Weekly Market Strategies

An Economic Newsletter
Contributing Research Staff: Dr Jan Vandersande, Mike King

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COVERING:
Stocks ■ Bonds ■ Interest Rates ■ Natural Resources ■ Currencies ■ Venture Cap■ Gold

Morning Comments – May 4, 2009

Market Laboratory --- Weekly Changes

Dow Nasdaq S&P 500 Transportation Russell 2000 Nasdaq 100

8,212.41 1,719.20 877.52 3,152.39 486.98 1396.62
+136.12 +24.91 +11.29 +14.63 +8.24 +23.34
+1.7% +1.47% +1.30% +0.47% 1.72% +1.70%
Gold Silver Crude Heating Oil Unleaded Gas Natural Gas
887.60 1250 53.20 138.84 1.5174 3.546
-26.00 -45 +1.65 +0.26 +.0699 +.144
-2.9% -3.3% +3.1% +0.19% +4.8% +4.4%
VIX Put/Call Ratios Put/CallRatios Bonds 10 Yr Note Copper
35.30 OEX CBOE Equity 122-05 120-24 210.10
-1.52 104/100’s 63/100’s -2-02 -255 +5.10
-4.1% +23/100’s -7/100’s (4.07% +0.19%) (3.15% +0.16%) +2.5%
CRB Inflation Barron’s Confidence S&P100 5 Yr Note Dollar
Index Index 408.48 117-03 84.55
229.04 60.6% +6.02 -06 -0.20
+6.18 +5.3% 1.50% (2.01%+ 0.08%) -0.2%
+2.8%
AAII Bullish Bearish Neutral
Confidence 36.1% 43.6% 20.3%
Index +4.3% +5.0% -9.3%

----------------------------------------------------------------------------------------------------------
 Fundamental News

First quarter earnings are exceeding meager expectations. With more than half having reported, 65% beat
analysts’ estimates. Earnings are bad, off 30 or more percent from a year ago, but the forward look hints of
recovery. Most of the better results came on the back of cost-cutting and massive job cuts rather than top-line
growth. Nasdaq prolonged its winning streak marking an eighth straight up week. Many tech companies utilized
cost cutting and lay-offs to reduce costs, bolster earnings amid slow revenues. Google ( GOOG: $ 393.69 )
+4.20 or +1.1% for the week, profits rose 9% for the quarter because of cost-cutting as revenue grew although
at its slowest pace in their history.

Auto sales in April were worse than expected falling to their lowest level in three decades. GM sales fell 34%,
Ford’s 32% while Toyota posted a larger drop of 42%. Chrysler reported a 48% drop and is idling most vehicle
production.

Airlines posted horrible losses. UAL Corp lost $ 1.2 billion and AMR the parent of American airlines lost $ 375
million. Both companies benefitted from lower fuel costs but lost so much money in poor fuel hedging at very
high prices that there was little net gain even with cost-cutting. Low cost better-managed smaller companies Jet
Blue and AirTran were able to post profits.

Many stocks have generally reported encouraging news. However, while they have been able to improve profits
by cost-cutting there is no indication that a transition to growth has happened yet. The Barron’s Confidence
Index jumped 5.3% to 60.6%, its highest level in many weeks.

Still there are opportunities everywhere to invest at prices that we might not see for another generation but
prudence , patience and selection is the name of the game.

Economic news

The Institute for Supply Management’s manufacturing index for April rose 3.8 points to 40.1, well above
expectations of 38.4 and weak March figures of just 36.3.The improvement in April was driven by a jump in the
new orders segment to 47.2 from 41.2 last month and 32.9 in December. The dividing line between expansion
and contracting in the manufacturing sector is 50.

Each Monday, except for two this year, has greeted traders with a dose of bad news. Last week it was the Swine
Flu outbreak. Last Sunday, Janet Napolitano, U.S. Homeland Security Secretary declared a “public health
emergency” in the U.S. as about 20 peopleat he time were confirmed to have been infected. The influenza
remained a headline throughout the week and by Friday the WHO announced that the worldwide total for
confirmed cases of the virus had risen to 331. Mexico reported 7 deaths and the U.S. one, while no other
countries reported deaths.www. A number of industries were adversely affected notably, travel and pork.
Hormel traded as low as $ 29.16/share, but closed the week at $ 31.31 up $ 0.67.

However, Tuesday morning Consumer Confidence came in a much better than expected 39.2 for April well
above the 29.7 consensus estimate. This huge positive enhancement turned the market around as traders soon
forgot about the swine flu pandemic. Then on Wednesday, although the GDP came in much weaker ( -6.1% vs
-4.7% ) but inventory contraction was so large ( -2.8% ) that traders soon realized that inventories were too low
and would necessitate manufacturing..
Crude prices rallied above resistance at $52 while gasoline prices have steadily risen just ahead of summer
driving season. Last summer, crude prices were just below $ 150/bbl, well above cost of production and at the
same time, reserves in the ground were enormous, with companies rushing to produce and overproduce. Since
then the price has fallen dramatically to $ 40-50 a barrel, roughly close to the cost of production. The number of
rigs which are used to find oil and gas has dropped from roughly 1,900 to 900. In addition there is a decline
curve. The older a well becomes the less oil and gas it produces. In America, on average, 20% to 30% per year
is the decline we are experiencing in existing wells. Fewer new wells and the decline in older producing wells
only spells higher energy prices. Take advantage of this trading opportunity; look at the “DIG” and its options.

Economic Numbers and Media Data

Monday: Markets are closed in Great Britain and Japan where they will remain closed through
Wednesday. Many Brits are in Las Vegas where they attended the Hatton fight.
1000 hrs Construction Spending ( -1.4% vs -0.9% )
1000 Hrs Pending Home Sales ( Flat vs +2.1% )
Tuesday: 1000 hrs ISM Services ( 42.8 vs 40.8 )
Wednesday: 0815 hrs ADP Employment Advance guess ( -643K vs -742K )
0900 hrs Treasury makes quarterly Refunding Announcement
10:30 hrs:Crude Inventories 4/24 ( N/A vs +3857K )
Fed Chairman Bernanke and FDIC Chairwoman Sheila Bair are among speakers at the
Chicago Fed Bank Structure conference.
Thursday: 0830 hrs., Initial Unemployment Claims for week 5/02 ( N/A vs 640K )
0830 hrs Productivity Q1 ( 0.9% vs -0.4% )
0830 hrs Unit Labor Costs ( 2.5% vs 5.7% )

Friday: 0830 hrs Unemployment Rate ( 8.9% vs 8.5% )

Nonfarm Payrolls ( -620K vs -663K )
Hourly Earnings ( + 0.2% unchanged ) Workweek ( unchanged at 33.2 )

Index Option Recommendations (count for 5% in our model portfolio)

Two weeks ago we recommended buying the DOW May 84 Put (DAVQF) to play the expected pullback once
the high was made. We still expect that pullback. We are currently holding the option at a small loss. Place a
stop loss at half the cost of the option.
For investors it has continually been recommended that some puts are held to protect one’s portfolio (portfolio
insurance) against sharp market sell-offs. Buy new and/or additional positions on the expected rally into early
May.
For those who have no put options to protect your portfolio we recommended the following options, especially
on any rally: the DOW June 82 puts (davrd) or the June 84 puts (davrf) and the QQQQ June 34 puts (qavrh)
or 33 puts (qavrg).

For those of you who do not buy puts to protect your portfolio, there is an ETF that is the inverse of the DOW.
The symbol is DOG and goes up when the DOW goes down and down when the DOW goes up.

Stock Option Recommendations

All options count for 5% each for model portfolio calculations.

When the option has doubled sell half the position.
Stop Loss protection is offered with each trade.
The cost of the option is the asking price (or the price between the bid and ask, whichever is more
realistic) at the close the previous Friday or at the open on Monday.
The options will be followed until closed out.

