December 15, 2014 Technical Analysis: Inflection Points · Technical Analysis Ari H. Wald, CFA, CMT Technical Analysis (212) 667 -5279 [email protected] December 15, 2014 Technical

Oppenheimer & Co. Inc. 85 Broad Street New York, NY 10004 Tel: 800-221-5588 Fax: 212-667-8229

Technical Analysis A division of Oppenheimer Asset Management Inc.

Ari H. Wald, CFA, CMT Technical Analysis (212) 667-5279 [email protected]

December 15, 2014

Technical Analysis: Inflection Points

Buy Ideas from Each Sector…Some Sells Too

We believe identifying and being invested in the strongest sectors will continue to be a more rewarding exercise than trying to get the next pullback right. Technology, Financials, Health Care, and Airlines are such areas we recommend buying.

Weakness in the energy sector is a key reason why credit spreads have widened, low volatility is improving vs. high beta, and internal breadth measures remain unconfirmed. If you’re worried about these divergences, the first thing you should sell is what’s causing it─ energy stocks.

For long/short ideas, we believe CVX and EOG can be bought against a short Energy sector position. However, we remain bearish on drillers, like RIG.

Select industries in the Industrials and Materials sectors are inflecting lower vs. the S&P 500, namely Electrical Equipment, Chemicals, and Metals & Mining. Sell ideas include ETN, PX, EMN, and ATI.

Buy ideas from each S&P 500 sector include: BRCM (Technology), BRK/B (Financials), DAL (Industrials), HSP (Health Care), SBUX (Cons. Discretionary), CVS (Cons. Staples), SRE (Utilities), TSO (Energy), and SEE (Materials). Each of these ideas screens positively based on trends in earnings revisions (see our MAER product), except for SBUX, which instead is fundamentally rated Outperform at the firm.

New to the 50/50 List – S&P 500

Added Buys: CVX, KMI, SE, IP, IFF, UNP, CHRW, SBUX, GS. Removed Buys: HAL, NOV, HES, CF, AA, NSC, R, JWN, AMT. Added Sells: EMN, ATI, JCI, BF/B, MRK, A, PBCT, ACN, AES. Removed Sells: AVY, BMS, PVH, HSY, ESRX, XRAY, CINF, ADI, ED.

mailto:[email protected]

2

S&P 500: Buy the Dip

Recent client inquiries have focused on the broadening price formation in the S&P 500 which has tended to be a negative pattern. However, many times the bearish implications of this pattern fail to materialize. For instance, the index rallied through similar conditions in March 2014.

Although internal divergences are more pronounced now than in March 2014, our view has been to give the S&P 500 the benefit of the doubt as long as support at the 2000 level holds because our longer term work is positive and because we’re in a seasonal period when it’s rare to see spikes in downside volatility. We are therefore closely watching this imminent test.

More importantly, however, we believe identifying and being invested in the strongest sectors will continue to be a more rewarding exercise than trying to get the next pullback right. Technology, Financials, Health Care, and Airlines are such areas we recommend buying.

Source: Oppenheimer Asset Management, and Bloomberg.

Daily Momentum (RSI)

S&P 500

w/ 50 & 200-day m.a.s.

It has paid to buy these dips in momentum

This broadening formation failed to materialize in early 2014.

Testing its 50-day m.a.

Technical Analysis

3

Seasonals Are Stronger When Trend Is Positive

Many are aware that December has tended to be one of the best performing months of the year for the S&P 500. Fewer are aware that seasonal trends are even stronger when considering the index is also in an uptrend.

For instance, December, January, February, and March have each averaged greater returns when the index starts the month above its 200-day moving average than below it since 1950.

We are also approaching the “Santa Claus Rally” (SCR), which is the seasonal tendency for equities to rally during the last five trading days of the year through the first two trading days of the new year. This year’s SCR period starts Dec. 24 and ends Jan. 5; we will have more on this study in next week’s report.

Source: Oppenheimer Asset Management, and Bloomberg. Note: These results cannot and should not be viewed as an indicator of future performance.

