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ISI International Strategy & Investment Group Inc.

ISI Technical Team:

Jeffrey S. deGraaf, CMT, CFA (212) 446-5629 [email protected]

John Kolovos, CMT (212) 446-9416 [email protected]

Craig S. Peskin (212) 446-5628 [email protected]

deGraafs WeeklySurvival Guide to

the Markets

March 17, 2009

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3/17/2009 ISI Group 2

Three Conditional Factors SupportEquities in the Intermediate-term

1) Generational Oversold Condition

2) Generational Sentiment Extreme

3) New Lows Contracting Since Oct

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3/17/2009 ISI Group 3

Master Price Proximity Oversold

1990 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20

3.5

3.0

2.5

2.0

1.51.0

0.5

0.0

-0.5

-1.0

-1.5

-2.0

-2.5

-3.0

-3.5Extreme Overbought

Extreme Oversold

Master Price Proximity Indicator

500

1000

1500

S&P 500 Index

As oversold as 2001 and 2002

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3/17/2009 ISI Group 4

J A S O N D 2006 M A M J J A S O N D 2007 M A M J J A S O N D 2008 M A M J J A S O N D 2009 M

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15Price as a Percent from its 200 Day Moving Average

700

800

900

1000

1100

1200

1300

1400

1500

1600S&P 500 Index

Deviation From Trend is Extreme

74s extreme was 29%

87s extreme was 21%

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3/17/2009 ISI Group 5

Only in 31 and 32 Did We HaveLarger Deviations from Trend

1929 1930 1931 1932 1933 1934

-50

-40

-30

-20

-10

0

10

20

30

40

50Price as a Percent from its 200 Day Moving Average

current level

5

10

15

20

25

30

35S&P 500 Index

We have to go back to1931 & 1932 to find asimilar deviation from trend

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3/17/2009 ISI Group 6

2001 2002 2003 2004 2005 2006 2007 2008 200

-10

-5

0

5

10

15

20

Outperform

Underperform

Rydex Model

700

800

900

1000

1100

1200

1300

1400

1500

1600S&P 500 Index

RYDEX Model J ust off Peak Levels

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3/17/2009 ISI Group 7

Highest Bear Readings in a

Generation

7 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20

5

10

15

20

25

30

35

40

45

50

55

6065

70AAII Bearish Readings

500

1000

1500S&P 500

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3/17/2009 ISI Group 8

Consensus Inc. at 8-yr Low

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

10

15

20

25

30

35

40

45

50

55

60

65

70

75

8085

Euphoric

Apocalyptic

Consensus Inc. Stock Indices

700

800

900

1000

1100

1200

1300

1400

1500

1600S&P 500

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3/17/2009 ISI Group 9

GE Capitulation Served as

Microcosm to Broader Sentiment

Nov Dec 2008 Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec 2009 Feb Mar

10000

2000030000

40000

50000

60000

70000

x10000

0

500

1000

10

20

30

40General Electric Company

GE Capital CDS

Spikes in CDS andVolume suggest near-term liquidation.

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3/17/2009 ISI Group 10

52 Week New Lows Contracted

Oct-06 J an-07 Apr-07 J ul-07 Oct-07 J an-08 Apr-08 J ul-08 Oct-08 J an-09

700

800

900

1,000

1,1001,200

1,300

1,400

1,500

1,600


700

800

900

1,000

1,1001,200

1,300

1,400

1,500

1,600

S&P 500 (SP50)Price - Close or Current Intraday

Oct-06 J an-07 Apr-07 J ul-07 Oct-07 J an-08 Apr-08 J ul-08 Oct-08 J an-090%

20%

40%

60%

80%

100%


20%

40%

60%

80%

100%

ISI GROUP INC. - TECHNICAL ANALYSIS

52 WEEK NEW LOWS AS % OF ISSUES

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3/17/2009 ISI Group 11

Correlation Contracting

2002 2003 2004 2005 2006 2007 2008

700

800

900

1,0001,100

1,200

1,300

1,400

1,5001,600

2002 2003 2004 2005 2006 2007 2008

700

800

900

1,0001,100

1,200

1,300

1,400

1,5001,600


2002 2003 2004 2005 2006 2007 2008

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

2002 2003 2004 2005 2006 2007 2008

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90


AVERAGE 65 DAY CORRELATION

Stock selection continues toshow it has a fighting chance inthis tape.

