In association with

Market Update 6th January 2011

The changing balance between FTSE and

DAX

The Macro Trader’s view:

From early September into mid-December the German DAX enjoyed a strong bull run
supported by a strong economic recovery, which helped pan-Euro zone economic data mask
the plight of many other Euro zone economies that were at best enjoying a modest recovery.
Or, more typically, were gripped by the Sovereign debt crisis that has forced Greece and
Ireland to seek a rescue. And to shelter under promises made by China to keep buying their
Sovereign debt.

The FTSE has rallied too, but the move has been less dynamic. Even though UK Q3 GDP
grew by 0.7%, following an even stronger Q2 GDP report of 1.1% or 4.4% annualised, which is
more than respectable. But unlike the DAX, the FTSE suffered a steep correction throughout
November.

Yet for all that, over recent days the FTSE has pushed higher, just when UK data has begun to
support the fears of many analysts that the UK economy could struggle in 2011. And now, the
DAX is now showing signs of fatigue if not vulnerability even though German data remains
almost uniformly positive.

For answers to this growing divergence from previous trends we must look beyond the UK and
German economies. In the case of the DAX, the Euro zone economy is under close scrutiny as
the Sovereign debt crisis continues to rumble on. The Germans have turned down requests to
allow the issuance of Pan-Euro zone debt in place of national Euro denominated debt as a

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This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
means of solving the crisis. Moreover they continue to push for hasher terms to be applied to
any new bailout requests from failing Euro zone member states.

The story now on many lips in the markets is: can the Euro zone survive at all or in a reduced
state, with or without Germany. Germany seems to think the way forward for the Euro zone is
for all member states to adopt the German export-led, suppressed domestic demand economic
model.

This model may work for Germany since it already has established world-class export
manufacturing industries that fuel growth and allow her to run large trade and current account
surpluses. But what do the majority of the peripheral states have to offer that would allow them
to adopt this economic model? We think very little and the result would be years of deflation
and austerity.

But what of the FTSE? The UK is implementing one of the most severe austerity programs
ever, with public spending slashed and VAT hiked. So severe is this program that there are
real fears the economy will not be able to cope, but this environment isn’t retarding the FTSE.
Why?

Over recent weeks the US economy has begun to publish strengthening data, and many now
judge the US economy is about to emerge from the long period of economic under
performance that forced the Fed to start a QE2 policy and Obama to agree to an extension of
the Bush tax cuts.

The result could prove dramatic. If the US economy can join the Chinese and Indian
economies and start to experience strong growth, demand for raw materials and energy will
move up to a level never before witnessed. That is because this would be the first economic
cycle where the US has two new large nearly-emerged economic powerhouses competing for
market share.

Over many years has evolved from being a parochial stock exchange to an international
market place where many foreign companies seek either a primary or secondary listing. This is
the advantage the FTSE has over the DAX. Consequently, as demand grows internationally for

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
energy, raw materials and commodities of all types, the companies that supply them will see
their equity in demand and this will help underpin the strength of the FTSE.

This year then could well see the FTSE outperform the DAX even though the UK economy
may underperform her German counterpart.

The Technical Trader’s view:

FTSE 100 Index LIFFE Continuous 11500

11000
10500 FTSE MONTHLY CHART
10000
9500
261.8%
9000 The FTSE is very well set-
8500
8000
up.
6802 High
7500

7000 A large Head and

5796 HIgh 5892.50 High
6500 Shoulders pattern has
161.8% 61.8%
6000 completed and looks to be
5500 driving the market better –
38.2%
5000 as far as 8500 or so.
4500
In the short and medium-
4000 term too, the price action is
compelling for the bulls -
3500
see how the market has
overcome both the Prior
3000
Highs at 5796 and 5893. (
A M J J A S O N D 2008 A M J J A S O N D 2009 A M J J A S O N D 2010 A M J J A S O N D 2011 and a Fibonacci
resistance) Both these
Highs will be powerfully
supportive on any pull-
backs

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
DAX Index Continuous
8500
DAX WEEKLY CHART
8000 In many respects the DAX
Low 7220.50 Resistance
7500 has been ahead of the 2009
rally in the FTSE, having
7000
overcome the same 61.8%
61.8% 6500 retracement resistance
6347,59,91
weeks earlier, but the clear
6000
over head price action
5500
resistance and resistance
from the Prior low at
5000 7220.50 is a warning to the
Dax bulls.
4500 Also, there is no equivalent
underpinning to the H&S
reversal pattern in the
4000
FTSE.
Comparing the short-term
3500 price action between the
markets is even more
20000
x10 intriguing.
M J J A S O N D 2008 A M J J A S O N D 2009 A M J J A S O N D 2010 A M J J A S O N D 2011 M

DAX Index Mar 11

7400
DAX DAILY CHART
Prior Low resistance 7220.50 7350
(August 2007) 7300
7250
7200
The sideways price action
High 7105.50 7150
7100
throughout December is
7050 clear and notable.
6919.50 High 7000
6950
6900

6700 High
6850 The drift has taken the
6800
6750 market back to the support
6700
6650 from the Prior High in Late
6600
6550 November ….
6500
Prior High support 6409
6450
6400
6350
Prior High support 6360
6300
6250
6200
6150
6100
6050
6000
5950
5900
5850
5800
5750

150000
100000
50000

26 2 9 16 23 30 6 13 20 27 4 11 18 25 1 8 15 22 29 6 13 20 27 3 10 17 24
August September October November December 2011

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
FTSE 100 Index Mar 11 FTSE DAILY CHART
6050
5983.50 High
6000
But the FTSE is a great deal
5950

5846 High 5872 High higher than it was in early

5900
December, bouncing from
5796.50 High from April 2010 5850
5810
the support of Prior Highs in
5800
the manner of a well-
5750
constructed bull trend.
Prior High 5653 5700

5650

5600

5550

5500

5450

5482 Low
5400

5350

200000

150000

100000

50000

26 2 9 16 23 30 6 13 20 27 4 11 18 25 1 8 15 22 29 6 13 20 27 3 10 17 24
August September October November December 2011

Mark Sturdy
John Lewis
Seven Days Ahead

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.