The purpose of this document is to present our technical long term views on different asset classes.Before reviewing some monthly and weekly charts, we would like first to point out two important observations. First, most of the markets we follow are caught in mid term (several months) complex trading ranges so that tactical asset allocations will be of paramount importance in 2013.And second the correlation between equity indices is falling down meaning that geographic bets will be of greater importance in 2013 Summary of 2012 and the context for 2013 After the flash crash in the summer of 2011, the market has entered a particularly volatile period of transition and that led to the validation of major bullish reversal patterns : a new uptrend was born. A deep correction occurs in Q2 2012 but long term supports have held up well and the accumulation zone correctly played its role sothat the recovery was very strong. Recently another (shallow) correction unfold but recent bullish reactions confirmed our view that indices are unlikely to make major selloffs in the coming weeks. For the beginning of 2013, we could see an upward acceleration toward the 2000 and 2007 peaks for the S&P 500 and toward 290-300 for the Stoxx 600. Around those technical levels, the upward cycle could be ending because most of the technical targets would have been achieved and the index may enter into a more random, erratic period. The timing for the next uptrend wave should be occurring between now and Q1 2013. 1)Our views on equities The S&P500 For now, there are no signs (reversal patterns) anticipating a possible trend reversal. Accordingly, the more likley scenario for the coming weeks/months is that of an upcoming test of the historic highs at 2000 and 2007, above 1500. Those levels are undoubtfully powerful resistances which, even in a bullish context, will be able to polarize prices for a few months. However, remaining divergences with long term indicators, volumes that have not confirmed the recovery since July and divergences between the Dow Industrials and the Dow transports (which remained below their 2011 highs) mean there is a high risk for a correction when prices will test their historic highs. What to watch : the highs of 2007 and 2000.Also, this cyclical bull market will be 4 years old (the average age) in March 2013.

Long term the index is approaching the upper part of its trading range

More and more technical indicators are now diverging from prices. The Stoxx 600&DJ Euro Stoxx 50 The main difference with the S&P is that the next resistances layer of the Stoxx 600 is less robust and critical. On the DJ Euro Stoxx 50 above the 2600 resistance level, European equities could rally a lot more before hitting the 3000 long term resistance. These observations match well with our idea of a continuing outperformance of European markets.Moreover European leadership is historically associated with strong returns for global equities. Since 1990, the MSCI All Country Index returned

an annualized 19.6% when Europe was the best-performing region, against average gains of 3.7% over the period . What to watch : European indices have held above major support levels, like 2400 on the EuroStoxx 50 But like the S&P 500, due to negative divergences still in place with long term technical indicators, there is a high risk for a correction after the index reaches our long term technical targets near major resistance zones. Sector leadership : has remained stable during the last weeks of 2012 with Financials and Industrials continuing to outperform and Telcos, Utilities and Oils, leading to the downside. This is consistent with a bullish underlying market. For 2013, you can see on the “ relative rotation graphs” that previous leaders like Health Care and Food&beverages are losing momentum.Even if their trends are still strong, we advice caution for these 2 sectors.On the contrary, Basic Resources is very oversold with momentum improving.This lagging sector could be bouncing strongly in the beginning of 2013.

Above 2600 there is room for the upside toward 3000

Sector rotations in Europe during the past 3 months show financials leaderships and Utilities, Oil&Gas and Telecom lagging way behind.These trends are not overextented. The Nikkey The index broke above the 9,200 resistance zone, confirming the anticipated upside breakout. Further rise favoured towards the 10,000 area. We continue to see a significant improvement of most weekly and monthly trend indicators which confirms the start of a trend improvement. What to watch : as long as the index remains above 9200, any pullback would be seen as a buying opportunity.

Breaking out above 9200 but the index remains volatile The MSCI Emerging Markets The two-year underperformance of EM equities may be over.You can see that the relative chart vs the MSCI World ex-emerging is close to the lower part of its long term uptrend.We have a clear preference for Asia.

