MIB Update May 10, 2009

UPDATE of LONG-TERM TECHNICAL VIEW – 1900 to 2009

Our interim update of February 17/09 had featured the monthly chart of DJIA dated back to 1900. Two technical price
indicators, the 14-month RSI and the %Year/Year change were used to demonstrate the severity of the meltdown the
market experienced since it topped out in October 2007. The update of this chart is included on page 2.

Included in the February 17th update was also a table that listed the 6-month, 12-month and 24-month changes in the
DJIA following the month the RSI initially dropped below the deeply over-sold limit of 30. At that time I noted that, with
the exception of 1903 and 1931, the DJIA was between 15.3% and 31.7% higher six month after the RSI initially
declined below 30. The updated table now includes the six month change following the last occurrence of RSI declining
below 30, at the end of October 2008. On April 30/09, closing at 8168.10, the DJIA was still down by 12.4% from the
time the RSI “generated its below 30 buy signal”. In other words, as impressive as the rally from March’09 lows has
been, it even failed to match the previous two weakest rebounds following the same RSI signal criteria.

Buy Signals from 14-months RSI of DJIA - 1900 to 2008

Month End of
Initial RSI RSI DJI Month of DJI DJI 6 %Change DJI 12 %Change DJI 24 %Change
Decline below Monthly Monthly Subsequent Subsequent Months in DJI in 6 Months in DJI in 12 Months in DJI in 24
30 Close Close Market Low Market Low Later Months Later Months Later Months
Jul-03 28.5 50.76 Nov-03 42.15 50.50 -0.5% 53.14 4.7% 81.70 61.0%
Oct-07 29.5 58.41 Nov-07 53.00 69.90 19.7% 82.50 41.2% 100.50 72.1%
Dec-14 24.7 54.60 Dec-14 53.20 71.90 31.7% 99.20 81.7% 106.80 95.6%
Sep-31 29.8 96.60 Jul-32 41.20 88.80 -8.1% 79.90 -17.3% 105.70 9.4%
Mar-38 29.9 98.95 Apr-42 98.95 114.07 15.3% 135.48 36.9% 136.23 37.7%
Aug-74 27.2 678.60 Oct-74 573.20 796.90 17.4% 846.1 24.7% 1026.30 51.2%
Oct-08 26.9 9325.01 Mar-09 6469.90 8168.10 -12.4%
Average Change in DJI following the RSI decline below 30 9.0% 28.7% 54.5%

50 RSI 14 50
While the 14-month RSI rebounded just a notch above
its over-sold zone, the 14-day version of RSI indicates
100.0% an over-bought level comparable to the levels seen at
1500 200-day SMA 1500
the all-time top of October’07 and at the intermediate
61.8% top of May’08. While this does not mean the market is
50.0% about to hit the skids again, the reading is one of the
1000 38.2% 1000 numerous technical signs of a short-term over-
23.6% extended market. I should also add that there are a lot
S&P 500 Daily of investors who watch for the resistance presumably
0.0%
related to the level of 200-day moving average,
presently at 954.60 and still trending down.
NYSE A/D Line 5
0
0
-5 However, in a view of the strong market breadth and
-5
-10 -10
volume (the NYSE A/D and Volume Lines), and still
-15
-15 relatively subdued sentiment indicators, any near term
-20
-20 NYSE Volume Line -25
correction is likely to be met by new buyers worried of
2007 2008 2009 missing the bullish wagon. Furthermore, in terms of
the Fibonacci retracement, this rally could continue
until it retraces 38.2% of the October 2007-March 2009 decline. The retracement to 1022 on the S&P 500 also
coincides with the resistance level that halted the intermediate bear market rallies in October’08 and November’08.
 MIB Update May 10, 2009
90
85
80
75
70
65
60
55
50
RSI 14 45
40
35
30
26.1 29.5 24.7 25 29.9 Extremely Oversold<30 18.4 25
23.2 20
15

%Y ear/Y ear Change 100

50

-46.9% Extremely Oversold<-35% -35.8% -42.4% -50

-38.6% -71.5%

20000
RSI Definition: http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators
? 15000

10000

DJ I A - Monthly 1900 - May 8/09 5000

(semi-log scale)

16 Y ears

18 Y ears

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010