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BespokePremium.com © Copyright 2015, Bespoke Investment Group, LLC. Bespoke Investment Group, LLC believes all information contained in this report to be accurate, but we do not guarantee its accuracy. None of the information in this report or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities.

In case you haven’t been near a TV or

financial news outlet recently, we’d like

to point out that WTI has exploded higher

by over 25% in the last three trading

days. But is this rally durable? In to-

night’s Closer, we go cross-asset as well

as looking at positioning data and funda-

mentals to get an idea whether the crude

rally has legs or needs a breather near

these levels.

First, at right, we show intraday and daily

candle charts for the front month WTI

contract. While the daily chart may look

extremely overbought here, we would

point out that to get overbought versus

its 50-DMA (which it tested today but

couldn’t close above), WTI would need to

get up above $55.04 (one standard devia-

tion above), which is well above the 200-

DMA at $53.77. In other words, while the

move has been violent and suggests a

need for pause, the technical indicators

we prefer aren’t showing this as a major

exhaustion area. This dovetails nicely

with other technical commentary we’ve

seen on the subject; with a clean break of

a persistent downtrend and explosive,

high volume price action to the upside,

we can’t blame technicians for getting

very bullish on crude here. But we do

think some more caution on crude and its

derivatives (equities and credit, primarily)

is warranted.

The primary source of our concern is posi-

tioning. At right we show net positioning as a percentage of open interest for crude, including both WTI

and Brent. To be sure, net positioning is extremely short crude relative to historical precedent, with

Brent for all intents and purposes at all-time highs in short interest, and WTI at its lowest levels since

2010. All else equal, this is extremely supportive of the move to the upside, but keep in mind the data

was recorded as of last Wednesday and therefore doesn’t capture any of the explosive upside in crude

since.

Crude Squeeze: Don’t Chase Texas Tea Front Month WTI - Last Five Days

37

39

41

43

45

47

49

51

+25.5% in 3 sessions!

Front Month WTI - Last 12 Months

35

45

55

65

75

85

95

105

115

CFTC Comittment of Traders: Managed Money Positioning

-5%

0%

5%

10%

15%

20%

25%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

WTI

Brent

5.3%

-2.4%

Crude Oil

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For Personal Use Only—Do Not Forward

At right, we show the disaggregated positioning

for hedgers (merchants that carry physical WTI

inventory, processors that need to buy crude and

producers) and for speculators (money managers).

As shown, actual users of oil have steadily gotten

more short crude while longs have diverged. This

is a trend that’s been underway since oil peaked.

But in the last few weeks both bullish and bearish

producers have retreated, covering shorts and

stopping out of longs. We think this serves as a

proxy for the market finding clearing levels, alt-

hough the evidence here isn’t very strong.

Much more important is the massive shift in finan-

cial positioning. As shown at right, the most re-

cent collapse in oil prices has been accompanied

by a huge stop out amongst longs and a massive

build up in short positioning to levels last seen

since the Spring and oil made its last short-term

low. When shorts are added into a falling price,

the conclusion is simple: price-insensitive sellers

are piling in, responding only to recent price movements and momentum. Therefore any catalyst for

higher prices is hitting stops, and cleaning out the huge short position that has helped push prices

down. We expect next week’s Commitment of Traders report from the CFTC to show a much, much

smaller oil short position after the huge short base has seen such a shocking move against it. Our con-

cern is that those shorts are the only bid, and that covering will be short-lived.

To be sure, there is a fundamental story here as well; OPEC today released a bulletin (available here)

that suggests supply response from the cartel after WTI dropped below $40. That said, Saudi Arabia is

still growing production aggressively, Iranian supply is likely to become available over the next several

years, Iraqi supply has large potential, and countries like Venezuela are unlikely to stick to quotas to

closely amidst catastrophic fiscal imbalances that need oil revenue. So while the OPEC supply dimen-

sion is a supportive one, we don’t see it as decisive. Supply cuts could come, but short of large quota

reductions in the next several months we don’t

see OPEC as being a difference maker with

rhetoric.

