By Jeffrey A. HirschChief Market Strategist

The return of volatility over the pastfour weeks has been quite a realitycheck for the market and itsparticipants. However, it has notshaken our resolve and our bullishoutlook for 2018. Economic dataand forecasts remain robust, butimproving economic conditions are a double-edged sword for the market.

Historically stocks tend tostruggle in rising rateenvironments, but theselevels are still well belowhistorical averages for the 10-Year Treasury yield and belowthe lower end for the benchmarkyield of around 4% prior to 2008.The uptick in growth, inflation,wages and corporate profits stokedfears of an accelerated run up ininterest rates, which spookedtraders and investors and heraldedin a return of volatility that began atthe end of January.

This influx of real volatility — largerdaily and intraday market indexprice swings — caused a run on thelatest Wall Street invention: lowvolatility derivatives, especiallyinverse volatility Exchange-Traded

Products (ETPs). The long-awaited10.2% correction that appears tohave found support at the February8 close — at least for now — has brought valuations, stockprices and the overboughtconditions back in line to lessoverextended levels.

It’s been two full years since the last10% correction, so make nomistake; this was a warning shotthat market volatility has returnedand the days of super easy gainsbeing long and strong stocks andthe broad market and short volatilityare likely over. This makes thehistorical time-tested seasonaltrading trends and pattern forfrequency and magnitude detailedin the Stock Trader’s Almanac for 51

years, even more imperative toconsider.

The fact that this correctionhappened in classic fashion inFebruary, the weak link in the BestSix Months, where big January

gains often correct orconsolidate, lends support tothe efficacy of and return ofmarket seasonality. This lookslike a textbook setup for amidterm-election year Worst

Six Months market soft patchand perhaps further correction

during the May-October period.

March historically remains strong inmidterm years, but April, May andJune have been weaker in midtermyears, so we suspect the rally toresume higher toward the Januaryhighs in March. Volatility is likely tocontinue, but we don’t expectanother meaningful pullback untilthe end of the Best Six Months.Midterm election campaignmachinations and political rhetoricare likely to heat up alreadyheightened tensions in Washington,

Volume 4, Issue 3 Published by Probabilities Fund Management, LLC March 2018

March Outlook: Still Bullish — Correction Brings Market and Valuations Back Inline

March Outlook 1

March Almanac 2

Events Calendar 3

Market at a Glance 4

(continued on page 2)

Inside

“...bewareThe Ides of March

as well as the week after March quarterly options expiration

and the end of Q1. The market tendsto come into March strong, but then

after mid-month is prone to weakness...”

Page 2The Seasonal Strategist

(continued on page 3)

fanning any market jitters from the new Fed, higherrates and market gyrations.

Bullish sentiment has come down considerably andtechnically the market is going through a constructiveconsolidation. Finally, while midterm March ishistorically strong, like Julius Caesar: beware The Idesof March as well as the week after March quarterlyoptions expiration and the end of Q1. The market tendsto come into March strong, but then after mid-month isprone to weakness and big end-of-Q1 hits.

March Almanac:Above Average in Midterm YearsTempestuous March markets tend to drive prices upearly in the month and batter stocks at month end.Julius Caesar failed to heed the famous warning to“beware the Ides of March” but investors have beenserved well when they have. Historically, stock priceshave often declined, sometimes rather precipitously,during the latter days of the month.

March packs a rather busy docket. It is the end of thefirst quarter, which brings with it quarterly optionsexpiration and an abundance of portfolio maneuversfrom The Street. March quarterly options expirationweeks have been quite bullish in recent years. But theweek after is the exact opposite, DJIA down 20 of thelast 30 years — and frequently down sharply for anaverage drop of 0.54%. Notable gains during the weekafter for DJIA of 4.9% in 2000, 3.1% in 2007, 6.8% in2009, and 3.1% in 2011 are the rare exceptions to thishistorically poor performing timeframe.

Normally a solid performing market month, March hasimproved modestly in midterm-election years (see VitalStatistics table below). In midterm years March ranks:4th best for DJIA and S&P 500 and 3rd best forNASDAQ. DJIA and S&P 500 have been up for fivestraight midterm Marchs.

Saint Patrick’s Day is March’s sole recurring culturalevent. Gains the day before Saint Patrick’s Day haveproved to be greater than the day itself and the day after.Perhaps it’s the anticipation of the patron saint’s holidaythat boosts the market and the distraction from theparade down Fifth Avenue that causes equity markets tolanguish. Or maybe it’s the fact that Saint Pat’s usuallyfalls in quarterly options expiration week. With theholiday falling on a Saturday this year (but also the dayafter quarterly options expiration), the day before couldbe weaker than usual as some traders may look tostretch the holiday into a three-day weekend.

Management TeamJoseph B. Childrey, Mary C. Gray,Founder & CIO COO

Jonathan L. Chatfield, CFA, Jeffrey A. Hirsch,Portfolio Manager & CCO Chief Market Strategist

Editor, Stock Trader’s Almanac

Christopher Mistal,Director of Research

Independent Research Consultants

Allen Shepard, PhD, Robert B. Ausdal, Jr., CFA,Research Consultant Research Consultant

Probabilities Fund Management, LLCA registered investment advisor.

