James Investment Group, Inc.

The tone in premarket action was downbeat yesterday, weighed down by higher commodity prices. Consequently, the DJIA was off just over 100 points, “right out of the gate.” It looked like since Crude Oil failed to penetrate important support between $110.72 (200-DMA) and $110 (breakout and retest price) recently, the shorts in crude oil panicked, sending “black gold” up over $7.00 at one point. When the move in Crude Oil failed to spook the bulls, demand for DJIA type stocks showed up. The “senior index” stabilized and then floated higher into late afternoon, up almost 60 points at one juncture. At the bell, the DJIA was up almost 13 points and NASDAQ fell almost nine points. Aided by strength from its energy components, the UTIL was the bigger winner, up almost five points.

On the NYSE volume has been below its 50-day average now for approximately one month and contracted to 907 million shares yesterday. The intraday advance – decline (A-D) statistics were weak all day, ending with a net negative reading of 423. There were 134 new 52-week lows. This reading is more consistent with the net negative A-D readings than it is with the small gain by the DJIA and it implies a market environment that is still struggling to find some consistent leadership.

Conclusion:

On July 22 the SPX closed at 1277.00. It closed yesterday at 1277.72. Thus, over the past 22 trading days the SPX has traveled a great deal but in essence, has made no progress. During this period, the traditional and common-stock-only NYSE Advance Decline Line is lower, as is the Advance Decline line for the SPX. Call the past 22 trading sessions “choppy”, “rotational”, “frustrating” or “#!&%!” Whatever!

It has been a difficult period and I don’t think it will change! In terms of portfolio performance, risk management (pro-actively cutting losses, taking profits, owning some “long-short” funds, and reducing or getting rid of poorly performing stocks) is still necessary in order to add incremental value.

Following a recent violation of its short-term up trend line by the SPX, I listed a few support levels. Specifically, support for the SPX exists at 1262, 1247, and 1234. Wednesday’s selloff held 1262. Consequently, these support levels are still in force and should be used accordingly. Initial resistance points for the SPX = 1302, 1313, 1321 (50% retracement of the May – July decline) and 1328 (April closing low).

Thursday Morning 08/21

The DJIA opened slightly higher (up 26 points), helped by a positive EPS report from HPQ ($46.45/Strong Buy). It then took a nosedive (down 58 points) as further news items crossed the tape concerning the financial complex. However, consistent with the stock market’s ongoing “schizophrenic manner,” following the release of inventory data from the Department of Energy, crude oil, which was up $2.50 prior to the news suddenly declined and was down as much as $1.92. In turn, the DJIA headed north like a homesick angel (up 100 points pre-noon). From there both the “senior index” and energy prices recorded numerous intraday swings. Yet, each ended the day in the “plus column.” At the closing bell HPQ accounted for 30 of the DJIA’s almost 69 point gain; NASDAQ was up just shy of five points. On the NYSE volume expanded to 1.06 billion shares, but once again, was dismal. There were 192 net advancing issues, weaker than the DJIA. There were 115 new 52-week lows, which relative to the DJIA was disappointing.

Consistent with my comment yesterday that I believed “the rubber band tied around the commodity complex is poised to snap back in the other direction (up), short term....” I want to bring the following chart of the iShares Silver Trust (SLV/$13.18) to your attention.

Notice that this particular ETF has pulled back “in and around” a long-term uptrend line. Additionally, it is as oversold as it has been in years.

Wednesday Morning 08/20

“They’re b-a-c-k.” “...the ants?” “No, the ‘leaders within the SPX’s and DJIA’s current down trend,’ are back”; specifically, the “mutated financial complex!” Please refer to yesterday’s report for context and please protect your capital in here, especially within the financial complex! I want to stress this because the relative strength line of the Bank Index (BKX) not only failed to follow through from its recent breakout but closed yesterday beneath a “previous reaction low support point!” Regardless, the stock market suffered an additional one-two punch yesterday. The “punch” consisted of slowing economic activity (slowing housing starts) and higher inflation (surging wholesale prices), labeled by some as “stagflation.” All of these events produced a 131 point decline by the DJIA (11348.55) and a 32 point loss by NASDAQ (2384.36). Commodity stocks rose, aided by higher crude oil and gold prices. Following their massive declines, I think the rubber band tied around the commodity complex is poised to snap back in the other direction (up), short term. However, please realize a tremendous amount of overhanging selling pressure exists pretty much across the entire commodity complex.

