UBS Wealth Management Research / 14 November 2007 ab

Technical Strategist

Technical Take Chief Technical Analyst Peter Lee

This technical report is intended to keep our readers abreast of key technical developments Contents Page in various financial markets. The objective is to address the macro markets and identify upside potential and downside risks for these major financial markets. Some of the trends U.S. Equity Market discussed will be shorter-term (i.e., cyclical) and as such are for traders and/or shorter-term S&P 500 Index – Monthly and Breadth Charts 2 investors. Others will be longer-term (i.e., secular) that may encompass many years and S&P 500 Index – Weekly and Breadth Charts 3 possibly numerous business cycles. We hope this technical discussion will address some of the key issues and concerns facing investors and traders today opening the door for further S&P 500 Index – Corrections/Monthly Regression 4 discussions on specific financial markets. All charts and data are sourced from Reuters S&P 500 Index – Daily and weekly Regression 5 S&P 500 Index – Daily Regression Analysis Study and Weekly and are as of 9 November 2007. 6 Fibonacci Retracement Study

S&P 500 Index – % of SPX Stocks above 26-week ma – 7 U.S. Equity Market: Weekly and Monthly The Oct 11th to Nov 12th pullback or -8.73% decline is the third correction so far this year CBOE Index (VIX) – Monthly and Weekly 8 for SPX. So is this the start of the cyclical bull decline as so many of the bears have been Dow Jones Industrial Average – Regression/Daily 9 suggesting? It is easy for us to turn negative on SPX given the negative monthly/weekly NASDAQ Composite Index – Retracement/Weekly 10 breadth readings, length and maturity of cyclical bull rally (i.e., 61 months old) and Indexed Studies between SPX and 11 deteriorating macro conditions (i.e., falling Dollar, rising commodity prices, credit problems NASDAQ Composite – Monthly and Daily and others). However, we would like to remind investors/traders that calling a market top Indexed Relative Strength Studies between S&P Citigroup Growth Index (SGX) and S&P Citigroup Value Index (SVX) – has been extremely difficult. Although we believe this is a matured cyclical rally that will 12 Monthly, Weekly and Daily eventually end, nonetheless, our current technical indicators suggest SPX Index is trading at S&P Citigroup Growth and Citigroup Value Index 13 fair value and can still stage a sustainable year-end to early 2008 technical rally. Favorable Currency Market seasonality factors and 4-year US Presidential Election Year cycle is in place. Also our key U.S. Dollar Index – Monthly and Daily Charts 14 technical indicators/studies such as the monthly/weekly linear regression studies and the % of SPX trading above 26-week ma favor another technical rally. One of Euro/Dollar and Yen/Dollar – Daily Charts 15 the primary reasons we have not yet thrown in the towel despite the widespread Fixed Income Market uncertainties in the marketplace is the ability of SPX to retain a higher-low pattern as Global Yield Curve – G7 Countries 16 represented by August 07 reaction low (1,370.60) trading above March 07 reaction low U.S. Treasury Yield Curve 16 (1,363.98). As long as this holds true we will respect the primary trend. Key technical 10-year Treasury Yield – Long-term Regression Study and 17 support levels: initial support=1,427-1,439 and secondary support=1,363.98-1,370.60 and Weekly TNX Chart Analysis intermediate-term support=1,330-1,340. Key resistance levels: initial supply=1,496-1,520, Daily TNX and 2-year Treasury Yield Regression 18 secondary supply=1,555-1,576 and intermediate-term supply = 1,585-1,600. Spreads between 10 & 2-year U.S. Treasury Yields 19 Currency Market: US Dollar Index continues to trade lower. Although an oversold Current FED Funds Pricing Table for 2007-2008 19 condition has been evident over the past few months there is no technical evidence of a Commodities Market major reversal. To generate an initial reversal, US Dollar Index still needs to trade above the Year to Date returns for CRB Index Components 20 high-70s-to-low-80s. A decline below recent Nov 07 low of 75 opens the door for Inverse Relationship between SPX & CRB – 1914 20 downside targets to 72-73 and possibly as low as 67-68, over time. This suggests longer- CRB Index – Monthly and Daily charts 21 term EURUSD target to 1.55-1.56 is possible and JPYUSD achieving close to par value. DJ AIG Commodity Index (DJP) 22 Fixed Income Market: DB Commodity Index Tracking Index (DBC) 22 The 10-year Treasury yields (TNX) recently violated a key support near 4.4%-4.6%, confirming a head and shoulders top and four-year uptrend. This development renders PowerShares DB Agriculture Funds (DBA) 22 downside targets to 3.8%-4.0% level or the mid-point of a monthly regression band as Crude Oil, Gold and Copper Futures 23 well as late-2004 and 2005 lows and head/shoulder top projections. Platinum, Palladium and Silver 24 Commodities Market: International Market Key commodities indexes have broken out of major technical basing patterns. This sets the MSCI EAFE, Nikkei 225 & MSCI Emerging Market 25 stage for phase 2 of the long-term secular bull trend in commodities. However, near-term Indexed Relative Strength between SPX and MSCI EAFE, 26 overbought conditions suggest high level consolidations before resumptions of up trends. Nikkei 225 and MSCI Emerging Market International Market: EAFE Index and MSCI Emerging Market Index continue to outperform the SPX Index from a relative strength perspective. The Nikkei 225 Average is struggling within a trading range.

THIS REPORT HAS BEEN PREPARED BY UBS FINANCIAL SERVICES INC. ("UBSFS"). UBS Wealth Management Research / 14 November 2007

3 negative 2 negative outside months: outside months: 1/00, 7/00, 9/00 2/07 and 7/07

10-month ma = 1,480 30-month ma = 1,355

Double Top or a V-type breakout? SPX has traded marginally above 3/00 high of 1,553.11 on 7/16/07 at 1,555.90 and on 10/11/07 at 1,576.09. Does this action then confirm a major technical breakout rendering long-term SPX projection to 2,338? Not necessarily. On 2000, 3 negative outside months (i.e., 1/00, 7/00 and 9/00) alerted investors to an impending major market top. 7 years later we note that 2 negative outside months have quietly appeared (i.e., 2/07 and 7/07). Given the maturity of the current 61-month cyclical bull rally (2nd longest since 1920s) and the lack of market breath coupled with deteriorating macro conditions is a major top developing? Calling a major market top is difficult but repeated failures to breakout above 1,555.90-1,576.09 accompanied by violation of Mar/Aug 07 lows at 1,363-1,370 warns of a potential top.

Negative divergence between monthly SPX price and breadth charts warns of lack of broad market participation. SPX has rallied to new high on 11/07 (1,576.09) on the backdrop of handful of S&P Sectors. However, the cumulative monthly advancing issues minus declining issues chart continues to trend lower. This non-confirmation between price and breadth charts does not support the basis for the start of a long-term secular bull trend as so many of the bulls have claimed. Rather, we believe this implies a matured cyclical bull rally that may be nearing an end. The negative divergence and non-confirmation also developed during 1998-2000 just before the Tech/Telecom bubble burst.

