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October 9, 2009

MARKET OVERVIEW

Thursday 4 day 4 day

Index started week ytd
close change change %
DJIA 9488.73 9786.87 298.14 3.14% 11.57%
NASDAQ 2056.52 2123.93 67.41 3.28% 34.52%
RUSSELL 2000 582.23 607.75 25.52 4.38% 21.67%
S&P 500 1026.87 1065.48 38.61 3.62% 17.99%

Summary of VE Stock Universe

Stocks Undervalued 53.99%
Stocks Overvalued 46.01%
Stocks Undervalued by 20% 27.64%
Stocks Overvalued by 20% 24.52%

SECTOR OVERVIEW

Sector Change MTD YTD Valuation Last 12- P/E Ratio

MReturn
Basic Industries 1.96% 6.83% 69.71% 16.51% overvalued 40.38% 25.32
Capital Goods 1.60% 4.47% 37.91% 12.11% overvalued 17.23% 20.73
Consumer Durables 2.20% 3.63% 62.42% 2.09% overvalued 12.95% 26.92
Consumer Non-Durables 1.31% 3.76% 47.48% 7.36% overvalued 24.41% 21.76
Consumer Services 1.17% 4.26% 62.65% 5.44% overvalued 24.90% 22.25
Energy 2.61% 6.78% 42.79% 16.61% overvalued 19.06% 19.99
Finance 0.35% 2.29% 25.45% 1.98% overvalued 11.28% 19.36
Health Care -0.11% 2.45% 59.24% 8.83% undervalued 31.06% 19.75
Public Utilities 0.68% 3.28% 20.67% 4.03% undervalued 25.20% 15.79
Technology 0.49% 2.91% 68.07% 4.00% undervalued 33.34% 26.12
Transportation 1.36% 4.32% 26.67% 7.64% overvalued 17.06% 17.08
 Sector Talk
--Top 1-Month Forecast Return Buys
At ValuEngine, we use two proprietary quantitative models--valuation and forecast. In
"normal" times, our valuation model strategy--which is based on valuations and does not
include sector diversity for its picks--provides the highest returns. In times of unsettled
markets with no clear rhyme or reason, it becomes difficult to rely on valuations as a primary-
selection criteria. Thus, since September 2007 we have found that our Forecast model
portfolio strategies--which are based on forecast figures and utilize sector diversity--have
tended to provide the best returns.
So, for today's bulletin we ran a basic screen with our ValuEngine Institutional software
(VEI) package and asked it to provide a basket of stocks meeting the following criteria:
• Buy-Rated "4-Engine" or Higher
• Average Daily Volume > 100,000 Shares
• Forecast 1-Month Return Rank > 90
This query returned a basket of 138 tickers from our universe of more than 4000 US and
foreign stocks that trade on US exchanges. Below, we provide the top-twenty selections
ranked in order of 1-Month Forecast Return. As you can see, the list has a an over-
representation of Energy Sector (Oil) tickers but is otherwise fairly diverse.

Last 12- Forecast Forecast 1-Yr

Mkt Valuation P/E
Ticker Name M 1-Month 1-Yr Chance of Industry
Price (%) Ratio
Retn(%) Retn(%)* Retn(%)* Gain(%)
KOG KODIAK OIL & GAS CORP 2.54 -22.89 217.5 15.9 8.41 52.57 N/A OIL

OFFICE
SR STANDARD REGISTER CO 7.89 -30.91 23.09 11.84 108.18 97.43 30.35 PRODUCTS

MELCO CROWN
MPEL 7.15 -16.17 124.84 10.61 49.55 73.14 N/A LEISURE
ENTERTAINMENT LTD
MONEYGRAM FINANCIAL
MGI 3.15 -25.87 156.1 9.28 171.86 97.85 26.25 SERVICES
INTERNATIONAL INC
GAYLORD ENTERTAINMENT
GET 19.25 -43.73 -6.37 8.05 21.89 61.43 46.5 LEISURE
CO.
IMMUNOMEDICS
IMMU 4.67 -50.51 264.84 6.39 28.39 63.17 11.17 BIOTECH
INCORPORATED
ELECTRONIC
FNSR FINISAR CORPORATION 1.23 -75 4.24 2.87 8.57 53.7 6.25 SYST/DEVICES

