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LFS Asset Management Restoring America’s Financial Independence–
One Client at a Time
The informa on, tools and services presented in this document are provided to you for informa onal purposes only and are not
to be used or considered as an offer of the solicita on or an offer to sell or to buy or subscribe for securi es or other financial
instruments. The informa on contained herein has been derived from sources believed to be reliable but is not guaranteed as to
accuracy. Investors should consider this informa on as only a single factor in making their investment decision. Ac on taken by
an investor should be based on their personal investment objec ves and risk tolerance. Further informa on on any security or
financial instrument men oned herein is available upon request.
Q-1 Portfolio Review /2016
1st Quarter 2016 News
AprilisFinancialLiteracyMonthandLFSAssetManagementiscommittedtoFinancialLiteracy…JohnLauwillbespeakingbeforetheCaliforniaSocietyofCPAs(CalCPA)EducationFoundationinJune,JulyandAugustinaseriesofeducationalprogramsforlocalCPAsandFinancialAdvisors.Johnwillpresentonavarietyoftopics,fromStockOptionstoSurvivingthePerfectRetirementStormintoday’smarketconditions.
JohnwillalsobeapresenterattheNorthernCaliforniaHumanResourcesAssociation(NCHRA)CompensationConferenceinMay,2016.John’spresentationwillbeonhelpingHRpersonneltounderstandEmployeeEquityCompensationPlans.
LFSalsooffersfinancialeducationworkshopsinpartnershipwithlocallibrariesandseniorcentersthroughFinancialAptitudeTraining(FiAT).Visitourwebsitewww.lfsfinance.com/eventsforthecurrentschedule.Upcomingworkshopsinclude:“FamilyLoveLetter”,“SurvivingThePerfectRetirementStorm”,“HowtoProtectYourPortfolioinaDownMarket”,“DisinheritingtheIRSFromYourRetirementAccounts”and“MaximizeYourSocialSecurityBenefits”.
Didyouknow…?InadditiontoourGeneralPublicworkshops,FiAToffersFinancialLiteracyprogramsattheworkplace.Theseprogramsareavailableatnochargetothecompanyortheemployees,andcanbecustomizedtoaddressyourcompany’sspecificbenefitspackage,orchangestoyourbenefitspackage.Employersalsomaychoosefromavarietyofworkshopsonhelpingworkingadultsprepareforretirement,maximizingthepowerofcompany401(k)s,andunderstandingthepowerofequitycompensationplans.IfyouwouldlikeinformationsenttoyouforyourHRdepartment,pleasecontactmeat650.401.4663,andfeelfreetovisitourwebsiteatwww.fiatprogram.org.
FreeFinancialEducationResources:thereisawealthofeducationalinformationonourwebsite.Visitwww.lfsfinance.com/resources/whereyouwillfindwebinarreplays,WhitePaperReports,andmore.
VisitLFSUpdatesonourwebsiteHomePageforourlatestupdates‐whetherit’savolatiletradingdayorafewtweakstothewebsite.
Asalways,weappreciateyourbusiness,anditisourpleasuretoserveyou.Warmregards,
DianaCasonVPofMarketing
The2016FinancialLiteracyandEntrepreneurshipSummerCampprogramwillbeheldatSt.MatthewsCatholicSchoolonJuly11ththroughJuly15th.TheSummerCampProgramisproducedbyFiAT,thecommunityoutreacharmofLFSAssetManagement,aregistered501(c)(3)organization.Theprogramissupportedentirelybydonations,anddonationsarenowfullytaxdeductible.Wewelcomeyourfinancialcontributions,andyoucandonateonthewebsiteatwww.fiatprogram.org/donate.
MonthlyWineandCheeseGathering‐StopbyourofficeonthelastFridayofeverymonth,from2pmto4:30pm,forwine,cheeseandconversation.JoinusonApril29th.—RSVPat650.401.4663.