Technical Strategist 2

UBS Wealth Management Research / 14 November 2007

This weekly chart is important as SPX has broken out of a major 3-year uptrend channel late last year. The channel breakout has led to several new records highs including July and Oct 07 highs. Historically, after an accelerated breakout the market in question often rallies sharply higher before returning to the top of its breakout channel. The ability of SPX to find support near the top of its uptrend channel may attract buyers to remerge leading to the resumption of the primary uptrend. This has occurred twice as SPX found key support on pullbacks during March 07 (1,363.98) and again on August 07 (1,370.60). Despite the recent market turmoil, the ability of SPX to maintain this uptrend channel currently rising at 1,440 will prevent bears from inflicting further damages. However, violation of the top of channel may trigger further selling a precipitous decline towards the bottom of channel now residing near 1,330-1,340. It is interesting to note that this support also coincides with Mar/Aug 07 lows at 1,363-1,370.

10-week ma = 1,511 30-week ma = 1,503

A Negative divergence is also apparent on the weekly chart as the SPX price chart has traded to an all-time high but the weekly breadth chart remains flat-to-down trending in the past 4-years. This discrepancy further supports the basis that the rally that started in earnest on October 2002/March 2003 is a cyclical bull rally rather than a secular bull rally. Waning market breadth, if it does not improve, warns of a matured rally and possibly impending trend reversal. Trading above 2005/2006 A/D chart highs confirm breakout.

Technical Strategist 3

UBS Wealth Management Research / 14 November 2007

July-Aug 07 = -11.91%

Average Correction (7 occurrences) = -7.81% October 11th to Present (11/12/07) = -8.73% Feb-Mar 07 = -6.68%

May-Jun 06 = -8.10%

Aug-Oct 05 = -6.23% Oct 07-present = -8.73% Mar-Apr 05 = -7.56%

Mar-Aug 04 = -8.81%

Jul-Aug 03 = -5.37% Since 3/03 market bottom SPX has endured 7 distinct corrections. The average correction has been -7.81% and lasting approximately 2 months. The frequency of corrections over the past 4 year tends to be 1-2 times per year. We note that this year alone SPX has suffered 3 corrections: 2/07-3/07 (-6.68%), 7/07-8/07 (-11.91%) and 10/11/07-present (-8.73%). Although corrections do not necessarily signal the onset of a major market top, increasing number of corrections may be a reflection of changing risk appetites. We would like to remind our readers that longer-term market trends are partly driven by structurally changes in investment psychology. Historically, a normal correction is defined as a decline of 5%-10% from the top. A severe correction is denoted by a decline of 11%-20%. A correction exceeding the 20% threshold is often classified as a bear market. A 10% correction brings SPX closer to 1,418.48 or just below the Mar/Aug 07 bottoms.

This long-term linear regression study on SPX suggests the market is extended or statistically expensive near the top of its 2- regression band at 1,721. Conversely, SPX is undervalue or statistically cheap as it nears the bottom of its band at 1,053. The equilibrium level or SPX’s fair value is now residing at 1,387. Based on current last sale of 1,453.70 SPX is neither expensive nor cheap but fairly priced, at least from a long-term statistical perspective. If this is true then does this imply the onset of a long-term secular trading range market environment? During the past two corrections on Feb-Mar 07 and July-Aug 07, the midpoint of the long-term regression band acted as key support repelling selling pressures. Will SPX soon retest this important level? And, most important, will SPX stage another impressive rally from this level?

Top of Band = 1,721 Middle of Band = 1,387 Bottom of Band = 1,053

Technical Strategist 4

UBS Wealth Management Research / 14 November 2007

30-day ma = 1,529 50-day ma = 1,516 150-day ma =1,502

The lack of a follow-thru to the 10/11/07 breakout is discerning, near-term. Also a negative outside day on 10/11/07 signals a short- term consolidation or corrective phase. Recent violation of trading support at 1,484-1,490 or June and Oct 07 lows may have negated a potential head and shoulders bottom and opens the door for a decline towards 1,449.10-1,461.57 or Apr 07 breakout and 61.8% retracement from Aug low (1,370.60) to Oct high (1,576.09). Below this support zone suggests a retest of early-Aug/late- Aug and Sept 07 lows near 1,427-1,439 or -9.46% from 10/11/07 high. Must hold onto this key near-term support or SPX may retest pivotal intermediate-term support at 1,363.98-1,370.60 or Mar/Aug 07 lows. Initial resistance is 1,496-1,520 or key ma and Oct 07 lows. Secondary supply is 1,555-1,576 or Jul/Oct 07 highs and then 1,585-1,600 coinciding with 2001-2004 technical base breakout measured move and psychological number. Optimistic projection remains 1,640-1,650 under ideal market conditions.

As we have reported in a prior technical report it is very unusual to find the midpoints of the weekly and monthly linear regression levels converging at almost identical levels. Often these levels differ because of different time frames. It is also striking that the top and bottom of regression bands for these two time frames are also similar. The midpoint of the regression band for the weekly regression is residing at 1,385 as compared to the monthly regression midpoint at 1,387. So is this an anomaly, a coincidence, or subtle indications that major intermediate-term support is available here? In any event, we recommend investors and traders monitor this important support as Mar/Aug 07 reaction lows are also converging around this level.

Top of Band = 1,782 Middle of Band = 1,385 Bottom of Band = 987

Technical Strategist 5

UBS Wealth Management Research / 14 November 2007

Top of Band = 1,598 Middle of Band = 1,525 Bottom of Band = 1,452

SPX have traded to the top of its daily regression bands 3 times this year on June, July and most recently on October. Each time SPX suffered subsequent corrections after failing to breakout above the top of its 2-standard deviation regression band. The current correction partly resembles the July-August setback as failed attempt to trade above the mid-point of the band led to another sharp downturn. Key initial resistance is now evident near the best fit line at 1,520-1,525. The ability to trade above this pivotal supply may lead a year-end rally resulting in a retest of the top of band near 1,598. Similar to the Aug 07 correction SPX is now trading just below the bottom of its daily band at 1,452. This suggests that from a near-term perspective SPX is oversold or has become statistically cheap/undervalue at current levels. A technical rally, if it develops, may bring SPX to the middle of the band at 1,520- 1,525. Above 1,525 is likely to attract investors to return igniting a rally back to the top of the band at 1,598.

23.6% retracement = 1,385.53

38.2% retracement = 1,267.64

50% retracement = 1,172.36

61.8% retracement = 1,077.08

The Fibonacci retracement theory has been uncanny in helping to identify key levels over the past few years. After a major rally the market in question almost always retraces a part of its prior move before resuming its primary uptrend. Convincing violation of 1,440 +/- 10 or the top of its uptrend channel may trigger the onset of the retracement process. Under adverse conditions, SPX may fall to the 50%-61.8% retracement level. The initial retracement is 23.6% level or 1,385.53. Although this is not a popular retracement we note this level marked the end to Mar and Aug 07 corrections. The pivotal 38.2% retracement or key intermediate-term support is at 1,267.64. Under severe selling pressure SPX can decline as low as the 50%-61.8% retracement level of 1,172.36-1,077.08.