AMERICAN GREETINGS
AM 22.87 -22.52 99.74 2.79 13.76 58.54 12.8 COMMUNICAT
CORP
EMPRESA NACIONAL DE ELECTRICAL
EOC 46.47 -35.11 41.07 2.58 16.33 70.06 7.85
ELECTRICIDAD UTILITIES

NATIONAL OILWELL VARCO

NOV 45.75 274.45 34.4 2.49 14.54 60.54 10.73 OIL
INC
FOOD
CPO CORN PRODUCTS INTL INC 28.14 -75 33.11 2.09 5.19 54.65 14.9 PROCESSORS

GFA GAFISA SA 32.14 0.36 104.97 2.08 34.43 65.23 34.93 INVESTMENTS
Ticker Name Mkt Valuation Last 12- Forecast Forecast 1-Yr P/E Industry
Price (%) M 1-Month 1-Yr Chance of Ratio
Retn(%) Retn(%)* Retn(%)* Gain(%)
FOOD
DLM DEL MONTE FOODS CO 11.55 -27.09 84.21 2.04 6.45 58.76 10.17 PROCESSORS

CHINA SECURITY & UNDESIGNATED

CSR 6.54 -48.85 -37.3 1.88 11.98 56.09 3.72
SURVEILLANCE TE TECHNOLOGY

PRECIOUS
SWC STILLWATER MINING CO. 7.78 -9.38 83.06 1.54 8.59 53.77 N/A METALS

CEO CNOOC LTD 144.54 20.27 75.18 1.44 6.88 55.99 13 OIL

XOM EXXON MOBIL CORP 69.05 0.97 -8.25 1.31 10.84 67.87 15.94 OIL

COLUMBIA SPORTSWEAR
COLM 41.21 -57.37 20.46 1.29 6.86 58.81 24.37 CLOTHING
COMPANY
CVX CHEVRON CORP 71.45 11.88 1.46 1.26 9 62.8 14 OIL

NIPPON TELEGRAPH AND TELEPHONE

NTT 22.08 -14.63 -0.81 1.21 20.63 78.36 6.02
TELEPHONE C UTILITIES

*Some stocks display extreme forecast figures due to the peculiarities of the current markets. Relative to other stocks, these tickers look that
good because they have reported huge increases in earnings and/or share price on a percentage basis in a relatively short timeframe. If a
company recently had a very large drop in share price and earnings and has had a strong rebound in the short term, it can skew the figures
and make them appear as though there is a data error. This is typically not the case but is a reflection of the tumultuous nature of the
markets over the past 24 months.

We recently re-balanced our ValuEngine Forecast 22 Market Neutral Strategy Newsletter.

Our portfolio continues to beat the S&P 500 benchmark handily on its long side. For the
latest re-balance period, our long side returned more than 9% vs the S&P's 5.5%. This
newsletter is based on our Forecast Model Benchmark Portfolio strategy.

For a market neutral strategy with significant volatility-reducing benefits, our newsletter
continues to perform remarkably well. In fact, this product has been so successful it was
recently selected by Forbes.com for inclusion into its stable of newsletter
products. Forbes.com believes that the VE Forecast 22 MNS Portfolio offers a sophisticated
newsletter for investors seeking access to hedge fund-type strategies without hefty
performance fees and onerous qualified investor requirements. Since inception in December
2008, our portfolio is up 18.31%.

For more on the VE Forecast 22 Market Neutral Strategy Newsletter Portfolio, Click
the Logo Below
What's HOT
--Checking in with TK Ng
Beating the Markets with Megatrends and ETFs--Continued
Former VE Analyst and Quant Guru T.K. Ng published the following on his Blog "Random Thoughts"
recently. It has been edited and re-published for our Weekly Newsletter. The original version can be
found HERE.

