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Market Summary

David Chojnacki S1F Market Technician

Revisions to earlier months' job reports were positive and encouraged traders that perhaps employers were beginning to hire. The Market traded to the upside throughout the session and the DJIA and S&P closed at new five year highs. At the close on Friday, the DJIA and S&P were up 1%, the Nasdaq100 added 1.1%. Breadth was decidedly positive, 3 to 1, on below average volume. For the week, the DJIA gained 0.8%, the S&P added 0.7%, and the Nasdaq100 ended the week up 0.9%. The Nasdaq100 a little stronger on the week, trying to catch up with the other indices as it has lagged the other major averages and other small and mid-cap indices. The Nasdaq100 had its 50D-SMA cross back above its 200D-SMA during the week, but its MACD remains below signal. Technicals are improving for the Nasdaq100 and it appears to want to join the other major indices and move to new highs. The Nasdaq100 made a new twelve year high in September, closing at 2864. The S&P and DJIA continue to move towards testing their all-time highs of 1576 and 14198. Their momentum is confirmed by the ADX and a VIX near 5 year lows. With the FED maintaining an accommodative policy, money continues to flow into equities. While there has been some selling in the bond market, we have not seen a mass exodus.

Trading Trends

David Chojnacki S1F Market Technician

The major indices continue to possess long term strength as the DJIA and S&P continue to make new highs. The Nasdaq100 which has lagged, gained a little technical strength last week. Short term, the Market has been in a move to the upside since mid-November with only a brief pause. While momentum is strong we expect a little pullback before moving to new all-time highs. We can see at least 1 3% pullback at these levels. Near term, the DJIA and S&P are in over-bought territory and are poised for some consolidation. European markets are weak his morning as political concerns are once again rearing their heads in Italy and Spain. Economic reports are light this week, but earnings continue. Futures are moderately lower in early trading versus fair value.

Major Economic Reports Today

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Data sources include ETF Database, ETFTrends.com, IndexUniverse.com, Google Finance, and Bloomberg data and at times other data sources are utilized. Leveraged, Inverse & Leveraged Inverse Conclusions and Risks 1) Leveraged, Inverse, and Leveraged Inverse (L&LI) ETFs generally capture a high percentage of their expected daily returns, particularly on a net asset value basis. 2) L&LI ETFs are not appropriate for all investors. However, we believe they can be appropriate tools for some investors looking to make short-term tactical trades if they perceive a high likelihood of a strong market move occurring in a relatively short time period. In strong trending markets, being on the right side of the "trade" with L or LI ETFs can lead to very strong returns. 3) Investors should not expect these ETFs to deliver total returns linked to their benchmarks over any period other than daily. The effects of compounding and the daily re-leveraging or de-leveraging that occurs with L&LI

ETFs can lead to unexpected results over the long term. As a result, we believe longer-term investors should consider regularly rebalancing positions. 4) Trendless markets, particularly those with a high level of volatility, can lead to substantial relative underperformance of L&LI ETFs. 2) Leveraged and Leveraged Inverse (L&LI) ETFs typically utilize futures and equity swap agreements. The use of these derivative instruments increases risk and enhances the possibility of tracking error.

Relative to traditional ETFs, leveraged, inverse and leveraged inverse ETFs typically have higher costs and lower tax efficiency. 3) The effects of compounding can lead to significant deviations from traditional benchmarks over longer time periods. For example, if $100,000 is invested in an index that increases in value by 10% on day one and then decreases in valueby 10% on day two, the investment will be worth $110,000 at the end of day one and $99,000 after day two. However, the value of a security that doubles the daily performance of the index would be worth $120,000 on day one and $96,000 after day two. Thus, the index is down 1% after two days, a doubling of which would be down 2%. However, the security attempting to double the return of the index is down 4%. Investors should consider carefully the potential impact over longer periods. MLP and MLP ETF Risks Individual MLPs are publicly traded partnerships that have unique risks related to their structure. These include, but are not limited to, their reliance on the capitalmarkets to fund growth, adverse ruling on the current tax treatment of distributions (typically mostly tax deferred), and commodity volume risk.

For tax purposes, MLP ETFs are taxed as C corporations and will be obligated to pay federal and state corporate income taxes on their taxable income, unlike traditional ETFs, which are structured as registered investment companies. These ETFs are likely to exhibit tracking error relative to their index as a result of accounting for deferred tax assets or liabilities (see funds' prospectuses). The potential tax benefits from investing in MLPs depend on their being treated as partnerships for federal income tax purposes and, if the MLP is deemed to be a corporation, then its income would be subject to federal taxation at the entity level, reducing the amount of cash available for distribution to the fund which could result in a reduction of the fund's value. MLP funds accrue deferred income taxes for future tax liabilities associated with the portion of MLP distributions considered to be a tax-deferred return of capital and for any net operating gains as well as capital appreciation of its investments; this deferred tax liability is reflected in the daily NAV; and, as a result, the MLP fund's after-tax performance could differ significantly from the underlying assets even if the pre-tax performance is closely tracked. Commodity ETF Risks Commodity ETFs may be subject to greater volatility than traditionalETFs and can be affected by increased volatility of commodities prices or indexes as well as changes in supply-and-demand relationships, interest rates, monetary and other governmental policies, or factors affecting a particular sector or commodity. Currency ETF Risks Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. ETFs mentioned at times may have material exposure to small cap and/or international securities that may have higher levels of risk and volatility than other ETFs.