WEEKLY GLOBAL ROADMAP

11 February 2016 1 WEEKLY GLOBAL ROADMAP Why a lower US dollar will help to stabilize markets What s new this week? This week, we started to see reactions typically observed in major financial crisis. This includes a flight to safety towards government bonds from Core Europe, USA and Japan, spiking Gold prices which hit 1200USD and massive selling pressure on equity markets. In this gloomy environment, the most surprising move was the reversal of the US dollar. With euro dollar confirming its breakout above 1.10 and dollar yen breaking below 116, the technical outlook of the US dollar is obviously deteriorating, at least in the short term. The paradox is that this trend reversal could provide support to world stockmarkets as it should help to stabilize highly volatile commodities and emerging markets. Interestingly, emerging markets did not participate to the selloff of the last two weeks as you can see on the chart below which is something quite important in my view. Chart of the week The impact of a lower US dollar on emerging markets As you can see on the chart above, the start of a significant pullback on the US dollar helped emerging markets to outperform the MSCI World over the last two weeks. A confirmation of this trend reversal would be good news for world stockmarkets as the persistent weakness of emerging markets is at the center of the financial crisis which rattled developed stockmarkets over the last two months. This situation looks similar to that of Q3 1998. Technical Analysis Cyril BAUDRILLART, CFTe @CBaudrillart charts@carax.com +33.1.70.91.67.58

11 February 2016 2 Indices Review - S&P 500 INDEX RESISTANCES 2135 / 2250 / 2325 / 2500 1950 / 1979 / 2020 / 2080 SUPPORTS 1815 1750-1730 / 1640 The Big Picture 1 Complex range forming since early 2015. This looks like a wave 4, which means that the long-term bull trend is not in jeopardy. The index was trendless during the full year 2015. However, it failed to start a sustained correction as the August selloff was short lived. I favour a continuation of a wave 4 consolidation during the first part of the year 2016. This could take the shape of a widening or a symmetrical triangle. In the event of a breakout above the 2135-area (May and July highs), the next upside target would be around 2250. On the downside, notice that the index bounced off an important support zone located at 1815 in January. Fine Tuning Trying to stabilize around support at 1815. The index resumed its short-term downtrend this week after hitting the 1950 resistance zone. However, it has been holding above the 1820-1800 area so far. I would favour further sideways trading between these two boundaries in the near term, a bit like in September 2015. If the lower part of this range is broken, next supports would be in the 1750 area. 1 Detailed comments and charts are available in The Big Picture Chartbook

11 February 2016 3 Indices Review - Euro STOXX 50 INDEX RESISTANCES 3700 / 4350-4500 / 5500 3000-3060 / 3130 / 3320 / 3524 SUPPORTS 2660 2550-2500 The Big Picture 2 The index continues to trade inside a major symmetrical triangle forming since 2000. The upper part of this triangle around 3700 should be challenged again in 2016. The index hit a major resistance line forming since 2000 in April 2015 but failed to break above it. A new wave of consolidation is underway. In the long term, I favour an upside breakout above this line which now trades around 3700 and corresponds to the upper part of a major 15-year symmetrical triangle. To confirm this view, I would prefer to see the index holding above 3000 or at least 2800-2725. Fine Tuning 2800 area reached and even broken amid persistent selling pressure. The index has accelerated sharply downwards since last week and reached an important chartist support zone around 2800 which was a vertical downside target on Point & Figure charts. The next downside target available on this trend following tool is around 2550. However, in coming weeks, I would rather favour a stabilization in the 2800 area due to significantly oversold conditions on a daily basis. On the upside, the 3000-3060 area is becoming an important resistance and the initial target for a relief rally. 2 Detailed comments and charts are available in The Big Picture Chartbook

11 February 2016 4 Relative Views on main developed stockmarket indices Technical view on countries relative to the MSCI World Index Country United States Japan United Kingdom France Switzerland Germany Canada Australia Spain Sweden Hong Kong Netherlands Italy Denmark Belgium Singapore Finland Norway Technical Rating (FX adjusted) Technical Rating (Local Currency) Comments on MSCI Developed Countries Relative Charts Downgrading France in local currency from Positive to Neutral as the relative chart is becoming unclear. Upgrading Australia from Negative to Neutral in USD and from Neutral to Positive in local currency.

