OUTLOOK

"Oil Stocks Correct as Forecasted"

6/2/2008

In our Outlook on 4/23/08, we expected the XOI index to correct below 1450 within 4 weeks.  As forecasted, the XOI corrected below 1450 within 4 weeks, reaching 1437.69 on 5/1/08.

The correction below 1450 was short-lived as the XOI rallied to over 1600 later in May.  By setting multiple exits, we took some profits on 5/1/08 as the XOI corrected below 1450.  We re-established our full short position on 5/21/08, the day the XOI reached its all-time high of 1663.95.  Later in May and early June, we took profits on our position as the XOI declined to the range of 1555 to 1575.

Year to date as of 6/2/08, we are net positive, outperforming the S&P 500 by over 6%.  Click on the TimerTrac Medallion located on the performance page to see our verified results.

Mark Yuan, CFA