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August 7, 2015 Dear Investors, In my previous letter, I stated that the month of July could be a preview of the markets’ activities over the next few months. After the first trading week in August, the volatility that we experienced last month has intensified. Last week, the McClellan Oscillator was suggesting large price moves early in the week. The fact is that the markets experienced large intraday price action every day with several key support levels taken out. Wednesday was a Fibonacci phi mate turning date, which can occur plus or minus up to three trading days. Rather than discuss economic data this week, I am going to discuss each of the major indices to illustrate how disjointed and tenuous the markets have become. The Dow Jones Industrial Average closed at 18,312.39 on May 19th. Since then, the Blue Chip Index has clearly started a downward trend marked by a series of waves lower and higher. Each wave lower closed lower than its previous low and each wave higher failed to surpass its previous high. It closed below its 200-day moving average for the first time at the end of June before its last wave higher. This week, the DJIA lost 316.48 points, or -1.8%, to close at 17,373.38, and is down 2.5% for the year. The DJIA is about a day or two away from its 50-day moving average to close below its 200-day moving average, which is commonly known as the “death cross” and often signals a prolonged downward trend. The S&P 500 Index closed at its high-water mark of 2,130.82 on May 21st. Unlike the DJIA, the downward trend is not as pronounced. The broad market index retested its May high but fell short on July 23rd. It kicked off a significant wave lower that saw the S&P close below its 200-day moving average for the first time on July 8th. The S&P then rocketed higher taking out its June high but once again failing to surpass its May high on July 20th. This was followed by a wave down that was stopped by its 200-day moving average and a bounce higher. This week, the S&P 500 Index lost all of last week’s bounce as it plunged 26.27 points, or -1.25%, to finish the week at 2,077.57, and is up 0.9% this year. It is interesting that the S&P had a strong intraday surge and closed higher on Wednesday, August 5th before its significant slide on Thursday and Friday. It is important to note that Friday’s decline appears to have been stopped by its 200-day moving average. The NASDAQ Composite reached its high-water mark of 5,218.86 on July 20th. The high-flying tech-heavy index has followed a different course and it is difficult to determine a trend. It first spent some significant time below its 50-day moving average during the first week of July before its surge to an all-time high. This week, the Composite lost 84.74 points, or -1.65%, to close at 5,043.54, and is up 6.5% this year. This week’s close lower is slightly higher than its last wave lower on July 28th. However, yesterday’s intraday low was well below its July 28th intraday low. The Russell 2000 appears to have peaked on June 23rd when it closed at 1,295.80 and, like the DJIA, it appears to be in a clearly defined downward trend defined by a series of lower lows and lower highs. This week, the small cap index plunged 2.6%, or -31.78 points, to close at 1,206.90, and is up 0.2% for 2015. Thursday was the first time that the Russell 2000 closed below its 200-day moving average and it was followed by a sharp decline on Friday. Normally, the major indices move in tandem with each other and they all peak around the same time at major trend changes. Although this did not occur, one common factor is that each of the waves higher that brought an index to a new high occurred on lower trading volume. All of the waves lower occurred during higher than normal trading volume. The DJIA has been down for the last seven trading days and the S&P 500 has been down five out of the last six days, so I would not be surprised to see a brief relief rally followed by more downside. If you have any questions about the markets or your portfolio, please feel free to call me. Best Regards, Vincent Pallitto, CPA, CFP® Certified College Planning Specialist Summit Asset Management, Inc. www.summitasset.com 973-301-2360 973-301-2370 Fax A branch office of, and securities offered through LPL Financial Member FINRA SIPC You cannot invest directly in a market index, market indices are for benchmark purposes. The information in this market commentary is obtained from various news sources, Stockcharts.com and technicalindicatorindex.com. Fibonacci Phi Date (also known as Fibonacci Time Extensions) is a technical indicator used to seek to identify the timing of significant price movement in the market, and is based on the Fibonacci Number Sequence. The Hindenburg Omen is a combination of technical factors that attempt to measure the health of the NYSE, and by extension, the stock market as a whole. The goal of the indicator is to signal increased probability of a stock market crash. The McClellan Oscillator is a market breadth indicator used in technical analysis by financial analysts of the NYSE to evaluate the rate of money entering or leaving the market and interpretively indicate overbought or oversold conditions on the market. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you consult your financial advisor prior to investing. The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance referenced is historical and is no guarantee of future results. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index. The Blue Chip Index is a stock index that tracks the shares of the top-performing publicly traded companies. These indices are unmanaged, which cannot be invested into directly. Past performance is no guarantee of future result.