Chartered

Fortrend Securities - Wealth Management

Joel Hewish is an Investment/Financial Adviser at Fortrend Securities. The opinions expressed are his
own.

Edition No. 10
7th July 2010

Bottom Line: Most financial markets have either completed a topping formation, are completing a topping
formation or are already well entrenched in the next phase of their downtrend. The time for action has well
and truly arrived. Most major markets are now set for significant declines! The next leg down in the larger
degree bear market has now been confirmed. If you have not moved to manage these risks and take
advantage of this opportunity, you need to ask yourself WHY NOT, and begin to do something about it!!

FREE UPCOMING SEMINAR – “Smart Investment & Financial Strategies for the new financial year.”

Wednesday 21 July 2010 at 12.30pm, Fortrend Securities Level 41, 55 Collins Street, Melbourne VIC.

You are invited to attend a free seminar to be conducted by Fortrend Securities Investment/Financial
Adviser Joel Hewish. Topics to be discussed will be:

• Fundamental and Technical overview of the financial markets.

• How you can manage risk and generate returns in the current environment.
• How he is positioning client’s portfolios.
• Recent changes to superannuation and strategies to take advantage of the recent changes.

Places are limited. Please contact Fortrend Securities on 03 9650 8400 or email jhewish@fortrend.com.au
to secure your seat.
Chart 1 – US S&P 500

• The special edition of Chartered released last Thursday highlighted that the S&P 500 has now
completed its head and shoulders pattern and in the process confirmed that the next leg of the
larger degree downtrend has now begun.
• If you are long this market, you face the very real prospect of significant declines in your portfolio’s
value.
• On the flip side, this market does not have to be a painful experience. In fact it could provide one
of the greatest opportunities to make money we have ever seen if you are positioned correctly.
• Given the S&P 500 has now broken below the neckline, anecdotal evidence and experience would
suggest that there is now a greater than 80% probability that the market will decline to at least 860
on the S&P 500.
• It should be noted however, that my base case outlook suggests prices are likely to decline
significantly below this level over the coming 18 – 24 months with the nadir likely between 2011
and 2012.
• These new lows appear likely to be well below the lows of March 2009.
Chart 2 – US S&P 500 – A closer look

• Volume continues to increase on the down moves while it declines on the up moves.
• This is not a healthy market.

Chart 3 – US Dow Jones Industrial Average

• The Dow Jones Industrial Average has now confirmed the head and shoulders pattern of the S&P
500 by completing its own head and shoulders pattern.
• It too is seeing a decline in volume as prices increase and an increase in volume as prices decrease.
• Technically there is nothing supporting the case for materially higher prices in either the S&P 500
or ‘Down’ Jones Industrial Average charts in the short term.
Chart 4 – Australian S&P ASX 200

• The S&P ASX 200, according to our labelling, has now commenced Wave 3 of Wave 1 down. Price
declines are almost certain to continue.
• Almost all financial markets are telling us that while material price declines have already occurred,
they are also telling us that it is just getting started.
• The price patterns and setups which are occurring display a high degree of predictability.
• It is highly unlikely that the same degree of certainty surrounding the overall direction of financial
markets will ever be this convincing again in my lifetime.

Chart 5 – Australian S&P ASX 200

• The declining volume over the past week suggests that a short term bounce could be on the cards.
• If it occurs, this will provide probably one of the last opportunities to be able to sell at a reasonable
price.
• But it could be that yesterday’s 1.28% bounce was the bounce we were expecting.
 • On the flip side it could also provide a good opportunity to place short trades, that is, if it occurs.
• Given momentum and the trend direction, any bounce is likely to last for days at most.

Chart 6 – London’s FTSE 100 Index

• London’s FTSE 100 index has completed a head and shoulders pattern of its own with a break
below the neckline as displayed above.
Chart 7 – Germany’s DAX Index

• Germany’s DAX index has recently etched out a double top formation.
• We can see classic signs of weakness in this chart with both tops displaying an imminent reversal
sign with the display of a Volume Spread Analysis, No Demand Up Bar.
• No demand up bars, when they occur at the top of a rising market, are used by professionals to
confirm buyers are no longer interested in buying.
• Professionals mark prices up, often into new highs around levels of previous resistance, the spread
of the bar is generally narrow, volume is lower than the past several bars and the next bar closing
down, confirms the weakness. That is buyers are no longer interested in chasing higher prices.
• For traders this is a great place to put a short trade, for investors a great place to hedge your
portfolio or sell.
Chart 8 – Japan’s Nikkei 225 Index

• Japan’s Nikkei 225 has also completed a head and shoulders pattern.

Chart 9 – AUD/USD Exchange Rate

• The AUD/USD cross rate has etched out an expanding diagonal.

• It also appears to be making impulse waves to the downside.
• The US dollar is likely to provide one of a small few opportunities in financial markets which you
can benefit from an appreciating asset value.
Chart 10 – Spot Gold

• Edition 8 of Chartered showed an analysis of the gold market. The overwhelming evidence
suggested that gold was due for a decline which we indicated was likely to occur within days.
• We got that decline.
• The break through the trend line outside of the ending diagonal is a very bearish signal.
• There is still much to occur in the gold market before we can confidently say that the recent price
declines are the beginning of the larger declines which we expect, but my money is on it, literally!!

Last night saw a strong bounce in European stock indices. Don’t be fooled, the larger degree trend is well
and truly now in play and it is down. Most financial markets are now well entrenched within the initial
stages of a larger degree downtrend and the momentum is gathering pace to the downside.

Markets are fragile and are now susceptible to unforseen news events impacting greatly. You should be
aware that negative news events such as bank instability, corporate financial stress, new sovereign debt
stress and even geopolitical tensions could weigh heavily on the performance of financial markets and
could have a sudden impact.

This can be a very profitable and pain free time in the markets or a very painful experience. It’s your choice
and you need to take the first step.

The greatest uncertainty provides the greatest opportunity.

As such we strongly encourage you to contact us to discuss your portfolio, how it is positioned, how you
can manage the risks and prosper during these uncertain economic times.

We hope you have enjoyed this edition of Chartered and found the content of interest. If you would like
me to analyse a particular market or chart from a technical point of view, please email your requests to
jhewish@fortrend.com.au and we will endeavour to look at any requests in upcoming editions.

In the meantime, if you would like to arrange a time to discuss your portfolio and some of the strategies
which can be used to help you navigate the prevailing market conditions and profit from this opportunity,
please do not hesitate to contact me.
Until next time, have a great fortnight!!!

JOEL HEWISH B.Bus (Bank & Fin), GDipAppFin, GCertFinPlan, SA Fin

Investment / Financial Adviser
FORTREND SECURITIES - WEALTH MANAGEMENT
Australian Financial Services Licence No. 247261

Chartered is a fortnightly publication from Fortrend Securities – Wealth Management and is provided for the
purpose of general information only. The views and opinions expressed in the publication are those of Joel
Hewish and do not necessarily match those views of Fortrend Securities – International Advisory. This
publication is provided as general information only and does not take into account your personal
circumstances, aims and objectives and should not be considered personal advice. You should first consult
a licensed Investment or Financial Adviser before acting on any of the information provided in this
publication.