Getting Technical.Com

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1 Getting Technical.Com Professional Market Technicians Editor Bill Carrigan, CIM Bi-Weekly Update May 4, 2011 GT1352 TSX Comp DJII Very Long Term Analysis - Technology The long secular advance in the English speaking stock markets equities was driven by the new economy technology boom. Ground zero was In November, 1971, when a company called Intel publicly introduced the world's first single chip microprocessor, the Intel In 1974, (at the peak of the Arab Oil Embargo) Dr. Gary A. Kildall, while working for Intel Corporation, created CP/M as the first operating system for the new microprocessor. The first personal computers appeared in the early 1980 s. Some early innovators were Apple, Tandy, Compaq and IBM. MS-DOS grew from a 1981 request by IBM for an operating system for its IBM PC range of personal computers introducing a youthful Microsoft. The 1990 s introduced the Internet and the first.com mania which ended with the Y2K fiasco and the.com bubble of The technology bubble of 2000 introduced the current secular bear market in global equities that is just completing the final of 3-cycles see chart above. The Next Big Thing The next big thing is a key must know for long term investors who wish to make above average market returns without excessive trading in and out of volatile stocks. The next big thing is a pending dominant theme that can persist for at least 16 years. The dominant theme will drive the beneficiaries upward to all time highs and for the most part will have long bull cycles interrupted by short flat bear cycles. Some past dominant themes were the Nifty Fifty of the 1950 s and 1960 s. The mid to late 1970 s introduced the modern economy or first technology boom of the English speaking countries. The mid 1980 s introduced a parallel boom in the financial services sector so for twenty years from 1980 to 2000 all you had to do was to own technology and bank stocks. Some recent false booms were infrastructure and alternate energy. Our chart is about 15-years of the technology weighted Nasdaq Composite that clearly displays the first technology bubble that was confined within the English speaking countries. The period is a 3-cycle secular bear which is now almost completed. Yesterday the Nasdaq jumped to a 10-year high as U.S. stocks rallied on Wednesday after Fed Chairman Ben Bernanke's first-ever press conference. This is significant technically because a second echo or global technology boom is now just getting underway in the emerging markets. The Nasdaq is our new dominant theme or the next big thing.. Participation in a pending 2 nd or echo technology boom is prudent via the exchange traded fund universe see analysis

2 Broad Technology ETFs List 28-Apr-11 Broad Global Technology ETFs SPDR S&P International Technology Sector IPK ishares S&P Global Technology IXN Broad US Technology ETFs ishares S&P North Amer Technology ishares Dow Jones US Technology SPDR Morgan Stanley Technology PowerShares QQQ Trust Technology Select Sector SPDR Technology Sub-Sector ETFs Software ETFs ishares S&P North Amer Tech-Software PowerShares Dynamic Software Software HOLDRs Hardware ETFs Internet Architecture HOLDRs IGM IYW MTK QQQ XLK IGV PSJ SWH IAH Networking ETFs Broadband HOLDRs BDH ishares S&P North Amer Tech-Multimd Ntwk IGN PowerShares Dynamic Networking PXQ Semiconductors ETFs PowerShares Dynamic Semiconductors Semiconductor HOLDRs ishares PHLX SOX Semiconductor Sector SPDR S&P Semiconductor Internet and Technology Services ETFs B2B Internet HOLDRs First Trust Dow Jones Internet Index Internet HOLDRs Internet Infrastructure HOLDRs Nanotechnology ETFs PowerShares Lux Nanotech PSI SMH SOXX XSD BHH FDN HHH IIH PXN Big Cap Technology Select Sector SPDR (XLK) Top 25 Components by % Weight Top 25 by weight 28-Apr-11 %Weight Apple Inc. AAPL International Business Machines IBM 7.91 Microsoft Corp. MSFT 7.31 AT&T Inc. T 6.99 Oracle Corp. ORCL 5.36 Google Inc. Cl A GOOG 5.19 Intel Corp. INTC 4.13 Verizon Communications Inc. VZ 4.08 Cisco Systems Inc. CSCO 3.69 Qualcomm Inc. QCOM 3.57 Hewlett-Packard Co. HPQ 2.77 EMC Corp. EMC 2.26 Texas Instruments Inc. TXN 1.61 ebay Inc. EBAY 1.52 VISA Inc. Cl A V 1.44 Corning Inc. GLW 1.27 Automatic Data Processing Inc. ADP 1.05 MasterCard Inc. Cl A MA 1.04 Dell Inc. DELL 1.01 Cognizant Technology Solutions. CTSH 1.00 CenturyLink Inc. CTL 0.97 Yahoo! Inc. YHOO 0.90 American Tower Corp. Cl A AMT 0.82 Applied Materials Inc. AMAT 0.81 Juniper Networks Inc. JNPR 0.80 Total% The broad Nasdaq Composite is a stock market index of the common stocks and similar securities (e.g. ADRs, tracking stocks, limited partnership interests) listed on the NASDAQ stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. Since both U.S. and non-u.s. companies are listed on the NASDAQ stock market, the index is not exclusively a U.S. index. The best way to get exposure is the broad PowerShares QQQ Trust (QQQ) Nasdaq vs S&P500 The Nasdaq has been a poor relative perform vs. the S&P500 from the peak of 2000 on to the 2007 peak. The Nasdaq signalled a return to relative out perform when it posted a higher low vs. the S&P500 in early See the up arrow chart left Note also the recent highs relative to the respective 2007 peaks unlike the S&P500, the Nasdaq has retraced all of the losses. The Nasdaq relative perform vs the S&P500 should accelerate through 2011 and 2012.