-3%

-2%

-1%

0%

1%

2%

3%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Above 200DMA* Below 200DMA*

S&P 500 Average Monthly Gain (1950-2013)

*At the start of the month

Technical Analysis

4

Leadership: If You See a Divergence, It’s Probably Energy

While the S&P 500 is coming off of a new all-time high, it is concerning that US credit spreads, the High Beta vs. Low Volatility ratio, and many internal breadth indicators have all diverged with price action in recent months.

In last week's publication, we exposed the energy sector as the primary culprit of widening credit spreads. The next two charts show that energy stocks have also been the key reason for unconfirmed leadership and breadth measures.

In our view, the argument surrounding these divergences is the same debate about whether the drop in the price of oil is bullish or bearish for equities. We side with the bulls, but continue to note that if you’re worried about these divergences, the first thing you should sell is what’s causing it─energy stocks.


S&P 500 (rs) High beta has lagged primarily

due to energy stocks

S&P 500: High Beta vs. Low Volatility (ls)

S&P 500: Energy vs. High Beta

w/ 200-day m.a.

Technical Analysis

https://opco2.bluematrix.com/sellside/EmailDocViewer?encrypt=edfb0e47-a653-4b84-a4e1-b76947fe5088&mime=pdf&co=Oppenheimer2&[email protected]&source=mail

5

Internal Breadth: Blame It on the Oil

As the table below details, the percent of S&P 1500 stocks above their 200-day m.a. has dropped to 71% (at the S&P 500’s December high) from 80% in July, largely because the percent of positively trending stocks in the S&P 1500 Energy sector (i.e., those above their 200-day m.a.) has dropped to 7% from 82% through the same period.

Participation has been mostly unchanged in the non-commodity related offensive sectors, especially Health Care and Financials, where 85% of the S&P 1500 constituents in these sectors were recently above their 200-day m.a.


% of S&P 1500 Stocks Above 200-Day Mov. Avg.

S&P 500

w/ 200-day m.a.

3-Jul-14 5-Dec-14 % Chg

S&P 1500 80 71 -9

Energy 82 7 -75

Materials 81 49 -32

Industrials 82 67 -15

Utilities 95 88 -7

Telecom 73 67 -7

Consumer Staples 82 79 -3

Financials 87 85 -3

Information Technology 77 76 -1

Consumer Discretionary 68 71 4

Health Care 78 85 7

% of S&P 1500 STOCKS ABOVE THEIR 200-DAY MOV. AVG.(July 2014 vs. December 2014)

…while participation in these non-commodity related cyclicals remains strong.

Internal breadth held back by Energy and

Materials…

Technical Analysis

6

Energy: Difficult to Bottom Fish without a Base

We believe it is too early to bottom fish in the Energy sector because support levels continue to break and price has yet to stabilize. In the S&P 500 Energy sector, the net percent of new 52-weeks lows has climbed to 46%, the most since 2008.

We believe a “less intense” low will likely be needed; this is when price falls to a new low and the percent of stocks at new lows shows improvement by making a higher low─also known as a bullish divergence.


S&P 500 Energy Sector

% Net New 52w Highs

A “less intense” low will likely be needed

*Every energy stock was at a 52-week low in 2008. Capitulation low

“Less intense” low

Technical Analysis

7

Oil: Still Too Soon to Speculate about the Low

The price of West Texas Intermediate (WTI) Crude Oil Futures continues to slide, and we recommend against speculating about the ultimate nadir until price at least starts to stabilize.

Our best-case scenario is that the worst has passed and that the price of oil will simply remain at low levels. Our worst-case scenario is that the price of oil continues to ebb and flow lower until reaching major support in the $40-$50 range. Adding it up, we still see this as an unfavorable risk/reward balance for oil bulls.


Little support until $40-$50

WTI Crude Oil Futures

Technical Analysis

http://1.bp.blogspot.com/-q06qRWmdUg4/UW97MQ4baCI/AAAAAAAAEU4/iS5Pw3_Y47Y/s1600/falling_knife.png

8

Why Is CVX on Our Buy List?!

