RCM THE RHODES REPORT

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1 THE RHODES REPORT Telephone: richard@rhodes-capital.com Web Address: WEDNESDAY DECEMBER 7, 211 German DAX Index (DAX Weekly) Still Below the 8-WMA Germany remains in the firing line for now; but the technicals are shaping up rather bullishly given the 21-wk RSI became oversold, with the recent lows successfully tested...thus far. Relative Strength Index (47.1) Germany DAX 6-WMA FORECAST STOCKS: The Fed Twist remains in place, with the prospect for QE-3 ultimately coming to fruition as several top FOMC members want it. Now, the European debt contagion is growing, and the world economy is decelerating including China, which did lower the reserve requirements today for the first time in 3-years. Collectively, given the bearish sentiment extant...should allow stocks to climb the Wall of Worry in the weeks ahead in a Santa Claus rally. STRATEGY: Technically speaking, the S&P has regained long-term support at the 4-mema at 119; which is critical given it delineates bull & bear markets. Moreover, the resultant strength should allow for a test of the previous highs at 1293 will be challenged, with the potential for even higher highs to develop by year-end This type of dissonance in Europe has a clear impact upon the capital markets; they don t want to see any of it, and if they do it is a lease to sell the Euro and stocks and commodities follow lower as the majority of market participants just don t see the Europeans getting this plan together. We beg to differ, for the alternative will be far worse. And while the agreements made will be distasteful they are necessary That said, we are following the Euro rather carefully on an hourly basis, and we are hearted from a long perspective that a rather bullish head & shoulders bottom is forming. Current prices are at 1.337, but neckline resistance stands at 1.3 hence all that is required is a move of 18 pips to breakout of CAPITAL MARKET COMMENTARY! ASIAN BOURSES ARE STRONGER; BUT EURO- PEAN BOURSES HAVE WEAKENED AND TURNED LOWER OFF THIS HIGHS: Once again, the Germans seem to be at the heart of the downturn from what were respective European stock market gains this morning. At the heart of the situation is that the German government opposes combining the Eurozone s interim bailout fund, the EFSF of 44 billion ($93.1 billion), with the permanent European Stability Mechanism of billion euro. A German official told reporters in Berlin that it has already been decided that the ESM will take over from the EFSF at an appointed time. Merkozy has been urging other fellow European leaders to agree to bring forward the launch of the ESM to 212 rather than from the previous launch of 213. OVERNIGHT PRICES Quotes at: 6:8am EST INDEX LAST CHG Morning Futures S&P up 1, Nasdaq Composite up 2, year Note Yield up 2.9% +4. bps Crude Oil down $ $ (.21) Euro down Yen down Gold down $ 1,718. $ (.37) % CHG 1 WEDNESDAY DECEMBER 7, 211 YTD YTD % CHG Foreign Indices FTSE 1 Index up, % % German DAX up 6, % % French CAC up 3, % % Japan Nikkei 22 up 8, % -1, % SSE China Composite up 2, % % India Sensex up 16, % -3, % Brazil Bovespa up 9,36..% -9, % US Indices Dow Industrials up 12, % % Nasdaq Composite up 2,6..% % S&P Large-Cap up 1, % 1.7% S&P 4 Mid-Cap up 89..% % S&P 6 Small-Cap up 414..% %

2 CAPITAL MARKET COMMENTARY this bullish formation. If so, then the target measures to 1.39 which just below the declining 2-day moving average. This should push the S&P sharply higher through the April highs towards the 137-to-14 zone by year-end. Therefore, we are putting greater emphasis upon the Euro trade than we have in past weeks, for it has been the tail that wags the dog primarily.! TRADING STRATEGY: We are long, and we are getting longer again today as the S&P is attempting to breakout above its 2-day moving average. Make no mention that the NASDAQ 1 has already done so; make no other mention that the Dow Industrials and Dow Transports have done so as well. It is only a matter of time before they are regained. Today, we are buying two additional positions: US Steel (X) and Agnico-Eagle Mines (AEM). 2 WEDNESDAY DECEMBER 7, 211

