Bloomberg L.P. Global Weekly Technical Strategy September 19th, 2008 This week: Important Trends in the Markets

INDU Index - Charting the stock market “crashes” Euro – Done correcting? Tamm4 – Some people say never buy an airline stock… Who leads who? JPY, VIX, or SPX?

US Ten Year Future and the Ichimoku Chart Indicator of the Week: The Ichimoku Chart & Cheatsheet Seminars / Books:

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Technical Analysis Tools – by Mark Tinghino Order now on BOOKS<Go> Market Recap as of 9/19 10:27am EST: %CYTD %CYTD %CYTD %CYTD INDU -14.43 USGG10YR -7.44 AUD -5.95 CLA 10.05SPX -15.30 GUKG10 1.66 GBP -8.13 NGA -4.52MEXBOL -13.35 GJGB10 -1.46 CAD -5.03 HOA 11.97IBOV -18.73 GEBU10Y 14.37 EUR -1.47 XBA 6.23UKX -18.80 GMXN10YR 15.60 JPY 4.19 GCA 0.35NKY -22.13 GACGB10 -12.01 NZD -10.71 SILV -18.39 Questions/Comments: Paul Ciana, CMT – pciana@bloomberg.net Satoshi Hongo – shongo@bloomberg.net Juan Manuel Quintero – jmquintero@bloomberg.net Geoff Wakeling – gwakeling@bloomberg.net

Bloomberg L.P. Chart of the Week – {INDU Index}

INDU Index during the 1929, 1962, 1969, 1987, 2000, 2008 – Percent Change The opening discussion of the current state of the market during two seminars this past week by Market Studies Inc. discussed two charts. The first represented the similarities between the 1973 stock market correction and today, and the second the 1929 and 1987 crash. Above is a chart with all of those time periods combined and I have added the 1961, 1969, and 2000 bear markets. In comparison, the 1929, 1962, and 1987 (white, orange, and yellow lines) corrected in similar fashion with a sudden large decline but diverged after the initial drop. The 1929 crash continued to fall after a false rally. The move after the 1962 and 1987 decline formed a double bottom and rallied strong. The 1969, 2000, and the 2008 markets (purple, green, and red lines) have striking similarities in that they had longer topping periods prior to entering a bear market. When overlaying these three bear markets, it may be too soon to consider the 2008 correction as over, but perhaps the worst is behind us. To create a chart like this on your Bloomberg terminal, press G<go> 1<go> and select Seasonality Chart.

- Paul Ciana, CMT

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Bloomberg L.P. Chart of the Week – {EUR Curncy}

Daily chart of the Euro After oscillating between a trading range of 1.53-1.6, the Euro has fallen as much as 13.4% from its high this year. The Euro rallied this week but the trend is still not clear. This week, the +DMI line crossed above the –DMI. While doing so the ADX line crossed below the ADXR line at an extreme level signaling a potential bottom. The DMI lines measure if there are higher highs or lower lows occurring. The ADX lines attempt measure the strength of the trend. Together, these are signs that the decline in the Euro is coming, at least, to a pause. Bloomberg Trender, an indicator designed to closely follow the trend using the Average True Range, new highs, and new lows, from a short term perspective turned bullish on Monday. The medium and long term trends have yet to reverse. The medium Trender line has presented itself as a strong resistance level. Price was able to trade above it but failed to close above it twice this week. On Monday and Thursday, the long upper shadows casts some doubt on a rally in the Euro and in turn strengthen the likelihood of a consolidation in the low to mid 1.4’s range. A close above 1.4491, and most certainly 1.45 would signal a rally. A close below 1.4 would signal a continuation of the downtrend.

- Paul Ciana, CMT

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Bloomberg L.P. Chart of the Week – {TAMM4 Equity<go>} TAMM4 BZ : TAM S. A. This week has been very difficult to find a stock that is showing a positive trend in the Latin American market. However, using EQS <Go>, a tool designed to screen for a list of securities with a specific criteria, I was able to find TAM. In the below search, I selected stocks that trade in Latin America, have a DMI ADX higher than 30 and lower than 40, have a +DMI that is higher than the -DMI, and required the 3 month average volume to be greater than 10,000.