Our 50/50 list consists of our top ideas, taking both a market-neutral and sector-neutral stance. This means we are constrained to recommend as many long ideas as short ideas within each sector regardless of our market or sector views. Each stock’s relative trend vs. its sector is therefore a critical input.

For this reason, we are adding Chevron (CVX) to our Buy List this week based on our expectation that the stock should outperform vs. the Energy sector in the coming months despite its broken absolute trend.

However, we recommend buying CVX only for those who 1) can short the Energy sector against the position, or for those who 2) disagree with our view that the Energy sector, and most of the stocks within it, needs time to stabilize first.


It’s telling when one of the best relative trends vs. Energy is in freefall on an absolute basis

CVX vs. Energy Sector

Chevron (CVX)

Both panels w/ 200-day m.a.

Technical Analysis

9

Buy EOG against a Short Energy Position

We also recommend buying EOG against a short Energy position based on a positive long-term relative trend vs. the sector that is consolidating above its multi-year breakout point.

Our complete list of (relative) buy ideas in the S&P 500 Energy sector consists of CVX, SLB, KMI, EOG, SE, and TSO.


Relative – Yes

Absolute – No EOG vs. Energy Sector

EOG Resources (EOG)


Technical Analysis

10

Transocean (RIG): Maintain Sell

The importance of these sector-neutral trends can be exhibited by Transocean (RIG), which has been on our Sell List since April due to its weak trend vs. the Energy sector.

The stock has fallen below its 2003 low at $26, and we see little support until its 1994 low at $11. Without signs of a base, RIG remains on our Sell List.

Our complete list of sell ideas in the S&P 500 Energy sector consists of RIG, DO, NE, RDC, DNR, and BTU.


RIG vs. Energy Sector

Transocean (RIG)

Back to $11?

Technical Analysis

11

Industrials: Inflecting Lower from Resistance

In our view, the Industrials sector is a tactical sell candidate based on the inflection from the falling slope of its smoothed trend vs. the S&P 500; this setup is a sell signal as defined in our process.

Relative to Industrials, we believe the Electrical Equipment industry remains vulnerable to additional underperformance based on its downward sloping trend. Within this industry, Eaton (ETN) is highlighted as a tactical sell idea on page 13.


Electrical Equipment industry vs. Industrials sector

Industrials vs. S&P 500

Key laggard in a weakening sector


Technical Analysis

12

Materials: Breaking Down vs. SPX

The Materials sector has fallen to a fresh relative low vs. the S&P 500 largely in part to stocks in the Chemicals and Metals & Mining industries. Within these industries, Praxair (PX), Eastman Chemical (EMN), and Allegheny Technologies (ATI) are highlighted as sell ideas on the following page.

The Materials sector remains one of our least favorite sectors based on a broken trend vs. the S&P 500, and is therefore a source of funds idea due to our expectation of additional underperformance.


Chemicals vs. S&P 500

Stocks in the Materials sector are breaking down on a relative basis


Metals & Mining vs. S&P 500

Technical Analysis

13

Eaton (ETN): Sell Electrical Equipment

All charts w. 200-day m.a.

Allegheny Technologies (ATI): Sell Metals & Mining

Eastman Chemical (EMN): Sell Chemicals

Praxair (PX): Sell Chemicals

Technical Analysis

14

New to the 50/50 List─S&P 500

This month’s changes to our list of 50 buys and 50 sells in the S&P 500 are included below. The full S&P 500 list is printed on the following page and consists of a diversified mix of relative trends, both emerging and established, from all sectors. Our favorite buy ideas are reversing higher relative to the S&P 500, and our favorite sell ideas are in topping formations. The changes listed below are sorted by sector, then by market cap.