3 PAID-TO-PLAY LONG/SHORT MODEL PORTFOLIO No. Trade Date Long/ Short Share No. Name Ticker Port % Invest Entry Price Model Portfolio Inception ($1k): January 1, 2 21 RECAP Starting Balance $ 244,639 2 Performance: +2.34% Closed Positions $ 8, Performance: +47.7% Open Positions $ 2, Performance: +2.84% Dividends $ Performance: -3.7% PORTFOLIO YTD (Gain/Loss) $ 26,388 $ 11, % TRADE 29 PRICE Performance: NOTE: +7.4% All entry and exit prices for stocks are the S&P average YTDof the high and low prices for the trading day.7% as provided for byyahoo! s website at 21 Performance: +1.22% Over/(Under) Performance 4.74% DISCLAIMER: "The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so that investors' securities, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. The illustrations and charts in this report are educational only and do not take into consideration your personal circumstances or other factors that may be important in making investment decisions. This report is not a recommendation to buy or sell a particular security. Current Price Unrealized P/L Percent P/L Stop Loss Point 1 11/1/211 L 8 Vulcan Materials VMC 1.6% $ 2,136 $ $ 33.9 $ 1, % $ 29. TRADE < 2 11/16/211 L 3 Cimarex XEC 9.6% $ 23,99 $ $ 7.7 $ % $ 6.8 TRADE < 3 11/17/211 L 1,2 Ecana ECA 9.3% $ 22,842 $ 19.4 $ $ 1,86 4.8% $ 17.7 TRADE < 4 11/17/211 L Transocean RIG 8.9% $ 24,68 $ $ 4.48 $ (1,828) -7.4% $ 41.2 TRADE < 12/1/211 L 1, Nabors NBR 1.9% $ 26,918 $ 17.9 $ $ 1, % $ 16.2 TRADE < 6 12/1/211 L 1, Pan American Silver PAAS 9.6% $ 2,2 $ 2.2 $ $ (81) -3.2% $ 23.2 TRADE < 7 N/A.% $ - $ - $ - $ -.% $ - 8 N/A.% $ - $ - $ - $ -.% $ - 9 N/A.% $ - $ - $ - $ -.% $ - 1 N/A.% $ - $ - $ - $ -.% $ - 11 N/A.% $ - $ - $ - $ -.% $ - 12 N/A.% $ - $ - $ - $ -.% $ - 13 N/A.% $ - $ - $ - $ -.% $ - 14 N/A.% $ - $ - $ - $ -.% $ - 1 N/A.% $ - $ - $ - $ -.% $ - 16 N/A.% $ - $ - $ - $ -.% $ - TOTAL 8.9% $ 148,82 $ 2,476 "<" Denotes Change TARGET Earnings Release Trade Orders: 1. US Steel (X) buy 9 shares. Place the stop loss at $ Agnico Eagle Mines (AEM) buy 7 shares. Place the stop loss at $4.3. Trade Executions: 1. None. The Rhodes Report is published by Rhodes Capital Management, Inc. Mailing address: 111 Presidential Blvd. Suite 13; Bala Cynwyd, Pennsylvania 194. All contents copyright Rhodes Capital Management, Inc. Reproduction, retransmission or redistribution in any form is illegal and strictly forbidden, as is regular dissemination of specific forecasts and strategies. Otherwise, feel free to quote, cite or review if full credit is given. The Rhodes Report is published daily, including special reports as market conditions warrant. Correspondence is welcome, but volume of often precludes a reply. Subscription rates are: $279/ annually or $19/six-months. Visa, MasterCard and American Express accepted. Delivery is available via Internet download and . This report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. The report is published for informational purposes and is not be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The report is based on information obtained from sources believed to be reliable, but is not guaranteed as being accurate, nor is it a complete statement or summary of the securities, markets or developments referred to in the report. The report should not be regarded by recipients as a substitute for the exercise of their own judgment. Any opinions expressed in this report are subject to change without any notice and The Rhodes Report is not under any obligation to update or keep current the information contained herein. Past performance is not necessarily indicative of future results. The Rhodes Report accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this report. 3 WEDNESDAY DECEMBER 7, 211

4 MAJOR MARKET FUTURES 1-Year Note Yield TNX Last: 2.93% 4-day BLI ( ) US Dollar Index Last: 78.7 DX 4-day BLI (2.6714) - 1 Y TSY YLD NDX DMA DEMA Overhead 2 resistance stands at 2.38% and it proved its merit; note the 8-dema remain in 18 a firm downtrend. 16 Oct Nov Dec 211 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb DMA The 2-dma was regained, but we remain skeptical of the ability to rally much further in the short-term. Potential Bullish Head & Shoulders Bottom US DOLLAR INDEX Continuous Oct Nov Dec 211 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb Gold Futures Last: $ 1,727.9 GC 4-day BLI (2.1644) CRB Index Last: CRB 4-day BLI (1.2221) - 1 OZ GOLD ELECTRONIC Continuous 19 The 14-dma support level is rising and 18 should hold any declines. A trendline breakout 18 would be very bullish DMA DMA Oct Nov Dec 211 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb Declining 38 trendline and 1-dma 37 resistance are 37 overhead; a breakout 36 would be bulilsh DMA COMMOD RSRCH BUR INDEX 2-DMA p Oct Nov Dec 211 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb WEDNESDAY DECEMBER 7, 211

