for the week ending October 28th, 2016

Market Focus: Equities traded lower during the month as the S&P 500 was down -1.81% with one more day to go in October. The index posted a negative 0.68% return for the week and has gained 5.88% year to date (YTD). After opening higher on Monday, the index slowly faded each day into the close on Friday. Tuesday, Wednesday and Thursday markets were driven primarily by bond yields, oil and earnings, in that order. Stocks fell Tuesday on a plunge in oil following Russian comments that they would only participate in a production cap, not a cut. Wednesday saw slight declines in the S&P 500 as oil continued its path lower and offset generally “ok” earnings while Thursday the declines accelerated a bit as a breakout in global 10-year bond yields to a five-plus-month high offset more “ok” earnings. Stocks did manage to rally Friday as bond yields were little changed, earnings were decent and there were more Mergers & Acquisitions rumors of GE buying BHI. Stocks were on the way to solid gains until the news broke about the “reopening” of the Clinton email investigation, although stocks recouped most of the immediate losses by the end of trading. I’m going to do another election update in tomorrow’s issue in lieu of this news, but right now Clinton remains the favorite. But we can expect polls to tighten significantly into the vote next Tuesday. We do not view the news as a material negative on stocks, yet, but it will be an additional headwind over the next six trading days.

Economic Focus: US GDP pace improves The United States enjoyed its best quarter of economic growth in two years in the third quarter, according to data released by the Bureau of Economic Analysis. The economy expanded at a 2.9% annual rate, boosted by a rise in inventories and on a narrower trade deficit. Consumption, which had kept the economy afloat in prior quarters, was muted in Q3. Yields extend recent rise Firm economic data, particularly in Europe and the United Kingdom, helped extend the recent move higher in most global bond yields. The Citigroup Economic Surprise Index, which measures how economic data fares relative to expectations, has shown a marked uptick of late, as neither the eurozone nor the UK have displayed much malaise in the wake of the surprise Brexit outcome in June. All investments involve risk, including loss of principal. Principal values and investments returns are neither guaranteed nor issued by, guaranteed by, or obligations of a bank, savings and loan, or credit union; and are not insured or guaranteed by the FDIC, SIPC, NCUSIF or any other agency. Portions of this newsletter was prepared by W E Sherman & Co., LLC. W E Sherman & Co., LLC is not affiliated with ProEquities or Harvest Investment Services, LLC. Advisory Services offered through Harvest Investment Services, LLC, a Registered Investment Advisor. Securities offered through ProEquities, Inc. A Registered Broker-Dealer and Member FINRA and SIPC. Harvest Financial Planning, LLC and Harvest Investment Services, LLC are independent of ProEquities, Inc

This Week Upcoming Economic Focus: Release

Date

Briefing.com Consensus

Chicago PMI

October 31st

54.0

ISM Index

November 1st 31st

51.7

Auto Sales

November 1st

NA

MBA Mortgage Index

November 2nd

NA

FOMC Rate Decision

November 2nd

0.375%

Initial Claims

November 3rd

256K

Nonfarm Payrolls

November 4th

175K

Unemployment Rate

November 4th

4.9%

Table 1: Briefing.com

Earnings Focus: The 3rd Quarter 2016 earnings within the S&P 500 – Of the 290 companies that have reported earnings for the 3rd Quarter, 73% have reported earnings above analyst expectations. This is above the longterm average of 64% and above the average over the past four quarters of 70%. Furthermore, 56% of companies have reported Q3, 2016 revenues above analyst short-term expectations, but long-term average of 59%. The estimated earnings growth rate for the S&P 500 of Q3 2016 relative to Q3 2015 is expected to increase 3.0%. When you examine the individual sectors, nine of the eleven sectors are estimated to report a yearover-year increase in earnings for Q3 2015. The Utilities and Technology sectors have the highest earnings growth rate for the quarter, while the Energy has the lowest anticipated growth. The S&P 500 revenue growth rate is estimated to increase 2.5% for the quarter. The Consumer Discretionary sector is expected to have the highest estimated revenue growth rate while the Energy sector is expected to have the lowest. The forward four-quarter (4Q16-3Q17) P/E ratio of the S&P 500 is 16.5, in line with the fifteen year average. This week, 134 S&P 500 companies are expected to report Q3 2016 earnings.

Corporate & Global News: VW receives settlement approval Volkswagen this week received court approval for a $14.7 billion settlement with US regulators and vehicle owners over a diesel engine emissions scandal. The settlement was reached with the US Department of Justice, the Federal Trade Commission, the state of California and vehicle owners who filed a class action lawsuit. Thomson Reuters, First Trust, Sevens Report & MFS.