Added Buys Chevron (CVX) Kinder Morgan (KMI) Spectra Energy (SE) International Paper (IP) Int’l Flavors Fragrances (IFF) Union Pacific Corp (UNP) CH Robinson Worldwide (CHRW) Starbucks (SBUX) Goldman Sachs (GS) Added Sells Eastman Chemical Company (EMN) Allegheny Technologies (ATI) Johnson Controls (JCI) Brown-Forman (BF/B) Merck (MRK) Agilent Technologies (A) People’s United Financial (PBCT) Accenture (ACN) AES Corp (AES)

Removed Buys Halliburton (HAL) National Oilwell Varco (NOV) Hess Corp (HES) CF Industries (CF) Alcoa (AA) Norfolk Southern (NSC) Ryder Systems (R) Nordstrom (JWN) American Tower Corp (AMT) Removed Sells Avery Dennison (AVY) Bemis Co (BMS) PVH Corp (PVH) Hershey (HSY) Express Scripts (ESRX) DENTSPLY International (XRAY) Cincinnati Financial Corp (CINF) Analog Devices (ADI) Consolidated Edison (ED)

Technical Analysis

15

Ticker Name Industry (GICL3)Date

Added

M.Cap

($B) Ticker Name Industry (GICL3)Date

Added

M.Cap

($B)

CVX CHEVRON CORP Oil, Gas & Consumable Fuels 12-Dec 194.1 RIG TRANSOCEAN LTD Energy Equipment & Services 11-Apr 6.1

SLB SCHLUMBERGER LTD Energy Equipment & Services 11-Apr 103.9 DO DIAMOND OFFSHORE DRILLING Energy Equipment & Services 1-Aug 4.6

KMI KINDER MORGAN INC Oil, Gas & Consumable Fuels 12-Dec 83.6 NE NOBLE CORP PLC Energy Equipment & Services 27-Jun 3.7

EOG EOG RESOURCES INC Oil, Gas & Consumable Fuels 11-Apr 47.0 RDC ROWAN COMPANIES PLC-A Energy Equipment & Services 11-Apr 2.5

SE SPECTRA ENERGY CORP Oil, Gas & Consumable Fuels 12-Dec 22.7 DNR DENBURY RESOURCES INC Oil, Gas & Consumable Fuels 11-Apr 2.3

TSO TESORO CORP Oil, Gas & Consumable Fuels 10-Oct 9.4 BTU PEABODY ENERGY CORP Oil, Gas & Consumable Fuels 5-Sep 2.0

IP INTERNATIONAL PAPER CO Paper & Forest Products 12-Dec 22.8 PX PRAXAIR INC Chemicals 10-Oct 36.3

SEE SEALED AIR CORP Containers & Packaging 14-Nov 8.6 MOS MOSAIC CO/THE Chemicals 11-Apr 16.6

IFF INTL FLAVORS & FRAGRANCES Chemicals 12-Dec 8.1 EMN EASTMAN CHEMICAL CO Chemicals 12-Dec 10.8

MWV MEADWESTVACO CORP Containers & Packaging 14-Nov 7.4 ATI ALLEGHENY TECHNOLOGIES INC Metals & Mining 12-Dec 3.4

UNP UNION PACIFIC CORP Road & Rail 12-Dec 101.9 GE GENERAL ELECTRIC CO Industrial Conglomerates 5-Sep 252.0

FDX FEDEX CORP Air Freight & Logistics 16-May 50.0 BA BOEING CO/THE Aerospace & Defense 5-Sep 86.2

DAL DELTA AIR LINES INC Airlines 27-Jun 40.2 PCP PRECISION CASTPARTS CORP Aerospace & Defense 1-Aug 32.8

CSX CSX CORP Road & Rail 16-May 35.3 ETN EATON CORP PLC Electrical Equipment 14-Nov 31.0

LUV SOUTHWEST AIRLINES CO Airlines 1-Aug 28.3 FAST FASTENAL CO Trading Companies & Distributo 1-Aug 13.7

CHRW C.H. ROBINSON WORLDWIDE INC Air Freight & Logistics 12-Dec 10.6 FLR FLUOR CORP Construction & Engineering 5-Sep 9.0

DIS WALT DISNEY CO/THE Media 1-Aug 156.0 MCD MCDONALD'S CORP Hotels Restaurants & Leisure 14-Nov 88.4