TAM is the biggest Brazilian airline, showing a bullish trend when using the DMI indicator. On Wednesday price fell R$3.74. On Thursday price opened slightly lower and closed higher with a wide trading range on the day forming a spinning top candle. By definition a spinning top needs confirmation and therefore a close on Friday higher than the close on Thursday would suggest a resumption of the uptrend. - Juan Manuel Quintero

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Bloomberg L.P. Chart of the Week – {JPY, VIX, & SPX}

The Risk Aversion Graph above is a leading indicator that can help make trading decisions. USDJPY (black line) completed a double bottom pattern on September 17th at exactly 104.66. On the same day, the VIX index (grey histogram) peaked at its highest level ever. The greater the value of this index, the more risk aversion taking place. The S&P 500 Index (red line) was falling as risk aversion took hold of the market. The bottoming of the Yen and the spike in volatility led the SPX to rally on September 18. The US administration and the Federal Reserve have put forward proposals to establish an entity to acquire the bad debts of financial institutions and to provide a comprehensive solution to the turmoil that has shaken global financial markets. The housing market in the USA, which precipitated the financial crisis, appears to be leveling out. Inflation, in the USA and globally, appears to be peaking and about to head lower, at least in the sort term. - Geoff Wakeling

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Bloomberg L.P. Chart of the Week – {TY1 Comdty<go>}

The General Overview chart (Ichimoku) is one of the most used technical indicators in Asia. It consists of a Base line, Conversion line, two Leading lines forming a Cloud, and a Lagging line. The idea of a Base line and Conversion line is similar to the concept of a Moving Average. You may take the Conversion line crossing the Base line from below as a buy signal and from above as a sell signal. The Cloud consists of two lines titled Leading Span 1 and Leading Span 2. You may take the Cloud as a thick moving average. Displaying the Cloud in the future is a very unique feature of this study because it allows one to anticipate the direction of trend based on the slope of the cloud and estimate the strength of support/resistance based on its thickness. The Lagging line is the current price plotted 26 bars prior. When the Lagging line is greater than (less than) price, it represents buying (selling). The above example is TY1 comdty (generic US Treasury note future) daily chart. When you look at a rally happened in latter part of this year, there were a few bullish signals. On the 1st of July Conversion line crossed upward Base line. On the 7th of July the lagging span crossed above the price bars. Throughout July, price stayed in the cloud and the cloud worked as a thick support and resistance zone. Price broke out above the cloud in August and the trend continued higher. In the weekly chart you may find more interesting behavior. From mid June upper edge of the cloud kept working as a good price support. The Lagging line is under price now and indicates the price bars plotted 26 weeks prior may work as resistance for next upward movement. If the lagging span breaks above the price bars, it will indicate a stronger trend. - Satoshi Hongo

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Bloomberg L.P. Indicator of the Week – General Overview Chart There are seven components to this indicator, they are:

(Magenta) (Yellow) (Gray) (Orange) (Green) (Shaded blue)

1. Conversion Line Default period of 9 2. Base Line Default period of 26 3. Lagging Span Default period of 26 4. Leading Span 1 Default period of 26 5. Leading Span 2 Default period of 26 6. The Cloud 7. Candlesticks TDEF<go> 15<go> for defaults

Bullish (Bearish) signals

1. Conversion line crossing above (below) Base Line = Buy (Sell) signal a. If these lines cross while price is above (below) the cloud with little downward

(upward) fluctuation = Bullish (Bearish) b. If these lines cross while the closing price is beneath (above) or within the cloud

and has shown upward (downward) movement over the last few days = Bullish (Bearish)

c. Closing price is within the cloud with little fluctuation = Neutral

2. Lagging Span is greater (less) than the closing price = Buy (Sell) a. If the value of the price today plotted 26 bars prior, the Lagging Span, is above

(below) the closing price of that day then price is protected by the mountain (lacks support of mountain).

3. Cloud composition: When Leading Span 1 is above (below) Leading Span 2 this is a

sign of a rising (falling) market. The thicker the cloud, the greater the support or resistance.

4. Incorporate candlestick patterns such as a Doji, Hammer, Star, Bullish/Bearish Engulfing, Rising/Falling Window, Tweezer Top/Bottom, Harami, etc to further confirm crosses and momentum.

Conversion Line = ((Highest High + Lowest Low) / 2) of the last 9 days Base Line = ((Highest High + Lowest Low) / 2) of the last 26 days Lagging Span = Today’s closing price plotted 26 days earlier Leading Span 1 = ((Base Line + Conversion Line) / 2) plotted 26 days forward Leading Span 2 = ((Highest High + Lowest Low) / 2) plotted 26 days forward

Calculations behind the lines:

- Paul Ciana, CMT

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