11 February 2016 5 Review of MSCI Developed Country Indices USA, Currency adjusted USA in EUR Japan, Currency Adjusted Japan in local currency Japan in EUR United Kingdom, Currency Adjusted United Kingdom in local currency UK in EUR

11 February 2016 6 Review of MSCI Developed Country Indices France, Currency Adjusted France in local currency France in EUR Switzerland, Currency Adjusted Switzerland in local currency Switzerland in EUR Germany, Currency Adjusted Germany in local currency Germany in EUR

11 February 2016 7 Review of MSCI Developed Country Indices Canada, Currency Adjusted Canada in local currency Canada in EUR Australia, Currency Adjusted Australia in local currency Australia in EUR Spain, Currency Adjusted Spain in local currency Spain in EUR

11 February 2016 8 Review of MSCI Developed Country Indices Sweden, Currency Adjusted Sweden in local currency Sweden in EUR Hong-Kong, Currency Adjusted Hong-Kong in local currency Hong-Kong in EUR Netherlands, Currency Adjusted Netherlands in local currency Netherlands in EUR

11 February 2016 9 Review of MSCI Developed Country Indices Italy, Currency Adjusted Italy in local currency Italy in EUR Denmark, Currency Adjusted Denmark in local currency Denmark in EUR Belgium, Currency Adjusted Belgium in local currency Belgium in EUR

11 February 2016 10 Review of MSCI Developed Country Indices Singapore, Currency Adjusted Singapore in local currency Singapour in EUR Finland, Currency Adjusted Finland in local currency Finland in EUR Norway, Currency Adjusted Norway in local currency Norway in EUR

11 February 2016 11 Relative Views on main emerging stockmarket indices Technical view on countries relative to MSCI Emerging Market Index Country Technical Rating (FX adjusted) Emerging Markets VS World China South Korea Taiwan India South Africa Brazil Mexico Russia Malaysia Indonesia Thailand Turkey Poland Philippines Chile Comments on MSCI Emerging Countries Relative Charts As discussed on the front page of this report, the relative chart of emerging markets against world index started a meaningful rally over the last two weeks. This shows that selling pressure is starting to ease on these gloomy markets. Most emerging countries are stabilizing in the short term except China.

11 February 2016 12 Review of MSCI Emerging Market Country Indices MSCI Emerging Markets in USD VS MSCI World China in USD South Korea in USD Taiwan in USD India in USD

11 February 2016 13 Review of MSCI Emerging Market Country Indices South Africa in USD Brazil in USD Mexico in USD Russia in USD Malaysia in USD Indonesia in USD

11 February 2016 14 Review of MSCI Emerging Market Country Indices Thailand in USD Turkey in USD Poland in USD Philippines in USD Chile in USD

11 February 2016 15 Global Macro Review US 10-year bond yields RESISTANCES (%) 2.50 1.85 / 2.00 / 2.35 SUPPORTS (%) 1.65 1.38 The Big Picture 3 The trend reversal of the year 2015 was not confirmed US bond yields made a significant bullish reversal in 2015. However, given the steep downside acceleration registered in early 2016, it seems that the yields failed to confirm last year s trend reversal. As a reminder, my previous preferred long-term scenario was further rise on yields towards 3-3.30% in 2016. The 2.50% area is becoming key resistance whilst key supports are found at 1.65% (2015 low) then 1.38%, the low of the year 2012. Fine Tuning Flight to quality. Last year s low at 1.64% hit. US bond yields easily reached their downside target at 1.74% which was available on my Point & Figure charts as the recent flight to quality move intensified. The low of late January 2015 could provide support in the near term whilst, in the event of a technical bounce, yields can easily reach 1.85-2.00%. 3 Detailed comments and charts are available in The Big Picture Chartbook

11 February 2016 16 Global Macro Review German 10-year bond yields RESISTANCES (%) 1.00 / 1.40 0.40-045 / 0.80 SUPPORTS (%) 0.20 0.05 The Big Picture 4 Start of a mean-reversal move in Q2 2015 but a major bullish trend reversal seems unlikely After an exceptional decline towards 0%, German bond yields made a major reversal during the spring 2015. However, reversing this major downtrend will probably take a long time, especially as QE should help to keep yields at a low level for a long time, probably below 1%. Fine Tuning The technical target at 0% is becoming realistic I previously highlighted that my Point & Figure charts were giving downside targets around 0.30%, now reached, with next close to 0%. With 10-year Japanese bond yields falling into negative territories, the prospect of German bond yields retesting April 2015 record lows is becoming realistic, especially given recent tensions registered on government bond yields from Southern European countries. The 0.40-0.45% area is the new key resistance in the event of a technical bounce. 4 Detailed comments and charts are available in The Big Picture Chartbook