ByJohnLau,Certi iedFinancialPlanner®,CPA,M.S.(Tax)
April15,2016
ThequarterendingMarch31,2016canbecharacterizedbyoneword–VOLATILITY.Afterstartingoffwithaviolent irstweekoftrading,themarketcontinuedinitsdivebeforesettlingatthemid‐Februarylows.
My long time clientsknow that I track the relative strengthsof sixmajor asset classeswith technical analysistools. These classes includeUSEquities, International Equities, Commodities, Fixed‐Income securities, ForeignCurrencies,andCash.Thisisthefoundationofmytacticalallocationapproach.Forthe irsttimesinceOctober2011,USEquitiesfelloutofthe irstplacepositionandwerereplacedbyFixedIncome.TherewasatimewhenUSEquitiesfellevenbeneathCash,droppingtothirdplace,behindFixedIncomeandCash.USEquitiesstayedbeneathCashupuntilMarch22,whenitmanagedtomovebackintosecondplace.AsofApril8,2016,theU.S.Equitiesgroupisbarelyekingoutasmallwinovercash1.
WhatMyMarketGaugesAreTellingMeToday?
SincethemarketlowonFebruary11,2016,thebenchmarkS&P500Indexisup11.95%.It'sahugemoveinashorttime.Andithaslotsoffolksaskingiftheworstisbehindus...andifthebullmarketisback.AtLFS,Iamcurrentlytrackingsixmarketgaugestohelpmeanswerthesequestions.InthisQ1/2016update,I’llshowyouwhattheyare…andhowIinterpretthemtohelpplanmytradingstrategiesgoingforward:
1.PositiveTrendIndicatorsBelow50%: Trendanalysisisoneofthecornerstonesintechnicalmarketanalysis.Positivetrend(PT)
indicators are based on thepremise that the greater thenumber of stocks trading in anoverallpositivetrend,thehealthierthemarketis,andpositivetrendscanbedeterminedbycalculatingthenumberofstockstradingabovetheirrespectivebullishsupportline,usingthebullishpercentconcept.Byde inition, thePercentPositiveTrend indicatorsmeasurethe%ofstockswithinagivenuniversethataretradinginapositivetrend,andthisnumberisthenplottedonascaleof0to100%.Historically,themarketisgenerallyhealthywhenthe Percent Positive Trend indicators are at 50% or greater. Generally speaking, themarket tends tosufferduring timeswhen thePT reading(s) arebelow50%.At the timeof thiswriting, approximately46%of thestocks that tradeon theNYSEare inanoverall positive trend.When lookingatotherPTindicators,IseethatthePTreadingforallU.S.equities(PTALL)isat38%.Simplyput,atthisjuncturethetrend picture for the individual stocks thatmake up "themarket" is tipped toward the bearish camp,lashingwarningsigns.
1Technical trading models are mathema cally driven based upon historical data and trends of domes c and foreign market trading ac vity, including various
industry and sector trading sta s cs within such markets. Technical trading models, through mathema cal algorithms, a empt to iden fy when markets are likely to increase or decrease and iden fy appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends, and there is no assurance that the mathema cal algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry, and sector performance.
Q1/2016 Market Review and Outlook
2.MarketBullishPercentindicatorshowing60%participation: Anothersigntowatchfor,toindicateadeterioratingmarket,isthemarketBullishPercent.
TheBullishPercentindicatorsare"participation"measurements,andstrictlyspeakingtheymeasure the%of stockswithin a givenuniverse (suchas theNewYorkStockExchange)that are showing Buy Signals. The participation rate for stocks on theNYSE (BPNYSE) iscurrentlyat60%,withBullcon irmed.Thismeans60%ofthestocksontheNYSEare
participatinginthemarketrally.TheBullishPercentindicatoris lashinggreenforthemarket. 3.S&P500Indexsettlingaboveits200‐DayMovingAverage: The 200‐daymoving average is an indicator used by inancial professionals to size up a
market'slong‐termtrend.Itworksbycollectinganasset'sclosingpricesfromthepast200days,thentakingtheaverageofthoseprices.Themarket’srallysinceMarchhaspushedtheS&PIndexaboveits200‐daymovingaverage(seechartbelow).Thisisanencouragingsign,anothergreenlightforthemarket.
