ecam newsletter november 2011

8/3/2019 ECAM Newsletter November 2011

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CONTENTS

1) MARKET COMMENTS

2) TECHNICAL ANALYSIS

3) TACTICAL ASSET ALLOCATION

4) RECOMMENDED HOLDINGS

1)1)1)1) MARKET COMMENTSMARKET COMMENTSMARKET COMMENTSMARKET COMMENTS

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1.3146 against the US Dollar as the Eurozone1.3146 against the US Dollar as the Eurozone1.3146 against the US Dollar as the Eurozone1.3146 against the US Dollar as the Eurozone

debt crisis continued to fester. The newsdebt crisis continued to fester. The newsdebt crisis continued to fester. The newsdebt crisis continued to fester. The news----flowflowflowflow

has been nothing short of dismal, with Portugalhas been nothing short of dismal, with Portugalhas been nothing short of dismal, with Portugalhas been nothing short of dismal, with Portugal

and Belgium getting downgraded by Fitch andand Belgium getting downgraded by Fitch andand Belgium getting downgraded by Fitch andand Belgium getting downgraded by Fitch and

S&P respectively while Greece reportedly pickedS&P respectively while Greece reportedly pickedS&P respectively while Greece reportedly pickedS&P respectively while Greece reportedly picked

a fighta fighta fighta fight with its creditors over an upcoming bondwith its creditors over an upcoming bondwith its creditors over an upcoming bondwith its creditors over an upcoming bond

For the week ending Friday, 25 November 2011 the major worlds markets closed as follows:

Close Weekly Change

Dow Jones Industrial Average ($DJAI) 11231 -4.78%

S & P 500 ($SPX) 1158 -4.69%

Nasdaq Composite Average ($COMPQ) 2441 -5.09%

Japan Nikkei Average ($NIKK) 8160 -2.57%

French CAC 40 ($CAC) 2856 -4.67%

German DAX Composite ($DAX) 5492 -5.30%

British FTSE 100 ($FTSE) 5164 -3.70%Sydney All Ords ($AORD) 4057 -4.45%

China Shanghai Composite ($SSEC) 2380 -1.50%

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INVESTOR NEWSLETTERINVESTOR NEWSLETTERINVESTOR NEWSLETTERINVESTOR NEWSLETTER 4th4th4th4th QUARTER UPDATEQUARTER UPDATEQUARTER UPDATEQUARTER UPDATE NOVEMBER 2011NOVEMBER 2011NOVEMBER 2011NOVEMBER 2011

By Dwayne Malone

It appears this past week could potentially have

been a pivotal event in the ongoing European debt

crisis.

Clearly there was a severe change in sentiment

from the previous week where it was generally

believed a work around solution would be foundto the current European debt crisis. This was

clearly spelled out in this weekends Euro market

wrap courtesy of DailyFx:

The Euro hit the lowest levThe Euro hit the lowest levThe Euro hit the lowest levThe Euro hit the lowest level in nearly two monthsel in nearly two monthsel in nearly two monthsel in nearly two months

last week on approach to the yearlast week on approach to the yearlast week on approach to the yearlast week on approach to the year----totototo----date low atdate low atdate low atdate low at


2/11

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swap meant to relieve its debt burden (to sayswap meant to relieve its debt burden (to sayswap meant to relieve its debt burden (to sayswap meant to relieve its debt burden (to say

nothing of thenothing of thenothing of thenothing of the German 10German 10German 10German 10----year bond auctionyear bond auctionyear bond auctionyear bond auction

fiascofiascofiascofiasco). These are all minor issues however). These are all minor issues however). These are all minor issues however). These are all minor issues however

relative to investors trrelative to investors trrelative to investors trrelative to investors true concern, that Germanue concern, that Germanue concern, that Germanue concern, that German

intransigence will doom the single currency.intransigence will doom the single currency.intransigence will doom the single currency.intransigence will doom the single currency.The abject failure of Eurozone politicians toThe abject failure of Eurozone politicians toThe abject failure of Eurozone politicians toThe abject failure of Eurozone politicians to

meaningfully contain the spread of the debtmeaningfully contain the spread of the debtmeaningfully contain the spread of the debtmeaningfully contain the spread of the debt

crisis up to this point is arguably a foregonecrisis up to this point is arguably a foregonecrisis up to this point is arguably a foregonecrisis up to this point is arguably a foregone

conclusion. Despite countless summitsconclusion. Despite countless summitsconclusion. Despite countless summitsconclusion. Despite countless summits

producing producing producing producing comprehensive remedies over nearlycomprehensive remedies over nearlycomprehensive remedies over nearlycomprehensive remedies over nearly

two years, officials have proven themselvestwo years, officials have proven themselvestwo years, officials have proven themselvestwo years, officials have proven themselves

unable to convince the markets that they areunable to convince the markets that they areunable to convince the markets that they areunable to convince the markets that they are

truly serious about sovereign risk. As manytruly serious about sovereign risk. As manytruly serious about sovereign risk. As manytruly serious about sovereign risk. As many