After 3 year of underperformance vs the MSCI World ex-emerging the relative chart is now on right on the ascending trendline support.

2)Our views on bonds The German 10 year yields Even if the long term trend is still down, the chart shows that the recent decline of yields looks extremely speculative. In the past every time the monthly RSI has fallen below oversold levels, bond yields started a significant recovery lasting between 1&2 years. Similar excess were seen in 1994,1999, 2005 and 2010.(see arrows on chart) Right now a buy signal on the RSI was given end May 2012. What to watch : to validate the start of a significant bullish reversal, (but not a significant change of the major downtrend) yields must surpass 1.73 which was the high made in September 2012.In terms of asset allocation a switch out of bonds into equities could be triggered by a break of recent bond yields ranges.

Still a long term downtrend but an oversold bounce should occur in 2013 Spanish&Italian 10 year yields Italian and Spanish 10 year yields have recently broken important support zones.Italian yields resume their bear trend targeting 4% while Spanish yields have broken their uptrend targeting 4.82%.From an FX perspective this means stay bullish € vs $.

3)Our views on the €,$ and commodities The € The rate was close to reach our long term target of 1.2.with large traders betting strongly against it.(very big short position)

The Euro had a breakout above an important down trendline, this was a bullish sign. We think this was the first leg up with more to come in 2013. Weekly and daily Macd are bullish. What to watch :to begin another bullish wave the rate must first surpass resistance zone above 1.305. Arrows on the chart show that the last 2 “counter trend rally” for the € had the same amplitude and duration. It is important to keep in mind that even if the € reaches 1.4, the long term trend is still down.

The € could reach 1.4 in 2013 The $ and commodities We think the 2 assets are close to make reversal patterns.You can see this on the chart of the US dollar index where there could be a potential big bearish head and shoulders pattern.On the other hand on the chart of the CCI index (commodities), one could observe a big bullish inverse head and shoulders pattern.For now these 2 patterns are not yet activated but if this scenario happens it will be consistent with our forecasts of a rise of the € and a fall of bond prices.

The US dollar vs Commodities: watching closely a possible trend reversal in 2013 Gold Long term, gold continues to rise versus every currency we track . Gold is correcting but we think it is a buying opportunity as large traders are now accumulating long position.

Gold is consolidating its long term uptrend. Traders are beginning to accumulate long position.(bottom pannel)

4)Topics-Convictions -Buy Europe equities vs US equities

The ratio SP500/Stoxx 600 shows that a new cycle of stronger European markets is in place since June of this year. -Buy Asia

We prefer Asia (bottom pannel) versus Latin America and Eastern Europe (top pannel) India

The Sensex recently made a 12 month high breakout. China H shares

After months of trading range, the Hang Seng China Entreprise broke above 10.000 points. Same breakout pattern for the MSCI China The Shanghai Composite (for local investors) is very oversold but this index remains in downtrend and all technical bounce attempts have been short lived so far. -Buy European luxury goods

The absolute and relative trends versus the Stoxx 600 show continuing outperformance. -Avoid high dividend stocks in Europe Using the Stoxx Europe Select 30 index as proxy, you can observe that the relative chart versus the Stoxx 600 is caught in a long term downtrend since 2007.

-Caution on European Corporate Bonds

Price diverging from long term technical indicators and the investment grade spread close to support zone may indicate a mature trend (but not a reversal yet). -Buy Asian currencies

Most of them are caught in strong uptrends versus the Euro. The Asian Dollar Index recently broke successful above the 118 level. Generally speaking appreciating currencies have been a tailwind for Asian equity markets. 4)Summary of our views for 2013 Bullish on equity until indices reach their respective targets which are close to major resistances.(end Q1- Q2)Preferences for European and Asian equities. Bullish €, (until 1.40), gold, Italian&Spain10 year yields. Bearish $. Neutral on the German 10 year yields with a bullish bias above 1.73% (bearish bias below 139 on the future)