Another positive is the US supply situation. At

right we show weekly and monthly production

estimates from the EIA. Today’s monthly pro-

duction assessment showed a deceleration to

production of ~9.3mm barrels per day in June

versus 9.5mm estimated in May. Supply re-

sponse in the US is bullish for crude.

WTI Hedger Positioning (Contracts)

0

100000

200000

300000

400000

500000

600000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

WTI Producer/Merchant Longs

WTI Producer/Merchant Shorts

WTI Speculator Positioning (Contracts)

0

50000

100000

150000

200000

250000

300000

350000

400000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

WTI Managed Money Longs

WTI Managed Money Shorts

EIA Estimated US Oil Production ('000 barrels/day)

5000

5500

6000

6500

7000

7500

8000

8500

9000

9500

10000

2010 2011 2012 2013 2014 2015

Weekly

Monthly

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Moderating that bullishness from a fundamen-

tal perspective is the reality that rig counts are

currently rising, albeit slowly. We would

broadly expect producers that are able to con-

tinuing to expand production, with smaller or

less efficient drillers not able to add rigs and

reducing overall production. The data roughly

fits that “sorting” process as the market bal-

ances at a lower average cost of production

and with lower total production. While lower

supply is bullish, the slight uptick in rigs sug-

gests that there are numerous producers that

are profitable at these levels, ultimately a

bearish sign for oil bulls.

Before we move on to the cross-asset reaction

to this massive rally, there are two other fac-

tors to consider. First, the WTI rally has taken

place with some narrowing of the WTI/Brent

spread, as shown at right, but nothing particu-

larly drastic. This suggests there’s less imbal-

ance between regions in the global oil markets

than there was during the previous collapse in

WTI to March lows. If physical markets are

able to stay in balance (as a moderate and rel-

atively stable WTI-Brent spread would suggest)

then the market could be much, much more

stable than it was earlier this year. This is an-

other mark for bulls. On the bearish side,

though, the shape of the WTI curve still means

that oil is extremely expensive to hold over

time, with a position losing over $5 per barrel

in negative carry over the course of the next 12 months. That negative carry (“contango”, red in the

chart at left) is a strong indication that spot markets continue to be oversupplied relative to demand,

for now. While the contango is less negative than it was a few days ago and much less negative than

the lows from March, it’s still going to cost money to hold an oil long, a condition that isn’t exactly sup-

portive of more buying at these levels. With supply starting to come off-line and talks of OPEC cuts, it’s

not particularly likely back months can drastically outperform front-months, so unless crude rallies sig-

nificantly longs will have to pay up every month as they roll contracts forward through time. We don’t

consider this a good sign for oil bulls hoping to attract more buyers, but the weight of contango is

starting to close somewhat.

Baker Hughes US Oil Rig Count

0

200

400

600

800

1000

1200

1400

1600

1800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

WTI - Brent Spread Per Barrel ($)

-14

-12

-10

-8

-6

-4

-2

0

2

WTI: Front Month - 12th Month ($)

-20

-15

-10

-5

0

5

10

15

2010 2011 2012 2013 2014 2015

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In addition to the positioning data (which makes

us concerned about the durability of the rally)

and the fundamentals (mixed, with the balance

of risk being supportive of further crude gains

here), we’ve seen quite a tepid reaction from

both equities and credit following the huge gains.

At left, we show a decile analysis that indicates

the biggest equity gains have come on short-

covering, as highly shorted stocks have bounced

the most. Small caps have also bounced more,

with poor liquidity and high short interest help-

ing to drive their move higher. Across the S&P

1500, there’s only been 6% outperformance of

Energy since the lows versus the broad market

last Wednesday; that’s hardly the stuff of an eq-

uity market desperate for Energy risk, expecting

enduring gains.