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3/17/2009 ISI Group 12

=

+

+

+

+

==

-

+

=

=

-- -

Momentum

Confirmation

MomentumConfirmation

Conditional Elements MeetMomentum

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3/17/2009 ISI Group 13

One of the Most Powerful Clusters

of Thrust Weve Seen in Years

Date 1d%chg A/D Ratio U/D Ratio TRIN VOL%

3/11/2008 3.71% 4.9 9.2 0.53 21%3/18/2008 4.24% 8.1 19.7 0.41 18%

9/30/2008 5.42% 4.2 9.2 0.45 15%

10/13/2008 11.58% 19.1 18.9 1.01 25%

10/28/2008 10.79% 4.0 20.4 0.20 18%

11/13/2008 6.92% 2.8 12.7 0.22 34%

11/21/2008 6.32% 1.7 4.0 0.43 53%11/24/2008 6.47% 7.7 13.7 0.56 30%

12/16/2008 5.14% 5.6 16.8 0.33 -5%

3/10/2009 6.37% 12.8 26.9 0.48 48%

3/12/2009 4.07% 9.0 17.9 0.50 22%

Average 6.46% 7.2 15.4 0.47 25%

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3/17/2009 ISI Group 14

NYSE A/D Ratio

Dec 2008 Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec 2009 Feb Mar

-50

0

NYSE Up Volume to Down Volume Ratio

-20

-10

0

10

NYSE Advance Decline Ratio

4000

5000

6000

7000

8000

9000

10000

+A/D Ratio >3:1

- A/D Ratio

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3/17/2009 ISI Group 15

We Have to Go Back to August of82 to Find More Impressive Thrust

S O N D 1981 M A M J J A S O N D 1982 M A M J J A S O N D 1983 M A M J J A S

-40

-30

-20

-10

0

1020

30

40NYSE Up Volume to Down Volume Ratio

-10

-5

0

5

10NYSE Advance Decline Ratio

95

100

105

110

115

120

125

130135

140

145150

155160165170

++

S&P 500 Index

Highest A/D Volume

Ratio x Sept 07

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3/17/2009 ISI Group 17

In Early 87 the Thrust Didnt Quite

Match Todays Breadth

6 Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec 1987 Mar Apr May J un J ul Aug Sep Oct Nov De

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15NYSE Advance Decline Ratio

200

250

300

350S&P 500 Index

BreadthThrust

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3/17/2009 ISI Group 18

Standard Deviation of Bear

Bounces in Todays Market

A M J J A S O N D 2008 M A M J J A S O N D 2009 M A M J J A S

600

650700

750

800

850

900

950

1000

10501100

1150

1200

1250

1300

1350

1400

1450

1500

1550

1600

1 stdev =896

2 stdev =987

3 stdev =1077

4 stdev =1168

S&P 500 Index

Anything +3 stdev has never beenseen in the U.S. while still in a bearmarket. 1938 bounce was theclosest at 59% (equal to 1057 SPX)

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3/17/2009 ISI Group 19

Well Get Concerned > 60%


700

800

900

1,000

1,1001,200

1,300

1,400

1,500

1,600


700

800

900

1,000

1,1001,200

1,300

1,400

1,500

1,600



20%

40%

60%

80%

100%


20%

40%

60%

80%

100%


% OF ISSUES ABOVE THE 50 DAY MOVING AVERAGE

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3/17/2009 ISI Group 20

721 is 50% Retracement

13

er

20 27 3 10 17

November

24 8 15

December

22 29 5 12

2009

20 26 2 9

February

17 23 2 9

March

16 23 30 6

April

13

650

700

750

800

850

900

950

1000

1050

0.0%

38.2%50.0%61.8%

100.0%

S&P 500 Index

733.4

720.7

Retracing Thursdays confirmationday would be negative, and

reasserts the importance of 721.Under that level, and the picturebecomes more muddled.