1665 Union Street, Suite A, San Diego, CA 92101Office: 800-519-0438Email: advisorservices@probabilitiesfund.comWebsite: www.probabilitiesfund.com

People

Contact

Page 3The Seasonal Strategist

Events CalendarProbabilities Fund Management, LLC invites you to join us at any of the following upcoming events:

To Register Early

For An Event or

For More Information,

Call (800) 519-0438

or Email

advisorservices@

probabilitiesfund.com.

ClaraphiAnnual Conference

Ritz CarltonDana Point, CA – April 26-28

Founder & Chief InvestmentOfficer Joseph B. Childrey

HBW Partners 2018 ExecutivesVictoria, BC – May 7-10

Chief Market Strategist Jeffrey Hirsch

The MoneyShow Las Vegas Bally’s/Paris Las Vegas

Las Vegas, NV – May 14-16

TradePMR RIA ConferenceSynergy 2018

Marriott Marquis San Diego MarinaSan Diego, CA – May 16-18

Index Definitions: The S&P 500 Index is an unmanaged composite of 500 large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks. The Dow Jones Industrial Average (‘DJIA’) is an unmanaged composite of 30 widely held stocks. The NASDAQ Index is an unmanaged composite of the common stocks and similar securities listed on the NASDAQ stock market companies. You cannot invest directly in an index and unmanaged index returns do not reflect any fees,expenses or sales charges. Past performance does not guarantee future results.

Past performance does not guarantee future results. You cannot invest directly in an index and unmanaged index returns do not reflect anyfees, expenses or sales charges.

March Almanac Vital StatsWhatever the case, since1950, the S&P 500 hasposted an average gain of0.21% on Saint Patrick’s Day(or the next trading daywhen it falls on a weekend),a gain of 0.13% the day after,but the day before averagesa 0.24% advance.

On the day before GoodFriday S&P 500 has logged gains averaging0.65% in the last 20 years,up 15 times, down 5 times.NASDAQ has averagedgains of 0.78% the daybefore Good Friday in thelast 20 years, up 18 times,down 2 times. Trading the day after Easter hasbeen weak.

Page 4The Seasonal Strategist

“fear has sentInvestors Intelligence

Advisors Sentimentsurvey bulls to

62.3%, bears down to 15.1% and

correction camp has shrunk to

just 22.6%.”

Market at a Glance

For more information about our strategies, products and services, including updated

fact sheets, performance summary reports and prospectuses, visit our web sites:

http://www.probabilitiesfundmanagement.com, http://www.probabilitiesfund.com or call Advisor Services today at (800) 519-0438.

The material provided herein has been provided by Probabilities Fund Management, LLC and is for informational purposes only. ProbabilitiesFund Management, LLC is the adviser to one or more mutual funds distributed through Northern Lights Distributors, LLC memberFINRA/SIPC. Northern Lights Distributors, LLC and Probabilities Fund Management, LLC are not affiliated entities.

More Information

Psychological: Stunned. Bullish sentiment wasrunning at multi-decade highs in late Januaryaccording to Investor’s Intelligence AdvisorsSentiment survey. This is no longer the case. Bullshave retreated to less than 50% and correctionadvisors have increased to nearly 37%. Bears are still scarce at just under 15%. In late January, the “wall of worry” that the market climbs wasessentially nonexistent.This appears to nolonger be applicable.The easing ofextremely bullishsentiment does givethe market some room to recover.

Fundamental: Firm. Unemployment is low,corporate earnings are growing and GDP iscurrently forecast to be running right around 3%.These are all fair data points, but clear signs ofeconomic overheating are still absent. The recentuptick in some inflation metrics and bond yields was once considered a positive. It was confirmation that the economy was onfirm(er) footing, not a warning that a recessionwas imminent.

Technical: Mixed. Markets went from overboughtto oversold in seemingly record time. Bullishlysupport was found above DJIA, S&P 500

and NASDAQ key technical levels. The currentrebound is struggling with resistance. Othermarket indicators have all improved and there isstill some room left. NASDAQ’s chart looks thebest having cleared recent resistance levels.Similar moves by DJIA and S&P 500 would bewelcome confirmation that the bull market is still

alive and well.

Monetary: 1.25-1.50%. Itwould seem the

greatest fear is thepossibility that theFed may be chasing

after inflation and mayneed to raise rates quicker

than previously expected.Inflation was well below the Fed’s stated 2%target for a rather lengthy amount of time andcould easily overshoot on the high side. Shouldinflation overshoot, the Fed may still take its timeraising rates considering all the effort (trillions of $in QE) that went into stimulating it.

Seasonal: Bullish. Normally a solid performingmonth, March typically enjoys even better resultsin midterm years. The month’s overall rankingimproves due to increase in average gains. DJIAand S&P 500 rank #4 while NASDAQ ranks thirdbest overall.

“Normally a solidperforming month, March typically

enjoys even better results in midtermyears. The month’s overall ranking

improves due to increase in average gains.”

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