“You say that we go round the sun. If we went round the moon it would not make a pennyworth of difference to me or to my work.” – Sherlock Holmes (from “A Study in Scarlet” by Arthur Conan Doyle) “It doesn’t matter if the cat is black or white, as long as it catches mice.” – Deng Xiaoping “I could float off this floor like a soap bubble if I wish to. I do not wish to, because the Party does not wish it. You must get rid of those nineteenth century ideas about the laws of Nature. We make the laws of Nature.” – O’Brien (from “1984” by George Orwell) A few million years ago – the blink of an eye in evolutionary terms – our ancestors were roaming around some African savannah in a small band. We are still that social hunter-gatherer, for better or worse, with all the advantages

INTRODUCTION Geometry: ‘Geo’ means Earth and ‘metry’ refers to measurement. I find this very profound; the word for the world of angles, shapes and associated ratios and formulas actually refers to the measurement of the Earth. What better field to borrow ideas for geometry from than the science of navigation, which rests upon a basic element of Earth-measurement, the nautical mile (‘NM’), which is simply formulated using two special and related numbers (360 and 60)? The Earth is divided into 360o vertically by longitude, while horizontally by latitude, with each degree further divided into 60 minutes. An individual minute of latitude, and of longitude at the Earth’s equator, is defined as one nautical mile and is quite literally 1/60 of 1o of the equator. Therefore the Earth’s circumference of 360o measured along the equator is 21,600 nautical miles: 360o x 60’ = 21,600’ = 21,600 NM. When applied to mass human decision making, which is simply

Editor’s note: This is an example of an analysis that applies the theory of technical analysis to create an action plan. The thought process Jonathan applies to portfolio management is easy to follow and instructive. In this report the goal of our sector allocation will be to tactically outperform the S&P 500 on a relative basis.1 We will adjust our portfolio weightings by maneuvering into leading sectors and shying away from the losers, at least from a technical perspective assuming a 3-6 month timeframe. My objective is to uncover the intermediate and long-term technical drivers while at the same time providing the tactical guidance required to navigate the ever- changing market conditions. As of July 1, 2013, I see several critical factors in the market. It is interesting how the 5/23/13 negative outside day pattern marked a price high for the S&P 500. The subsequent 6/20/13 downside gap and the 6/21/13 negative outside week

Editor’s note: This is an extract of an internal, weekly macro technical research report written solely to address the concerns of the Quantitative Strategies Group (QSG) at ICC Capital Management Company. The topics and layout are designed specifically for the needs of QSG in terms of content and formatting. This report was prepared on July 26, 2013 and opinions expressed in this report may have changed since then. Report Summary Markets ended higher last week as earnings season got under way as the Tech’s rattled while the Financials emboldened. The long term VIX trace has once again tested long term horizontal support in the low teens. The S&P 500 Weekly Candlestick (7/26/13) seems to have trouble consolidating which confounds the bear camp time and again seemingly, and we too have been calling for caution as the 24 week cycle shown above looked as though an inversion was in progress, yet with the latest