On the NYSE while volume marginally expanded (one billion shares), it was once again dismal. There were 1411 net declining issues. 52-week lows, consisting mostly of financial and overseas related issues, expanded to 184.

While providing a “big picture” perspective of the SPX (1266.69) in yesterday’s report, I also addressed the short term structure of the SPX. Following is an additional short-term perspective, only this time it concerns the DJIA.

What you will notice is that following a rally “in and around” resistance, as the DJIA violated a very short-term up trend line, the “senior index” is on the verge of recording a negative crossover by a MACD (moving average convergence divergence) momentum indicator.

In looking at three previous instances in which a negative crossover occurred, two were helpful (they suggested you implement some type of defensive strategy) and one was false (in this case I ask, “do you have insurance premiums and do you deem it worth your while even if you don’t have to use it?”).

While I can’t say for certain whether this reading will prove valuable or not, I can say that in light of the trend line violation “prudence” makes sense. If I can help you identify if any of your stock specific positions are exhibiting a similar configuration as the DJIA, suggesting some type of protective action, please let me know.

Tuesday Morning 08/19

Yesterday was a replay of “Them.” No, not the 1954 movie in which common ants mutated and threatened civilization, but the financials again. Yesterday it was FNM ($6.15), FRE ($4.39), a plethora of “DJIA financial components” and LEH’s ($15.03) turn (LEH breaks down again under $15.00). In any event, after a quick “plus 31” reading by the DJIA, the “senior index” slowly gathered downside momentum and was down approximately 225 points shortly after 3:00 p.m. At the closing bell the DJIA fell 180.51 points and the NASDAQ lost 35.54 points. On the NYSE volume was dismal as less than one billion shares traded. Specifically, 973 million shares changed hands. Using the “traditional Wall Street Journal” figures, there were 1385 net declining issues, a good relationship. My common-stock-only reading of 1038 net declining issues was also a good reading. There were 105 new 52-week lows, the highest reading in just over two weeks…#$&@#!

U.S. Dollar Index: In the life of a technical analyst, “what you see can be a function of how thick your pencil is.” Consistent with this, while the U.S. Dollar Index has already recorded a big percentage gain over the past few weeks and does have a lot of overhanging resistance at 78 and “in and around” 80, at the same time and in my opinion, good things are “rearing their ugly head,” longer-term.

Consistent with the observation concerning the U.S. Dollar Index, in light of the inverse relationship between the U.S. Dollar and commodity prices (I do not know the exact correlation), one short-term guidepost as to whether the U.S. Dollar moves through resistance or pulls back first, can be discerned by viewing the RJ/CRB Index (384.35), which has a heavy weighting in energy prices.

A few days ago the RJ/CRB Index almost tagged 379, which is support. This support is defined by its March lows (380 - 377.45) and a one-half retracement of its 2007 – 2008 rally (379.50). Consequently, the CRB Index and commodities, as a whole, are sitting at an important support point. If the 377 to 380 support area doesn’t hold, than something closer to 363 to 357 could be in the cards for the CRB Index. Please use these figures accordingly. You can go to stockcharts.com to find charts of the U.S. Dollar Index and RJ/CRB index.

Conclusion:

In light of some recent e-mails, phone calls, and Chief Investment Strategist Jeffrey Saut’s comments yesterday, I want to put the stock markets “big picture” into perspective.

Following is a chart of the S&P 500 (SPX) going back to its 2000 peak. In late 2001, when the DJIA violated a major trend line drawn off its 1982 low, I continually discussed that the stock market (the major market indices) had entered a period of “normalcy,” or a multi-year period of lateral-sideways price action. During this time period, in order to improve portfolio performance, a change in "tactics” was necessary. What this entailed was a much more pro-active mindset, versus a “buy and hold and forget about it” approach. Unfortunately, after discussing this macro change for approximately 12 to 15 months, I stopped doing so.

Please notice the SPX has made no progress over the past 8+ years, nor has an account that “bought the market” and held on. In my opinion, tactically, we are still in the midst of this environment, such that a more pro-active mindset (sector and capitalization size rotation, cutting losses, hedging or booking profits, use alternative methods to hedge “long-only” positions) will aid portfolio performance.