In credit, cash high yield spreads (shown below-

left as the spread between Energy-only credit and

the broad market) has moved much less than

might be expected given the size of the widening

over the last few months. In investment grade,

we noted repeatedly over the last couple of

weeks in both the Fixed Income Weekly dated

8/19/15 and The Bespoke Report Friday that a

bounce in WTI would be supportive of the overall

index. Below we show the spreads for the top

ten widest issuers in CDX IG. Once again, we em-

phasize that while credit spreads tightened for

the most part, the move was relatively modest

versus what the oil markets have done, calling in

to question the rally’s durability.

S&P 1500 Energy Avg Short Interest Deciles & Performance (%)

12.21 11.98

18.3020.39

16.1819.28

21.71 22.15

32.94

29.81

1.59 2.55 3.59 4.32 5.047.64

10.07

14.64

24.90

36.25

0

5

10

15

20

25

30

35

40

4 Day Performance

Short Interest % of Float

S&P 1500 by Market Cap: Avg Short Interest & Performance (%)

14.89

26.66

20.72

6.72

18.99

7.72

0

5

10

15

20

25

30

Large Cap Small Cap Mid Cap

4 Day Performance

Short Interest % of Float

S&P 1500 Energy Relative Performance

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

9/14 10/14 11/14 12/14 1/15 2/15 3/15 4/15 5/15 6/15 7/15 8/15

+6%

BBG USD HY Energy OAS - All High Yield OAS vs WTI

37

42

47

52

57

62250

300

350

400

450

500

550

12/31 1/23 2/13 3/9 3/30 4/21 5/12 6/3 6/24 7/16 8/6 8/27

OAS (bps, Left Axis)

WTI ($, Inverted, Right Axis)Name (5Y CDS) Sector Spread (Ask) Today

Transocean Inc Energy 930 -9

Teck Resources Ltd Materials 775 -10

Freeport-McMoRan Inc Materials 635 18

Weatherford International Energy 495 -19

Assured Guaranty Municipa Financials 369 -2

Nabors Industries Inc Energy 354 -25

Barrick Gold Corp Materials 310 5

Enbridge Inc Energy 263 5

Newmont Mining Corp Materials 225 1

Canadian Natural Resource Energy 223 -20

CDX IG - Highest Spread Components (bps)

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To summarize: positioning was supportive of a move in crude like the one we’ve seen, but we suspect

short-covering has driven the rally more than fresh demand. Fundamentals like production and OPEC

machinations are supportive, but not for drastically large gains given current levels. Equity and credit

reactions have been basically weak. Finally, history is not on the side of oil bulls after large rallies like

the last three days.

At right we show the largest three

day rallies in crude oil’s history.

As shown, while large rallies can

be quite bullish for oil in the short

-term, we see a clear pattern of

underperformance over the short

and medium term following large

price spikes. Given our views on

what the recent price action has

done to positioning, we think the

short-squeeze without legs is the

best example here and the data

broadly supports it, especially

when compared to overall histo-

ry.

At left we show the percentage change for WTI around large rallies such as the one we’ve just seen. As

shown, it’s on average likely to see poor performance over the subsequent several months, with losses

of as much as 70% from the surge. While we don’t expect that, we do not recommend investors chase

the move in the commodity itself, in equities, or in credit after the current rally. Its speed and force,

when combined with historical analysis, positioning data, mixed fundamentals and a relatively unim-

pressive cross-asset reaction suggest to us that this is a poor place to be adding to Energy exposure.

Look for a pullback over the next several weeks to reconsider, but do not let the current rip in Texas

Tea draw you in. The risk-reward, in our view, is poor.

