The document provides a summary of a technical and market analysis presentation by Mike Zaccardi. It defines technical analysis and its key assumptions. It outlines different categories of technical indicators like momentum, contrarian, and smart money indicators. It then analyzes current market conditions and provides charts and analysis of different indexes, commodities, sectors, and individual stocks. It concludes with a discussion of other technical analysis tools and resources for learning technical analysis.

1. Technical and Market Analysis Mike Zaccardi Technical Analyst 2009-2010 Osprey Financial Group

2. Street Cred 2009-10 OFG – Energy, Materials, Utilities equity analyst; Technician 2010 CFA Global Investment Research Challenge Competitor, Florida Champions One of five OFG students, competed in New York City in Americas Challenge 2010 Financial Management Association Financial Quiz Bowl Champion – Chicago, IL 10-11 UNF Finance and Investment Society President Financial Columnist, UNF Spinnaker 2011 FMA Best All-Around Forecaster (Crude Oil, Weather) Briefly…Research Analyst, Intrepid Capital Mgmt

4. Agenda TA as defined by the CFA Institute Current Market Analysis & Outlook OFG Technical Calls Energy Charts Other Technical Analysis Indicators Lightning Round

5. What is Technical Analysis? Security analysis discipline for forecasting the future direction of prices through the study of past data, primarily price and volume Contradictory to weak-form EMH Like weather forecasting, TA does not provide an absolute prediction

6. Technical Analysis per CFAI Though the CFA program does not emphasize TA, it WILL appear on the exams Quantitative Methods About 5 questions out of 240

7. Assumptions Stock values determined by supply and demand Supply and demand are driven by both rational and irrational behavior Security prices move in trends that persist for long periods While causes of changes in supply and demand are difficult to determine, the changes themselves can be observed in market price behavior

8. TA vs. Fundamentals Fundamental analysts look for changes in stock values (risk and return) that lead to changes in supply and demand and believe stock prices adjust quickly to new information about value Technical analysts look directly for signals and indicators of changes in supply and demand and believe stock prices move in trends that can persist for long periods

9. Advantages of Technical Analysis Quick and easy (sometimes) Does not involve messing with data and adjusting for accounting changes and differences Incorporates psychological as well as economic (rational as well as irrational) reasons behind price changes Behavioral Finance

10. Challenges to Technical Analysis The weak form of EMH suggests that stock prices reflect all available trading information Statistical tests find no evidence of price trends or profitable trading rules If statistical trading rules worked, price changes would become self-fulfilling prophecies; its value would be neutralized Interpreting technical rules is subjective, and decision variables change over time

11. Categories of Technical Indicators Contrarian indicators: The majority is often wrong, do the opposite Smart money indicators: “Smart” investors are right, do what they are doing Momentum indicators: Direction and strength of market movement Stock price and volume techniques: Identify patterns that repeat

12. Contrarian Opinion Rules Mutual fund (cash) ratio = cash/total assets Investor credit balances in brokerage accounts Opinions of investment advisory services OTC volume/NYSE volume CBOE put/call ratio Percentage of bullish stock index futures traders

13. Smart Money Indicators Confidence index = high quality bond yields average bond yields Increase (closer to 1) is bullish; Yield CI T-bill yield to Eurodollar yield spread Narrower is bullish, wider is bearish Margin debt in brokerage accounts Increase is bullish, decrease is bearish

14. Momentum Indicators Breadth of market: Advance-decline line Number of stocks above 200-day moving average 80% of stocks above 200-day MA, a correction is likely (overbought)

15. Price and Volume Techniques Dow Theory – major trends (tides), intermediate trends (waves), short-run movements (ripples) Ratio of upside to downside volume (>1.75 is overbought, <0.75 is oversold) Support and resistance levels – movements through these levels on high volume, breakouts Relative strength – ratio of stock price to market index, increasing is bullish, decreasing is bearish, trend expected to continue

16. Price and Volume Techniques Moving averages – Stock price moves through the 50-day moving average on strong volume 50-day moving average crosses the 200-day moving average on strong volume (golden cross) To identify Trends: Bar Charts – a bar from high to low price over a period with volume per period at the bottom Point and figure charts – only record price movements of some minimum amount

17. Market Analysis Highlights Headline risk Dollar near lows, Euro weak (you’ll see) US Stocks fairing well vs. Intls Energy, Health Care leading the way Volume steady, low (summertime) A look at gold, silver Commodities cool off Credit markets, money velocity - Deflation

18. SPX 9-Month

19. NASDAQ 100 ETF (NDX) 9-Month

20. 10-yr Yield

21. Small Caps Outperformance

22. Internationals vs. SPX

23. Emerging Markets vs. SPX

24. CBOE VIX 1-Year

25. VIX 10-Year

27. What’s the worst ETF in the world?

28. VXX – Short Term VIX

29. NYSE Daily Volume 1-Year

30. Cotton (BAL) ETF – Parabolic Move Cotton ($CT_F) Bubble Burst

31. Gold ($GC_F) 1-Yr

32. Silver ($SI_F) 4-Month

33. Fibonacci 13 th century Italian mathematician discovered a self-replicating sequence of numbers 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89 etc Sum of two adjacent numbers forms the next number Ratio of two consecutive numbers is 1.618, or its inverse, 0.618 Thus 61.8% and 38.2% are thought to be important retracement levels

