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EDITOR: DICK STERN CIO: BRAD LAMENSDORF

O C T O B E R 2 0 1 5

+100% -25%75% 25% 0%50% -50%

sThe charts and graphs presented in LMTR’s newsletter are not produced by LMTR. The interpretation of the charts and graphs is only the opinion of LMTR and does not reflect the associated firms’ opinions.

W E S T P O R T, C O N N E C T I C U T B R A D @ L M T R . C O M

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Bearish Sentiment Indicates Likelihood of a Fall Rally, But Anticipate

a Bear Market after the BounceThe third quarter correction has knocked sentiment numbers down to oversold readings, indicating an upward market bounce at least through the autumn. However, technical damage created during the correction has very negative implications over the long run. This issue of LMTR will focus heavily on sentiment indicators, but we will also spend some time reviewing troublesome long-term indicators.

(S500)

Weekly Data 12/14/1973 - 10/02/2015 (Log Scale)

Source: S&P Dow Jones Indices666852

1089139217792274290837174752607577669928

1269216225

666852

1089139217792274290837174752607577669928

1269216225

Too Many BearsBearish Advisors (Four-Week Smoothing)

Too Few Bears Source: Investors Intelligence5

10152025303540455055606570

510152025303540455055606570

Excessive Optimism

Too Few Optimists

Bullish Advisors (Two-Week Smoothing)

Source: Investors Intelligence152025303540455055606570758085

152025303540455055606570758085

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Dow Jones Industrial Average

Copyright 2015 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved..www.ndr.com/vendorinfo/. For data vendor disclaimers refer to www.ndr.com/copyright.htmlSee NDR Disclaimer at

The Investors Intelligence Bulls/Bears Ratio, a poll of the sentiment of 155 newsletter writers, has become dramatically more bullish. For more than a year the bears were stuck at about 15%, which was a 30-year low. But during the current correction the number of bears jumped to 36%. While a year ago the bulls were at 60%, they have now collapsed to 24%. The bulls minus bears are now at minus 12%, which is a favorable reading.

LAMENSDORF MARKET TIMING REPORT O C T O B E R 2 0 1 5

W E S T P O R T, C O N N E C T I C U T B R A D @ L M T R . C O M

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More than a year ago Ned Davis Research’s Crowd Sentiment poll registered at 73.3, one of the tool’s highest positive sentiment readings in the last 10 years. It is currently at 46.2, which is its highest negative reading in three years. This is bullish.

S574© Copyright 2015 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved.See NDR Disclaimer at www.ndr.com/copyright.html For data vendor disclaimers refer to www.ndr.com/vendorinfo/

S&P 500 Composite Index 2002-07-31 to 2015-09-29 (Log Scale)(Updated weekly on Wednesday mornings)

S574© Copyright 2015 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved.See NDR Disclaimer at www.ndr.com/copyright.html For data vendor disclaimers refer to www.ndr.com/vendorinfo/

S&P 500 Composite Index 2002-07-31 to 2015-09-29 (Log Scale)(Updated weekly on Wednesday mornings)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

665

735

812

898

992

1,097

1,212

1,339

1,480

1,636

1,808

1,998

2,208

665

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992

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1,212

1,339

1,480

1,636

1,808

1,998

2,208

S&P 500 Index Gain/Annum When:1995-12-01 to 2015-09-29

NDR Crowd Sentiment Pollis:

% Gain/Annum

% ofTime

Above 61.5 1.6 42.5

Between 55.5 and 61.5 10.4 21.0

* Below 55.5 8.5 36.5

Arrows represent extremes in optimism andpessimism. They do not represent buy and sellsignals and can only be known for certain (andadded to the chart) in hindsight.

Extremes Generated when Sentiment Reading:Rises above 61.5% = Extreme OptimismDeclines below 55.5% = Extreme Pessimism

Sentiment must reverse by 10 percentage pointsto signal an extreme in addition to the aboveextreme levels being reached.

Average Value Of Indicator At:Optimistic Extremes (down arrows)= 68.4Pessimistic Extremes (up arrows)= 46.9Average Spread Between Extremes = 21.5

Source: S&P Dow Jones Indices

NDR Crowd Sentiment Poll

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33.9 33.9

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46.6

42.5

49.947.6

38.0 37.1

32.530.9

46.8

51.3

40.5

50.3

38.4

47.2 48.2

55.253.3

53.5

59.4

75.7

68.1

73.5

67.169.6

71.970.5 69.5

72.2

58.1

62.3

69.8 70.773.0

63.2

70.768.3

71.673.9 73.3

Source: Ned Davis Research, Inc.