3 Risk Avoiders - LONG TERM new for Q2 of 2011 we see the U.S. sectors sorted by monthly change at March 31, the best diversification would be exposure to the BOLD sectors Monthly 2 nd Dimension First Derivative Second Derivative Sector rank Mar 11 1-Month Trend Rank Change SPDR-Energy XLE Advancing SPDR-Health Care XLV Advancing SPDR-Materials XLB Advancing SPDR-Industrial XLI Advancing HOLDRS Telecom TTH Advancing SPDR-Consumer Staples XLP Advancing SPDR-Technology XLK Advancing SPDR-Utilities XLU Advancing SPDR-Financial XLF Advancing SPDR-Consumer Discreti XLY Stationary Topping ProShares Short S&P500 SDS Declining There is less risk in the smaller 1-Month change numbers The NASDAQ-100 Trust Series 1 (QQQ) exchange-traded fund, sponsored and overseen since March 21, 2007 by Invesco through PowerShares, trades under the ticker NASDAQ: QQQ. On December 1, 2004, it was moved from the American Stock Exchange where it had the symbol QQQ to the NASDAQ and given the new four letter code QQQQ. On March 23, 2011, Nasdaq changed its symbol back to QQQ. During the period it traded as QQQQ, it was sometimes referred to as the "Cubes", or "Quad Qs". In 2000, it was the most actively traded security in the United States, and hit an all-time split adjusted intra-day trading high of $ on March 24 of that year, but has since dropped to being within the top five after other stocks and ETFs such as the Standard & Poor's Depositary Receipts. On July 17, 2007, the ETF closed above $50 for the first time since early After reaching a peak of $55.07 on October 31, 2007, the Qs succumbed to a wider financial crisis along with a decline in technology spending and plunged towards a November 21, 2008 intra-day low of $ Last week the Qs traded at an all time high of $59.34 The SPDR XLK vs. the QQQ We prefer the QQQ because it is a pure technology play. The SPDR Technology (XLK) has some exposure related to telecommunication services Note the long established relative out perform of the QQQ over the XLK see chart lower left