11 February 2016 17 Global Macro Review Euro dollar RESISTANCES 1.17 / 1.21 / 1.25 1.15 SUPPORTS 1.08 / 1.0730 / 1.0650 1.05 / 1.00 / 0.96 The Big Picture 5 Further decline seems likely towards 1.00 in the medium term. The primary trend turned bearish in late 2014 and stayed bearish in 2015. The rate is unlikely to make a significant bullish reversal in early 2016 and may even go to parity or even below (0.96). The 1.05 area is an important intermediate support zone. On the upside, the 1.17-1.18 area is becoming a key resistance. Fine Tuning Confirmation of last week s breakout above 1.10. The rate confirmed last week s breakout above 1.10 and easily hit the trading target at 1.1250 discussed last week. The next one is around 1.15 which corresponds to the October high. I favour further rise towards this next target in the near term or at least contained setbacks between 1.1050 and 1.10. 5 Detailed comments and charts are available in The Big Picture Chartbook

11 February 2016 18 Global Macro Review Dollar Yen RESISTANCES 121.50 / 123.50 / 126 116 / 118 SUPPORTS 112-111.50 106 The Big Picture 6 Breakdown below 116 jeopardising the long-term bullish view. The dollar yen dropped below 116 in February which was a major support level since late 2014. Although I am not convinced that this will mark the start of a major trend reversal, I cannot ignore that it is a significant bearish technical event. This breakdown could validate a major bearish head & shoulder which theoretical downside target is around 106. Intermediate targets are found at 114 then 112 whilst the 121.50 area is becoming key resistance. Fine Tuning Major breakdown below 116. Bull trap seen last week. The rate even broke below a key technical level at 116 this week. As discussed above, this is a bearish technical event. A downside target available on my short-term Point & Figure chart at 112 was directly reached. This is a massive selloff. Possible start of technical bounces in coming weeks but 116 is becoming a key resistance. 6 Detailed comments and charts are available in The Big Picture Chartbook

11 February 2016 19 Global Macro Review Cable (GBP/USD) RESISTANCES 1.50 / 1.5250 / 1.55 / 1.58-1.59 1.4660 / 1.48 SUPPORTS 1.4230 / 1.4150-1.4080 1.40 / 1.35 The Big Picture 7 The rate should continue to decline in 2016 towards 1.40 maybe even 1.35. Formation of a very complex range since 2009 with numerous traps. Major supports are found in the 1.40-1.35 area. Further decline towards these levels could be seen in 2016. The 1.58-1.59 area is becoming a key resistance zone. Fine Tuning Resistance at 1.4660 hit but not broken. My recommendation to sell strength last week was profitable, even with the US dollar index breaking down. The resistance at 1.4660 was hit but not broken. I think that the British Pound should stay under pressure against most currencies including USD. Keep selling it on strength. 7 Detailed comments and charts are available in The Big Picture Chartbook

11 February 2016 20 Global Macro Review Gold RESISTANCES 1400 1200 / 1320 SUPPORTS 1130-1110 / 1080 1050 / 992 / 884 The Big Picture 8 Technical outlook still weak after four declining years Gold remained weak in 2015, the fourth consecutive bearish year. The next downside target available on my Point & Figure charts is at 992 whilst next major Fibonacci support is found at 884. At this stage, it is difficult to anticipate the start of a significant bullish reversal. On the upside, the 1200 area is becoming a major resistance zone to surpass in H1 2016 in order to improve the index s mid-term outlook. Fine Tuning Significant bullish reversal The start of a consolidation of the US dollar combined with a flight to safety move at the beginning of the week boosted Gold which even broke above the 1200 area this week. As you can see on the chart, prices are even breaking above a major declining resistance line. This is the most significant bullish reversal in three years with prices even breaking above the upper weekly Ichimoku cloud. In the short term, Gold should take a breather around 1200 whilst the 200-day MA around 1130 is becoming first important support to monitor in the event of a pullback. 8 Detailed comments and charts are available in The Big Picture Chartbook