In the last few posts, we discovered that we could cut out the market's daily noise and ride
on megatrends with ETFs. For this exercise, we postulated the following "megatrend"-- the
relative decline of the US economy versus the rest of the world, the gradual erosion in
dominance of the USD, and the risk of inflation because of the flood of debt issued by Central
Banks to 'save' the world economic system.
In this post, we examine this megatrend investing idea further by analyzing the year- to- date
(YTD) performance of the world's financial markets, some key asset classes-- stocks, bonds,
commodities, currency, real estate, and some specialized ETFs.
Our first chart uses some major ETFs to track the performance of some of the world's major
stock indices*:
*NOTE: Click on each chart to see a higher-resolution/easier to read version

Courtesy Google Finance

SPY: SPDR ETF of the S&P500, ETF: the ETF of the MSCI EAFE Index (Europe, Australia, Far East)--or effectively the rest of the world
stock exchanges minus USA and Japan, FXI: ETF representing the Xinhua 25 China big caps, AAXJ: ETF of stocks markets of All Asia Ex-
Japan,

All the ETFs above exhibit a broad correlation with each other, but the degree of correlation
with the US has been decreasing since March 2009. This provides support for our de-
coupling thesis. We also see from the above table that All Asia Ex-Japan is outperforming
China alone--All Asia is less volatile, and includes China, India, Taiwan, Korea, Singapore,
Malaysia, Indonesia, and Thailand. Although all of the other Asian nations are a significant
beneficiary of China's growth, each of these countries also have their own growth drivers,
both domestically and trading amongst themselves.
The chart below tracks the performance of different asset classes via some popular ETFs:

Courtesy Google Finance

SPY: SPDR SP500 (Stocks), GSG: Goldman Sachs Commodities Index (Commodities), IEF: iShares Barclays 7-10 year Treasuries
(Bonds), UUP: PowerShares DB US Dollar Bullish (Currencies), RWX: SPDR DJ International Real Estate

This time, the correlation is of lesser degree. Especially for US$(UUP) and Bonds (IEF).
These two classes are also the poorest performers YTD, and their lack of volatility makes
them unsuitable for shorter-term investment objectives. Towards the end of September, we
see Commodities(GSG) making a sharper fall than Stocks (SPY)--a potential sign of loss of
confidence in the sustainability of the recovery, and perhaps taking into account that China's
appetite for natural resources has been partially satiated. If you trace back to the lows of
March 2009, you can see that the biggest gainer has been Real Estate (RWX)

We have seen how ETFs can be created to represent and replicate any asset class. And
now, we are about to learn that ETFs can be more than an general market/sector/asset class
index. There are some ETF's which are 'intelligent' ETFs, that is, their underlying assets are
'not dumb' components of an index, but pre-screened, differently weighted and created to
achieve a defined objective.*
* For example, PowerShares FTSE RAFI Asia Pacific ex-Japan Portfolio (ticker symbol:PAF) is based on the FTSE RAFI Asia Pacific ex-
Japan Index . The Index is designed to track the performance of the largest equities of companies domiciled in the Asia Pacific region
(excluding Japan), Another example is DOO: WisdomTree International Dividend Top 100 Fund is a non-diversified fund. It seeks investment
results that closely correspond to the price and yield performance, before fees and expenses, of the WisdomTree International Dividend Top
100 Index.
Let's take a look at some of the more specialized ETFs:

Courtesy Google Finance

PAF: PowerShares FTSE RAFI Asia Pacific x-Jap, DOO: WisdomTree International Dvd. Top 100 Fd, GLD: SPDR Gold Trust , DBO:
PowerShares DB Oil Fund , JNK: SPDR Barclays, Capital High Yield (Junk Bonds.)

We are especially interested in the performance of PAF and DOO versus the rest. These
pre-screened 'intelligent' ETFs represent the new breed of ETFs that attempt to go beyond
dumb replication of a general market/sector or asset class index. I am especially impressed
by the performance of PAF. The only problem is very low liquidity niche ETFs often result in
very wide spreads of Buy and Sell. Still, if a small portion of your ETF portfolio is devoted to
niche ETFs [say 10%] with a promising theme, it could do a lot to boost your overall bottom
line.

Suttmeier Says
--Commentary and Analysis from Chief Market Strategist Richard Suttmeier

If you have any comments or questions, send them to Rsuttmeier@Gmail.com

Treasuries
The 30-Year was just below 4.00% at auction time on Thursday, but a
weak auction and follow through selling had this yield testing 4.15% this
morning, up 25 basis points from the low yield of last Friday. The $12
billion 30-Year Bond auction tailed, so supply finally trumped
demand.
The daily chart shows that the decline in yield failed at the 200-day simple moving average at
3.92 following the weak employment data last Friday. A close today above my semiannual
pivot at 4.098 indicates risk to monthly support at 4.513.
A higher bond yield is a drag on equity valuations, which should sustain the
September 23rd equity highs.