4 Very Long Term Analysis cont. The Internet commerce space is a leader note the bottom posted in late 2008 almost sis months ahead of the broader market. The Internet HOLDRS (HHH) is heavy weighted in consumer cyclical web based enterprise Company Symbol % Assets Amazon.com, Inc.AMZN ebay Inc. EBAY priceline.com Inc PCLN Yahoo! Inc. YHOO Time Warner Inc. TWX 6.39 Time Warner Cab TWC 3.72 TD Ameritrade AMTD 2.46 EarthLink, Inc. ELNK 0.71 Although compelling we would avoid the sector in favour of the broader QQQ These are the very long term (24 months) cycle and momentum placements for the U.S. sectors sort on 1-Month Change S&P500 Index April 18, 2011 Sector Return 1-Month Trend Sector Weight Y-T-D Change Energy 12.90% 12.54% 9.69 Advancing Health Care 11.20% 7.37% 4.79 Advancing Materials 3.60% 2.84% 2.71 Advancing Industrials 11.10% 5.88% 2.12 Advancing Telecom Svc 3.00% 1.44% 1.80 Advancing Cons Staples 10.60% 28.52% 1.72 Advancing Info Tech 17.90% 2.62% 1.45 Advancing Utilities 3.20% 1.56% 1.13 Advancing Financials 15.70% 0.13% 1.00 Advancing Cons Disc 10.60% 4.22% Stationary Topping Total % There is less risk in the smaller 1- Month change numbers Nasdaq Composite Index This important sector has signaled a high risk buy signal at February 28, 2011 and is must own sector - Important this group has exceeded the 2007 price peaks Summary and Analysis: We assume the technology boom to be broad based and so would not engage in stock picking The best offering appears to be the PowerShares QQQ Trust (QQQ) Canadian Dollar Accounts enjoy via the BMO NASDAQ 100 Equity Hedged to CAD Index ETF (ZQQ) or the ishares S&P/TSX Capped Information Technology Index Fund (XIT) Information Getting Technical Info Services All Rights Reserved

5 The Leading Sub-Groups PowerShares Dynamic Networking (PXQ) This high energy sub-sector has been leading the broader technology space since the bear market lows of 2008 The top weighted components Company Symbol % Assets Riverbed Technology, Inc. RVBD 7.31 Motorola Solutions, Inc. MSI 5.97 Citrix Systems, Inc. CTXS 5.27 Broadcom Corporation BRCM 5.24 Symantec Corporation SYMC 5.20 Finisar Corporation FNSR 4.88 Juniper Networks, Inc. JNPR 4.88 Amphenol Corporation APH 4.87 Vmware, Inc. Common VMW 4.85 QUALCOMM Incorporated QCOM 4.73 Semiconductor HOLDRs (SMH) and the SPDR S&P Semiconductor (XSD) Company Symbol % Assets NVIDIA Corporation NVDA 5.11 Maxim Integrated Product. MXIM 4.66 Skyworks Solutions, Inc. SWKS 4.32 Atheros Communications. ATHR 4.31 Texas Instruments Inc TXN 4.3 Broadcom Corporation BRCM 4.3 Cree, Inc. CREE 4.29 Rambus, Inc. RMBS 4.25 PMC PMCS 4.21 Intel Corporation INTC 4.2 The semi s have a Tendency to lead at important junctures see chart left Microsoft and Intel - two sleeping giants awaken and should benefit the QQQ Canadian Dollar Accounts enjoy via the BMO NASDAQ 100 Equity Hedged to CAD Index ETF (ZQQ) or the ishares S&P/TSX Capped Information Technology Index Fund (XIT) Getting Technical.Com is published by Getting Technical Information Services Inc. an independent market research company. The opinions therein should not be construed as a solicitation or offer to buy or sell the securities mentioned. Getting Technical assumes no obligation to update the information or advice on any further developments relating to these securities. GT, its officers and directors may have positions in any securities mentioned in this market letter. GT is not a financial advisor. GT may receive remuneration from securities industry professionals for independent research services. The opinions are based on technical analysis and more information should be obtained before making an investment decision. GettingTechnical 3823 Brookside Dr Vineland, Ontario. L0R 2C0 info@gettingtechnical.com