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3/17/2009 ISI Group 21

Some Resistance at 804 First

2008 A S 09 16 O 06 10 13 17 23 24 28 29 N 10 17 20 D 04 16 2009 F M :

650

700

750

800

850

900

950

1000

1050

1100

1150

1200

1250

1300

1350S&P 500 (10.000x30.000-H/L)

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3/17/2009 ISI Group 22

Bear Market is Not OverDate Beginning Date End Magnitude Duration

9/16/1929 7/8/1932 -86.2% 704

3/10/1937 4/28/1942 -60.0% 1,284

10/9/2007 3/9/2009 -56.8% 355

3/24/2000 10/9/2002 -49.1% 637

1/19/1906 11/15/1907 -48.5% 459

1/11/1973 10/3/1974 -48.2% 436

6/17/1901 11/9/1903 -46.1% 602

11/3/1919 12/21/1920 -44.2% 283

11/21/1916 12/19/1917 -40.1% 268

11/29/1968 5/26/1970 -36.1% 369

8/25/1987 12/4/1987 -33.5% 715/29/1946 6/13/1949 -29.6% 761

11/19/1909 7/30/1914 -29.0% 1,178

12/11/1961 6/26/1962 -27.7% 136

11/28/1980 8/12/1982 -27.1% 430

2/9/1966 10/7/1966 -22.2% 167

8/2/1956 10/22/1957 -21.6% 307

7/16/1990 10/11/1990 -19.9% 629/21/1976 3/6/1978 -19.4% 366

8/3/1959 10/25/1960 -13.9% 311

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3/17/2009 ISI Group 24

If You Bought Today and Were Repeating

the 1930sU.S. Stocks - Total Return Index

0

0.5

1

1.5

2

2.5

1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941

From a percentagedecline, we are

here (-52.8% from

peak)

1y -52.09%

2y -17.66%3y -25.65%

4y -1.04%

5y 46.89%

6y 64.35%

7y 28.47%

8y 30.61%

9y 17.83%

10y 27.19%

Forward Total Returns - Monthly

(J an. 31, 1931 -52.8% from Peak)

Four years laterreturns were stillnegative.

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3/17/2009 ISI Group 26

Inflation Proportion is Beginning to Expand

U.S. 10 Year Yield versus Attribution

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

12/11/2007 2/12/2008 4/15/2008 6/17/2008 8/19/2008 10/21/2008 12/23/2008 2/24/2009

RealYield/Inflation/DefaultRis

k

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

Real Yield Inflation Expectations Default Risk (CDS) U.S. 10 Year Yield

10 Year Yield

(right scale)

Real Yield

Default Risk

Inflation

ISI Group Inc. - Technical Analysis Research

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3/17/2009 ISI Group 27

AAA CMBX Showing Stress

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3/17/2009 ISI Group 28

Fed Balance Sheet About to Expand

Again w/ TALF

0

400,000

800,000

1,200,000

1,600,000

2,000,000

2,400,000

2,800,000

J an 2008 Mar 2008 May 2008 J ul 2008 Sep 2008 Nov 2008 J an 2009 Mar 2009

Securities held outright (mostly Treasuries) Repurchase AgreementsTerm Auction Credit +Discount window PDCFAMLF CPFFMaiden Lane LLC Other assetsMaiden Lane III LLC Credit Extended to AIG

Source: Federal Reserve Board; ISI Economic Research

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3/17/2009 ISI Group 29

Oil Trend Bearish But Improving

Aug Sep Oct Nov Dec 2009 Feb Mar

30

40

50

60

70

80

90

100

110

120

130

140150Crude Oil

Trend Following: 1

J ul Aug Sep Oct Nov Dec 2009 Mar

30

40

50

60

70

80

90

100

110

120

130

140150160

Trend Following: 2

Aug Sep Oct Nov Dec 2009 Feb Mar

50

100

150

Trend Following: 3

pr May J un J ul Aug Sep Oct Nov Dec 2009 Feb Mar

30

40

50

60

70

80

90

100

110

120

130

140150160

Trend Following: 4

Apr May J un J ul Aug Sep Oct Nov Dec 2009 Feb Mar

0

50

100

50

100

150Trend Following: 5

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3/17/2009 ISI Group 31

Copper with a Modest Breakout

n J ul Aug Sep Oct Nov Dec 2008 Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec 2009 Feb Mar