4.S&P500200‐DayMovingAveragebigpictureisstilldown: While stocks can bounce up and down violently, they tend to follow the path of the
200‐Daymovingaverageforextendedperiodsoftime.Whiletheindexiscurrentlyabovethe200‐Daymovingaverage,theaverageitselfisstillatadowntrend,thusdampeninganyeuphoria causedby the index’s current reading. The S&P500'smove above its 200‐daymovingaverageisencouraging,butfornow,thedownsideriskinstocksislargerthantheupsidepotential.
5.S&PstillbelowitsMay2015highof2131 MyotherbullmarketgaugeistheMay2015highof2131.Inmyview,surpassingthis
old high is an important psychological barrier. A move above 2,131 would meaninvestorsbelievethemarketrallyis inallysustainable.Ifthestockmarketweretobreakabove2,131, itwouldgoa longwaytowardrepairingfaith intheeconomyandthestockmarket.Evenaftertherecent doubledigitmovehigher, theS&P500isstill2.4%awayfromhittingitsoldhigh.
6.Defensiveassetclassesare2of3intermsofrelativestrength. Inmyview,RelativeStrengthisstilloneofthemostrobustandadaptablemethodsof
securityandassetclassanalysis.Muchlikecomparingastockagainstanindex,wecancompareanindexagainstanotherindextodeterminetheoverallstrengthofaparticularareaofthemarketorassetclass.
In adeterioratingmarket, defensive asset classes ( ixed‐income securities, currencies,andcash) typicallygive relative strengthbuy signalsoveroffensiveasset classes (U.S.equities,internationalequities,andcommodities.)Defensiveclasseshavelowerbetavalues
andlower‘risk’thanoffensiveassetclasses. Today,twoofthethreetopassetclassesinthetechnicalanalysesthatIfollowaredefensive,withthe
topassetclassbeing ixed‐incomesecurities,followedbyU.S.equities,thencloselyfollowedbycash.
WithonlytwoofsixBullmarketgauges lashinggreenlights,itisstilltimetobecautious.
OneofmymostadmiredinvestorswasSirJohnTempleton.Templeton'sphilosophyisoneIwanttoemulate.Hewashappytoholdhighlevelsofcashandbondswhencheapstockswerehardtocomeby.Hewasnotamarkettimer,buthestucktohispositions,evenifthismeanttrailingthemarketwhenitwentnuts.Andthatiswherewearetoday.Weareholdingplentyofcashwhilekeepingawatchfuleyeoutforcheapbuthighqualitystocks,andusingtoolssuchasoptionstohedgeriskandtakeadvantageofopportunities.Thefactis,evenwithallthetoolsandindicatorstogaugethemarket,attheend,wedon'tknowhowthemarketwillbehave,andwewon'tknowuntilwedoknow.However,wewilladaptalongtheway...wewillalwaysadapt.
ToyourHealth,Wealth,andHappiness…
Sincerely,
JohnLauManagingDirectorCerti iedFinancialPlanner®,CPA,M.S.(Tax)
LFSAssetManagement
RestoringAmerica’sFinancialIndependence–OneClientataTime
Phone:(650)344‐1700
Email: inancialtips@lfs inance.comwww.lfs inance.com
577AirportBlvd,Suite150,Burlingame,CA94010
AdvisoryservicesofferedthroughLFSAssetManagementSecuritiesofferedthroughGirardSecurities,Inc.MemberFINRA,SIPCLFSAssetManagementisnotaf iliatedwithGirardSecurities,Inc.
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JohnLauistheprincipalandManagingDirectorofLFSAssetManagement(RegisteredInvestmentAdvisor).JohnisaCerti iedFinancialPlanner®,CPA,andvolunteersforFiAT,alocalFinancialLiteracyprogram.Johnisapublishedauthorandhislatestbookistitled"ARaceBetweenTimeandMoney.“
www.aracebetween meandmoney.com