34. US Dollar Index 1-Year

35. JPY and EUR vs. USD

36. Australian Dollar (AUDUSD)

37. USDJPY 1-Year (Flash Crash)

38. EURCHF – “Risk-Off”

39. US Dollar Index 40-Year

40. S&P 500 Sectors YTD

41. S&P 500 Companies

42. OFG Technical Calls

43. Raytheon (RTN) Upside Breakout

44. OIH Double-Bottom

45. Oil Services ETF 200-EMA

46. Energy E&P ETF (XOP)

47. USD – Reversal

48. DXY Flag Formation

49. OFG and the Dollar

50. Diamond Offshore (DO)

51. Freeport-McMoRan (FCX)

52. S&P 500 w/200ema & 50sma OFG Strategy: Raise Cash on 2/3 with S&P at 1090-1105 Buy back equities between 1045-1060 Reasoning: Market was in Corrective phase, 200 ema @ 1045, 10% correction at 1035 – buyers likely to step in ahead of 10% number as it had been much anticipated

53. What Happened? Technical call at 1103 on the S&P turned out to be nearly exactly what occurred S&P quickly moved from 1103 to 1044.50 in only a few days and reversed higher, retracing 100% of the move downward within just 2 weeks My sectors : sold FCX in January, remained in cash in Materials Sector Energy was roughly half in cash as of 2/4 Market weight defensive Utilities Sector Bought back OIH at $115.10 (S&P 1057) 2/5 Bought back XOP at $38.38 (S&P 1049) 2/5 Bought back FCX at $69.20 (S&P 1059) 2/8 Sold on 2/19 at $77.75 for a 12.4% profit in <9 trading days

54. Scotts Miracle Gro (SMG)

55. Anomalies January Effect Sell (equities) in May and Go Away Sell Treasuries in February Options Expiration – Heavy Volume Mutual Fund Monday! Final 10-20 Minutes of Trading January Barometer President’s Third Year Presidential Election Cycle

56. Energy Charts

57. RBOB Gas 1-YR (+$0.65)

58. WTI Crude – 10-Year

59. WTI/Brent Spread

60. What’s Commodity is not Performing?

61. Nat Gas 10-YR

62. Contango!

63. Backwardation

64. Technical Indicators

65. Candlesticks

68. Abandoned Baby Engulfing Pattern

69. Golden Cross

70. Death Cross

71. Market Internal Indicators CBOE Put/Call Ratio (WILL BE UPDATED) Today: 0.76 (VIX: 20.36 +1.29, +6.8%) Advance/Decline 1092/1812 New highs/new lows 214/5 Up Volume/DownVolume 0.645 TRIN: +1.60

72. Bollinger Bands The indicator consists of three bands designed to encompass the majority of a security's price action. A simple moving avg in the middle An upper band (SMA plus 2 standard deviations) A lower band (SMA minus 2 standard deviations)

73. Bollinger Bands

74. Elliot Wave

75. 3 More… MACD – Moving average convergance/divergance: momentum indicator that shows the relationship between two moving averages of prices. Stochastics – Slow/Fast: momentum indicator that shows the location of the current close relative to the high/low range over a set number of periods. RSI – Relative strength index: compares the magnitude of a stock's recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100.

76. Netflix (NFLX)

77. Kroger (KR) Quiet Leader

78. Apple (AAPL) Loud Leader

79. Beat down Goldman Sachs (GS)

80. Molycorp (MCP)

81. Google (GOOG) Beware

82. Mosaic (MOS) looks good

83. Bank of America (BAC)

84. Peet’s Coffee (PEET)

85. Flash Crash – 5/6/2010 1000 point drop in Dow SPX lost 105 points (9%) intraday SPX lost 7% in about 10 minutes Recovered 6% in 20 minutes Errant trade in SPX futures PG fat finger Many stocks had ‘trade-aways’ causing scrutiny at the exchanges Shattered investor confidence Continued outflows from equity mutual funds in coming months High-frequency trading, computer algorithms: Man vs. Machine

88. Apple on Flash Crash

90. Now’s the time?

91. Or are we the next Japan?

92. 10-yr Returns

93. All other Technical Indicators 100s more technical indicators If you look hard enough, you can find an indicator to agree with you (Bad!) Use technical indicators with other indicators for better results Combine TA with Fundamental Analysis for the best results!

94. Want to be a TA? Market Technicians Association Be aware: having technical analysis on your resume can hurt you. Many firms, especially valuation firms, look down on TA Somewhat specialized, not many TA entry level positions Stocktwits/Twitter

95. Books Edwards, Robert D. and Magee, John, Technical Analysis of Stock Trends, 9th Edition Kirkpatrick, Charles D. and Dahlquist, Julie R.: Technical Analysis The Complete Resource for Financial Market Technicians Pring, Martin J.: Technical Analysis Explained, 4th Edition Jeremy du Plessis, The Definitive Guide to Point and Figure Frost, A.J. and Prechter, Robert R., Elliott Wave Principle, Tenth Edition Kaufman, Perry J., New Trading Systems and Methods, 4th Edition Nison, Steve, Japanese Candlestick Charting Techniques, 2nd Edition Pring, Martin J., Investment Psychology Explained Aronson, David R.: Evidence-Based Technical Analysis Brown, Constance M., Technical Analysis for the Trading Professional Murphy, John J., Intermarket Analysis: Profiting From Global Market Relationships Shiller, Robert J., Irrational Exuberance, 2nd Edition O’Neil, William J, How to Make Money in Stocks (latest edition)

96. Good Websites: Ino.com (Futures charts) Kitco.com (metal/commodities) Optionmonster.com (TA/Options) Sectorspdr.com/marketmap/ (Tree) Googlefinance Yahoofinance Bigcharts.com Briefing.com (Economic/Earnings Calendars) Twitter (live news, traders) Brokerage accounts for streaming quotes/analysis (Thinkorswim, StrategyDesk, eSignal)