11 February 2016 21 Global Macro Review Brent RESISTANCES 54-55 / 70 37 / 40 / 43 / 46.50 SUPPORTS 30 27 / 23 The Big Picture 9 Back below 2000 highs Since early 2015, I have always highlighted that the 35USD area was a key support zone which should provide support in the event of further slide. As this level was broken in early 2016, the long-term bullish Elliott wave count is not valid anymore. In other words, the pullback below the high of 2000 jeopardised the wave count previously favoured. It does not mean that now is a good time to sell but just that Brent is entering in unchartered territories like Natural Gas in 2009. Next potential long-term supports are found at 27 whilst the 31 area is another possible support (hit in early January). Fine Tuning Stabilisation phase after strongest relief rally since August Brent seems on track for the anticipated stabilisation phase within the 30-37 range after a 30% bounce as discussed last week. Brent is therefore near the lower part of this range. 9 Detailed comments and charts are available in The Big Picture Chartbook

11 February 2016 22 Table of Contents Indices S&P 500 P. 2 Euro STOXX 50 P. 3 MSCI World Developed Countries Summary of Views P. 4 Countries Charts P. 5-10 MSCI Emerging Market Countries Summary of Views P. 11 Countries Charts P. 12-14 Global Macro US 10-year bond yields P. 15 German 10-year bond yields P. 16 Euro Dollar P. 17 Dollar Yen P. 18 Cable P. 19 Gold P. 20 Brent P. 21

11 February 2016 23 Technical Analysis Equity Sales Cyril BAUDRILLART cbaudrillart@carax.com +33.1.70.91.67.58 Methodology All technical indicators used in this publication are based on historical prices broadcasted by Bloomberg. Several types of indicators are used in this report such as Bollinger Bands, Oscillators (RSI, MACD), Point & Figure charts, Ichimoku, Keltner Bands and other technical analysis tools. More details on how to interpret and use these tools are available upon request. Market timing indicators developed by Tom DeMark are also used in this report. The DeMark Indicators are a registered trademark of DeMark Analytics, LLC. Please note that all the content shown are my personal views and based on my own interpretation of the DeMark Indicators using the DeMark Service for Bloomberg. Please visit www.demark.com for more information. Disclaimer This publication has been prepared by Equity sales team of CARAX and does not constitute an investment research nor an investment advice material according to applicable regulation. This document is considered as marketing documentation within the meaning of the AMF regulation. It has not been developed in accordance with legal requirements designed to promote the independence of investment research and its author (s) is/are not subject to any prohibition on dealing in the relevant financial instrument ahead of the dissemination of the marketing communication. This publication is for information purposes only and does not constitute a personalized investment recommendation. This document is intended for general distribution and the products or services described herein do not take into account any specific investment objective financial situation or particular need of any recipient. This document shall not be construed directly or indirectly as an offer or solicitation for the subscription or purchase or sale of any securities, or for engaging in any other transaction. This document is based on public information. The information herein was obtained from various sources believed to be reliable, but has not been independently verified by CARAX or its affiliated companies ( CARAX ). CARAX does not warrant the accuracy, completeness or reliability of such information and does not accept any related liability. Opinions, estimates and projections in this message constitute the current judgment of the author as of the date of this publication. They do not necessarily reflect the opinions of CARAX and are subject to change without notice. CARAX has no obligation to update, modify or amend the content of this publication or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. The financial instruments mentioned in this document may not be suitable for all investors. This publication is exclusively intended for Professional Clients and Eligible Counterparties (according to MiFID classification). The recipient of this publication should not presume that the information contained herein is sufficient to make investment decisions. Any loss or other consequence arising from the use of this publication shall be the sole and exclusive responsibility of the investor and CARAX accepts no liability for any such loss or consequences. Prices and availability of financial instruments are subject to change without notice. Past performance is not guarantee of future performance. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of CARAX. This document is published and distributed in France in accordance with the laws and regulations in force. Laws and regulations of other countries may also impose restrictions on the distribution of this document. It is the sole responsibility of any recipient of this document to comply with all applicable legislation or regulation. Recipients in possession of this document must keep informed of such legal restrictions and comply with them.