Date WTI Price 3 Day Move 1 Day 3 Day 5 Day 1 Month 3 Month 1 Year

8/5/1986 15.02 34.71 -0.33 -1.26 2.20 7.92 -2.06 39.75

8/6/1990 28.05 30.22 0.93 -8.48 -4.56 6.13 21.21 -22.92

8/31/2015 48.43 25.49

1/5/2009 48.81 25.06 -0.47 -14.57 -22.99 -17.39 4.59 69.06

9/22/2008 120.92 24.45 -11.83 -10.67 -20.30 -41.37 -71.99 -44.72

4/7/1986 14.33 24.39 -12.98 -5.93 -9.49 -0.07 -21.70 25.47

6/24/1998 14.60 23.31 -3.90 -3.63 -1.58 -5.00 7.33 32.12

1/21/2009 43.55 23.02 0.28 5.01 -3.19 -10.59 12.17 69.16

10/25/1990 34.25 20.68 -3.62 0.85 2.69 -3.80 -37.66 -32.53

2/3/2015 53.05 19.13 -8.67 -2.56 -5.71 -4.32 13.85 n/a

Average -4.51 -4.58 -6.99 -7.61 -8.25 16.92

Median -3.62 -3.63 -4.56 -4.32 4.59 28.80

Average 0.03 0.10 0.15 0.58 2.03 7.69

Median 0.00 0.15 0.23 0.60 1.84 3.50

WTI Top Ten 3 Day Rallies

Top Ten

All Days

Forward Returns

Top Ten WTI Three Day Rallies - Indexed to 0 On 3rd Day of Rally

-80

-60

-40

-20

0

20

40

60

80

-30

-25

-20

-15

-10 -5 0 5

10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 951

00

10

51

10

11

51

20

12

5

Days from 3rd Day of Rally

High

Average

Low

Current

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Bonds, stocks, and the dollar sold off today as the S&P 500 closed down 84 bps (futures off slightly

more) and the VIX rose as September VIX futures rose 2.00 points to close at 25.425. CDS index prod-

uct widened, with but cash bonds performed much better, led tighter by Energy, although as discussed

earlier less than we might have expected.

Overnight, it’s an absolute banquet of economic data covering every sector of the global economy.

PMIs will get a lot of attention, especially in China, but there’s also GDP releases, central bank policy

decisions, and hard data from numerous sectors and countries to look forward to.

Asset Last Change

S&P 500 1965.50 -121.9

Russell 1156.60 -63.6

VIX Fut 26.43 818.8

TSX 814.10 -25.7

2 Year 73.8 2.2

5 Year 154.8 3.6

10 Year 221.8 3.7

30 Year 296.2 5.0

2s10s 147.8 1.7

5s30s 141.3 1.5

5 Yr BE 129.38 2.8

10 Yr BE 163.67 1.9

Sep '15 99.630 -0.8

Dec '15 99.515 -1.5

Mar '16 99.375 -1.5

Jun '16 99.205 -1.5

Gold 1134.80 11.0

Silver 14.63 13.8

WTI 48.09 634.7

Copper 233.80 -36.2

Nikkei 18890.5 -128.5

Shanghai 3206.0 -81.6

ASX 200 5207.0 -107.5

Stoxx 600 362.79 -13.5

BBG USD 1206.82 -6.8

EURUSD 1.121 23.2

USDJPY 121.23 -39.4

EM FX 68.5 -38.8

CDX IG 81.8 1.8

Cash IG 165.2 1.0

CDX HY 392.4 8.4

Cash HY 605.9 -4.6

Change Today (bps)

Trsy

Yie

lds

Cu

rve

s/B

EEu

rod

oll

ars

Co

mm

od

ity

Equ

ity

Futs

Int'