(including ourselves) have argued for some(including ourselves) have argued for some(including ourselves) have argued for some(including ourselves) have argued for some

weeks now, the only two options this late inweeks now, the only two options this late inweeks now, the only two options this late inweeks now, the only two options this late in thethethethe

game are joint Eurobondsgame are joint Eurobondsgame are joint Eurobondsgame are joint Eurobonds a setup that woulda setup that woulda setup that woulda setup that would

effectively allow healthier core countries to coeffectively allow healthier core countries to coeffectively allow healthier core countries to coeffectively allow healthier core countries to co----

sign loans to their debtsign loans to their debtsign loans to their debtsign loans to their debt----strapped brethrenstrapped brethrenstrapped brethrenstrapped brethren orororor

an aggressive bondan aggressive bondan aggressive bondan aggressive bond----buying program from thebuying program from thebuying program from thebuying program from the

European Central Bank to hold down regionalEuropean Central Bank to hold down regionalEuropean Central Bank to hold down regionalEuropean Central Bank to hold down regional

borrowing costs and bborrowing costs and bborrowing costs and bborrowing costs and buy time for structuraluy time for structuraluy time for structuraluy time for structural

reforms.reforms.reforms.reforms.

Germany has been quick to reject both options,Germany has been quick to reject both options,Germany has been quick to reject both options,Germany has been quick to reject both options,claiming Eurobonds will allow profligateclaiming Eurobonds will allow profligateclaiming Eurobonds will allow profligateclaiming Eurobonds will allow profligate

countries to sidecountries to sidecountries to sidecountries to side----step reform with impunitystep reform with impunitystep reform with impunitystep reform with impunity

while an ECB version of quantitative easing willwhile an ECB version of quantitative easing willwhile an ECB version of quantitative easing willwhile an ECB version of quantitative easing will

unleash inflation. Admittedly, the Eurobounleash inflation. Admittedly, the Eurobounleash inflation. Admittedly, the Eurobounleash inflation. Admittedly, the Eurobondndndnd

option is not a great one. Looking past theoption is not a great one. Looking past theoption is not a great one. Looking past theoption is not a great one. Looking past the

moral hazard argument, such a scheme wouldmoral hazard argument, such a scheme wouldmoral hazard argument, such a scheme wouldmoral hazard argument, such a scheme would

practically take a long time to set up, and time ispractically take a long time to set up, and time ispractically take a long time to set up, and time ispractically take a long time to set up, and time is

not something that Eurozone politicians have innot something that Eurozone politicians have innot something that Eurozone politicians have innot something that Eurozone politicians have in

surplus at this point. On the other hand, if thesurplus at this point. On the other hand, if thesurplus at this point. On the other hand, if thesurplus at this point. On the other hand, if the

ECB were to be giECB were to be giECB were to be giECB were to be given the green light to enter theven the green light to enter theven the green light to enter theven the green light to enter thefray as a true buyer of last resort for memberfray as a true buyer of last resort for memberfray as a true buyer of last resort for memberfray as a true buyer of last resort for member

states bonds, it could do so quickly and providestates bonds, it could do so quickly and providestates bonds, it could do so quickly and providestates bonds, it could do so quickly and provide

immediate relief. Indeed, the inflationimmediate relief. Indeed, the inflationimmediate relief. Indeed, the inflationimmediate relief. Indeed, the inflation

implications of such a move seem hardlyimplications of such a move seem hardlyimplications of such a move seem hardlyimplications of such a move seem hardly

problematic now as slowing growth bears downproblematic now as slowing growth bears downproblematic now as slowing growth bears downproblematic now as slowing growth bears down

oooon price growth, so if ever there was time ton price growth, so if ever there was time ton price growth, so if ever there was time ton price growth, so if ever there was time to

print money than this is it.print money than this is it.print money than this is it.print money than this is it.

With all of this in mind, the spotlight in the weekWith all of this in mind, the spotlight in the weekWith all of this in mind, the spotlight in the weekWith all of this in mind, the spotlight in the week

ahead will turn to a twoahead will turn to a twoahead will turn to a twoahead will turn to a two----day meeting of Euroday meeting of Euroday meeting of Euroday meeting of Euro

area finance ministers starting in Brussels onarea finance ministers starting in Brussels onarea finance ministers starting in Brussels onarea finance ministers starting in Brussels on

Tuesday, with ECB involvement in conTuesday, with ECB involvement in conTuesday, with ECB involvement in conTuesday, with ECB involvement in containingtainingtainingtaining

spreading turmoil likely in focus. Indeed, ifspreading turmoil likely in focus. Indeed, ifspreading turmoil likely in focus. Indeed, ifspreading turmoil likely in focus. Indeed, if

policymakers emerge out of the sitpolicymakers emerge out of the sitpolicymakers emerge out of the sitpolicymakers emerge out of the sit----down withdown withdown withdown with

another halfanother halfanother halfanother half----baked proposal akin to what wasbaked proposal akin to what wasbaked proposal akin to what wasbaked proposal akin to what was

announced in October, traders are unlikely toannounced in October, traders are unlikely toannounced in October, traders are unlikely toannounced in October, traders are unlikely to

respond favorably. Against this backdrop, arespond favorably. Against this backdrop, arespond favorably. Against this backdrop, arespond favorably. Against this backdrop, along list of countrieslong list of countrieslong list of countrieslong list of countries including Italy, Belgium,including Italy, Belgium,including Italy, Belgium,including Italy, Belgium,

