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Market Update 5th November 2010

FTSE surges – but doubts remain

elsewhere
The Technical Trader’s view:
FTSE 100 Index LIFFE Continuous 261.8%
9000
WEEKY BAR CHART
423.6% 8500

8000
The market has smashed
161.8% 7500
up through a prior high of
261.8%
7000 importance (5796) and at
100.0% 6500
the same time confirmed
a large Head and
6000
161.8% 61.8% Shoulders reversal
5500 pattern suggesting very
much higher around
38.2%
5000 8500.

4500
Note the small nested
H&S Reversal that began
4000
the recent bull run.

3500 Note lastly, but not

leastly, the cluster of
Aug Sep Oct Nov Dec 2008 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 Fibonacci levels -
resistances – that have
been smashed.

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FTSE 100 Index Dec 10

5950

DAILY Dec 10 BAR CHART

5900
5774.50 High

5850
The market’s drive up through
5800
the Prior high of 5720, the
High 5720
5750 completion of the Head and
5700
Shoulders reversal, and the
5650
smash up through the near High
5616.50 at 5774.40 today are a heady
approximate level 5600
of the weekly cont. mixture leading to the current
chart neck 5550
overbought levels.
5500

5450

5400

5350

5363.50 High
5300

5250
250000
200000
150000
100000
50000

26 2 9 16 23 30 6 13 20 27 4 11 18 25 1 8 15
August September October November

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Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
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This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
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S&P 500 Stock Index CME Continuous 1700
1574 prior All Time High 2003 1650
1600 WEEKLY CHART
1550
1500
The S&P is a far less compelling
Minimum move from the H&S
1450 prospect. See how the two Head
1400
1350 and Shoulders patterns operating
1300
on the market have their
1250
61.8%
1253.10 Low
1201 Low
1200
minimum target closely aligned in
1150 the middle of the band of
1100
resistance from the Prior Lows
1050
38.2%
38.2%
from late 2007 and 2008.
1000

950

900
Note too that the near Prior High
850
pivot (from the continuation chart
is at current levels… and may
800
take a while to properly
750
767.50 Prior Low Pivot from 2002 overcome….
700

A M J J A S O N D 2008 A M J J A S O N D 2009 M A M J J A S O N D 2010 M A M J J A S O N D 2011 Add to these considerations the

presence of an important
Fibonacci resistance in the
middle of the band of
resistance… and it is clear this
market is far more technically
constrained compared to the
FTSE.

The Macro Trader’s view:

After FOMC policy makers openly disagreed about QE2 tactics two weeks ago and un-nerved
the markets, traders were re-assured on Wednesday when the FOMC announced a US$600.B
QE2 program to be implemented by the end of Q2 2011.

This was the option originally favoured by Bernanke and assumed by traders to be the way
forward. As a result stocks globally have taken the policy decision well and rallied. Indeed
markets look far from over-extended as they have only just regained the levels seen
immediately before the Euro zone sovereign debt crisis, which caused panic-selling.

Naturally US equity markets should be the main beneficiaries of the Fed’s policy action as the
new Central Bank reserves set to be pumped out will enter the US economy, but the globally
economy will be affected too.

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 in association with

For those economies that are struggling to gain traction a hopefully more vibrant US economy
will provide opportunities. But for those economies that are already growing fast, especially
those of China, India et al there is the problem from a potentially much weaker Dollar. Because
they are growing fast, hot money will look to invest there for higher yield. The authorities do not
welcome this as it will drive up the value of their own currencies and hinder growth.

For China the problem is different; the Rinimbi is pegged to the Dollar and isn’t fully convertible,
but China has massive US Dollar currency reserves of the order of US$2.0T. A weaker Dollar
will effectively devalue these holdings and China is none too pleased.

But for western stocks the Fed’s move is positive. The UK and Euro zone are important trading
partners of the US and while their currencies will undoubtedly rally against the Dollar, the
potential trade opportunities should outway this.

Moreover, in the Euro zone the lead economy is Germany which is enjoying a fast recovery. A
stronger Euro isn’t yet a problem because interest rates set by the ECB for the wider Euro
zone are much lower than they probably would be were they set by the Bundesbank for purely
German domestic needs.

In the UK the Pound was heavily oversold during the recession, so a rally is welcome by the
Bank of England as an offset to persistently higher than expected CPI inflation.

In conclusion, traders have moved on from the original financial crisis and this year’s Euro
zone Sovereign debt crisis and the Feds QE2 is just the shot in the arm equity markets need.

Mark Sturdy
John Lewis
Seven Days Ahead

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Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.