All investments involve risk, including loss of principal. Principal values and investments returns are neither guaranteed nor issued by, guaranteed by, or obligations of a bank, savings and loan, or credit union; and are not insured or guaranteed by the FDIC, SIPC, NCUSIF or any other agency. Portions of this newsletter was prepared by W E Sherman & Co., LLC. W E Sherman & Co., LLC is not affiliated with ProEquities or Harvest Investment Services, LLC. Advisory Services offered through Harvest Investment Services, LLC, a Registered Investment Advisor. Securities offered through ProEquities, Inc. A Registered Broker-Dealer and Member FINRA and SIPC. Harvest Financial Planning, LLC and Harvest Investment Services, LLC are independent of ProEquities, Inc

Market Momentum Focus: One important aspect to the Harvest Focus is that it will provide you with key information about how various sectors and asset classes are trending relative to one another and also to the broad market. The Market Focus will help you better understand the momentum investment approach utilized by the AlphaSolutions strategies that we employ to help you “Harvest Gains and Limit Losses”. It will also help demonstrate our rules based investment approach of why specific positions were purchased or held onto and why others were sold. We have highlighted a few of the significant changes from a week ago. There were a few significant movements in the Major Asset Classes and Sectors, the Consumer Cyclical Sector moved up 5 ranking 17th and the Dow 30 moved up 5 ranking 10th. SmallCap Growth fell 12 to 21st and MidCap Blend fell 8 to 20th.

Figure 2 Source: W E Sherman & Co, LLC All investments involve risk, including loss of principal. Principal values and investments returns are neither guaranteed nor issued by, guaranteed by, or obligations of a bank, savings and loan, or credit union; and are not insured or guaranteed by the FDIC, SIPC, NCUSIF or any other agency. Portions of this newsletter was prepared by W E Sherman & Co., LLC. W E Sherman & Co., LLC is not affiliated with ProEquities or Harvest Investment Services, LLC. Advisory Services offered through Harvest Investment Services, LLC, a Registered Investment Advisor. Securities offered through ProEquities, Inc. A Registered Broker-Dealer and Member FINRA and SIPC. Harvest Financial Planning, LLC and Harvest Investment Services, LLC are independent of ProEquities, Inc

The Big Picture: The “big picture” is the months-to-years timeframe; i.e., the timeframe in which Cyclical Bulls and Bear operate. Below is a snapshot of the current indicator statuses we closely watch for broad market direction:

Figure 3 Source: W E Sherman & Co, LLC

US Bull-Bear Equity Indicator this week is 55.20; lower than last week 57.82. This is a longer term (months to years) indicator for the market direction and is used to establish the equity allocation in many of our AlphaSolution’s strategies.

Figure 4 Source: W E Sherman & Co, LLC All investments involve risk, including loss of principal. Principal values and investments returns are neither guaranteed nor issued by, guaranteed by, or obligations of a bank, savings and loan, or credit union; and are not insured or guaranteed by the FDIC, SIPC, NCUSIF or any other agency. Portions of this newsletter was prepared by W E Sherman & Co., LLC. W E Sherman & Co., LLC is not affiliated with ProEquities or Harvest Investment Services, LLC. Advisory Services offered through Harvest Investment Services, LLC, a Registered Investment Advisor. Securities offered through ProEquities, Inc. A Registered Broker-Dealer and Member FINRA and SIPC. Harvest Financial Planning, LLC and Harvest Investment Services, LLC are independent of ProEquities, Inc

Personal Wealth Enhancer Tip: Remember when you were a kid, things were simple, good, and secure. You kept things in a box, but as you grew older the number of boxes grew until you could not keep track of everything. The Question here is do you know where everything is, or what everything is worth? Because, if you don’t know you should, and now you can all in one place instead of having things tucked away in boxes all over the place. You can have a secured location for all your finances and information with daily updates and financial activity. Don’t make life difficult by trying to do things on your own, but let us help you with an integrated website that allows you to take control and feel at ease knowing where all your boxes are. “Those who know what they have, fare better than most.” Click here to watch the video.

Click Here to watch the video explanation of the AlphaSolutions Sector Rotation Model by Harvest’s Managing Director Tim Newell. The video gives an excellent description of how the model is setup and how all our models are rules based and what kind of protection they can potentially offer you.

For More Model Information: AlphaSolutions Models Sources Include (but are not limited to): The Sherman Reports, Sevens Report, First Trust, MFS & Thomson Reuters All investments involve risk, including loss of principal. Principal values and investments returns are neither guaranteed nor issued by, guaranteed by, or obligations of a bank, savings and loan, or credit union; and are not insured or guaranteed by the FDIC, SIPC, NCUSIF or any other agency. Portions of this newsletter was prepared by W E Sherman & Co., LLC. W E Sherman & Co., LLC is not affiliated with ProEquities or Harvest Investment Services, LLC. Advisory Services offered through Harvest Investment Services, LLC, a Registered Investment Advisor. Securities offered through ProEquities, Inc. A Registered Broker-Dealer and Member FINRA and SIPC. Harvest Financial Planning, LLC and Harvest Investment Services, LLC are independent of ProEquities, Inc