France and Spain are set to hold bondFrance and Spain are set to hold bondFrance and Spain are set to hold bondFrance and Spain are set to hold bond

auctions, givingauctions, givingauctions, givingauctions, giving EU politicians a realEU politicians a realEU politicians a realEU politicians a real----timetimetimetime

reading on traders assessment of their effortsreading on traders assessment of their effortsreading on traders assessment of their effortsreading on traders assessment of their efforts

via yield levels.via yield levels.via yield levels.via yield levels.

If Berlins administration is ready toIf Berlins administration is ready toIf Berlins administration is ready toIf Berlins administration is ready to

meaningfully deal with the crisis, it cameaningfully deal with the crisis, it cameaningfully deal with the crisis, it cameaningfully deal with the crisis, it can selln selln selln sell

ECB involvement to their population as aECB involvement to their population as aECB involvement to their population as aECB involvement to their population as a

bulwark against deflationary pressure amidbulwark against deflationary pressure amidbulwark against deflationary pressure amidbulwark against deflationary pressure amid

slowing growth rather than a bailout (whichslowing growth rather than a bailout (whichslowing growth rather than a bailout (whichslowing growth rather than a bailout (which

would not be entirely dishonest consideringwould not be entirely dishonest consideringwould not be entirely dishonest consideringwould not be entirely dishonest considering

the sharp slowdown in headline CPI beingthe sharp slowdown in headline CPI beingthe sharp slowdown in headline CPI beingthe sharp slowdown in headline CPI being

forecast for 2012). It would be wiseforecast for 2012). It would be wiseforecast for 2012). It would be wiseforecast for 2012). It would be wise forforforfor

Germany itself, for as an exporter it wouldGermany itself, for as an exporter it wouldGermany itself, for as an exporter it wouldGermany itself, for as an exporter it would

benefit from saving the single currency whilebenefit from saving the single currency whilebenefit from saving the single currency whilebenefit from saving the single currency while

driving down its value. The rest of thedriving down its value. The rest of thedriving down its value. The rest of thedriving down its value. The rest of the

Eurozone is best to press and pray for justEurozone is best to press and pray for justEurozone is best to press and pray for justEurozone is best to press and pray for just

such an outcome.such an outcome.such an outcome.such an outcome.

It appears the end of the kick the can down

the road exercise is close at hand and we are

approaching a climax. Over the past 2 months

the market has dealt severe punishment on

those countries who have not exhibited a true

desire to reform in terms of increased bond

yields demanded for sovereign bond sales. In

the process two political leaders have been

replaced by the market (Papandreou in Greece

and Berlusconi in Italy). The key is where we

go from here.

As said above, the markets were in a

fundamental and technical condition to

advance into year end. Year-to-date the

markets are down on all major indexes and we

are entering what is traditionally the best

months of the year to be invested in equities(Nov-Apr annually). In addition the

Thanksgiving week has traditionally been a

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3/11

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very bullish time to be in the markets but last

weeks Thanksgiving gave the worst performance

since 1932!

Portfolio managers have severelyunderperformed the markets given the

incredible volatility present over the past year

and it is my belief there will be a concerted

effort on their parts over the next month to

window dress portfolios going into year end.

U.S. Economic data has been quite encouraging

over the past few weeks and the economy in the

U.S. remains in muddle along mode.

Fundamentally corporate profits in the U.S. are

at record levels due to high productivity gains

combined with a consumer who still appears

willing to spend despite the terrible jobs picture.

This past week I noted both rail and truck traffic

in the U.S. remains strong and more indicative

of a growth mode as opposed to a slow down

mode. Transportation metrics such as the

American Trucking Association's Truck Tonnage

Index and the American Association of Railroad'sWeekly Rail Traffic Report both showed a

manufacturing sector that remains in growth

mode.

Truck Traffic:Truck Traffic:Truck Traffic:Truck Traffic:

"The American Trucking Associations advance"The American Trucking Associations advance"The American Trucking Associations advance"The American Trucking Associations advance

seasonally adjusted (SA) Forseasonally adjusted (SA) Forseasonally adjusted (SA) Forseasonally adjusted (SA) For----Hire Truck TonnageHire Truck TonnageHire Truck TonnageHire Truck Tonnage

Index increased 0.5% in October after rising aIndex increased 0.5% in October after rising aIndex increased 0.5% in October after rising aIndex increased 0.5% in October after rising a

revised 1.5% in September 2011. The latest gainrevised 1.5% in September 2011. The latest gainrevised 1.5% in September 2011. The latest gainrevised 1.5% in September 2011. The latest gainput the SA index at 116.3 (2000=100) input the SA index at 116.3 (2000=100) input the SA index at 116.3 (2000=100) input the SA index at 116.3 (2000=100) in

OctobOctobOctobOctober, up from the September level of 115.8.er, up from the September level of 115.8.er, up from the September level of 115.8.er, up from the September level of 115.8.