Switching gears and from a shorter-term perspective, following the “failure” at resistance and then “failed” breakouts by the DJIA and SPX, discussed last week, I labeled the market as “indecisive” and had previously recommended taking some short-term profits and or tightening stop loss points. At the time of my “indecisive” label the DJIA, SPX, and NASDAQ were trading at 11533, 1286, and 2429, respectively. Currently, all three market indices are below those levels.

Consistent with this, if I look at a chart of the SPX (1278.60), I notice that a rising wedge formation has developed. Yesterday’s price action generated a violation of the lower trend line and as a result, implies further downside testing. Support levels for the SPX = 1262, 1247, and 1234.

Again, I think further downside testing is upon us. Please use support accordingly.

The opinions offered in this piece should be considered a part of your overall decision-making process. These comments are published individually on a daily basis. This report contains a compilation of several days' worth of comments and is updated weekly. Unless otherwise noted, prices included are as of the previous day's close. For more information about these reports - to discuss how this outlook may affect your personal situation, to learn how this insight may be incorporated into your investment strategy, and/or to receive individual daily reports - please contact your Raymond James financial advisor .

Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability categories, is available at www.rjcapitalmarkets.com/SearchForDisclosures_main.asp. Copies of research or Raymond James summary policies relating to research analyst independence can be obtained by contacting any Raymond James & Associates or Raymond James Financial Services office (please see www.raymondjames.com for office locations) or by calling (727) 567-1000, toll free (800) 237-5643 or sending a written request to the Equity Research Library, Raymond James & Associates, Inc., Tower 3, 6th Floor, 880 Carillon Parkway, St. Petersburg, FL 33716.

The views expressed in this report accurately reflect the personal views of the analyst(s) covering the subject securities. No part of said person's compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. In addition, said analyst has not received compensation from any subject company in the last 12 months.

Investors should consider this report as only a single factor in making their investment decision.

International securities involve additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets.

Small-cap stocks generally involve greater risks. Dividends are not guaranteed and will fluctuate. Past performance may not be indicative of future results.

Investors should consider the investment objectives, risks, and charges and expenses of mutual funds carefully before investing. The prospectus contains this and other information about mutual funds. The prospectus is available from your financial advisor and should be read carefully before investing.

For clients of Raymond James & Associates (RJA) and Raymond James Financial International, Ltd. (RJFI): This report is for distribution only to persons who fall within Articles 19 or Article 49(2) of the Financial Services and Markets Act (Financial Promotion) Order 2000 as investment professionals and may not be distributed to, or relied upon, by any other person.

For clients of Raymond James Investment Services, Ltd.: This report is intended only for clients in receipt of Raymond James Investment Services, Ltd.’s Terms of Business or others to whom it may be lawfully submitted.

For purposes of the Financial Services Authority requirements, this research report is classified as objective with respect to conflict of interest management. RJA, Raymond James Financial International, Ltd., and Raymond James Investment Services, Ltd. are authorized and regulated in the U.K. by the Financial Services Authority.

For institutional clients in the European Economic Area (EEA) outside of the United Kingdom:

This document (and any attachments or exhibits hereto) is intended only for EEA institutional clients or others to whom it may lawfully be submitted.

Proprietary Rights Notice: By accepting a copy of this report, you acknowledge and agree as follows:

This report is provided to clients of Raymond James & Associates, Inc. (RJA) only for your personal, noncommercial use. Except as expressly authorized by RJA, you may not copy, reproduce, transmit, sell, display, distribute, publish, broadcast, circulate, modify, disseminate or commercially exploit the information contained in this report, in printed, electronic or any other form, in any manner, without the prior express written consent of RJA. You also agree not to use the information provided in this report for any unlawful purpose. This is RJA client releasable research

This report and its contents are the property of RJA and are protected by applicable copyright, trade secret or other intellectual property laws (of the United States and other countries). United States law, 17 U.S.C. Sec.501 et seq, provides for civil and criminal penalties for copyright infringement.

Weekly Technical Commentary by Art Huprich

Friday Morning 08/22

Conclusion:

Thursday Morning 08/21

Wednesday Morning 08/20

Tuesday Morning 08/19

Conclusion: