CitiFX Technicals

The 12 Charts of Christmas

December, 2011

A very warm Season’s greetings to all our readers and best wishes for a healthy and prosperous 2012

The CitiFXTechnicals team

Please note that publications between now and the holiday period will be on an ad hoc basis.We anticipate regular commentary to resume in the New Year

CitiFX Technicals–Market Commentary

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Inthisnotewegiveyouour12chartsofChristmas.

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Thesearethe12mostimportantcharts(inourview)thatestablisha“startingpoint”forourviewsonmarketsasweheadinto.

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Asalwaysthiswillcontinuetobeaworkinprogressoverthecourseof2012,butthepagesaheadgiveyouasenseofourstrongestcoreviewsasweheadintonextyear.

“”:

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TheDJIA/S&Ptohaveanintrayeardrawdownof20%+andfinishtheyeardownadoubledigitpercentage(13-17%).Result:Hightolowdrawdownof21.6%betweenMayandOctoberintheS&Pandjustover19%intheDJIA.Unlikelytoachieveadoubledigitdowncloseontheyearatthispoint.

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U.S.10yearyieldstorisetoatleast4%andquitepossiblybackover4.5%.Result:Peakof3.77%veryearlyintheyearbeforeafallto1.67%.YieldcurvepriceactioninApril-Maystronglyquestionedthisview.

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CommoditiestorallystronglywithCrude(WTI)headingbackover$100andGoldabove$1,700.Result:Crudehitapeakof$114.83inMayandGoldpeakedat$1,920inSeptember.

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EURUSDtorallydoubledigitpercentages(11%)andtheUSD-indextodropabout8%.Result:EURUSDralliedtoapeakof1.4940inMay(11.6%)andtheUSD-Indexfellto72.696(Fallof8.01%)

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Datatoimprovebutastruggletogetstrongtrendinggrowth.Inflationconcernscouldstarttomaterialisetowardsthelatterpartoftheyear.Growthremainssubdued.Inflation,whilenotyetaconcernatofficiallevelshaspickedup.

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Creditoverhangmaymakeanyrecoveryheremoresubduedthan1976-1978.Sofarthisappearstobetrue

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Overallnotabadresultinourview.ThebigMisswasinfixedincome.TheperformanceoftheyieldcurveinApril-Juneandtheyieldchartsingeneralthereafterdidleadustobackawayfromthisviewaroundmidyear.

CitiFX Technicals–Market Commentary

(Note: All expectations in this document for 2011 were the views of the CitiFX Technicals team. They in no way constituted official Citigroupviews.)

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What do we believe for 2012?

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EURUSDwillfalltowards1.20inQ1,2012andpossiblyeven1.10-15inthesummerbeforebouncingback towards1.2000+.WealsoexpectarallyontheUSD-Indexthisyearofabout15%whichsuggeststhatthismovewillbepredominatelydrivenbyEURUSD.(57.6%oftheUSD-Index).

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U.S.10yearyieldswillfallcloseto1.25%with30yearyieldspossiblytradingbelow2%asU.S.interestrate curvesflatten.Atthatpointtheycouldbouncelikea“beachballletgounderwater”.

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Goldmayinitiallydiptowards$1,600andpossiblyabitlowertowards$1,550beforeturningandrallying,.,-,butwouldnotalterourbigpictureview.

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CrudeOilisunlikelytotrademuchlowerthanthemidtolow$80’slevel(Ifeventhat)beforerallyingtobreakthe2011highandpossiblyheadingclosetothealltimehigh

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TheS&P500willdroptowardsthe960-1,015area,probablyintheearlypartoftheyear(First3-4months) beforea20%bounceandfinishtheyeardown3-6%.challenging.(Note All expectations in this document for 2012 are the views of the CitiFX Technicals team and in no way

CitiFX Technicals–Market Commentary

constitute official Citigroup views.)