Compared with October 2010, truck tonnageCompared with October 2010, truck tonnageCompared with October 2010, truck tonnageCompared with October 2010, truck tonnage

was up 5.7% following an increase in Septemberwas up 5.7% following an increase in Septemberwas up 5.7% following an increase in Septemberwas up 5.7% following an increase in September

of 5.8% above a year earlier. Further, Octobersof 5.8% above a year earlier. Further, Octobersof 5.8% above a year earlier. Further, Octobersof 5.8% above a year earlier. Further, Octobers

tonnage reading was just 4.4% below the indexstonnage reading was just 4.4% below the indexstonnage reading was just 4.4% below the indexstonnage reading was just 4.4% below the indexs

allallallall----time high in January 20time high in January 20time high in January 20time high in January 2005.05.05.05.

Tonnage readings continue to show thatTonnage readings continue to show thatTonnage readings continue to show thatTonnage readings continue to show that

economy is growing and not sliding back intoeconomy is growing and not sliding back intoeconomy is growing and not sliding back intoeconomy is growing and not sliding back into

recession, ATA Chief Economist Bob Costellorecession, ATA Chief Economist Bob Costellorecession, ATA Chief Economist Bob Costellorecession, ATA Chief Economist Bob Costello

said. Over the last two months, tonnage is upsaid. Over the last two months, tonnage is upsaid. Over the last two months, tonnage is upsaid. Over the last two months, tonnage is up

nearly 2% and is just shy of the recent high innearly 2% and is just shy of the recent high innearly 2% and is just shy of the recent high innearly 2% and is just shy of the recent high in

January of this year.January of this year.January of this year.January of this year.

Manufacturing output has been the primaryManufacturing output has been the primaryManufacturing output has been the primaryManufacturing output has been the primaryreason why truck freight volumes are increasingreason why truck freight volumes are increasingreason why truck freight volumes are increasingreason why truck freight volumes are increasing

more than GDP. The industrial sector shouldmore than GDP. The industrial sector shouldmore than GDP. The industrial sector shouldmore than GDP. The industrial sector should

slow next year, but still grow more than GDP,slow next year, but still grow more than GDP,slow next year, but still grow more than GDP,slow next year, but still grow more than GDP,

which means truck tonnage can increase fasterwhich means truck tonnage can increase fasterwhich means truck tonnage can increase fasterwhich means truck tonnage can increase faster

than GDP too, he said."than GDP too, he said."than GDP too, he said."than GDP too, he said."

RaRaRaRailway Traffic:ilway Traffic:ilway Traffic:ilway Traffic:

The Association of American Railroads (AAR)The Association of American Railroads (AAR)The Association of American Railroads (AAR)The Association of American Railroads (AAR)

today reported gains in weekly rail traffic, withtoday reported gains in weekly rail traffic, withtoday reported gains in weekly rail traffic, withtoday reported gains in weekly rail traffic, with

U.S. railroads originating 301,919 carloads forU.S. railroads originating 301,919 carloads forU.S. railroads originating 301,919 carloads forU.S. railroads originating 301,919 carloads for

the week ending Nov. 19, 2011, up 1.1 percentthe week ending Nov. 19, 2011, up 1.1 percentthe week ending Nov. 19, 2011, up 1.1 percentthe week ending Nov. 19, 2011, up 1.1 percent

compared with the same week last year.compared with the same week last year.compared with the same week last year.compared with the same week last year.

Intermodal vIntermodal vIntermodal vIntermodal volume for the week totaled 243,234olume for the week totaled 243,234olume for the week totaled 243,234olume for the week totaled 243,234

trailers and containers, up 3 percent comparedtrailers and containers, up 3 percent comparedtrailers and containers, up 3 percent comparedtrailers and containers, up 3 percent compared

with the same week last year.with the same week last year.with the same week last year.with the same week last year.

Eleven of the 20 carload commodity groupsEleven of the 20 carload commodity groupsEleven of the 20 carload commodity groupsEleven of the 20 carload commodity groupsposted increases compared with the same weekposted increases compared with the same weekposted increases compared with the same weekposted increases compared with the same week

in 2010, including: nonmetallic minerals up 30.6in 2010, including: nonmetallic minerals up 30.6in 2010, including: nonmetallic minerals up 30.6in 2010, including: nonmetallic minerals up 30.6

percentpercentpercentpercent; petroleum products, up 21.3 percent,; petroleum products, up 21.3 percent,; petroleum products, up 21.3 percent,; petroleum products, up 21.3 percent,

and motor vehicles and equipment, up 16.3and motor vehicles and equipment, up 16.3and motor vehicles and equipment, up 16.3and motor vehicles and equipment, up 16.3

percent. The groups showing a decrease inpercent. The groups showing a decrease inpercent. The groups showing a decrease inpercent. The groups showing a decrease in

weekly traffic included: primary forest products,weekly traffic included: primary forest products,weekly traffic included: primary forest products,weekly traffic included: primary forest products,

down 13.8; farm products, excluding graindown 13.8; farm products, excluding graindown 13.8; farm products, excluding graindown 13.8; farm products, excluding grain

down 12.4, and grain, down 11.9 percent.down 12.4, and grain, down 11.9 percent.down 12.4, and grain, down 11.9 percent.down 12.4, and grain, down 11.9 percent.

