Our focus over the last two weeks has been the persistent weakness of economic numbers and

the markets conclusion that

a rebound in the second half may not be coming. While the media has been squarely focused on the debt ceiling debate
our commentary has been more concerned over economic growth and employment. As this commentary is written the
congress is coming together to make a deal on the debt ceiling. Regardless of the benefit of this deal stocks have now
reached the bottom of their respective channels. Stocks are ready to bounce not because of optimism but rather because
the short term pessimism is excessive. The negative overhang is in place and now is a time for equities to bounce in the
short term. The analysis is for educational purposes only and not a solicitation to buy or sell any security at any time. The
comments are made in the context of ETF position trading and Forex position trading. Visit my technical analysis blog for
more information at http://www.sealionllc.com
Economic concerns trump debt deal
Chart #1SPY, SPDR S&P 500
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This chart book is for educational purposes only and not a solicitation to buy or sell any security.
08/01/2011 Volume 1, Issue 16
Sea Lion Capital Management LLC
Chart Book
Chart Notes
3. Possible lower high with shooting star
candle
4. Prices are now above the median line of
the bullish channel and have found short
-term resistance.
5. Prices rally through resistance and out
of the channel. A consolidation will be
required before the next move up.
6. No consolidation yet as prices are rising
along channel resistance.
7. Prices retreat to prior resistance now
support for consolidation
8. Prices testing lower channel support and
need to reverse quickly to maintain the
rally
9. Prices could be back testing setting up a
move lower but more likely the channel
needs to be redrawn or this is a
temporary noisy overshoot.
10. Prices have no violated the channel
support and are trying a back test. The
back looks weak in nature.
11. Prices have broken through the channel
and head lower gyrating around their
median line.
12. Prices have exceeded their channel but
consolidated and stopped under prior
channel support. This bull trap will
reverse shortly.
13. Prices under old support line from prior
channel and at resistance of redrawn
channel.
14. With resistance tested and in place
prices have moved lower and begin their
move to the bottom of the channel.
15. Prices move aggressively half way across
the channel and are driving toward
channel bottom.
16. Prices reached channel bottom and have
bounced. The hammer bottom should
hold and prices should rise from here.
17. Prices are gyrating sideways and
forming a base from which they can
bounce. The bounce may be short
lived.
Page 2
Sea Lion Capital Management LLC
Prices have bounced with a hammer bottom and moved higher. This will serve as the near term
low while the debt ceiling legislation comes together. Once the deal is done we anticipate a rever-
sal but will be watching price action to determine when.
Chart Notes:
3. Possible change in trend needs
confirmation with a new high.
4. Prices are now in the upper half of
the bullish channel and have more
room to run.
5. Prices have continued up and no
extend beyond the channel. Prices
will need to consolidate before the
next leg higher.
6. Prices rising along resistance.
7. A return to former resistance now
turned support. A mild consolida-
tion has begun.
8. Testing the median line. Price
often finds support here.
9. Prices found support at the median
line and are poised to move higher.
10. Prices are holding their channel
support and a bounce may occur.
11. Prices have broken channel support
and are falling around the median
line.
12. Price have stopped at channel
resistance but need to reverse to
maintain the downtrend channel.
13. Prices at the apex of old support
now resistance and the current
channel resistance. Prices will
reverse soon.
14. Prices failed to hold their afternoon
rally and are now moving lower.
15. Prices gapped lower and may now
challenge the lower portion of the
channel.
16. Having found the bottom of the
channel and bounced with a
hammer prices should rise from
here in the near term.
17. Prices are bouncing around support
and forming the base necessary to
move higher.
Chart #2IWM, iShares Russell 2000
Page 3
Volume 1, Issue 16
Prices broke lower today with a rise in Euro zone concerns and optimism over the US debt ceiling.
Chart# 3EUR/USD, Eurodollar
Chart Notes:
1. Markets bullish trend broken
with violation of prior swing low.
2. Markets bounces and reverses
but puts in a lower high.
3. Market retests $1.40 low and if it
holds a sideways channel is in
place.
4. Prices reverse on support in an
evening star reversal in a show
of strength and the markets
wiliness to be open to risk.
5. Prices have failed to advance the
reversal and are now below the
reversal high. A retest of lower
channel support looks likely.
6. Prices made a dead-cat
bounce and will head lower to
range support.
7. Prices have edged higher but are
still below the median line and
are poised to reverse.
8. Prices rallied just short of the
prior high and have begun to
possibly reverse. A reversal
would correlate with a downturn
in equities.
9. The Euro strengthens against a
weak dollar and mild concern
over the US debt ceiling crisis.
Prices will reverse shortly.
10. Prices reversed hard today and a
new downtrend has begun.
11. Prices paused in their move
down but this is temporary as
the next moves are lower.
12. Prices finished lower but have
not closed lower than the lows of
last week. A break of the
median line will accelerate the
selloff.
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