Dear Investors

May 20, 2016

Dear Investors,

Despite the S&P 500 Index finishing higher for the first time in four weeks, the market internals continued to weaken. The S&P moved sharply higher on Monday and Friday on distinctly lower trading volume. The trading volume was its highest on Tuesday, Wednesday, and Thursday when the markets were setting new intraday and closing lows for this downward wave pattern. The primary catalyst for this week’s volatility was the release of the minutes from the last Federal Open Markets Committee meeting which implied that an interest rate hike is likely for June. Therefore, any economic data, whether it is correct or not, that suggests strength in the economy will likely send the markets lower. Conversely, weaker economic data will likely send the markets higher because investors will think that the Fed will not raise interest rates. It will be interesting to see how this fits into the technical market analysis. No one knows for sure when good news is actually good news for the markets, or as I suggested above, when good news is dangerous for investors. Monday is another Fibonacci phi mate date, so we could see another short-term top plus or minus two trading days.

After spending most of the week in the red, a relief rally on Friday based on low trading volume helped the S&P 500 Index add 5.71 points, or 0.3%, to close the week at 2,052.32, and it is up 0.4% this year. The Dow Jones Industrial Average slipped 34.38 points, or -0.2%, this week to close at 17,500.94, and is up 0.4% this year. However, the NASDAQ Composite jumped 51.88 points, or 1.1%, this week to close at 4,769.56, and is down 4.75% this year. The Russell 2000 gained 9.84 points, or 0.9%, this week to close at 1,112.28, and is down 2.2% this year.

This week’s mostly better than expected data rattled investors after the release of the FOMC minutes. The April Consumer Price Index was higher than expected suggesting higher inflation and a possible need for higher interest rates to slow inflation. April housing starts and existing home sales were better than expected but it is important to keep them in perspective following data in February and March. New building permits in April were slightly lower than expected. Industrial production and capacity utilization also picked up in April but again following lowered expectations after worse than expected first quarter levels. This week, we are expecting the second estimate of the first quarter GDP to be up 0.9%, which would be up from the first estimate of 0.5%. Make no mistakes about it, neither is a sign of economic prosperity.

In December, the Fed suggested that it expected to raise interest rates 2-4 times this year. I have always believed that the Fed was forced into raising interest rates in December because it was losing credibility after threatening to do so for almost two years. I never believed that it would raise interest rates even twice in 2016, an election year and I am still skeptical that they will raise rates in June. However, I believe that it may be forced to raise rates if there is even the slightest positive data. If they do not raise rates in June, then it will be be too close to the election. Since it announced that they would raise rates 2-4 times this year and if it does not raise them at all, it will prove how out of touch they are with the current economic situation. The uncertainties facing the market continue to rise and the downside risk of the markets is still much greater than the upside potential. This may be a great time to take some profits or rebalance or reallocate your portfolio. If you want to discuss your financial plan, risk analysis, and/or tax strategies or would like to refer a friend or family member, then please call our office or email [email protected]. It is time to put our B.E.L.I.E.V.E. Wealth Management process to work for you.

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 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.