Extreme Pessimism (Bullish)

Extreme Optimism (Bearish)

2015-09-29 = 46.2

(DAVIS134)

Daily Data 7/05/2006 - 10/02/2015 (Log Scale)

Standard and Poor's 500 Stock IndexGain/Annum When:

Gain/ %NAAIM Survey is Annum of Time

Above 73% 0. 5 33. 6* Between 14% and 73% 4. 3 61. 6

Below 14% 49. 0 4. 8Source: S&P Dow Jones Indices702

745791840892947

1006106811341204127913581442153116261726183319462067

702745791840892947

1006106811341204127913581442153116261726183319462067

NAAIM member firms who are active money managers are askedeach week to provide a number which represents their overallequity exposure at the market close on a specific day of theweek, currently Wednesdays. (Weekly Data Updated Twice a Month)

Source: NAAIM, Survey of Manager Sentiment http://www.naaim.org High Average Allocation (%) Optimistic

Low Average Allocation (%) Pessimistic-505

101520253035404550556065707580859095

100105

-505

101520253035404550556065707580859095

100105

S D2007

M J S D2008

M J S D2009

M J S D2010

M J S D2011

M J S D2012

M J S D2013

M J S D2014

M J S D2015

M J S

Standard and Poor's 500 Stock Index

National Association of Active Investment Managers (NAAIM) Survey Average Copyright 2015 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved.

.www.ndr.com/vendorinfo/. For data vendor disclaimers refer to www.ndr.com/copyright.htmlSee NDR Disclaimer at

The National Association of Active Investment Managers’ Exposure Index averages its membership’s actual exposure to U.S. equity markets. This is an important difference from bullish and bearish sentiment polls. A year ago exposure was 100% long. However after the recent correction it has fallen to 15% long, which is bullish.

LAMENSDORF MARKET TIMING REPORT O C T O B E R 2 0 1 5

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The High-Low Index seeks to provide confirmation of a market trend by comparing the daily number of stocks reaching new 52-week highs with the number reaching new 52-week lows on a broad equity index. It is calculated by dividing the number of high stocks and low stocks by the total of number trades on that day. Last year this indicator traded at 80, which is extremely overbought. As a result of the recent correction, the indicator has moved into buy territory. At one point it dipped to 6, and it is currently at 10.

(S244A)

Daily Data 7/15/1981 - 10/02/2015 (Log Scale)

S&P 500 IndexGain/Annum When:

Gain/ %Bottom Clip is Annum of Time

Above 61 11. 5 53. 5Between 36 and 61 5. 0 32. 2

* Below 36 3. 8 14. 3

Source: S&P Dow Jones Indices113132155182213250293343402471552647758889

10421221143116771966

113132155182213250293343402471552647758889

10421221143116771966

10/02/2015 = 31.1%Source: Ned Davis Research, Inc.05

1015202530354045505560657075808590

05

1015202530354045505560657075808590

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S&P 500 Index

Percent of NDR Multi-Cap Stocks Above Their 200-Day Moving Averages Copyright 2015 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved.

.www.ndr.com/vendorinfo/. For data vendor disclaimers refer to www.ndr.com/copyright.htmlSee NDR Disclaimer at

One of my favorite market indicators is the percentage of stocks that are trading higher than their 200-day moving average. It is a simple tool that can be used in two very different ways. The first and most obvious use of this tool is for assessing overbought and oversold situations. An overbought reading occurs at levels above 80, and oversold readings occur at levels below 30. It recently fell to 22, but it has since inched its way back to 31. This is a bullish signal.

This chart also has a secondary use, pinpointing positive or negative divergences in the marketplace. A large negative divergence has been present since the end of 2013. This means the underlying market trend is much weaker than the market indexes have been showing.

© Copyright 2015, All Rights Reserved Stockcube Research Ltd. Further distribution prohibited without prior permission. www.investorsintelligence.com

LAMENSDORF MARKET TIMING REPORT O C T O B E R 2 0 1 5

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Despite the correction, and lower stock prices, corporate insiders have yet to show up as buyers. According Trim Tabs Investment Research, during August and September a mere $600 million in stock was purchased by insiders. Moreover, a single company (Seattle Genetics) made up a third of this total. Significant bottoms occur when value has been created. Insiders have a knack for spotting value in their own companies. The fact that insiders have yet to show up as buyers is extremely negative.

© 2015 TrimTabs Investment Research. All rights reserved.

This particular chart shows that for the first time since 2009 all six major Fed regional activity surveys are in contraction, which could suggest a weaker earnings environment for next year.

© Copyright 2015, All Rights Reserved www.zerohedge.com. Further distribution prohibited without prior permission.

LAMENSDORF MARKET TIMING REPORT O C T O B E R 2 0 1 5

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The first chart displays the average price of the 25 cheapest stocks in the S&P500 index, and it is utilized as a technical tool. The second chart displays the price multiples of equities, which is a fundamentally oriented tool. While the indicators look at different data, they are both flashing warning signs. Both were in overbought territory before the correction. While they have pulled in some, these two indicators remain in overbought territory. This is a huge long-term concern.