Technical Strategist 6

UBS Wealth Management Research / 14 November 2007

2

6/02/03= 92.8% 1/12/04= 91.0% 12/27/04= 90.2% 2/12/07= 86.2%

10/1/07= 58.4%

3/12/07= 52.0%

11/5/07= 10/17/05= 39.6% 32.7%

4/11/05= 31.4% 7/10/06= 30.6% 2/3/03= 25.0% 7/10/04= 27.9% 8/13/07=28.2% 9/03/07=28.9%

This technical indicator has identified bullish/bearish market conditions associated with key market tops/bottoms in the past 4 years. Major SPX tops often occur near 90.2%-92.8% readings and SPX bottoms often occur near 25.0%- 31.4%. This overbought/oversold indicator has recently fallen from a high of 58.4% on 10/1/07 to a current level of 32.7%. This indicator is now reaching levels associated with previous bottoms in the mid-20s-to-low 30s. Will this lead to another rally soon?

The monthly technical indicator has also accurately forecasted extreme OB/OS levels associated with major market bottoms and tops. During Emerging Market crisis this indicator fell to an extreme reading of 9.0% (8/98) before recording a major bottom. Most recently during the Tech/Telecom bubble of 2000-2002 this indicator traded to an extreme level of 7.6% on 9/30/02 confirming a mid-term election year low. If this OB/OS indicator does not maintain the 25.0%- 31.4% level can we then expect SPX to trend down towards the extreme levels of the past cycles? 10/07 = 58.4%

11/07 = 32.7%

8/98= 9.0% 9/30/02=7.6%

Technical Strategist 7

UBS Wealth Management Research / 14 November 2007

Rising implied volatility as represented by VIX Index indicates increasing concerns/fears from the investment community. Conversely, declining implied volatility is often a reflection of optimistic or bullish investment sentiments. So what is the VIX telling us about current market conditions? From 2003-2006 SPX implied volatility has been relatively low, at least by historical standards. This low volatility subsequently led to the start of a cyclical bull rally. In fact, during the late 2006 timeframe, VIX fell to an extreme level of 9.39 or close to 8/4/94 historical low of 8.2 before finally reversing direction. During the summer 2007 a major technical breakout above the low-to-mid-20s signaled the onset of higher volatility. Since the Aug 07 breakout VIX has become increasingly erratic as evident by a sharp decline in late-summer to early-fall 2007 and another explosive surge from October to present. We believe volatility will likely increase as investors become increasingly concerned about market conditions. The adjustments of new volatility bands may be required. The Aug 07 high at 37.50 marks the top of the trading band. A convincing surge above this key supply can lead to VIX trending to high-40s to low-50s or the area coinciding with the extremely volatile periods during 1989, 1997-1998, and 2001-2002 time frames. The bottom of the volatility range is visible in the mid-to-high-teens or the 10/30-month ma and prior low.

Extreme High = 171.52 (10/20/87) Extreme Low = 8.20 (8/04/94) Current Level = 28.50 10-month ma = 18.55 30-month ma = 14.47

VIX is now approaching near-term resistance in the low-30s. A breakout above this supply may lead to a retest August 07 high at 37.50. Under adverse market conditions VIX can also trade to the low-40s to retest the late 2002 volatile time frame. Under severe selling situations investors can send VIX back to past extreme levels in the high-40s to low-50s range. Sharply rising implied volatility may imply a market sell-off. On the other hand, failure to convincingly breakout above the low-30s may help contain recent selling pressure. As implied volatility begins to subside to a more normalized level in the high-teens to-low-20s investors may begin to return to the marketplace leading to another potential rally.

10-week ma = 21.68 30-week ma = 18.85

Technical Strategist 8

UBS Wealth Management Research / 14 November 2007

Top of Band = 12,306 Middle of Band = 8,110 Bottom of Band =3,914

On 1/00 DJIA traded 9.93% above the top of its 2-standard deviation regression band. This action alerted investors to an extreme overbought condition and subsequently marked the top in cycle. During the same month a negative outside month developed. Also a rare diamond type pattern appeared. In hindsight there were amble warnings to suggest DJIA was nearing the end of its 18-year secular bull trend. In 2007 we note DJIA has traded above the top of its long-term regression band. Today, DJIA stands at 15.52% above the top of its monthly regression band during DJIA Oct 07 rally to 14,198.10. In addition, a negative outside month developed on 1/07. There are two interpretations to this technical condition. The bullish scenario is the DJIA is now transitioning into a new structural bull market. The bearish scenario is DJIA is the 61-month cyclical bull rally has ended. Narrowed breadth readings, selective buying, and volatile price swings, if they continue, warn of the maturing of the cyclical bull. DJIA remains a price weighted index and as such is heavily influenced by higher priced DJIA stocks. It is interesting to note in 2000 DJIA set a major top on 1/00 nearly 2 months before other key US indexes. The top of the regression band at 12,306 may act as key support on pullbacks. Violation here may send DJIA to midpoint of its band at 8,110.

Although DJIA has rallied sharply to yet another record high on 14,198.10 (10/11/07), it appears that a pattern remains intact. This pattern is often characterized by erratic price movements with heavy during each peaks and bottoms. This pattern is indicative of a market that often lacks sustainable sponsorships. Although DJIA did not trade to the top of its broadening top projection of 14,900, recent failures to confirm Jul 07 highs is troublesome as this signals a corrective phase. Minor support is..

30-day ma = 13,790 50-day ma = 13,693 150-day ma = 13,474

…evident near 13,407-13,474 or Oct 07 low and 150-day ma. Recent break of support here has now resulted in a decline towards 13,052-13,022 or the late-Aug/Sept 07 lows. Failure to maintain support here opens the door for further selling and a decline towards 12,800 corresponding to April 07 breakout and the bottom of broadening pattern. Key intermediate-term support remains near 12,517.94 or the Aug 07 bottom. The reaction lows of March 2007 at 11,939.61-11,750 is also important support from an investment perspective as this level is associated with 3/14/07 reaction low, 30-month ma and pivotal 2006 technical breakout. Violation here confirms a lower low pattern and sets into motion the start of a major correction or worst, the start of a cyclical bear decline. Initial supply is 13,400-13,500 and then 14,021-14,198 or Jul/Oct 07 record highs.

Technical Strategist 9

UBS Wealth Management Research / 14 November 2007

The Fibonacci Retracement study has accurately forecasted key support and resistance levels in the past. As we have mentioned in prior technical reports we believe after a major downturn (i.e., 2000-2002) there is a tendency for the market in question to retrace a portion of its prior decline via retracement. A 38.2% retracement from 2000 high of 5,132.52 to the 2002 low of 1,108.49 brings NASDAQ to 2,645.67. Above 38.2% retracement can often lead to a retest of 50% retracement or 3,120.51. Note the sideways multi-year basing pattern from 2001-2005 and the subsequent breakout during 2006 renders technical projection to 3,000. During strong rallies the index in question can rally as high as 61.8% retracement or 3,595.34 before encountering formidable resistance. Since COMP.Q is market-cap weighted towards the Technology sector (45% market-cap) we believe the sustainability of the COMP.Q rally will depend heavily on future performances of Technology and Growth sectors.

61.8% retracement = 3,595.34

50% retracement = 3,120.51

38.2% retracement = 2,645.67

10-week ma = 2,709 30-week ma = 2,626

The 3-year uptrend channel near 2,525-2,550 in April/May 07 still remains intact. This key breakout continues to project targets to 2,645 or the 38.2% retracement of the 2000 to 2002 rally and then to 2,800-2,850. COMP.Q successfully achieved both of these technical targets in the past few months. Based on 3-year channel breakout of nearly 400-410 points we still expect COMP.Q to return to 2,950-3,000, intermediate-term and possibly towards 3,120.51 or 50% retracement. Our longer-term projection to 3,595.34 or 61.86 retracement is achievable under ideal market conditions. Although we retain a bullish biased on COMP.Q the volatile nature of this particular market warrants risk management strategies. Supports are defined as follows: Violation of initial support near 2,700-2,725 suggests a retest of secondary support near 2,625-2,650 or Oct 07 low and July 07 high. 2,490-2,531 or early to late Aug 07 lows and Feb 07 highs provide further support. Intermediate-term support remains at 2,331.57-2,386.69 or 3/07 and 8/07 bottoms, 30-month ma and pivotal April 06 technical breakout. Investment-term support is available near 2,200 or the bottom of its 3-year uptrend channel.

Technical Strategist 10

UBS Wealth Management Research / 14 November 2007

The Tech/Telecom bubble burst from 2000-2002 soon led to a long-term trading range over the past next 4 to 5 years which is common after previous selling climaxes in the past. Although we do not expect the NASDAQ market to return to the same leadership role as in the prior cycle (1990s to 2000 bull trend) we believe this long-term indexed relative strength provides clues as to the re- emergence of NASDAQ market as it relates to SPX. A convincing surge above 143-144 level is technically significant as this action confirms a long-term trading range breakout and suggests investors returning to this key market. On the other hand, repeated failure to surge above this key supply may result in the continuation of a trading range environment. The bottom of its secular 143-144 or the top of its long- range is 127-128 and then 121-122. term range from 1996/2003

Current level = 139.04 (11/07)

Since May 2007 COMP.Q has outperformed SPX, at least from an indexed relative strength perspective. However, this out performance cycle has recently slowed to 105.2% during the recent market downturn. Despite NASDAQ’s sharp decline last week we remain encouraged by this relative strength chart as long as the short-term up trend lines near 103-104.5 are not convincingly broken. The ability to find trading support here may help to contain further 108.41 selling and signal another out performance cycle. A positive divergence signal similar to the 11/7/07 July-Aug 2007 timeframe may once again alert us to another key buying opportunity in the NASDAQ marketplace. Until then we maintain a cautiously optimistic view and wait for further technical signs before taking decisive actions.

105.20 11/9/07

Technical Strategist 11

UBS Wealth Management Research / 14 November 2007

This indexed relative strength analysis Given nearly 7 years of between S&P Citigroup Growth Index underperforming Value stocks (SGX) and S&P Citigroup Value Index we now believe this monthly (SVX) shows large-cap growth relative strength study investing now outperforming value. We substantiate our bullish call on find it interesting that this out large-cap Growth over large- performance cycle promptly started on cap Value. The recent 5-year May/June 2007 when Technology and downtrend channel breakout Telecom stocks assumed market suggests SGX may outperform leadership after lagging for years. SVX for the foreseeable future.

This weekly indexed relative strength analysis also offers technical evidence to support the basis for continued growth style investing (SGX) over value style investing. A 3-year downtrend channel breakout during the week of 7/16/07 also reaffirms the start of an investment shift towards large-cap growth.

Higher-lows and higher-highs and a major near-term channel breakout in late Oct 07 reaffirms investors are still favoring large-cap growth over large-cap value. After surging to 107.29 on 11/7/07 the daily indexed strength line has pulled back to a current reading of 105.59 or indicating SGX has outperformed SVX by 5.59% since earlier this year (Jan 07). We believe the recent decline in daily relative strength back to the top of its channel breakout near 105 represents another buying opportunity to further shift allocation to favor the growth side.

Technical Strategist 12

UBS Wealth Management Research / 14 November 2007

Large-cap growth as represented by S&P Citigroup Growth Index (SGX) has emerged as a leadership group, in our view. The following key technical developments offer evidences to support this bullish call. A higher-low pattern has been confirmed via Aug 07 low (638.87) is higher than Mar 07 low (626.03). In addition to an accumulation pattern we note a key pattern in mid-Aug 07 (see circle) signals higher prices. Although near-term violation of initial support near 700 may lead to further pullback possibly to 670-680 we believe SGX can still achieve near-term technical targets to 753.93 or the 61.8% retracement from 2000 high (972.11) to 2002 low (400.96). Intermediate-term target to 797.91 is based on Jul-Sep technical base of 79.52 points.

30-day ma = 718 50-day ma = 710 150-day ma = 696

30-day ma = 807 50-day ma = 803 150-day ma = 805

Although we are not outright negative on the S&P Citigroup Value Index (SVX) we note the relative underperformance of this index to its larger cap growth counterpart (SGX Index) in recent months. This lost of relative strength as evident by a lower-low pattern via Mar/Aug 06 and failure to breakout to new reaction highs further support our call of investors moving away from large-cap value to favor large-cap growth investing. We expect SVX to remain in a trading range scenario as defined by 730-750 to the downside and by 820-840 to the upside.

Technical Strategist 13

UBS Wealth Management Research / 14 November 2007

A long-term head and shoulders (h/s) top pattern remains intact on the monthly charts. This distribution formation reinforces our longer-term Head secular bear call on US Dollar Index. The recent violation of key neckline support near 78.43-80.5 corresponding to 1991, 1992, 1995, and 2004 lows reinforces bearish tendencies. Since this is a monthly chart failure to reverse above a major neckline breakdown opens the 10-month ma = 80.23 door for the start of another major down leg. Initial supply falls to 30-month ma = 84.84 79.5-80. Key secondary supply is now visible near 82-83.25 or Jun/Aug 07 highs and 1-year downtrend. Intermediate-term supply is in the mid-80s or 30-month ma and Jan/Feb 07 highs. Left Shoulder

Left Shoulder

Right Shoulder

Neck Line

30-day ma = 77.35 50-day ma = 78.12 150-day ma = 80.36

US Dollar Index is now trading at extremely oversold level, at least based on this daily chart. A technical rally can now be expected to initial supply coinciding with 30 and 50-day ma now declining at 77.35-78.12. However, we do not believe sustainable buying will emerge under US Dollar Index clears above pivotal supply near 79-80.5 or the top and bottom of down trend channel as well as the 150-day ma. Repeated failures to trade above resistance in the high-70s-to-low 80s accompanied by a break of 11/9/07 low at 75.02 may extend the downdraft towards 72-73. If selling continues we project intermediate-term downside targets to 67-68 based primarily on the measured projection based on the confirmed 2005-2006 head and shoulders top.

Technical Strategist 14

UBS Wealth Management Research / 14 November 2007

The weakness in US Dollar has led to a major uptrend channel breakout above 1.40. This channel breakout renders targets to 1.45-1.46. Our intermediate-to-longer term projection towards 1.5693 is based primarily on the 3-year ascending breakout above 1.3668 on July 2007. Although we believe higher prices are likely over time an overbought condition warrants a near-term consolidation phase possibly back to initial support near 1.4281-1.44 or prior Oct 07 breakout and the top of 1-year channel breakout. Secondary support rises to 1.40-1.4016 or the10/9/07 low. A convincing breakdown below 1.40 may trigger further selling and extend the correction towards 1.3839-1.3852 or July/Aug 07 highs. Intermediate-term support remains visible near 1.35-1.3552 or bottom of 1-year uptrend channel. Jun/Aug 07 reaction lows at 1.3264-1.3361 or a higher low pattern represents investment-term support as well as 1.2810-1.2899 or 30-month ma and Jan 07 lows.

30-day ma = 1.4309 50-day ma = 1.4152 150-day ma = 1.3765

Several key factors may lead to a sustainable longer-term rally in Yen: (1) Unwinding of the Yen Carry-Trade. (2) Relative economic/stock market recovery in Japan. (3) Onset of global risk aversion. So what are the charts telling us? A large multi-year symmetrical triangle pattern is intact. The ability to find pivotal support near its 9-year uptrend just north of 8.0 during Jun 07 10-month ma = 8.5088 decline coupled with 2005 downtrend breakout near 8.5 confirms an intermediate-term trend 30-month ma = 8.5955 reversal. Recent surge above Dec 06/Mar 07 highs at 8.7361-8.6830 as well as the recent breakout above Aug/Sept 07 highs near 8.9585-8.8797 reinforces intermediate-term recovery. The next major hurdle is to challenge key resistance associated with May 06 and Sept 05 highs at 9.1748-9.1933. Breakout here will return Yen back near par value at 9.8619-9.8328 or Dec 99 and Jan 05 highs. Initial support now moves up to 8.8-8.9 or prior November 07 breakout. Secondary support also rises to 8.4474-8.4803 or the 150-day ma and Oct 07 low. Intermediate- term remains at 8.0557-8.0876 or Jun/Jul 07 lows and corresponding 9-year uptrend. Investment term support remains at 7.3998-7.5 or the Jan 02 low and pivotal 17-year uptrend.

Technical Strategist 15

UBS Wealth Management Research / 14 November 2007

Despite widespread consensus view that there is a global synchronized economic recovery/boom this G7 global yield curve analysis paints a contrasting picture. It appears only two G7 countries (i.e., Italy and Japan) exhibit strong signs of sustainable growth patterns via normal yield curves (rising slopes). A normal yield curve in Japan is probably due to the emergence from a 14-year deflationary environment (1989-2003). With the exception of Japan and Italy we find that many of the other G7 countries remain in flat-to-inverted yield curve environment. In fact, the yield curves of 2 important G7 countries, Great Britain and Canada, have maintained flat-to-inverted yield curves for the past couple of years. Does this then imply the current global economy is not as strong as it appears since it has been driven primarily by the explosive growth from emerging countries such as Brazil, Russia, India and China? If so will the explosive growth rates coming from emerging markets be enough to offset the potential for slowdowns in the US and other G7 countries?

Since late 1980s US Treasury Yields experienced sharp declines in 4 prior periods (i.e., 1989-1990/1994-1995/2000-2001). Note that each of the previous periods was closely associated with internal/external events or financial crisis. For instance, during 1989-1990 Japanese stock/real estate bubble burst, First Gulf War and Latin America financial crisis led many investors to seek the safety of US Treasuries. In 1994, the Orange County municipality crisis led a flight to safety. Y2K and the Tech/Telecom bubble burst during 2000-2002 led to yields falling sharply. Will the current Housing Bubble/Credit debacle ignite another sharp decline in interest rates?

Technical Strategist 16

UBS Wealth Management Research / 14 November 2007

We still retain our long-term bearish trend call or accommodating interest rate environment based primarily on the secular 25-year downtrend channel. Although many believe yields are headed much higher, we, on the other hand believe the failure of 10-year Treasury to surpass the top of its long-term regression channel near 5.32% signals the resumption of the primary downtrend. In the past, repeated failures to trade above the top of its long-term channel have led to major buying opportunities (i.e., 1987, 1989/1990, 1994, 2000, 2007) as TNX reverted back to its primary downtrend. Although we do not believe yields will fall to the bottom of its long-term band at 2.35%, we would not be surprise to see TNX return to the mid-point of its band at 3.77%, over time. On the upside, a convincing surge above the top of long-term regression band near 5.18%-5.32% warns of major trend reversal for higher yields.

Top of Band = 5.18% Middle of Band = 3.77% Bottom of Band = 2.35%

10-week ma = 4.47% 30-week ma = 4.73%

After staging a rally from 2003 low of 3.07% to Jun 07 high of 5.32% or up nearly 225 basis points we believe the 10-year Treasury yields is now reverting back to a flat-to-down trending yield environment, at least from an intermediate-term perspective. A 4-year rising wedge formation has been convincingly broken via recent violation of the bottom of uptrend near 4.6%-4.7%. This technical action accompanied by Sept/Oct 07 failed attempts to trade above breakdown level and 30-week ma strongly supports the basis for lower yields. Next key support is evident near 3.8%-4.0% or 2004/2005 lows and 2002 uptrend.

Technical Strategist 17

UBS Wealth Management Research / 14 November 2007

Despite an oversold condition the shorter-term trend remains bearish (lower yields) as evident by TNX violating various support levels including 4.85- 4.9%, 4.6-4.7% and 4.3%-4.4%. It appears failed attempts to trade above key near-term supply corresponding to 4.7% have resulted in rates falling back below Sept 07 reaction low of 4.3%. A confirmed head and shoulders top pattern renders downside projections to 3.78%, over time. We will note that this projected technical target coincides almost exactly with the midpoint of the monthly regression band forecast of 3.77%. On the upside it is possible for TNX to return to initial supply at 4.5% and possibly as high as 4.7-4.75%% if profit taking develop. Intermediate-term supply remains at 4.85-4.9% and investment-term supply is at 5.2%-5.32%.

30-day ma = 4.47% 50-day ma = 4.49% 150-day ma = 4.73%

We believe the short-end of the US treasury yield curve as represented by the 2-year Treasury yield will also remain accommodating (i.e., lower yields). Recent failure to trade above the top of its regression band in 2006 and once again in 2007 now suggests the possibility of lower yields possibly to the best fit line (purple) at 2.94%. The 50%-61.8% retracement of 2003 low (1.02%) to 2006 high (5.28%) also renders projected targets to 3.15%- 2.65%. Based on a comparison between the best fit lines for 10-year Treasury yield (3.77%) and the 2-year Treasury yield (2.94%) it appears the shorter-end of the yield curve still offer the better buying opportunity for patient investors, at least from a longer-term relative perspective.

Top of Band = 5.52% Middle of Band = 2.94% Bottom of Band = 0.35%

Technical Strategist 18

UBS Wealth Management Research / 14 November 2007

During late summer 2006 to early 2007 US Treasury spreads between 10-year yields and 2-year yields contracted sharply to extreme levels that were not sustainable. As a result, starting on 3/07 yield spreads Spread = 2.216 reversed direction and began to widen. It has now Spread = 2.675 April 1993 traded as high as 0.817 and we can expect this trend to July 2003 continue possibly extending to the historical level of 75-100 basis point. To determine if the widening of spreads ultimately affects the US economy we go back as far back as the late-1980s for comparison. During 2 time periods (i.e., 1989-1992 and 2000-2003) spreads contracted to extreme levels prompting reversals as spreads quickly expanded in subsequent years. In both occurrences the short-end of the yield curve fell faster and greater than the long-end. The end result was the same - recessions developed during the midpoint of its spread widening cycles. For instance, spreads tightened to -.0402 on Mar 1989 before expanding over the next 3 years. This ultimately led to the 1990-1991 Current Spread recession. Spreads again contracted to an extreme = .817 (11/07) level of -0.474 on Mar 2000 before expanding aggressively over the next 3 years. The end result is again the US economy slipped into a recession in 2001. In Nov 06 spreads contracted to an extreme low of - 0.15 before reversing course. We wonder if spreads Historical Yield Spread continue to expand beyond 75-100 BP with the shorter- = 75-100 basis points. term yields falling faster than longer-term yields will this also lead to another recession in 2008.

Spread = -0.402 (3/89) Spread = -0.474 (3/00) Spread = -0.15 (11/06) Jan-May 89 (5-months) Feb-Dec 00 (11-months) Aug06-Feb07 (7months)

During early summer 2007 we ran this FED Funds table to determine if fixed income participants were expecting the FED to take action. At that point in time traders were not expecting any FED moves into the second half of the year. However, this abruptly changed starting on Sep 2007 as the FED suddenly cut short-term rates by 50 basis points and then followed with another 25 BP during October FOMC meeting. So now the heated debate is what will the FED do in the next FOMC on Dec 07? A brief analysis of the current FED Fund table now suggests the possibility that the Street is expecting another 25 BP FED cut by the end of the year. Note that there is a tendency for this FED Funds table to adjust quickly due to market conditions. The pertinent question then becomes with the recent 75bp ease and the potential for another 25bp by year end is the FED now ahead of the curve as it relates to monetary policy or will the FED have to continue to ease rates to prevent the US economy from slipping into a recession.

Technical Strategist 19

UBS Wealth Management Research / 14 November 2007

After a difficult 2006 timeframe it appears many commodity futures have returned to their primary up trends. Based on this year-to-date performance table (as of 11/9/07) agricultural commodities including Wheat and Soybeans, Soybean Meal, Soybean Oil retain leadership roles. Buying also continues within Metals and Energy commodities including Crude Oil, Gasoline and Heating Oil, Copper, Platinum and Gold. Laggards remain concentrated within a handful of commodities including Sugar, Lumber, Lean Hogs and Natural Gas.

CRB Returns

1929-1949 = +590% 1966-1982 = +256% 2001 low-present = +97% For the past 92 years there has been a strong long-term inverse relationship between soft assets such as stocks (SPX Index) and hard assets such as commodities (CRB Index).

This long-term chart confirms the historical inverse relationship between soft assets (i.e., stocks) and hard assets (i.e., commodities). When Equities enter into long-term bear markets investors tend to turn to commodities investing. Since these secular trends are longer-term in nature, we believe the current secular bull trend in commodities is probably in the mid-point of its secular bull rally and may sustain for another 3-5 years or longer. Note that since 2001 bottom CRB Index has returned +97% or only a fraction of the gains as compared to prior secular bull rallies of +590% during 1929-1949 and +256% during 1966-1982.

Technical Strategist 20

UBS Wealth Management Research / 14 November 2007

One of the keys behind successful investing is the ability of an investor to trade in the direction of the long-term dominant trend. This is one of the primary reasons we maintain a long-term bullish stance on the commodities market despite the erratic and volatile conditions over the past year. We believe the 20-year downtrend channel breakout in late-2003 near 255 was technically significant as this signaled the end to 21-year secular bear trend and the start of a long-term secular bull trend in commodities. Given the 100% gains from its 2001 low to 2006 high it is reasonable to expect a consolidation phase. We suspect the past 1-year consolidation has taken many /speculative traders out of commodities market and reset prices back to a more normalized level. The prior pivotal breakout at 255-260 represents key investment support. The ability to hold onto this crucial support level reaffirms our long-term bull call. We are also encouraged to find CRB Index successfully tested the 50%- 61.8% retracement of 274.06-252.49 during Feb 07 decline to 277.66. CRB has recently slightly above its May 06 highs at 365.45 on 11/12/07 at 367.05. However, an overbought condition has developed and we would not be surprise to see a consolidation phase soon develop near-term. 320-330 or the 150-day ma as well as prior Sept 07 breakout provides key initial support. May/June/Aug 07 lows at 299-307 offers secondary support. Jan/Feb 07 lows at 277.66-284.61 represents intermediate-term support and 255 remains investment support.

10-month ma = 324 30-month ma = 325

After suffering a sharp correction last year CRB has quickly transition into a basing effort via a 1-year ascending triangle pattern. This bullish accumulation phase was finally validated in mid-Sept 07 as CRB broke above key resistance near 320-327. This technical breakout renders targets to 359.14-365.45 or 2006 highs. Note a technical base of 35-32 points also projects near-term CRB targets to 355-369. CRB recently achieved this target on 11/12/07 as it traded to a high of 367.05 on an intra-day basis. A negative outside day on 11/12/07 and the potential for a negative outside week (11/12/07) warns of a near-term profit taking phase. Although we remain bullish on commodities longer-term and expect price projections to 400, intermediate-term and possibly as high

…450, over time the near-term risk/reward profile is no longer favorable. Traders may want to 30-day ma = 340 take near-term profits and wait for a consolidation phase before reentering the commodities 50-day ma = 333 market. Trading support is now available near 334-340 or the rising 30 and 50-day ma. 150-day ma = 320 However, key near-term support remains at 320-327 or prior Sept 07 breakout and150-day ma. 300-307 or May/June/Aug 07 lows and Jan 07 uptrend provides secondary support. The reaction lows on Jan 07 near 285 offers pivotal intermediate-term investment support.

Technical Strategist 21

UBS Wealth Management Research / 14 November 2007

DJ AIG Commodities Index (DJP) is heavily skewed towards Energy (35%) and Agriculture (28%). A recent breakout above key resistance at 53 confirms a breakout and renders projection to 56-58, near-term and then to 61-62, intermediate- term. We have recently achieved our near-term target and a moderately overbought condition now suggests a pullback to 52-53 or prior breakout and key 50 and 150-day ma is now likely. Secondary support is also available near 48-49 or the bottom of ascending triangle and Aug 07 lows. Investment-term support remains at 45-46 or Oct 06 and Jan 07 lows.

30-day ma = 54.30 50-day ma = 53.56 150-day ma = 51.87

Another commodity index based on six key commodities including Crude Oil, Heating Oil, Gold, Aluminum, Corn and Wheat. This index has also broken out above 2006 and Jun/Jul 07 highs at 26- 26.75. This confirms a key breakout and renders technical targets initially to 29-29.5 and then to 31.25- 32. Both of these aggressive technical projections have been achieved. We will now recommend traders locked in trading profits and wait for better entry points. Initial support moves up to 28-29. 26.75-27 or prior breakout is key near-term support and then 23.5-24.5 or Aug 07 bottom and Jan 07 uptrend. Investment-term support remains at 22.24-22.3 or Feb 06/Jan 07 lows.

