State of the Market August 2010

Daryl MontgomeryAugust 31, 2010

Copyright 2010, All Rights Reserved

The contents of this presentation are not intended as a recommendation to buy or sell any security.

Background Material for the Talk

• Moving Averages – 50-day, 200-day plus 10, 20, 30, and 40-day.

• Bollinger Bands – plus or minus 2 standard deviations from a ~20-unit moving average.

• RSI – relative strength index, 80-overbought, 20 oversold, 50 divides bearish and bullish

• MACD – moving average convergence divergence, zero divide bullish bearish, peak and bottom numbers variable

• DMI – Directional Movement Index, +DI (blue), -DI (red) and trend line.

Disconnect Between Economy and Markets

• Economy is clearly deteriorating yet markets haven’t had a big sell off yet.

• Similar picture happened in summer 2008 when Credit Crisis was accelerating.

• Market dropped sharply in the fall 2008 to catch up with reality.

• Either the market will fall apart or the economy will re-accelerate strongly.

• November election keeping market up.

Currency Summary

• U.S. $ bounced off 200-day, still in rally pattern.

• Euro still in bear pattern, hasn’t rallied to 200-day.

• Japanese Yen rally to 15-year highs against U.S. $ big story.

DXY Dollar Index: Three-Years Weekly

10, 40-Week Moving Averages, RSI, DMI, MACD

DXY Dollar Index: One-Year Daily

50, 200-Day Moving Averages, RSI, DMI, MACD

FXE Euro ETF: Three-Years Weekly

10, 40-Week Moving Averages, RSI, DMI, MACD

FXE Euro ETF: One-Year Daily

50, 200-Day Moving Averages, RSI, DMI, MACD

FXY Yen ETF: Three-Years Weekly

10, 40-Week Moving Averages, RSI, DMI, MACD

FXY Yen ETF: One-Year Daily

50, 200-Day Moving Averages, RSI, DMI, MACD

Metals

• Gold is bullish and rallying and trying to convincingly break to a new high.

• Silver still range trading and at top of range. Silver is economically sensitive.

• Mining stocks stuck have not gone to new highs and confirmed gold rally.

• Nova Gold (NG) 50-day MA trying to bounce off 200-day.

Gold ETF GLD Three-Years Weekly

10-40 Week Moving Averages and RSI, DMI, MACD

Gold ETF GLD One-Year Daily

50, 200-Day Moving Averages, RSI, DMI, MACD

Silver ETF SLV Three-Year Weekly

10, 40-Week Moving Averages, RSI, DMI, MACD

Silver ETF SLV One-Year Daily

50, 200-Day Moving Averages, RSI, MACD, DMI

Mining ETF GDX Three-Years Weekly

10, 40-Week Moving Averages and RSI, DMI, MACD

Mining ETF GDX One-Year Daily

50, 200-Day Moving Averages, RSI, DMI, MACD

NovaGold (NG) Three-Years Weekly

10, 40-Week Moving Averages and RSI, DMI, MACD

Nova Gold (NG) One-Year Daily

50, 200-Day Moving Averages, RSI, DMI, MACD

Energy and Food

• Oil has been range trading for months. Charts in bear pattern since June. Seasonal weakness starts by September.

• Natural Gas looks like it is trying to test bottom from last year. Watch it!

• Wheat has had a big rally and food commodities have turned bullish.

Oil ETF DBO Three-Years Weekly

10, 40-Week moving average, RSI, DMI, MACD

Oil ETF DBO One-Year Daily

50, 200-day moving average, RSI, DMI, MACD

Natural Gas ETF GAZ Three-Year Weekly

10, 40-Week Moving Averages, RSI, DMI, MACD

Natural Gas ETF GAZ One-Year Daily

50, 200-Day Moving Averages, RSI, MACD, DMI

Food ETF DBA Three-Years Weekly

10, 40-Week Moving Averages and RSI, DMI, MACD

Food ETF DBA One-Year Daily

50, 200-Day Moving Averages and RSI, DMI, MACD

Stocks and Bonds

• VIX has calmed down from its jump in the spring. Big rally off the bottom was extreme and unusual.

• Dow, S&P 500, Nasdaq and Russell 2000 had bear sell signals in July. DJT Monday.

• Interest rates have had sharp sell off globally. Looks like a liquidity trap.

Volatility Index VIX: Three-Years Weekly

10, 40-Week Moving Averages and RSI, DMI, MACD

Volatility Index VIX: One-Year Daily

50, 200-Day Moving Averages, RSI, DMI, MACD

DJIA Three-Years Weekly

10, 40-Week Moving Averages and RSI, DMI, MACD

DJIA One-Year Daily

50, 200-Day Moving Averages and RSI, DMI, MACD

DJT Three-Years Weekly

10, 40-Week Moving Averages and RSI, DMI, MACD

DJT One-Year Daily

50, 200-Day Moving Averages and RSI, DMI, MACD

S&P 500 Three-Years Weekly

10, 40-Week Moving Average and RSI, DMI, MACD

S&P 500 One-Year Daily

50, 200-Day Moving Average and RSI, DMI, MACD

Nasdaq Three-Years Weekly

10, 40-Week Moving Averages, RSI, DMI, MACD

Nasdaq One-Year Daily

50, 200-Day Moving Averages, RSI, DMI, MACD

Russell 2000 Three-Years Weekly

10, 40-Week Moving Averages and RSI, DMI, MACD

Russell 2000 One-Year Daily

50, 200-Day Moving Averages and RSI, DMI, MACD

30-Year Bond Interest Rate Three-Years Weekly

10, 40-Week Moving Averages, RSI, DMI, MACD

30-Year Bond Interest Rate One-Year Daily

50, 200-Day Moving Averages, RSI, DMI, MACD

10-Year Bond Interest Rate Three-Years Weekly

10, 40-Week Moving Averages, RSI, DMI, MACD

10-Year Bond Interest Rate One-Year Daily

50, 200-Day Moving Averages, RSI, DMI, MACD