Commodities
Comex gold sustains its breakout, but Thursday’s high of $1062.7 is now a resistance. My
semiannual pivot is now support at $991.7 with quarterly and semiannual resistances at
$1094 to $1102. Gold is becoming overbought on its weekly chart.
Comex Copper remains below its 200-week simple moving average at 292.27 with MOJO
declining below the overbought reading of 8.0. Strength has stalled since mid-August.
Nymex Crude oil has been below its 200-week simple moving average at 75.08 since mid-
June with MOJO declining with a reading at 6.8. My annual pivots remain magnets at $68.81
and $66.51.
The performance of Comex copper and Nymex crude oil still casts doubt on the
"global growth story."

The Dollar Index is well above its longer term up trend that goes back to April / July
2008.
The dollar index is ending the week with some stabilization. The weekly chart shows the
dollar oversold, but a bottom won’t be confirmed until there’s a weekly close above its five-
week modified moving average at 77.51. Each week the five-week MMA will be declining
making the dollar buy signal more likely as long as any additional weakness holds the longer
term up trend with support rising between 75 and 74.

Stocks still strong, but still below September 23rd lows.

The Dow held my annual pivot at 9,750, but stayed shy of its September 23rd high at 9,918.
My monthly support is 9,306 with annual resistance at 10,012. The Dow has become within
200 points of 10K since mid-September, and as this scenario moves sideways there’s a
negative divergence in MOJO as the overbought reading declines to 8.9 from 9.2.
The NASDAQ entered its September 23rd trading range of 2130.34 to 2167.70 on Thursday,
but closed below that range. Its overbought MOJO reading slipped to 8.8 from 9.2. The
NASDAQ shows monthly resistance at 2183 and the 200-week simple moving average at
2215. The five-week modified moving average is support at 2052.
For the 10-Year note the weekly and monthly supports are 3.457, 3.677 daily resistance at
3.194, and the 200-day simple moving average at 3.125, last tested on May 21st. Risk
aversion trumps increasing supply, and the flight to quality is a warning for stocks.
--VE Now Available on Bloomberg Terminal
ValuEngine has long been a provider of independent research to both retail and institutional
clients. In addition to our retail website and software package, we have contracts with major
banks and investment advisors such as UBS, Deutsche Bank, Wachovia Securities, and
others.
In an effort to further our reach into the professional finance space, we have now partnered
with Bloomberg LP and have made our proprietary model data, stock reports, and premium
newsletter content available for download via the Bloomberg terminal. This effort will bring
our rating, valuation, and forecast data on over over 5000 US, Canadian, and Japanese
stocks to an even larger audience of investment professionals.
To access ValuEngine on any Bloomberg terminal, just hit VLUE <GO> or contact
ValuEngine at Support@ValuEngine.com or (800) 381-5576

--Canadian Stock Reports Now Live on Scotia iTRADE

ValuEngine has added the Canadian stock market to its coverage universe and entered into
a partnership with Canada’s Scotia iTRADE. ValuEngine will provide Scotia iTRADE’s online
stock-trading service with access to individual stock reports for more than 500 Canadian
equities and 4,000 US equities. The addition of Canadian equities coverage further expands
ValuEngine's stock universe to @ 4,500 individual stocks trading on US and Canadian
markets and is part of ValuEngine's effort to be the world leader in total market coverage.
Scotia iTRADE is owned by Scotiabank, one of North America's premier financial institutions
and Canada's most international bank. In March of 2009, Scotiabank completed a rebranding
to Scotia iTRADE from E*TRADE Canada, which the Bank purchased in 2008. With close to
69,000 employees, Scotiabank Group and its affiliates serve approximately 12.8 million
customers in some 50 countries around the world. Scotiabank offers a diverse range of
products and services including personal, commercial, corporate and investment banking.
ValuEngine welcomes our new Canadian clients!
Bienvenue a ValuEngine!