30-day ma = 29.06 50-day ma = 28.17 150-day ma = 26.56

This index is comprised of Corn, Wheat, Soybeans and Sugar representing a basket of key agricultural commodities. We maintain our technical value call in this particular commodities market despite the recent strong performances from Wheat and Soybean this year. The Sep 07 breakout above 28-28.5 renders technical projections to 31 and then 32.5-33, over time. DBA has also met our initial price target of 31 coinciding with the late Sep 07 rally. We believe a minor pullback to pivotal support corresponding to early Sep 07 breakout at 27.5-28.5 represents another attractive buying opportunity. Additional support is also evident near 26-27 or the 150-day ma as well as the June 07 breakout. 24.5-25 offers investment support.

30-day ma = 29.06 50-day ma = 28.59 150-day ma = 26.92

Technical Strategist 22

UBS Wealth Management Research / 14 November 2007

Crude Oil has broken out of a major 2-year basing pattern (i.e., head/shoulders bottom) above key neckline supply at 78-79. This bullish technical development suggests targets to 84-86, near-term and then to 97-98 or top of 2003 uptrend channel, intermediate- term. As Crude Oil nears 97-98 we would not be surprise to see traders take near-term profit here. However, given the recent 2-year breakout we still project Crude Oil to 105-107, longer-term.

10-week ma = 85.67 30-week ma = 74.77

On a near-term basis, Crude Oil is now vulnerable for near-term consolidation back to initial support near 87-89 or 30 and 50-day ma. If selling escalates we can expect a decline towards 77-79 or the recent 2007 breakout. The 10-mo ma and 30-week ma near the mid-70s offers intermediate-term support. Jun 07 breakout, Aug 07 reaction low, 61.8% retracement from Jan 07 low to Nov 07 high and 30-mo ma near 68-70 is investment term support.

Gold has finally broken out of 2-year symmetrical triangle pattern via convincing surge above 685-690. In addition, the ensuing rally has recently exceeded 4 key resistances – Apr 07 high at 698, pivotal May 06 high of 732, 761.5 or Mar-Aug 07 near-term measured base projection of 761.5 and intermediate-term projection of 825-830. Our longer-term projection to 873 or a retest of 1/80 record high remains intact. Also the 2-year symmetrical triangle breakout also hints of the potential for Gold to achieve new record highs of 960-970, over time. An overbought condition has developed that suggests only buying on dips. Trading support is visible near 750-770 or 30/50-day ma and then 725-732 or May 06 highs. Intermediate-term support remains at 685-698 or prior Sept 07 breakout and 30-week ma. 635-650 or Mar/Jun/Aug 07 lows provides investment-term support on major corrections. 30-day ma = 775 50-day ma = 753 150-day ma = 698

A large 2-year inverted head and shoulders bottom pattern has yet been confirmed as Copper has struggled near the top of its trading range. A convincing move above 370-380 would confirm a major technical breakout and suggests a retest of 5/06 record high of 404 and then 440-450, intermediate-term. Longer-term target as high as 525- 545 is also achievable, over time. Key intermediate-term support is evident near 297.5-304.7 corresponding to Nov 06 lows (left shoulder) and Aug 07 lows (right shoulder). 238.50 or the Feb 07 low represents longer-term support as this coincides with head of a head/shoulders bottom pattern as well as the top of the pivotal 2004 uptrend channel. We expect buyers we reenter this industrial metals given the accumulation pattern and the favorable risk/reward profile.

30-day ma = 353 50-day ma = 350 150-day ma = 348

Technical Strategist 23

UBS Wealth Management Research / 14 November 2007

Prior to entering into 2006-2007 consolidation phase, Platinum was the trading vehicle for momentum based traders. The recent ascending triangle breakout above 1,347- 1,354 or May 2006 and May 07 highs may hint that momentum investors may be returning. Our projection to 1,475-1,485 on a near-to-intermediate-term has been met. However, we still continue to forecast upside targets to 1,640-1,650 longer-term. Note a similar ascending triangle breakout in late 2005 also produced an impressive rally. A negative outside week suggests profit taking back to initial support near 50-day ma at 1,384-1,400 and possibly to prior breakout at 1,347-1,354 if selling continues. Key intermediate-term support remains at 1,225-1,250 or bottom of ascending triangle.

30-day ma = 1,430 50-day ma = 1,384 150-day ma = 1,327

Palladium has broken out of a major symmetrical 4-year symmetrical triangle in early 2006 at 300 rendering long-term target to 535. Although this projection is achievable overtime the rally temporarily stalled near 409 in May 2006 as commodities market corrected. Palladium is poised to breakout of another 2-year symmetrical triangle pattern.

30-day ma = 372 50-day ma = 360 150-day ma = 364

…Convincing move above 380-390 renders targets to 409-419 or May 1998 and May 2006 highs and then 450. Intermediate-term targets to 505.99 or 38.2% retracement of 2001-2003 decline and then mid-550s are achievable. Key support levels: 350-355 and then 315-325.

Very similar to Palladium, Silver has also been consolidating for the past 2 years via a symmetrical triangle pattern. A convincing surge above 14.25-14.50 confirms a major base breakout and suggests a retest of 14.74-15.20 or Feb 07 and May 06 highs. Above 15.20-16.0 the rally can extend to 18.02 or 38.2% retracement of 1980 high to 1991/1993 lows. Our longer-term targets to 20 or the measured target based on 2-year base and then 22.51 or 50% retracement are achievable over time. Raise initial support to 14-14.5 or the prior breakout. Also note the 30-week ma is also rising near 13.29 offering secondary support. 12- 12.50 or Jan/Mar/Jun 07 lows is intermediate-term support. Aug 07 low, 30-mo ma and bottom of symmetrical triangle at 11.06-11.5 is investment support.

30-day ma = 14.09 50-day ma = 13.66 150-day ma = 13.25

Technical Strategist 24

UBS Wealth Management Research / 14 November 2007

Still retains leadership role as evident by V-type breakout above 1,774 in early 2006. This breakout renders longer term projection to 2,700-2,800. However, repeated failures to trade above key near-term supply at 2,400 or the top of 2003 uptrend channel may lead to consolidation. Initial support is visible near 2,208- 2,250 or 30-week ma, 10-month ma and Jun 07 lows. Key intermediate-term support remains at 1,980- 2,100 or Jan/May/Aug 07 lows, Nov 06 breakout and bottom of 4-year uptrend channel. 30-month ma at 1937 provides additional support. The prior 2006 V-type breakout at 1,774 provides longer-term support.

10-month ma = 2,241 30-month ma = 1,937

Nikkei 225Average continues to under perform its Asian equity counterparts. So why do we retain our longer-term bullish call on the Japanese equities? First, we believe the deflationary cycle from 1989-2003 has officially ended and Nikkei 225 is now transitioning into a new long-term secular bull trend. Second, during Aug 07 setback Nikkei 225 is still trading above the extension of a 16-year downtrend breakout and its 2003 uptrend and Jun 06 low near 14,000-14,045. However, if this key support is convincingly broken we will turn Neutral on Japan equities, longer- term. Key challenge is for Nikkei 225 to convincingly trade above 10/30-week ma near 16,417-17041. 18,300 or the Feb/Jun/Jul 07 highs represent pivotal intermediate-term supply. Breakout here renders long-term projections to 20,000-21,000 or the 2000 reaction high.