Previous week’s recommendations

Option COST Date Sold Date Profit/(Loss)

ENZFZ 1.70 4/24/09
NGHQC 2.65 4/24/09
DAVQF 5.20 4/20/09
GGEE 3.00 4/17/09
QQQQI 2.60 4/20/09
STPQZ 2.00 4/17/09
SZSER 2.52 4/10/09
TGTQH 2.40 4/10/09
QCYEC 2.45 4/3/09 4.90 (half ) 4/3/09
QAVPF 2.13 3/30/09 0.50 stopped out 4/9/09 ( 77% )
TGTPG 2.19 3/27/09 1.15 stopped out 4/2/09 (47% )
BNQDZ 2.30 3/20/09 2.30 4/17/09 0%
QAVPE 1.90 3/20/09 1.50 stopped out 3/23 ( 21% )
XOKDC 4.40 3/13/09 7.50 (half) 3/19/09 65%
7.00 ( half 3/30/09
CHLDI 2.50 3/13/09 3.10 4/17/09 24%
QGJDV 2.10 3/13/09 3.40 4/17/09 62%
QCBDA 0.90 3/6/09 3.00 (half) 3/13/09 289%
4.00 (half) 3/30/09
NDQDU 0.70 3/6/09 1.85 (half) 3/16/09 204%
4/17/09
FPADF 6.35 3/6/09 9.00 (half) 3/13/09 52%
10.35 ( half) 3/30/09
DIJDL 4.80 3/9/09 9.40 (half) 3/16/09 111%
10.85 (half ) 3/23/09
FJJDW 2.95 2/27/09 4.80 (half) 68%
5.10 (half)
TBTDT 4.35 2/27/09 0.80 stopped out 3/30/09 ( 84% )
QBYDZ 0.70 2/27/09 0.50 stopped out 3/5/09 (29%)
XOKDW 4.35 2/27/09 2.60 stopped out 3/2/09 (40%)
GLDOV 5.50 2/20/09 8.30 (half) 2/26/09 35%
6.50 (half ) 3/20/09
ENZDZ 1.95 2/20/09 1.95 4/17/09 0%
DIJCS 5.05 2/23/09 2.90 stopped out 2/27/09 (43%)
TGTOF 2.40 2/13/09 4.05 (half) 3/9/09
4.80 (half) 3/2/09 84%
BHPCH 4.70 2/13/09 1.00 stopped out 3/2/09 (79%)

(Previous closed out option positions can be found in the February 23, 2009, January 19 2009,
September 15, 2008 and November 24, 2008 newsletters)
 Option Comments
We got within cents of the targets to take half profits on some of our option positions so we were unlucky.

New Recommendations

XLF- Financial ETF- 10.65- we have played this one several times and made money every time so we will try
again. Rallied from 6 to just over 11 in two months and looks like it wants to pull back so puts are timely. Buy
the June 12 Put -XJZRL- 1.87- for a move back to 9 and then possibly 8. Place a stop loss on the option if the
ETF closes over 12. Take partial (half) profits when the ETF is at 9.50.

COH- Coach Inc- 24.85- we have played this one before and made money so we will try again. Rallied from 12
to 25 in two months so is overbought and puts are thus timely. Buy the June 26 Put -COHRH- 2.75- for a move
back to 22 and then 20. Place a stop loss on the option if the stock closes above 27. Take partial (half) profits
when the stock is at 22.

MODEL PORTFOLIO
Each stock is allocated a 5% share of the portfolio (unless otherwise indicated).

We recommend a 10% position in ENZ and CAGC.

Stock Purchase Purchase Stop loss Price/Date Profit/(Loss)

Price Date Sold
GG 27.01 4/17/09 25
FXI 31.85 4/10/09 28
AMED 29.97 4/3/09 26
DUG 22.46 4/3/09 20
BOOM 5.23 3/6/09 4.00 14.18 half
(4/20/09
NGLS (10%) 8.67 11/28/08 6.00 .9.70 (4/20/09) 18%
ENZ (10%) 4.29 11/21/08 2.50
CAGC (5%) 1.35 9/19/08 0.40
CAGC (5%) 0.75 11/17/08 0.40
MTBR 0.09 6/29/08 0.02

( Previous closed out positions can be found in the March 23 letter )

New Stock Recommendation

SPNG- Spongetech Delivery Systems- 0.0197- we will try a low priced speculation this week. The company
could have revenues of as much as $80 million this year and should be profitable. Has 723 million shares
outstanding. It has been running commercials for its car wash sponge on CNBC. Sell half at 0.03 and place a
stop at 0.013. It is speculative and volatile, so beware.
 Model Portfolio Comments/Changes
Some of our recommendations such as BOOM and AMED are doing great.