150

200

250

300

350

400

450Copper High Grade COMEX Continuous

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3/17/2009 ISI Group 33

Sector Ranking of Our Top 25%

S&P Names as a % of Sectors

Based on performance from 11/20/08 & 1/6/0#of Stocks #of Stocksin Sector Sector in Top125 %

9 Telecommunication Services 5 55.6%

75 Information Technology 36 48.0%

54 Health Care 21 38.9%

39 Energy 10 25.6%

80 Consumer Discretionary 20 25.0%40 Consumer Staples 9 22.5%

29 Materials 6 20.7%

34 Utilities 5 14.7%

81 Financials 9 11.1%

59 Industrials 4 6.8%

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3/17/2009 ISI Group 34

Breadth Stronger than

Price in Technology


200

250

300

350

400

450


200

250

300

350

400

450

S&P 500 / Information Technology -SEC (SP701)Price

Oct-06 J an-07 Apr-07 J ul-07 Oct-07 J an-08 Apr-08 J ul-08 Oct-08 J an-09-1,000

-800

-600

-400

-200

0

200

400

600

800

Oct-06 J an-07 Apr-07 J ul-07 Oct-07 J an-08 Apr-08 J ul-08 Oct-08 J an-09-1,000

-800

-600

-400

-200

0

200

400

600

800


ADVANCE-DECLINE LINE

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Bullish Breadth Di ergence

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3/17/2009 ISI Group 36

Bullish Breadth Divergence

in Energy


300

350

400

450

500

550

600

650


300

350

400

450

500

550

600

650

S&P 500 / Ener gy -SEC (SPN01)Price

Oct-06 J an-07 Apr-07 J ul-07 Oct-07 J an-08 Apr-08 J ul-08 Oct-08 J an-09-200

0

200

400

600

800

1,000

Oct-06 J an-07 Apr-07 J ul-07 Oct-07 J an-08 Apr-08 J ul-08 Oct-08 J an-09-200

0

200

400

600

800

1,000


ADVANCE-DECLINE LINE

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3/17/2009 ISI Group 37

Fresh Breakout in Top 25

2005 2006 2007 20082004

10

20

30

4050

607080

29.6

59.2

USD

Millions

Mkt Cap: $2018.94WFMIFood RetailWHOLE FOODS MARKET INC

50daymovingavg200daymovingavg

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3/17/2009 ISI Group 38

Legal StuffANALYST CERTIFICATION: The views expressed in this Report accurately reflect the personal views of those

preparing the Report about any and all of the subjects or issuers referenced in this Report. No part of thecompensation of any person involved in the preparation of this Report was, is, or will be directly or indirectlyrelated to the specific recommendations or views expressed by research analysts in this Report.

DISCLOSURE: Neither ISI nor its affiliates beneficially own 1% or more of any class of common equity securities ofthe subject companies referenced in this Report. No person(s) responsible for preparing this report or a member ofhis/her household serve as an officer, director or advisory board member of any of the subject companies. NeitherISI nor its affiliates have any investment banking or market making operations. At various times these reportsmention clients of ISI from whom ISI has received non-investment banking securities related compensation in thepast 12 months.

The person(s) responsible for preparing this report regularly trade the constituents of the CRB index, currencies,fixed income securities and stock indices.

DISCLAIMER: This material is based upon information that we consider to be reliable, but neither ISI nor its affiliatesguarantee its completeness or accuracy. Assumptions, opinions and recommendations contained herein aresubject to change without notice, and ISI is not obligated to update the information contained herein. Pastperformance is not necessarily indicative of future performance. This material is not intended as an offer orsolicitation for the purchase or sale of any security.

degraaf 03-17jsd

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