10-month ma = 17,123 30-month ma = 15,936

MSCI Emerging Markets Index continues to be influenced heavily by momentum and fast money. Although this market appears to be technically extended it appears buyers continue to buy into corrections. Previous key distribution type patterns such as negative outside week (7/23/07) and negative outside month (5/06) have been easily negated via higher prices. The recent 4-year channel breakout and strong surge above prior July 07 high of 1,163 has now extended the rally to as high as 1,327-1,338. Although a speculative buying phase may be developing it is difficult to determine when the bubble will occur. We therefore recommend investors adhere to a disciplined risk management strategy to protect profits. 10- week ma resting at 1,240 now offers initial support. The top of 2003 uptrend channel and July 07 high at 1,125-1,163 provides secondary support. Index is trading at 15% above its 30-week ma. This places MS- EM Index at a moderately overbought level. To trigger a major correction the bottom of 4-year uptrend channel near 950-965 must be convincingly violated. 30-month ma at 859 is investment term support.

10-month ma = 1,089 30-month ma = 859

Technical Strategist 25

UBS Wealth Management Research / 14 November 2007

SPX has outperformed EAFE Index from 1994-2002. Since 2002 it appears the benchmark international market has consistently outperformed the US stock market for 5 consecutive years. We expect this out performance cycle to continue especially if the monthly indexed relative strength surge above the mid-70s. Above the mid- 70s can extend the out performance cycle of international stocks towards the 100-105 level, over time.

The perception on the Street is the Japanese equity market has consistently lagged its peers over the past few years. However, this monthly index relative strength study suggests the Nikkei 225 Average has been basically trading in-line with the SPX Index since the early 2000. A 7-year basing pattern remains intact on this monthly indexed relative strength chart. At a current reading of 14.92 it would take a convincing surge above low-20s to convince investors of a sustainable out performance cycle as it relates to the SPX Index. On the downside a convincing decline below the low-teens would negate this technical basing effort and signal the start of another long-term underperformance cycle.

MSCI Emerging Markets has also consistently outperformed SPX since early 2001. However, we believe investors did not appreciate the significance of this call until the mid-2000s timeframe. The monthly indexed strength reading has now surpassed the important 100 threshold level and has recently traded as high as 119 on Oct 07. The question then becomes can the Emerging Market returned to the extreme levels established during the mid-90s at 172.20 (9/94)? This would then imply continued out performance coming from the Emerging Markets in relationship to the US equities market.

Technical Strategist 26

UBS Wealth Management Research / 14 November 2007

Statement of Risk Stock market returns are difficult to forecast because of fluctuations in the economy, investor psychology, geopolitical conditions and other important variables.

Appendix

Terms and Abbreviations Terms / Abbreviation Description / Definition % +or- Moving Avg (DMA) % +or- is the percent above or below the moving average is used to help measure an overbought or oversold condition. It is calculated by taking the difference between the group price and its 30-week moving average, and then dividing by the 30-week moving average times 100. The percentage above or below the moving average is used to help measure an overbought or oversold condition and is a component of risk management. Adjusted Relative Strength (ARS) Number gives a 50% weighting to the 1-month relative strength, 30% to the 3-month, and 20% to the 6-month numbers to arrive at a single weighted number. Base A marking a period of accumulation following a downtrend. The larger the base, the greater the upside potential following its completion. A base can take many forms. Breakdown A technical term indicating a downside resolution of a chart pattern. Its significance is determined by the same factors governing a breakout. Breakout A technical term indicating an upside resolution of a chart pattern. Breakouts can take many forms, and their degree of importance is determined by the significance of the chart pattern which preceded it. Channel A chart pattern comprised of two parallel trend lines, which form a trading band. Channels take the form of uptrend, downtrend and horizontal. Downtrend Line A trend line connecting successively lower peaks for a stock (or market). Its technical significance is determined by the same factors governing an uptrend line An open space in a chart created when a stock (or market) opens either higher than its highest level attained during the prior session (referred to as an upside chart gap) or lower than its lowest level reached during the prior day (called a downside chart gap). Internal Trend Line A single trend line connecting at least several high and low points for a stock (or market) over time. For continuation please see next page

Technical Strategist 27

UBS Wealth Management Research / 14 November 2007

Appendix

Terms and Abbreviations (continued) Terms / Abbreviation Description / Definition Moving Average A tool designed to smooth out a stock’s (or market’s) shorter-term fluctuations to provide a better picture of an underlying trend. Many moving averages exist, but the 30- week moving average (also known as the 30-week line or 150 day line) is one of the most popular and respected in technical circles. It is calculated by totaling the latest 30 weekly (usually Friday closing) price levels and dividing by 30 to arrive at the average. Each week, the most recent week’s figure is added to the total, and the price level from 30 weeks ago is subtracted – hence the term “moving.” Please note that a breakout above or breakdown below this line does not, in and of itself, constitute a buy or sell signal. Positive/Negative “Outside” Day When one day’s range (high and low) exceeds the prior day’s range, and the stock (or market) in question closes near its daily peak, this is referred to as a positive “outside” day. A negative “outside” day would be recorded if the stock (or index) finished near its daily low after having a wider range than the prior session. The same rule can be applied on a weekly and monthly basis as well. Relative Strength Relative strength is a performance comparison between a sector, group, or stock and the S&P 500 Index over a specified time frame. Our time frame is often a one, three, and six month basis but does vary according to investment orientation. Resistance Also known as supply. An area where increased selling interest is likely to develop during a rally. These areas usually prove to be only temporary barriers to higher quotes during a primary uptrend, during which time many resistance levels are usually bettered. Resistance areas tend to repel a stock’s upward progress during a primary downtrend, and they also take several forms (minor, major, etc.). Support An area where increased buying interest is likely to develop during a decline. These points, which can take several forms (minor, major, etc.) often provide downside protection for an issue in a primary uptrend, but only temporary relief to an issue in a primary uptrend, during which time many support levels are often broken. Top A chart pattern marking a period of distribution following an uptrend. The larger the top, the greater the downside potential following its completion. It, too, can take many forms. “Uptrend Line” A trend line connecting successively higher low points for a stock (or market). The longer this line is in force, and the points that occur along it, the greater its’ technical significance.

Technical Strategist 28

UBS Wealth Management Research / 14 November 2007

Appendix

Required Disclosures

Analyst Certification

If the date of this report is not current, the investment opinion and contents may not reflect the analyst's current thinking.

UBS Securities LLC is a subsidiary of UBS AG and an affiliate of UBS Financial Services Inc. UBS Financial Services Inc. is a subsidiary of UBS AG.

Technical Strategist 29

UBS Wealth Management Research / 14 November 2007

Appendix

Other Important Disclosures In certain countries UBS AG is referred to as UBS SA. This publication is for our clients’ information only and is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation and needs of any specific recipient. We recommend that recipients take financial and/or tax advice as to the implications of investing in any of the products mentioned herein. We do not provide tax advice. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. 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Technical Strategist 30