Weekly carload volume on Eastern railroads wasWeekly carload volume on Eastern railroads wasWeekly carload volume on Eastern railroads wasWeekly carload volume on Eastern railroads wasdown 1.2 percent compared with the same weekdown 1.2 percent compared with the same weekdown 1.2 percent compared with the same weekdown 1.2 percent compared with the same week

last year. In the West, weekly carload volumelast year. In the West, weekly carload volumelast year. In the West, weekly carload volumelast year. In the West, weekly carload volume

was up 2.7 percent compared with the samewas up 2.7 percent compared with the samewas up 2.7 percent compared with the samewas up 2.7 percent compared with the same

week in 2010.week in 2010.week in 2010.week in 2010.

For the first 46 weeks of 2011, U.S. railroadsFor the first 46 weeks of 2011, U.S. railroadsFor the first 46 weeks of 2011, U.S. railroadsFor the first 46 weeks of 2011, U.S. railroads

reported cumureported cumureported cumureported cumulative volume of 13,444,752lative volume of 13,444,752lative volume of 13,444,752lative volume of 13,444,752

carloads, up 1.8 percent from the same pointcarloads, up 1.8 percent from the same pointcarloads, up 1.8 percent from the same pointcarloads, up 1.8 percent from the same point

last year, and 10,584,178 trailers andlast year, and 10,584,178 trailers andlast year, and 10,584,178 trailers andlast year, and 10,584,178 trailers and

containers, up 5.2 percent from last year.containers, up 5.2 percent from last year.containers, up 5.2 percent from last year.containers, up 5.2 percent from last year.



4/11

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The technical picture this week deteriorated significantly. What started out as a promising setup on

both the daily (short term) and weekly (medium term) charts rapidly turned around as of Mondays open.

The majority of the price charts are now bearish on the daily and neutral-to-bearish on the weekly.

This is combined with bearish confirmation on the monthly charts that has been in place since

September. However, short term markets are oversold and due for bullish turn.

CyclesCyclesCyclesCycles

----YYYYear 1 of the 10 year Decenear 1 of the 10 year Decenear 1 of the 10 year Decenear 1 of the 10 year Decennial patternnial patternnial patternnial pattern

If Europe took care of business quickly, it is my belief global stock markets would rally sharply as early as

next week. Unfortunately, there is a major ongoing political crisis in the region and until it is sorted out

the volatility and downtrend will continue.

2) TECHNICAL ANALYSIS2) TECHNICAL ANALYSIS2) TECHNICAL ANALYSIS2) TECHNICAL ANALYSIS

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5/11

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----YYYYear 3 of the 4 year Presidential Cycleear 3 of the 4 year Presidential Cycleear 3 of the 4 year Presidential Cycleear 3 of the 4 year Presidential Cycle The first table shows the DJIA for Presidential Year 3.

Year Total return MDD MDD date

1887 -8.42% 16.98% 10/15/1887

1891 11.11% 9.34% 7/30/1891

1895 1.68% 19.35% 12/21/1895

1899 9.20% 24.91% 12/18/1899

1903 -24.03% 37.73% 11/9/1903

1907 -37.73% 45.00% 11/15/1907

1911 0.40% 16.23% 9/25/1911

1915 81.66% 15.88% 5/14/1915

1919 30.45% 13.43% 12/22/1919

1923 -3.25% 18.62% 10/27/1923

1927 28.75% 10.01% 10/22/1927

1931 -52.67% 62.03% 12/17/1931

1935 38.53% 9.76% 3/14/1935

1939 -2.92% 21.58% 4/8/1939

1943 13.81% 11.14% 11/30/1943

1947 2.23% 11.53% 5/17/1947

1951 14.37% 7.79% 6/29/1951

1955 20.77% 10.02% 10/11/1955

1959 16.40% 9.89% 9/22/1959

1963 17.00% 6.44% 11/22/1963

1967 15.20% 9.92% 11/8/1967

1971 6.11% 16.08% 11/23/1971

1975 38.32% 11.07% 10/1/1975

1979 4.19% 11.25% 11/17/1979

1983 20.27% 6.83% 8./8/1983

1987 2.25% 36.13% 10/19/1987

1991 20.32% 6.93% 12/10/1981

1995 33.45% 3.29% 8/24/1995

1999 25.22% 11.53% 10/15/1999

2003 25.32% 14.91% 3/11/2003

2007 6.43% 10.03% 11/26/2007

Averages 14.85% 16.64%

There has not been a down 3rd year since 1939.

October and November each had 7 MDD's, December

had 5, March, May, August and September each had 2

and April, June and July each had 1.

