on the Eurocurrency).

7 Coffee (weekly and daily graphs) The advance on Wednesday completed a 10+ month rounding bottom on the daily Coffee chart. The mid-2014 low around 160 on the weekly graph is the initial target. U.S. Dollar Index (monthly and daily charts) Same song 97 th verse (that s the number of consecutive weeks I have been a long-term super bull on the U.S. Dollar, and super bear on the Eurocurrency). The advance in Sep 2014 completed a massive 6-year symmetrical triangle bottom. The market has been forming a continuation rectangle since Mar I believe this rectangle will eventually be resolved by an upward breakout followed by a move to 109, then 120. Factor is long with a stop just below breakeven. See charts next page. 7

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The high on Friday (as I write this Update) has been 1.11689.

9 EUR/USD (weekly and daily graphs) The dominant chart construction in the Eurocurrency is the possible 16-month rectangle forming on the weekly graphs. On Tuesday I issued a Tweet that the Euros could rally back into the to zone. The high on Friday (as I write this Update) has been I am monitoring EUR/USD for a shorting opportunity but only if I have a comfortable lead in my current long U.S. Dollar Index position. EUR/USD and USDX have high correlation. 9

Gold (daily chart) On Tuesday I issued an Alert analyzing recent periods characterized by extreme long positions on the part of large specs (hedge funds, CTAs, prop trading operations) and extreme

10 Gold (daily chart) On Tuesday I issued an Alert analyzing recent periods characterized by extreme long positions on the part of large specs (hedge funds, CTAs, prop trading operations) and extreme short positions on the part of commercials. My conclusion was that this CFTF Commitment of Traders (COT) profile does not automatically suggest negative price pressure on Gold. The daily graph exhibits a 16-week broadening formation. While I want to be constructive on Gold prices, the broadening pattern typically is resolved by a bear trend. There have been very rare occasions of a continuation broadening pattern which would be strengthened by a decisive close above Factor is flat Gold. I find the idea of being long Silver much more appealing, but would be interested in a low risk buying opportunity on a close above Dow Jones futures The decline in the Dow on June 24 decisively completed a 9-week symmetrical triangle top. As I mentioned in last week s Update, the Brexit-induced declines in U.S. stock indexes was questionable. I shorted the Dow futures at during the June 24 decline. Given my suspicion of decline, I jammed my stops and exited the trade at on Wednesday. I am completely baffled by the U.S. stock market indexes as they continue in their extended morphology. 10

Natural Gas (daily graph) The daily continuation graph of Nat Gas has met its H&S bottom target. The Oct contract has moved more than 70% from the breakout point to its target of 3.

11 Natural Gas (daily graph) The daily continuation graph of Nat Gas has met its H&S bottom target. The Oct contract has moved more than 70% from the breakout point to its target of thus enacting the 3-Day Trailing Stop Rule. Factor is long a 50% position. Crude Oil and RB Gas The recovery advance in Crude Oil has reached resistance at the Oct 2015 high on the weekly chart (roll-over on the last trading day of each contract month). Longer term the recovery could carry toward the Apr 2015 high at Shorter term, the Sep 2016 contract is forming a possible 4-week descending triangle (bearish implications). The RB Gas nearby continuation graph displays a possible 11-week H&S top. The RB Gas graph features only true ranges candlesticks that exclude the spindles. I personally believe that true range charts are more accurate than full candlesticks that include the spindles. Spindles are most often caused by HFT-engineered intraday volatility. Factor is flat. I would consider a short in Crude Oil if the completion of the descending triangle occurs in such a way that I can limit my risk to less than 60 points against an intraday rally pivot point. See charts, next page. 11

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Silver (daily graph) Talk about leaving money on the table!!!!! The advance on Jun 29 met the target of 18.52 (revised from 18.63) established by the Apr 12 completion of an 8-month H&S bottom.

Of course, Silver s advance accelerated on Thursday and Friday without me. There are times when I hang with a position when the target is reached until the 3-day Trailing Stop Rule takes me out.

13 Silver (daily graph) Talk about leaving money on the table!!!!! The advance on Jun 29 met the target of (revised from 18.63) established by the Apr 12 completion of an 8-month H&S bottom. As a result, Factor is now flat in Silver. This trade ended up as a 554 BP profit, thus establishing Silver as a qualified member of the 2016 Best Dressed List and a Bottom-Line trade for Factor. Of course, Silver s advance accelerated on Thursday and Friday without me. There are times when I hang with a position when the target is reached until the 3-day Trailing Stop Rule takes me out. This would obviously been the best decision to have made in Silver. I must emphasize that the Silver is in a dominant bull trend and much higher prices are likely. Silver is back in the leadership position in the precious metal category. The next likely target is the Jul 2014 high at Factor is flat in Silver. If I was smart enough to still be long, would be my target. 13

14 Soybean Oil The weekly true range chart of Soybean Oil displays a possible H&S bottom pattern dating back to Aug I will monitor this market for a buying opportunity. KC Wheat minus Corn The price relationship between KC Wheat (used for bread) and Corn is reaching an extreme with KC Wheat underpriced in relationship to Corn. I am willing to buy Dec KC Wheat and sell Dec Corn if the spread narrows to under 50 cents premium KC Wheat. This is the type of trade in which I am willing to add to a loser and roll the position forward until the spread returns to $1.25 premium KC Wheat. This trade is NOT based on classical charting principles. plb ### 14

Japan Mothers Index (proxy is SCJ) Medtronics (MDT) Cosmo Pharmaceutical Silver. Platinum

Japan Mothers Index (proxy is SCJ) Medtronics (MDT) Cosmo Pharmaceutical Silver. Platinum Factor Update, May 22, 2016 Administrative note: This Factor Update is being issued early on Friday morning (U.S. time). Friday s price behavior may negate or modify some analysis herein. The picture to