Technical Cross-Asset Prices Action Summary

The risk assets bull trend resumed post the US election results and cross-assets price actions have now built up most of the
medium-term impulse wave 3 of long-term wave 5 (last wave of the cycle). Developed market equities are now ready to start the
last short-term impulse wave 5 of medium-term wave 3. This represents about 3% additional upside before a more significant
corrective wave 4 of long-term 5 likely materialises in April/May 2017 (helped by unfavourable seasonality). We think this coming
correction (6% to 8%) will be the last opportunity to re-enter the bull cycle at attractive levels. This SPX corrective wave 4 could
extend the consolidation to 2,280 before the last wave of the cycle (wave 5 of 5) rises toward 2,600 in 3Q or 4Q17.
EUR/USD short-term price action is bullish and likely to test the critical resistance level of 1.0850. We see increasing probability of a
sharp EUR/USD squeeze toward 1.13 up to 1.15 if (and only if) 1.0850 is broken to the upside. Even in the case of sharp squeeze
materialising, we still believe the bear trend would resume once 1.13 (up to 1.15) are reached and still expect EUR/USD to fall to
1.0 down to 0.95 by 3Q or 4Q17. Similar FX squeeze levels are to be monitored on USD/JPY at 111.3 and gold at 1,250.

The US10y treasuries primary bullish trend is now over and we think any additional pullback to 125.4 is another sell opportunity.
Euro Bund seems likely to follow a similar path with a noticeable downside break of the 2011 bullish channel bottom line. Lastly,
Brent crude oil is still trading at crossroads, testing the critical 2016 uptrend support.

Overall, we believe markets are on the verge of a corrective wave 4 (likely April/May downside risk) that we see as an opportunity to
re-enter the bull cycle at discounted levels. From a technical perspective, we think the final medium-term wave 5 of long-term 5
might then reach a historical new high level of around 2,600 in 3Q or 4Q17. This final buying climax / bullish exuberance will end the
cycle: we expect the final capitulation with the great rotation to be the market consensus.

Quant / Risk-Parameters Summary :

Since summer 2016, cross-asset risk parameters have started to reflect the shift in governments’ rhetoric toward fiscal stimulus
(post G20 summit) and to take the relay after central banks’ unconventional monetary policy easing reached exhaustion point.
Since then, equity volatility and skew across regions came back to non-stressed levels; interestingly they are not mirroring yet the
levels of investor confidence observed during at the end of the great moderation period (2005-2007), neither during the peak of
central banks’ unconventional monetary easing experiment.
The SPX index was the exception, whose skew fell over the past quarter, while volatility remained subdued post the US election; in
our opinion, the SPX skew might collapse below 8 in the last investors’ capitulation before the cycle ends in a final buying climax. In
the meantime, risk parameters (vol, skew and correlation) should spike in our expected April/May corrective wave 4.

Cross-Asset Price Actions, Targets, Entry and Stop Loss Level Matrix

US equity market: Wave 5 to extend to 2,600 by 3Q17 or 4Q17

The S&P 500 broke the major resistance of 2120 in mid July 2016, posting a new historical high. This distribution/take
profit area has capped the bullish trend since January 2015. The July 2016 breakout gave us final confirmation that SPX is
now trading in the final wave 5 bull cycle and not in a complex corrective wave 4 (which appeared to be a classical a,b,c
zig zag correction).
In March 2017 the wave 5 reached the 2,400 target we pushed over the last six months. Taking into account price action
cross assets, we are reviewing our medium-term Elliott wave count (Page 6) and are delaying the expected end of cycle,
previously set at 2Q17, by a quarter or two.
We have raised our SPX cycle target to 2,600: we think wave 5 might now reach this target sometime in 3Q or 4Q17.

SPX Monthly Chart — wave 5 to extend to 2,600 by 3Q17 or 4Q17

(Elliott Theory)

Spot Level: 2,370
Technical Target: 2,600
Ideal Entry Level: 2,280 (14.0% potential gain)
Stop-loss Level: 2,180 (4.4% potential loss)
Time Horizon: 6 months
Tactical Buy
Reward-Risk Profile (Ratio of Gain vs. Loss): 14.0% / 4.4%

US equity market: Corrective medium-term wave 4 of long-term 5 to come

According to the Elliott cyclical model, the current long-term wave 5 will be made of 5 sub-waves. The chart below shows
SPX is now trading in sub wave 3 of long-term 5.
Sub-wave 3 of long-term 5 is an impulse wave that started at the end of June 2016. This wave is likely to be made of 5 sub
waves. SPX is currently building the short-term corrective (a,b,c) wave 4 of medium-term sub-wave 3. The short term subwave
3 of medium-term 3 topped at 2,401 on the 01/03/2017 where a consolidation (wave 4) started, helping massively
overbought RSI to normalise to a more neutral area.
Conclusion: Current short-term wave 4 (of medium-term 3 of long-term 5) consolidation is unlikely to extend below 2,320.
We then expect short-term impulse wave 5 (of medium-term 3 of long-term 5) to materialise toward 2,440.
Medium-term corrective wave 4 of long-term wave 5 might start sometime in April/May 2017 with a more pronounced
correction toward 2,280. (negative seasonality — sell in May and go away).
Final medium-term wave 5 of long-term 5 might then reach a historical new high level of around 2,600/2,700 in a final
buying climax that will end the cycle: we expect the final capitulation with the great rotation to be the market consensus.

Spot Level: 2,370

Technical Target: 2,600

Ideal Entry Level: 2,280 (14.0% potential gain)

Stop-loss Level: 2,180 (4.4% potential loss)

Time Horizon: 6 months

Tactical Buy
Reward-Risk Profile (Ratio of Gain vs. Loss): 14.0% / 4.4%

Marketing communication : This document has not been developed in accordance with legal requirements designed to promote the independence of investment research and its author(s) is/are not subject to any prohibition on dealing in the relevant financial instrument ahead of the dissemination of the marketing communication.

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