Sector Watch Current & Emerging Opportunities In Relative Performance January 16, 2015

1 Sector Watch Understanding Our Metrics We utilize the 9 Select Sector SPDR ETFs for all of our price- and asset flow-based metrics. We track and analyze each sector’s quarterly momentum vs. the S&P 500, which typically oscillates between technically overbought and oversold relative extremes, to help determine when intermediate term relative performance trends are beginning and ending. We track the percentage of sector bet-related assets invested in each sector to : 1) identify historic over- and under-invested extremes, and 2) determine where the money is going now (which sectors are accumulating assets and which are shedding them). We also track the total daily assets invested in each sector ETF on an outright basis to determine potential peaks and bottoms in price. These metrics collectively help us to identify potential intermediate term, 1-2 quarter overweight/underweight opportunities, as well as the optimum timing for entries and exits.

Sector Watch: Asbury’s Current Bias Our Model’s Current Bias as of January 16 th 2 The table above lists our model’s current bias for relative sector outperformance (green background), underperformance (red background), and market performance (blue background) versus the S&P 500 in the 9 sectors of the S&P 500 as represented by the Select Sector SPDR ETFs. The table includes the date that we initiated the call, relative sector performance since then, and in the rightmost column Asbury’s performance- to-date relative to the direction of the call.Select Sector SPDR ETFs

Sector Watch: Asset Flows Historic vs. Current Asset Flows: Energy & Materials Under-Invested, Consumer Discretionary & Health Care Over-Invested 3 This chart shows the historic daily average distribution of investor assets in the 9 Sector SPDR ETFs since our data series began on May 31 st, This chart displays the current distribution of these assets through January 14 th. The most under-invested sectors are currently, in order, Energy, Materials, and Utilities. The most over-invested sectors are Consumer Discretionary, Health Care, and Industrials.

Sector Watch: Asset Flows investor Assets Moving Into Consumer Discretionary, Out Of Industrials 4 The sector with the biggest inflow of ETF-related investor assets during the past 7 days has been Health Care. The biggest inflows over the past 1 month and 3 month periods have been into Consumer Discretionary. The biggest outflow of assets during the past 7 days has come from Energy.

5 However, as long as the percentage of assets allocated to Utilities continues to expand, and remains above its quarterly moving average, recent relative sector outperformance is likely to continue. Sector Watch: Outperform Utilities: as of October 20 th 2014 This chart shows that the Utilities Sector SPDR ETF (XLU) is hovering at quarterly overbought extremes versus the S&P 500 (SPY), warning of its vulnerability to upcoming relative sector underperformance.

6 However, weekly momentum in the relative performance line between XLY and SPY still remains positive. A negative shift in momentum, amid a contraction in assets invested, would be necessary to confirm a significant bearish reversal. Sector Watch: Outperform Consumer Discretionary: as of December 1 st 2014 The percentage of ETF-related sector bets allocated to Consumer Discretionary (XLY) is 10%, double its historic average per Slide 3. Previous similar extremes have preceded periods of relative sector underperformance.

relative underperformance by the Energy Sector SPDR ETF (XLE) versus SPY has resulted in the most extreme quarterly oversold condition in a decade. Similar but lesser extremes have led periods of relative sector outperformance. Sector Watch: Outperform Energy: as of January 5th The late December expansion in the percentage of sector bet assets allocated to Energy must resume -- and quickly -- to suggest that a new trend of relative sector outperformance is emerging.

8 Meanwhile, the negative divergence between the relative performance line between XLK and SPY and the weekly MACD indicator shows a negative shift in quarterly momentum, toward underperformance. Sector Watch: Underperform Technology: as of January 5th The percentage of ETF-related sector bet assets allocated to Technology have been in a quarterly trend of contraction since October, which typically coincides with or leads an intermediate term trend of relative sector underperformance.

9 Meanwhile, recent relative sector underperformance has turned the weekly MACD downward, which also suggests an emerging intermediate term trend of more relative underperformance by Financials. Sector Watch: Underperform Financials: as of January 16th The recent contraction in the percentage of sector bet assets allocated to Financials (XLF) has turned the quarterly trend to one of contraction, warning of more relative weakness in Q

10 The Materials Sector SPDR ETF (XLB) is starting to rise from quarterly oversold extremes versus the S&P 500 SPDR (SPY). Previous similar extremes led every significant period of relative sector outperformance since Sector Watch: Market Perform Materials: as of November 12 th However, significant and sustained sector outperformance is unlikely until the percentage of sector bet-related investor assets allocated to Materials expands back above its quarterly moving average – which it has been below since June 2014.

11 The total assets invested in the Industrials Sector SPDR ETF (XLI) have been contracting since December 10 th. Similar contractions in June and September 2014 triggered the previous two declines in XLI. Sector Watch: Market Perform Industrials: as of December 15 th Meanwhile, recent relative sector underperformance has the weekly MACD on the verge of turning downward from its zero line, which would confirm that an intermediate term trend of relative underperformance by Industrials is underway.

12 Meanwhile, the percentage of ETF-related sector bets being allocated to Consumer Staples stalled in November, and is now drifting below its quarterly moving average. Turning negative? Sector Watch: Market Perform Consumer Staples: as of January 5 th The Consumer Staples Sector SPDR ETF (XLP) has been hovering at quarterly overbought extremes versus SPY since October. Previous similar extremes have led periods of sector underperformance.

13 However, the percentage of ETF-related sector bets allocated to Health Care expanded back above its quarterly moving average this week, after contracting below it in December, which suggests that the June 2014 outperformance trend isn’t quite over yet. Sector Watch: Market Perform Health Care: as of January 16 th The Health Care Sector SPDR ETF (XLV) continues to hover at quarterly overbought extremes versus the SPY that have historically preceded periods of relative sector underperformance – in addition to being historically overinvested per Slide 3.

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