OUTLOOK

"Bearish on Oil Stocks (XOI Index)"

4/16/2007

We believe the XOI index will decline to 1225 or less from its recent high of 1274.13 on 4/16/07.  We expect this correction to take place within the next 8 weeks.

Our system is indicating extremes in bullish sentiment and overbought readings in the XOI Index.  We view this as an opportunity to short energy stocks to profit from a decline in the XOI Index.  As of 4/16/07, we have entered a short position in XLE at 62.65.

Mark Yuan, CFA