Technical

In the past few weeks we have been writing that the lows made on Tuesday April 7 were the key to the near
term bullish case. These lows are at DOW: 7,750, S&P 500: 814 and QQQQ: 31.21. The market this week held
above those lows and the April 21 intraday lows at DOW: 7,791, S&P 500: 826 and QQQQ: 32.08 and
continued rallying. We are now in our cycle high time frame of late April/early May so we must be on the watch
for a top. It is possible that the highs on Thursday April 30 at DOW: 8,308, S&P 500: 889 and QQQQ: 34.90
were the cycle highs. On that day the S&P 500 actually traded above the January, February and April highs at
875-878 (getting up to 889 intraday) but could not close above those highs. On Friday the S&P 500 closed at
877.52, right in this band of resistance. We wrote two weeks ago that the S&P 500 (and other indices as well)
had formed a very well defined rising wedge formation (which is a bearish formation). On April 20 the S&P
500 broke down out of this rising wedge formation, a very bearish breakdown. When such a breakdown occurs
the market either accelerates to the down side for a few days or rallies back to the underside of the rising wedge
formation. The latter occurred twice the previous week and again last Thursday and each rally got exactly up to
the rising broken trend line. The market should now move to the down side if it is going to confirm the
breakdown. Closes below DOW: 7,939, S&P 500: 847 and QQQQ: 33.26 would be the first indication that the
sell off had started. If these levels hold then the market will rally further. The end of the month window dressing
and the beginning of the month 401k and pension money investment should almost be over, reducing some of
the buying pressure. There has still been a lot of call option buying (although not as much as previously)
showing too much optimism (low put/call ratio) confirming the likelihood of a down move soon. If the April 21
and then the April 7 lows are broken then there is support at the March 30 lows at DOW: 7,437, S&P 500: 779
and QQQQ: 29.65 and then at the March 20 lows at DOW: 7,257, S&P 500: 766 and QQQQ: 28.98. As long as
the April 21 lows hold the rally could continue this week. If there are closes the April 30 highs then the upside
targets are DOW: 8,400, S&P 500: 900 and QQQQ: 36.00. Once the pullback is over, whether it is sharp or
shallow, we expect higher prices into an intermediate cycle in July. A pullback that breaks the support at DOW:
7,437 S&P 500: 779 and QQQQ: 29.65 would show market weakness much greater than we expect at this time
and the lows at DOW: 6,979, S&P 500: 724 and QQQQ: 27.71 could then be tested. The parameters to watch
are thus very clear and let the support and resistance levels govern your trading and your stops.
We are in a bear market that appears to be far from over and we expect lower prices later this year. However,
every bear market has several good rallies that can last from a few weeks to a few months and are definitely
worth playing. We are in one of those rallies now.

This is no doubt that we are in a severe recession which could get worse and last longer than expected. The
prestigious Economic Cycle Research Institute has stated that the economy is in a severe recession and no end is
yet in sight, even though the downside momentum has slowed. In 1930 and 2001 the Fed kept on cutting rates
but could not prevent a recession/depression. The Fed might again be pushing on a string. So this is a time to be
very cautious. Keep tight stops on long positions.

The support and resistance levels to watch now are: S&P 500: support is at 847, then 826, then 814, then 779,
then 766 and then 724 while resistance is at 876-878, then 889 and then 944 for the QQQQ: support is at 33.30,
then 32.08, then 31.21, then 29.65, then 28.98 and then 27.71while there is resistance at 34.90 and then 36.15
and for the DOW: support is at 7,939, then 7,791, then 7,759, then 7,437, then 7,257, then 6,979 and then 6,450
while there is resistance at 8,315 and then 8,406.
 Cycles
We had an intermediate-term cycle due in late February/early March (plus or minus a week) and the low came
in on March 6/9. The next important cycle is due now in late April/early May (plus or minus a week) and it will
be a high. The cycle following that one is a short term cycle in mid/late May (expected to be a low) and then an
intermediate cycle due in early/mid July (expected to be a high).

Rule 17B requires disclosure of payment for investor relations

Princeton Research has received about $ 2,500 per month from MTBR with asterisk.
MTBR is reviewing a contract which would pay $ 2,500 per month plus some restricted shares.
The main principal of Princeton Research has obtained his own shares amounting to 2,500,000 shares.

Mike King
Princeton Research
e-mail: mike@princetonresearch.com
Phone: (702) 650-3000
Fax: (702) 697-8944
3887 Pacific Street
Las Vegas, Nevada 89121

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