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Jim: Hi everyone, today is Thursday, September 6, 2018 and this is our weekly market update call with financial news and information plus a review of our market indicators.

If you live long enough you can see everything happen—the trick, I say, is living long enough. Having lived this long, I can tell you that insider trading never really went away. It’s just that insider traders are allegedly being caught again—this time with Chris Collins from New York as the first member of Congress charged with Insider trading since Congress created the STOCK Act in 2012. The situation involved Collins who is a congressman and is allowed to sit on a corporate board—this time a pharma company that when they informed their directors, Collins allegedly took a personal hit but may have passed on information to family members who sold their shares and protected themselves from losses. So what is insider trading and why does it matter to you and me?

According to the SEC, illegal insider trading occurs when the buying or selling of a security is based on material, nonpublic information about the security. So as long as the information about the security is based on information that is available to the public, nothing illegal has occurred. It matters to us, simply because if we own a security that is being traded by those with inside information that we do not have, we are vulnerable to the negative outcome when an insider is able to protect their investment but we are not able to do so for ourselves.

Just in recent days, there have been 4-5 additional insider trading charges from football players to Wall Street executives. The SEC is in charge of enforcing insider trading, but in the Collins case, Congress may get involved due to the STOCK Act of 2012. STOCK stands for Stop Trading on Congressional Knowledge and the bill prohibits the use of non-public information for private profit by members of Congress and other government employees. While the bill was won by overwhelming majorities, ironically Collins did not vote on the bill nor join the congress until 2013.

Jack Snopkowski, our intern from the University of Richmond, has provided an explanation of the difference between fundamental and technical analysis.

Fundamental Analysis vs Technical Analysis

Fundamental and Technical Analysis are both useful for making investment or trading decisions. However, the theory and data that are used for each analysis are entirely different. For example, a fundamental analyst uses concepts like Return on Equity, earnings per share, and dividend growth while a technical analyst focuses mainly on price data. Technical analysis is a current pricing assessment that looks more at trends, whereas fundamental analysis is a collaborative look at financial data.

One main goal of fundamental analysis is to find the intrinsic value of a stock. The intrinsic value can be defined as the present value of all expected future cash flows or what an investor is willing to pay. This is what investors believe the stock is actually worth instead of the current listed price. Factors that influence fundamental analysis include financial data, industry trends, competitors’ performance, and also an economic outlook. Then—and only then—fundamental investor can confidently make investment decisions.

On the other hand, the main goal of technical analysis is to find the right time to enter or exit the investment based on past and current trends and price patterns. This is decided by looking at price movements and other market data in an attempt to predict future outcomes based on past and current pricing. The trends and patterns in technical analysis deal mostly with charts, rather than arranging data to find the intrinsic value in fundamental analysis. Note: There are no fundamental factors considered in technical analysis.

This week's indicators…

Our indicators begin with three large groups of stocks. These groups range in size from 2200 to 3600 companies. One group is comprised of companies that trade on the New York Stock Exchange, another is comprised of companies that trade in the Over the Counter Market and the third is a combination of those two groups. What distinguishes that third group is that it is made up of companies from each of the first two groups but only with stocks that have option agreements––that trade parallel to the stock––through the Option Clearing Corporation's exchanges.

The reason why we track large groups is because the law of large numbers is a lighthouse, if you will, as the probability of investment choice can be enhanced by tracking how the large group is changing inside.

All three groups had been holding steadily. But recent volatility has moved the dynamics of each of the three large groups. The NYSE—where we choose most of our investments from—continues to stay positive but without new advancement. The OTC and the OPTI groups have pulled back a bit but aren’t in jeopardy at this time—so these are new developments in those groups.

We also rank 6 different asset classes. There is a widening of the difference between domestic equities and international as the domestic equities continue to rise while the international equities tick lower in relative strength. The commodity group is holding its own in the third most popular spot after domestic and international stocks. The bottom, less attractive classes are still Fixed Income, Cash and Currency trading.

Interest rates? We follow the short term rate of the 13 week Treasury bill. That rate has hit a new 10 year high since we last talked to you a few weeks ago. The intermediate rates of the 5-year and 10-year treasuries—as well as the old bellwether 30-year Treasury bond have started back up just in the past week. The talking heads in the financial news are still talking about how a recession will halt the rise in rates. So far that is a futile conversation.

That's all for today's call.

Opinions expressed are not necessarily those of Raymond James & Associates. The author's opinions are subject to change without notice. Information contained was received from sources believed to be reliable, but accuracy is not guaranteed. Past performance is not indicative of future results. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. There is no assurance these trends will continue or that forecasts mentioned will occur.

Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security.

There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices rise. One basis point is equal to 1/100^th of 1%, or 0.01% (0.0001).

Commodities are generally considered speculative because of the significant potential for investment loss.

International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets.

Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.

The S&P 500 is an unmanaged index of 500 widely held stocks. The Dow Jones Industrial Average is an unmanaged index of 30 widely held securities. It is not possible to invest directly in an index. U.S. Treasury securities are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

James Schmidt, Raymond James, its affiliates, officers, directors or branch offices may in the normal course of business have a position in any securities mentioned in this report. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.

Dividends are not guaranteed, will fluctuate and must be authorized by the company's board of directors. Investing in stocks involves risk, including the possibility of losing one's entire investment.

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