5 MAJOR WORLD RISK POINTS China Shanghai Last: 2, day BLI (-.6997) Italy MIB Index Last: 1, day BLI ( ) DMA A key reversal higher was 22 forged from the lows at major support; look for this low to be sacrosant. China Shanghai Composite 2-DEMA Oct Nov Dec 211 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb Mar Apr Key Reversal HIgher Italy FTSE MIB Index DMA DMA Oct Nov Dec 211Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212Feb Mar Apr The lows have held the decline thus far; a further countertrend rally is expected. Key Reversal HIgher Spain Madrid Genera Last: day BLI (-2.224) Crude Oil Futures Last: $ day BLI (7.828) - 11 Spain Madrid General The sharp rally is correcting, which is well warranted at this juncture. 11 LIGHT CRUDE Continuous - Bearish Key Reversal Lower DMA DEMA DMA DMA 8 8 The lows 8 have held the decline thus far; a further countertrend rally is expected ec 211 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb Mar Apr Oct Nov Dec 211 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Fe Key Reversal HIgher WEDNESDAY DECEMBER 7, 211

6 S&P INDEX/ BROAD MKT INDICATORS day BLI S&P INDEX 18-DMA -DEMA 38-DEMA 2-DMA Resistance stands between the 2-dma at 126 and the - dema/38-dema at 121; the current breakout is bullish day BLI - % Above 1-DMA Bullish turn higher Declining Overbought - - % Above 2-DMA 1-dma resistance 1-DMA -DMA Intermediate-Term Model 1-DMA Bearish breakdown Sep Oct Nov Dec 211 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb S&P INDEX TECHNICAL COMMENTS # THE TECHNICAL PICTURE IS TURNING BULL- ISH AS OCTOBER S BULLISH MONTHLY KEY REVER- SAL REMAINS IN PLACE: Last Wednesday s trade regained the -dema/38-dema levels at 122, which puts the 2-day moving average in play at 1263 a level that roughly -times has turned prices lower. If this level is regained and we do believe it shall be sooner rather than later, then we ll expect further gains towards the October highs at perhaps sharply towards a test of the April highs towards 14. As far as our indicators are concerned, they are shaping up in bullish fashion especially the hooks higher starting to materialize in both the 4-day model as well as the Intermediate-term model. TECHNICAL INDICATOR REVIEW: $ The 14-day has turned higher in bullish fashion, with the 4-day model in modest decline. $ The % of stocks above their 1-day moving average has moved back to overbought levels very quickly. Look for churning. $ The % of stocks above their 2-day moving average stands at 39%... flat from the prior close. Note that is on the verge of breaking out above its 1-dma...this would be bullish. $ The Intermediate-term Model is near overbought levels and has turned lower through its 1- dma. A turn higher in the model would be bullish. 6 WEDNESDAY DECEMBER 7, 211

7 MODEL PORTFOLIO POSITIONS I Vulcan Materials VMC Last: $ 33.9 TGT: $ - Entry: $ STP: $ 29. Cimarex XEC Last: $ 7.7 TGT: $ - Entry: $ STP: $ day BLI (1.4868) 4-day BLI (3.2423) day BLI (1.461) 14-day BLI ( ) Vulcan Materials 2-DMA 8-DMA DMA Cimarex Energy Co. 2-DMA A potential head & shoulders bottom 3 is on the verge of being violated; that would allow for 2-dma mean reversion higher to materialize. 3 7 A potential head & shoulders bottom 6 is on the verge of being violated; that would 6 allow for 2-dma mean reversion higher to materialize Oct Nov Dec 211 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb ec 211 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb Ecana ECA Transocean Last: $ TGT: $ - Entry: $ 19.4 STP: $ 17.7 RIG Last: $ 4.48 TGT: $ - Entry: $ STP: $ day BLI ( ) 4-day BLI ( ) day BLI ( ) 14-day BLI ( ) Ecana 9 Transocean Inc DMA 2-DMA DMA 2-DMA The distance below the 2-dma is material; look for mean 2 reversion higher. 2 Although new lows were forged, the distance below the 2-dma is material; look for 4 mean reversion higher t Nov Dec 211 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb ec 211 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb Ma 7 WEDNESDAY DECEMBER 7, 211