l Eq

uit

yFX

Cre

dit

Time Release Period Estimate Reading Last

8:30 Canada Current Account Balance (bn CAD) Q2 -16.9 -17.4 -17.5

9:00 ISM Milwaukee Aug 50.00 47.67 47.12

9:45 Canada BBG Nanos Economic Confidence 28-Aug -- 53.7 53.2

10:00 Chicago PMI Aug 54.5 54.4 54.7

10:30 Dallas Fed Manf. Activity Aug -3.8 -15.8 -4.6

16:00 Corn Crop Condition 28-Aug -- 68% 69%

16:00 Soybeans Crop Condition 28-Aug -- 63% 63%

19:50 Japan Capital Spending Q2 +8.8% -- +7.3%

20:00 NZ QV House Prices YoY Aug -- -- +10.1%

21:00 China Manufacturing PMI Aug 49.7 -- 50.0

21:00 China Non-Manufacturing PMI Aug -- -- 53.9

21:30 Australia BoP Current Acct Bal (AUD, bn) Q2 -15.9 -- -10.7

21:30 Building Approvals MoM Jul +3.0% -- -8.2%

21:35 Japan Nikkei Manf PMI (Final) Aug -- -- 51.9

21:45 China Caixin Manf PMI (Final) Aug 47.1 -- 47.1

21:45 China Caixin Svcs PMI Aug -- -- 50.2

0:30 RBA Policy Decision 1-Sep 2.00% -- 2.00%

1:00 India Nikkei PMI Manf Aug -- -- 52.7

1:00 Japan Vehicle Sales YoY Aug -- -- -1.3%

2:30 Commodity Index YoY Aug -- -- -20.2%

3:15 Spain Markit Manf PMI Aug 53.6 -- 53.6

3:45 Italy Markit Manf PMI Aug 55.0 -- 55.3

3:50 France Markit Manf PMI (Final) Aug 48.6 -- 48.6

3:55 Germany Markit Manf PMI (Final) Aug 53.2 -- 53.2

3:55 Germany Unemployment Change ('000s) Aug -4 -- +9

4:00 EZ Markit Manf PMI (Final) Aug 52.4 -- 52.4

4:00 Italy Unemployment Rate (Prelim) Jul 12.7% -- 12.7%

4:00 Italy Quarterly Unemployment Rate Q2 12.5% -- 12.4%

4:30 UK Mortgage Approvals ('000s) Jul 68.1 -- 66.6

4:30 UK Markit Manf PMI Aug 52.0 -- 51.9

5:00 Italy GDP QoQ (Final) Q2 +0.2% -- +0.2%

8:30 Canada GDP MoM Jun +0.2% -- -0.2%

8:30 Canada Quarterly GDP (QoQ SAAR) Q2 -1.0% -- -0.6%

9:30 Canada RBC Manf PMI Aug -- -- 50.8

9:45 Markit Manf PMI (Final) Aug 52.9 -- 52.9

10:00 Construction Spending MoM Jul +0.6% -- +0.1%

10:00 ISM Manufacturing Aug 52.5 -- 52.7

n/a Domestic Vehicle Sales (mm SAAR) Aug 13.7 -- 13.92

n/a Total Vehicle Sales (mm SAAR) Aug 17.3 -- 17.46

13:10 Boston Fed President Rosengren Speaks on the Economic Outlook in NY

16:30 API US Crude Oil Inventories (mm bbls) 31-Aug -- -- -7.3

US Data Recap and Overnight Preview

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Popular Tweets From @bespokeinvest on Twitter

“Large cap Energy sector stocks are down an average of 39% from their respective 52-Week highs. $XLE ” - 9:09

“Pretty big miss in Dallas Fed -15.8 vs -4.0 forecast. ” - 10:31

“Biggest three day rally for Crude Oil (+23.9%) since January 2009. $USO ” - 12:10

“Since our data starts in 1983, this is the 4th largest 3 day move in crude oil's history. +25.23%. More analysis in The Closer tonight. ” - 14:33

“If you shorted crude oil for the month of August, your month just fell apart. From Down 18% MTD to up 4% MTD in just 3 trading days. $USO ” - 16:46

“Worst August for the S&P 500 since 2001. ” - 16:04

Closing Charts & Tweets

Oil Future: Last 15 Trading Days Gold Front Month Future: Last 15 Trading Days

US Dollar Index: Last 15 Trading Days Long Bond Future Intraday: Last 15 Trading Days

S&P 500 Intraday: Last 15 Trading Days Nasdaq Composite: Last 15 Trading Days

37

38

39

40

41

42

43

44

45

46

47

48

49

50

8/11 8/13 8/17 8/19 8/21 8/25 8/27 8/31

92.0

93.0

94.0

95.0

96.0

97.0

98.0

8/11 8/13 8/17 8/19 8/21 8/25 8/27 8/31

155.0

156.0

157.0

158.0

159.0

160.0

161.0

162.0

163.0

164.0

8/11 8/13 8/17 8/19 8/21 8/25 8/27 8/31

1800

1850

1900

1950

2000

2050

2100

8/11 8/13 8/17 8/19 8/21 8/25 8/27 8/31

4200

4300

4400

4500

4600

4700

4800

4900

5000

5100

5200

8/11 8/13 8/17 8/19 8/21 8/25 8/27 8/31

1075

1095

1115

1135

1155

1175

8/11 8/13 8/17 8/19 8/21 8/25 8/27 8/31

Ticker Name Change Last 6 MosSPY S&P 500 -0.81IJH S&P 400 -0.70IJR S&P 600 -0.07DIA Dow 30 -0.69QQQ Nasdaq -1.24IWB Russel l 1000 -0.76IWM Russel l 2000 -0.36XLF Financia ls -0.85XLB Materia ls -0.55XLE Energy 1.03XLI Industria ls -0.89XLY Cons . Cycl ica l -0.77XLP Cons . Staples -0.69XLV Health Care -1.82IYZ Telecom -0.63XLK Technology -0.91XLU Uti l i ties -1.60GDX Gold Miners -0.98XME Metals & Mining 1.54XRT Reta i l -0.18XHB Homebui lders 0.17IYR US Real Estate -1.99KRE Regional Banks 0.91IWD Russel l 1000 Value -0.47IWF Russel l 1000 Growth -1.15VXX VIX 3.91AGG Total Bond Mkt -0.07TLT 20+ Yr Treasuries -0.77MUB Muni . Bonds -0.07LQD Invest. Gr. Bonds -0.25JNK High Yield Bonds 0.05BKLN Senior Loan 0.13GLD Gold 0.11SLV Si lver 0.50USO Oi l 6.79UNG Natura l Gas -1.24VT Tota l World -0.64CWI World Ex-US -0.72VEA Developed Mkts -0.74EEM Emerging Mkts 0.18EZU Eurozone -0.28DXJ Japan JPY Hdg'd -1.99EWZ Brazi l -2.01FXI China -1.24EWT Taiwan 0.38EWH Hong Kong -1.03EWW Mexico 0.80

Key ETFs (1 Day % Change)

MCF 16.47 RGS -11.16 PLL 973.39 BH -77.81

BIG 15.67 GME -8.03 ANN 872.42 CABO -77.72

BAS 15.48 REX -6.78 BIG 742.96 POL -67.23

PVA 14.50 ADSK -4.96 OCR 672.56 MDAS -67.15

CRC 12.83 IPXL -3.57 RGS 637.01 SYNA -67.05

BCEI 12.82 BXLT -3.24 HVT 586.27 WRLD -65.96

WPX 12.60 BOFI -3.19 ADSK 429.96 PLCM -65.91

REXX 12.27 HHS -3.12 GME 408.72 SVU -65.36

SGY 12.09 LL -2.86 CAL 308.10 HMSY -64.49

TUES 11.77 IO -2.84 MDP 242.95 CMG -63.63

CLD 10.63 UNFI -2.76 UE 236.49 THOR -63.09

GLF 10.40 PRXL -2.50 MYE 231.16 CCE -63.05

NOG 9.60 LITE -2.35 INDB 226.74 IPCM -62.99

BBG 9.54 MYL -2.18 CMTL 219.06 FORR -62.51

PBY 9.41 PRSC -2.15 PRAA 216.54 ZBRA -62.01

Most Down

Price (%)

S&P 1500 Biggest MoversVolume vs Historical Avg (%)

Most Up Most Down Most Up

The Tale of The Tape: S&P 500 vs Russell 2000 (Small Caps)

1,156

1,157

1,158

1,159

1,160

1,161

1,162

1,163

1,164

1,165

1,166

1,965

1,970

1,975

1,980

1,985

1,990

S&P 500 Russell 2000 (Small Caps)

1,156

1,157

1,158

1,159

1,160

1,161

1,162

1,163

1,164

1,165

1,166

1,965

1,970

1,975

1,980

1,985

1,990

S&P 500 Russell 2000 (Small Caps)

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Sentiment Indicator vs Historical One Week Two Weeks One Month

CBOE Call Volume 1.2 ## -1.8 0.08 -0.11 -0.12

NYSE Up vs Total Volume (%) 38.6 ## -1.7 0.25 1.62 2.11

Nasdaq Up vs Total Volume (%) 40.9 ## -1.4 0.31 0.65 0.04

Index vs Equity PC Ratio 0.0 ## -1.9 0.29 0.84 0.87

VIX 50-Day ROC (%) 103.7 ## 2.9 -1.09 -0.55 -0.32

VIX 10-Day ROC (%) 118.4 ## 6.6 -2.63 -3.47 -4.94

Investors Intelligence Bullish (%) 31.6 ## -2.1 1.41 2.14 3.19

Investors Intelligence Bearish (%) 22.5 ## -0.4 0.11 0.22 0.90

Inv Intell. Bull Bear Spread 9.1 ## -0.9 0.24 0.48 1.43

AAII Bullish (%) 32.5 ## -0.8 0.18 0.34 0.42

AAII Bearish (%) 38.3 ## 0.5 0.08 -0.07 0.37

AAII Bull Bear Spread -5.8 ## -0.7 0.02 0.49 0.21

Overall Sentiment ## -0.1 0.15 0.41 0.40

Technical

S&P 500 10-Day Avg. Spread (%) -0.6 ## -0.3 -0.18 0.16 -0.24

S&P 500 50-Day Avg. Spread (%) -4.8 ## -1.3 -0.04 0.44 -0.07

S&P 500 200-Day Avg. Spread (%) -5.0 ## -0.8 -0.41 -0.46 -0.62

S&P 500 Monthly ROC (%) -5.8 ## -1.4 -1.72 -1.29 -1.24

S&P 500 Weekly ROC (%) 4.2 ## 1.6 0.07 0.27 0.17

S&P 500 Quarterly ROC 1 (%) -6.7 ## -1.0 -0.51 -0.68 -2.08

Group 10-Day A/D Line -100.0 ## -2.4 0.69 1.39 4.13

Group 50-Day A/D Line -60.0 ## -1.1 0.64 0.82 1.55

S&P 500 10-Day A/D Line -1497.0 ## -2.2 2.47 7.78 8.67

S&P 500 50-Day A/D Line -1039.0 ## -1.0 -0.30 -0.21 0.40

NYSE TRIN Index 1.5 ## 1.2 -0.48 -0.64 -0.48

Overall Technical ## -0.8 -0.18 0.16 -0.07

Fundamental/Monetary

Corporate Spreads (10-Day ROC) 5.0 ## 0.3 0.15 0.39 0.53

Corporate Spreads (50-Day ROC) 25.0 ## 0.5 0.07 0.17 0.20

High Yield Spreads (10-Day ROC) 14.0 ## 0.3 0.04 0.31 0.41

High Yield Spreads (50-Day ROC) 99.0 ## 0.6 -0.10 0.05 -0.59

S&P 500 P/S Ratio 1.7 ## 1.3 -0.06 -0.36 -1.16

S&P 500 P/E Ratio 17.4 ## 0.0 -0.12 0.02 0.47

S&P 500 P/B Ratio 2.9 ## 0.8 -0.06 0.17 0.49

Yield Curve (50-Day ROC) 0.0 ## 0.0 0.09 0.41 0.63

Yield Curve (10-Day ROC) 11.1 ## 0.5 0.16 0.32 0.52

Overall Fundamental ## 0.5 0.04 0.17 0.47

Bottom Line ## -0.2 0.07 0.24 0.39 Average S&P 500 Performance (All Days) 0.10 0.19 0.38

Average S&P 500 Performance (%)Current Level

Direction

Bespoke Market Timing Model: 8/31/15

Neutral Bearish Bullish

Page 9 of 9 The Closer 8/31/15 BespokePremium.com

For Personal Use Only—Do Not Forward

Sentiment Indicator vs Historical One Week Two Weeks One Month

CBOE Call Volume 1.7 0.6 0.6 0.13 -0.22 -0.44

Overall Sentiment 0.3 0.3 0.14 0.16 0.28

Bottom Line 0.3 0.3 0.12 0.21 0.27

Average S&P 500 Performance (All Days) 0.12 0.24 0.50

Current Level Average S&P 500 Performance (%)

Direction

The Bespoke Market Timing Model is a compilation of some widely (and not so widely) followed market indicators. While

most investors have one or two indicators they rely on, we all recognize that no indicator by itself is correct all of the time.

With this in mind, we set out to create a series of indicators from multiple disciplines in order to see what the 'crowd' of

indicators are telling us. Just as no individual is bigger than the market, we contend that no single indicator is more accurate

at forecasting the market than the sum of them all. What follows below is an explanation of the various fields in our report.

Indicator: Current level of the given indicator. In this example, CBOE call volume is 1.7 times CBOE put volume.

Direction: Change in the indicator (positive or negative) over the last week. In this example, calls relative to puts have

increased during the last week.

vs Historical: This field measures the distance in standard deviations that the indicator is currently at versus its average

over the last five years. In the above example, the volume of calls relative to puts is 0.6 standard deviations above its histori-

cal average.

Indicator: Current level of the given indicator. In this example, CBOE call volume is 1.7 times CBOE put volume.

Average S&P 500 Performance: This field displays the average performance of the S&P 500 following previously occasions

when the indicator was at similar levels to the present. Values highlighted in green indicate the two indicators for that

group which are predicting the biggest gains, while indicators highlighted in red highlight the indicators which are signaling

the most negative returns going forward.

Overall Scores: Averages all the indicators for a given category. In the example above, overall sentiment is 0.3 standard

deviations from its long-term average. At similar levels in the past, the S&P 500 has gone up an average of 0.14% over the

next week, 0.16% over the next two weeks, and 0.28% over the next month.

Bottom Line: This line shows the average of all the indicators in the study. In the example above, the aggregate level of

all the indicators is currently 0.3 standard deviations above the historical average, and based on prior experiences, the S&P

500 has gone up an average of 0.12% in the next week, 0.21% in the next two weeks, and 0.27% in the next month. Values

highlighted in red indicate returns that underperform the S&P 500 over the entire period covered (regardless of the indica-

tor level), while green highlights indicate that they outperformed the overall average S&P 500 performance.

Average S&P 500 Performance (All Days): This line measures the average historical performance of the S&P 500 over all

periods for one week, two week, and one month time frames. These levels are then compared to the average level the

indicators are predicting.in the next two weeks, and 0.27% in the next month. Values highlighted in red indicate returns

that underperform the S&P 500 over the entire period covered (regardless of the indicator level), while green highlights

indicate that they outperformed the overall average S&P 500 performance.

Average S&P 500 Performance (All Days): This line measures the average historical performance of the S&P 500 over all

periods for one week, two week, and one month time frames. These levels are then compared to the average level the

indicators are predicting.