Should we close out the yearShould we close out the yearShould we close out the yearShould we close out the year belowbelowbelowbelow 11577 on the11577 on the11577 on the11577 on theDow Jones Industrial AverageDow Jones Industrial AverageDow Jones Industrial AverageDow Jones Industrial Average (currently 11231)(currently 11231)(currently 11231)(currently 11231) itititit

would be the 1would be the 1would be the 1would be the 1stststst losing year in the 3losing year in the 3losing year in the 3losing year in the 3rdrdrdrd year of ayear of ayear of ayear of a

Presidential Cycle since 1939 (and only the 7Presidential Cycle since 1939 (and only the 7Presidential Cycle since 1939 (and only the 7Presidential Cycle since 1939 (and only the 7thththth sincesincesincesince1887).1887).1887).1887).



6/11

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----Within the 6 month strength period of the Annual Stock Market CycleWithin the 6 month strength period of the Annual Stock Market CycleWithin the 6 month strength period of the Annual Stock Market CycleWithin the 6 month strength period of the Annual Stock Market Cycle

We are currently in the 2nd month of the 6 month strength period as defined by the

months of Nov-Apr inclusive.

Since 1950 the months of Nov-Apr produced an average yearly gain of 7.3% in the

Dow Jones Industrial Average whereas the months of May-Oct produced an average

gain of only 0.1%. Needless to say the strongest (and safest) time to be in themarkets historically is from November-April yearly.



7/11

7

The SPX monthly chart remains bearish from

the end of August 2011.

The following constitutes a bearish

alignment:

1) price closed the month below the 10

month simple moving average, along with

2) confirmation from the associated

technical indicators as indicated on the

chart.

It is interesting to note on the chart we still

have a non-confirmation relative to the

previous head-fake in mid-2010 on the

RSI (14). It is the only technical indicator on

the chart yet to confirm so must be assumed

to be an outlier which should come into

alignment soon.

Until proven otherwise it must be assumed

we are headed lower. Good support levelsare shown near 1020-1030 on the chart

along with the 50% Fibonacci retracement

level. This would be a good initial price

target for the current bear market decline

(which would be an approximate 25% decline

from the 1370 peak and typical of a

standard bear market decline).

THE MONTHLY CHART REMAINS BEARISHTHE MONTHLY CHART REMAINS BEARISHTHE MONTHLY CHART REMAINS BEARISHTHE MONTHLY CHART REMAINS BEARISH

AND INDICATES LOWER PRICES AHEAD OVERAND INDICATES LOWER PRICES AHEAD OVERAND INDICATES LOWER PRICES AHEAD OVERAND INDICATES LOWER PRICES AHEAD OVERTHE NEXT FEW MONTHS.THE NEXT FEW MONTHS.THE NEXT FEW MONTHS.THE NEXT FEW MONTHS.

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8/11

8

The SPX weekly chart was looking somewhat

bullish up until the past week. Most of the

technical indicators had come into bullish

alignment (as shown by the dashed greenline) and there was every reason to believe

the probability of the market advancing

through Thanksgiving and into the year end

was strong. However, it appears the

European situation thwarted that attempt

and now we need to monitor whether the

intermediate term trend reverses back to

bearish.

As noted on the chart, during the lastadvance both the ADX and OBV did not

confirm the move. This had me somewhat

suspicious of the advance. Now, by the

same token; this decline is not confirmed by

both the Full Stochastic and MACD. Either

they are late to the game and will come

into alignment over the next week or they

are right.

Until proven otherwise it is safe to assume

the intermediate direction is neutral. It is

too early to call for huge downside and too

soon to call for huge upside. Unfortunately

sometimes when you have conflicting

indicators the sit on the fence approach is

warranted.

THE WEEKLY CHART IS CURRENTLY NEUTHE WEEKLY CHART IS CURRENTLY NEUTHE WEEKLY CHART IS CURRENTLY NEUTHE WEEKLY CHART IS CURRENTLY NEUTRALTRALTRALTRAL

AND INDICATES MARKET INDECISION OVERAND INDICATES MARKET INDECISION OVERAND INDICATES MARKET INDECISION OVERAND INDICATES MARKET INDECISION OVERPRICE DIRECTION IN THE NEXT FEW WEEKS.PRICE DIRECTION IN THE NEXT FEW WEEKS.PRICE DIRECTION IN THE NEXT FEW WEEKS.PRICE DIRECTION IN THE NEXT FEW WEEKS.



9/11

9

The short term daily SPX chart turned

bearish on November 16 (as shown by the

vertical red line on the chart) with all

technical indicators in alignment.

Key price support was broken at the 1218-

1220 level. This is a very important level

and clearly indicates the bears currently

have the short term advantage.

On the bright side, this decline has been

on low volume (you always look for volume

to support a given price movement) so it

appears there are not a lot of institutionalinvestors running for the exits. It is also

interesting to note the ATR (Average True

Range) has been very well behaved over

the decline. Normally strong declines are

supported by an INCREASE in average true

range due to panic selling. In this case the

ATR has continued to DECLINE. This is

short term positive.

Previous support at the bottom of the blue

box near 1120 is evident as well as a

parallel declining channel line Ive drawn

on the chart. Price is approaching

oversold and this suggests a short term

bounce is due.

THE DAILY CHART REMAINS BEARISH BUTTHE DAILY CHART REMAINS BEARISH BUTTHE DAILY CHART REMAINS BEARISH BUTTHE DAILY CHART REMAINS BEARISH BUT

IS SHOWING SIGNS THE CURRENT DECLINEIS SHOWING SIGNS THE CURRENT DECLINEIS SHOWING SIGNS THE CURRENT DECLINEIS SHOWING SIGNS THE CURRENT DECLINE

MAY BE ENDING. WITH THE OVERSOLDMAY BE ENDING. WITH THE OVERSOLDMAY BE ENDING. WITH THE OVERSOLDMAY BE ENDING. WITH THE OVERSOLDCONDITION IT IS SUGGESTING HIGHERCONDITION IT IS SUGGESTING HIGHERCONDITION IT IS SUGGESTING HIGHERCONDITION IT IS SUGGESTING HIGHER

PRICES AHEAD OVER THE SHORT TERM.PRICES AHEAD OVER THE SHORT TERM.PRICES AHEAD OVER THE SHORT TERM.PRICES AHEAD OVER THE SHORT TERM.



10/11

10

3)3)3)3) ECAMECAMECAMECAM TACTICAL ASSET ALLOCATION MODELTACTICAL ASSET ALLOCATION MODELTACTICAL ASSET ALLOCATION MODELTACTICAL ASSET ALLOCATION MODEL

The ECAM tactical asset allocation model derives its strategic allocation based upon the same technical

analysis strategy utilized for the S&P 500. The given table below shows its current allocation.

EMIRATES CAPIEMIRATES CAPIEMIRATES CAPIEMIRATES CAPITAL ASSET MANAGEMENTTAL ASSET MANAGEMENTTAL ASSET MANAGEMENTTAL ASSET MANAGEMENT www.emiratescapitalassetmanagement.blogspot.comwww.emiratescapitalassetmanagement.blogspot.comwww.emiratescapitalassetmanagement.blogspot.comwww.emiratescapitalassetmanagement.blogspot.com

Basic AssetType

Basic %Allocation

ETF Name ETF Symbol Specific Asset Type Technical ReadingWeekly/Monthly

CurrentHoldings %

Vanguard Total MarketVIPERS-10%

VTI U.S. Large Cap DOWN/DOWN 0%U.S.DomesticEquities

15%

Vanguard Small CapVIPERS-5%

VB U.S. Small Cap DOWN/DOWN 0%

Vanguard FTSE All-Worldex-US-15%

VEU Developed Markets ex-U.S.

DOWN/DOWN 0%ForeignEquities

25%

Vanguard EmergingMarkets VIPERS-10%

VWO Emerging Markets DOWN/DOWN 0%

Vanguard Total Bond

Market-10%

BND U.S. Bonds UP/UP 10%Bonds 15%

iShares Barclays TIPSBond Fund-5%

TIP U.S. InflationProtected Bonds

UP/UP 5%

Vanguard REIT VIPERS-10%

VNQ U.S. Real Estate DOWN/DOWN 0%Real Estate 15%

SPDR Wilshire Intl RealEstate Index ETF-5%

RWX Foreign Real Estate DOWN/DOWN 0%

DB Commodities TrackingIndex Fund-10%

DBC Broad CommodityBasket

DOWN/DOWN 0%

PowerShares DB Multi-Sector Commodity TrustAgriculture Fund-5%

DBA Soft (food) andLivestock Commodities

DOWN/DOWN 0%

Claymore/Clear GlobalTimber Index-2.5% CUT Managed Forest andTimber Harvest DOWN/DOWN 0%

Commodities 20%

Market Vectors GoldMiners ETF-2.5%

GDX Gold Miners/Producers DOWN/DOWN 0%

None 0%Discretionary 10%

Cash Powershares DB USDollar Index BullishFund

UUP85%


11/1111

4) RECOMMENDED HOLDINGS4) RECOMMENDED HOLDINGS4) RECOMMENDED HOLDINGS4) RECOMMENDED HOLDINGS

The weekly and monthly equity charts are both currently bearish. As such, it would be unwise to hold

considerable long term equity positions given the current intermediate to-long term charts.

In the short term the market has undergone a large correction on low volume and is currently

oversold. This bodes well for the near term as cyclically we are entering a strong period in the

markets.

By way of comparison, the following statistics are for the month of December:

Since 1963, over all years, the NASDAQ in December has been up 65% of the time with an averageSince 1963, over all years, the NASDAQ in December has been up 65% of the time with an averageSince 1963, over all years, the NASDAQ in December has been up 65% of the time with an averageSince 1963, over all years, the NASDAQ in December has been up 65% of the time with an average

gain of 1.9%. During the 3gain of 1.9%. During the 3gain of 1.9%. During the 3gain of 1.9%. During the 3rdrdrdrd year of the Presidential Cycle December has been up 75% time with anyear of the Presidential Cycle December has been up 75% time with anyear of the Presidential Cycle December has been up 75% time with anyear of the Presidential Cycle December has been up 75% time with an

average gain of 4.6%. The best December for theaverage gain of 4.6%. The best December for theaverage gain of 4.6%. The best December for theaverage gain of 4.6%. The best December for the NASDAQNASDAQNASDAQNASDAQ was 1999 (+21.3%), the worst 2002 (was 1999 (+21.3%), the worst 2002 (was 1999 (+21.3%), the worst 2002 (was 1999 (+21.3%), the worst 2002 (----

10.1%).10.1%).10.1%).10.1%).