8 MODEL PORTFOLIO POSITIONS II Nabors NBR Last: $ TGT: $ - Entry: $ 17.9 STP: $ 16.2 Pan American Silve PAAS Last: $ TGT: $ - Entry: $ 2.2 STP: $ day BLI ( ) 2-day BLI ( ) day BLI ( ) 14-day BLI (-4.889) Pan American Silver 4 3 Nabors Industries Ltd DMA 3 3-DMA DMA DMA The correction back into the 6-1 dma has held; expect a move to higher highs and above trendline resitance The distance below the 2-dma is rather large, 2 with the models at oversold levels and turning higher. We find this rather bullish indeed. 3 2 Dec 211 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Fe ec 211 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb Mar N/A Last: $ - TGT: $ - Entr y: $ - STP: $ - N/A Last: $ - TGT: $ - Entry: $ - STP: $ - 8 WEDNESDAY DECEMBER 7, 211

9 STOCKWATCH POTENTIAL LONGS I US Steel X Last: $ 17.2 $ (.18) TRADE BUY 9 Shares Agnico Eagles AEM Last: $ 1.8 $.12 TRADE BUY 7 Shares 4-day BLI (2.2491) 4-day BLI (-7.328) day BLI (1.769) 14-day BLI ( ) United States Steel Corp. 2-DMA DMA AGNICO EAGLE MINES ORD 2-DMA DMA The head & shoulders breakout 3 is bullish; we are buyers as a result. 3 The sharp decline is far below the 2-dma. A bottom is attempting to form with the 4 models in a bullish config. Buy Nov Dec 211 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb Mar Dec 211 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb Mar SandRidge Energy SD Last: $ 4.6 $ (.32) JP Morgan JPM Last: $ 16.2 $.1 4-day BLI ( ) 4-day BLI ( ) day BLI (-.4769) 2-day BLI ( ) A breakotu - above the 8-dma level would be 14 bullish for higher prices. 13 The models support 12 further gains. 11 SANDRIDGE ENERGY J.P. Morgan Chase & Co. 2-DMA DMA DMA A potential double bottom is 3 forming, which would mean 2- dma mean reversion could be underway Nov Dec 211 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 212 Feb Mar ber 211 February April May June July AugustSeptember November 212 Feb 9 WEDNESDAY DECEMBER 7, 211

10 GLOSSAR OSSARY The Blue-Line Indicator or BLI Explained The BLI is our simple momentum oscillator used for timing and trend decisions; we rarely if ever use other momentum indicators for we prefer to focus and understand one indicator really well rather than a basket of indicators that can at times be contradictory. Furthermore, we prefer to use the BLI in conjunction with basic chart patterns; it is our experience that this combination works rather well for type of trading style. Basically, the BLI it is a full stochastic indicator derivative of our own undertaking; our changes have been several, but primarily relate to smoothing the indicator in order to provide for better signals once it does in fact change directions. We use varying time periods dependent upon whether we are working with weekly or daily charts. We have found that a 14- period BLI works well with the weekly charts, whereas both a 2-period and 4-period work well with daily charts. Obviously, the 4-period BLI catches longer and more tidal changes in direction. We normally don t use these in our Daily Bulletin given its shorter-term time frame, but behind the scenes it plays a big part. When using the BLI with price charts; we look upon the following 3-factors as set-ups upon which the probability is highest to trade: 1. BLI Extremes: Oversold (-6 to -8)/Overbought (+6 to +8) When the BLI trades into either extreme, our reversal ears go up as a change in trend becomes a higher probability. This puts the risk/reward dynamic in our favor generally, but we won t take a position without well defined stop losses and perhaps prices are trading into support or resistance as the case may be. However, we must note that extreme conditions can and will become more extreme in a powerfully trending market; hence this is the caveat to trading with the BLI in isolation. 2. BLI Divergences: Positive/Negative A divergence is said to have occurred when the price and BLI do not make new lows/highs together. They in effect diverge, with the BLI not confirming the prevailing trend. If the BLI turns higher/lower from below a previous BLI low/high then a divergence is said to have occurred, of which the probability is increased that the trend is changing in favor of the BLI direction. 3. BLI Reversals from Positive/Negative Levels Another very good BLI trading pattern which denotes a strongly stock is when the BLI turn higher from already positive levels this suggests a strong upwards acceleration is underway. Conversely, a turn lower from already negative numbers suggests a strong downward acceleration is underway. 1 WEDNESDAY DECEMBER 7, 211