S264

Daily Data 1/20/1972 - 10/02/2015 (Log Scale)

S&P 500 IndexGain/Annum When:

Price of 25th* Cheapest Gain %Stock in the S&P 500 is: /Annum of Time* Above $16 3. 1 9. 4

Between $6 and $16 5. 7 83. 1$6 and Below 25. 6 7. 5

*Price will represent 24th cheapest stock when S&P 500 has fewer than 500 members Source: S&P Dow Jones Indices57667687

101116134155178206237273315363418481555639736848977

11261297149417211983

57667687

101116134155178206237273315363418481555639736848977

11261297149417211983

S&P 500 Index vs. Price of 25th* Cheapest Stock in the S&P 500 Index

468

10121416182022

468

10121416182022Price of the 25th* Cheapest Stock in the S&P 500 (5th Percentile) ( ) 10/02/2015 = $16.25

Excessive Speculation

Speculators Fearful

Sell Low Priced Stocks

Buy Low Priced Stocks

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Copyright 2015 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved..www.ndr.com/vendorinfo/. For data vendor disclaimers refer to www.ndr.com/copyright.htmlSee NDR Disclaimer at

Weekly Data 5/30/1980 - 10/02/2015 (Log Scale)

(DAVIS52)

S&P 500 Gain/Annum When:

Gain/ %Indicator Is: Annum of Time* Above 16.4 2. 1 34. 9

Between 12.9 and 16.4 10. 6 40. 612.9 and Below 14. 4 24. 6

10/02/2015 = 1951.4Source: S&P Dow Jones Indices94

111132157187222264313372442526624742881

10471244147817562087

94111132157187222264313372442526624742881

10471244147817562087

10/02/2015 = 17.2Source: Value Line

19.70

789

1011121314151617181920

789

1011121314151617181920

Data moved ahead one week to reflect reporting lag.

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Standard & Poor's 500 Stock Index

Value Line Price/Earnings Ratio Copyright 2015 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved.

.www.ndr.com/vendorinfo/. For data vendor disclaimers refer to www.ndr.com/copyright.htmlSee NDR Disclaimer at

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Copyright © 2015 Lamensdorf Market Timing Report.

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Lamensdorf Market Timing Report is a publication intended to give analytical research to the investment community. Lamensdorf Market Timing Report is not rendering investment advice based on investment portfolios and is not registered as an investment advisor in any jurisdiction. Information included in this report is derived from many sources believed to be reliable but no representation is made that it is accurate or complete, or that errors, if discovered, will be corrected. The authors of this report have not audited the financial statements of the companies discussed and do not represent that they are serving as independent public accountants with respect to them. They have not audited the statements and therefore do not express an opinion on them. The authors have also not conducted a thorough review of the financial statements as defined by standards established by the AICPA.

This report is not intended, and shall not constitute, and nothing herein should be construed as, an offer to sell or a solicitation of an offer to buy any securities referred to in this report, or a “buy” or “sell” recommendation. Rather, this research is intended to identify issues portfolio managers should be aware of for them to assess their own opinion of positive or negative potential.

The LMTR newsletter is NOT affiliated with any ETF’s Nor any investment Advisors.

DISCLAIMER

Brad Lamensdorf, a seasoned money manager and market strategist, is the CIO of The Lamensdorf Market Timing Report, a newsletter designed to help investors improve performance via market timing by assessing the environment of the stock market using a variety of technical, fundamental and sentiment-oriented tools from powerful independent research firms. Many investors mechanically enter and depart the market without a true “game plan.” Studies have shown that retail investors, in particular, are very poor market timers, tending to invest at or near market peaks and sell at or near market lows. The newsletter is designed to provide risk parameters for both professional and retail investors around the short-term stock market environment, giving subscribers better insight about when to allocate assets into or out of the equity markets.

Lamensdorf, a frequent guest commentator and analyst on major business networks including CNBC, CNN and Fox Business News, also serves as a Portfolio Manager and Principal of Ranger Alternative Management LP, a sub-advisor to the Advisor Shares Ranger Equity Bear Exchange Traded Fund (NYSE: HDGE). In this role, he conducts top-down technical evaluations of broader market liquidity, sentiment and breadth to help identify short and intermediate-term market trends, manage exposure and mitigate risk. HDGE was launched in 2011 and is the first and sole actively managed, short-only ETF in existence.

Lamensdorf, also has managed investment portfolios for the Hughes family and was principal of Tarpon Partners, managing a long/short fund that was up more than 200% gross over six years. Earlier in his career, he was as an equity trader/market strategist for Taylor and Company, the Bass brothers’ trading arm, co-managing a short-only strategy in a derivative format with national exposure. He also served as the in-house market timing strategist for the entire internal and external network of Bass managers.

BIOLAMENSDORF MARKET TIMING REPORT O C T O B E R 2 0 1 5

The months of November through April are typically viewed as seasonally favorable for the stock market. During this time frame endowments, pensions, etc. receive annual inflows, which are then put to work through asset allocation models. Since sentiment is also low, and large corporate buybacks are still occurring, the market is set up for a fourth quarter rally. I predict that if a bounce does materialize, another more serious correction will occur next year. Last week paying subscribers of LMTR were alerted to cover their short positions. We were 50% short and made 10% on the position when we covered it.

CONCLUSION: The Good, the Bad and Possibly the Very Ugly