Since 1928 the SPX has been up 75% of the time in December with an average gain of 1.5%. DuringSince 1928 the SPX has been up 75% of the time in December with an average gain of 1.5%. DuringSince 1928 the SPX has been up 75% of the time in December with an average gain of 1.5%. DuringSince 1928 the SPX has been up 75% of the time in December with an average gain of 1.5%. During

the 3the 3the 3the 3rdrdrdrd year of the Presidential Cycle the SPX has been upyear of the Presidential Cycle the SPX has been upyear of the Presidential Cycle the SPX has been upyear of the Presidential Cycle the SPX has been up 80% of the time with an average gain of80% of the time with an average gain of80% of the time with an average gain of80% of the time with an average gain of

2.2%. The best December for the SPX was 2008 (+10.7%) the worst 1931 (2.2%. The best December for the SPX was 2008 (+10.7%) the worst 1931 (2.2%. The best December for the SPX was 2008 (+10.7%) the worst 1931 (2.2%. The best December for the SPX was 2008 (+10.7%) the worst 1931 (----13.4%).13.4%).13.4%).13.4%).

Since 1979 the Russell 2000 (R2K) has been up 75% of the time in December with an average gain ofSince 1979 the Russell 2000 (R2K) has been up 75% of the time in December with an average gain ofSince 1979 the Russell 2000 (R2K) has been up 75% of the time in December with an average gain ofSince 1979 the Russell 2000 (R2K) has been up 75% of the time in December with an average gain of

3.0%. During the 33.0%. During the 33.0%. During the 33.0%. During the 3rdrdrdrd year of the Presyear of the Presyear of the Presyear of the Presidential Cycle the R2K has been up 88% of the time with anidential Cycle the R2K has been up 88% of the time with anidential Cycle the R2K has been up 88% of the time with anidential Cycle the R2K has been up 88% of the time with an

average gain of 4.4%. The only down year during the 3average gain of 4.4%. The only down year during the 3average gain of 4.4%. The only down year during the 3average gain of 4.4%. The only down year during the 3rdrdrdrd year of the Presidential Cycle for the R2K wasyear of the Presidential Cycle for the R2K wasyear of the Presidential Cycle for the R2K wasyear of the Presidential Cycle for the R2K was

1983, down 2.1%. The best December for the R2K 2008 (+19.8%) following a November that was1983, down 2.1%. The best December for the R2K 2008 (+19.8%) following a November that was1983, down 2.1%. The best December for the R2K 2008 (+19.8%) following a November that was1983, down 2.1%. The best December for the R2K 2008 (+19.8%) following a November that was

ddddown 12.1%, the worst 1983 (own 12.1%, the worst 1983 (own 12.1%, the worst 1983 (own 12.1%, the worst 1983 (----2.1%)2.1%)2.1%)2.1%)

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 70% of the time in December with anSince 1885 the Dow Jones Industrial Average (DJIA) has been up 70% of the time in December with anSince 1885 the Dow Jones Industrial Average (DJIA) has been up 70% of the time in December with anSince 1885 the Dow Jones Industrial Average (DJIA) has been up 70% of the time in December with an

average gain of 1.2%. During the 3average gain of 1.2%. During the 3average gain of 1.2%. During the 3average gain of 1.2%. During the 3rdrdrdrd year of the Presidential Cycle the DJIA has been up 77% of theyear of the Presidential Cycle the DJIA has been up 77% of theyear of the Presidential Cycle the DJIA has been up 77% of theyear of the Presidential Cycle the DJIA has been up 77% of the

time in December withtime in December withtime in December withtime in December with an average gain of 1.3%. The best December for the DJIAan average gain of 1.3%. The best December for the DJIAan average gain of 1.3%. The best December for the DJIAan average gain of 1.3%. The best December for the DJIA waswaswaswas 1903 (+10.7%),1903 (+10.7%),1903 (+10.7%),1903 (+10.7%),

the worst 1931 (the worst 1931 (the worst 1931 (the worst 1931 (----14.6%).14.6%).14.6%).14.6%).

Given the statistical history and the fact we have sold off quite dramatically with the short term charts

oversold, the odds favor a market rise over the short term (next 4-6 weeks). Those utilizing a shorter

term trading account may want to enter long positions near current levels.

Given any rise in the short term will probably move the weekly charts back to bullish, those who are in

cash may want to consider a 50% cash/50% equity positioning on any significant move in the short

term.

Given the monthly charts are bearish, unless the SPX can close above 1273 (10% above current levels)

those that are currently fully invested may want to consider moving to a 50% equity/50% cash position

on any short term strength over the next few weeks.

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ecam newsletter november 2011

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