SBUX STARBUCKS CORP Hotels Restaurants & Leisure 12-Dec 62.6 JCI JOHNSON CONTROLS INC Auto Components 12-Dec 31.2

CMG CHIPOTLE MEXICAN GRILL INC Hotels Restaurants & Leisure 14-Nov 20.4 DISCA DISCOVERY COMMUNICATIONS-A Media 5-Sep 22.7

UA UNDER ARMOUR INC-CLASS A Textiles, Apparel & Luxury Goo 16-May 14.9 BWA BORGWARNER INC Auto Components 14-Nov 12.1

TIF TIFFANY & CO Specialty Retail 5-Sep 13.6 SNI SCRIPPS NETWORKS INTER-CL A Media 14-Nov 10.6

LEN LENNAR CORP-A Household Durables 14-Nov 8.5 HAR HARMAN INTERNATIONAL Household Durables 14-Nov 7.2

CVS CVS HEALTH CORP Food & Staples Retailing 11-Apr 104.1 PM PHILIP MORRIS INTERNATIONAL Tobacco 11-Apr 132.0

RAI REYNOLDS AMERICAN INC Tobacco 5-Sep 34.3 GIS GENERAL MILLS INC Food Products 14-Nov 31.5

ADM ARCHER-DANIELS-MIDLAND CO Food Products 14-Nov 32.5 BF/B BROWN-FORMAN CORP-CLASS B Beverages 12-Dec 18.6

MJN MEAD JOHNSON NUTRITION CO Food Products 27-Jun 19.8 CPB CAMPBELL SOUP CO Food Products 10-Oct 13.8

STZ CONSTELLATION BRANDS INC-A Beverages 1-Aug 17.6 CCE COCA-COLA ENTERPRISES Beverages 10-Oct 10.5

GILD GILEAD SCIENCES INC Biotechnology 10-Oct 159.8 PFE PFIZER INC Pharmaceuticals 27-Jun 194.4

UNH UNITEDHEALTH GROUP INC Health Care Providers & Servic 14-Nov 95.4 MRK MERCK & CO. INC. Pharmaceuticals 12-Dec 166.1

ALXN ALEXION PHARMACEUTICALS INC Biotechnology 11-Apr 37.7 BAX BAXTER INTERNATIONAL INC Health Care Equipment & Suppli 5-Sep 39.0

ISRG INTUITIVE SURGICAL INC Health Care Equipment & Suppli 10-Oct 18.4 A AGILENT TECHNOLOGIES INC Life Sciences Tools & Services 12-Dec 13.4

EW EDWARDS LIFESCIENCES CORP Health Care Equipment & Suppli 27-Jun 13.9 LH LABORATORY CRP OF AMER HLDGS Health Care Providers & Servic 14-Nov 8.7

HSP HOSPIRA INC Pharmaceuticals 1-Aug 10.4 PKI PERKINELMER INC Life Sciences Tools & Services 14-Nov 4.7

BRK/B BERKSHIRE HATHAWAY INC-CL B Diversified Financial Services 10-Oct 365.0 AFL AFLAC INC Insurance 14-Nov 26.4

C CITIGROUP INC Banks 14-Nov 161.7 L LOEWS CORP Insurance 11-Apr 14.8

GS GOLDMAN SACHS GROUP INC Capital Markets 12-Dec 85.0 LUK LEUCADIA NATIONAL CORP Diversified Financial Services 11-Apr 8.1

MS MORGAN STANLEY Capital Markets 5-Sep 71.3 PCL PLUM CREEK TIMBER CO Real Estate Investment Trusts 14-Nov 7.3

ALL ALLSTATE CORP Insurance 10-Oct 28.5 TMK TORCHMARK CORP Insurance 14-Nov 6.8

EQR EQUITY RESIDENTIAL Real Estate Investment Trusts 1-Aug 26.0 ZION ZIONS BANCORPORATION Banks 5-Sep 5.5

LM LEGG MASON INC Capital Markets 14-Nov 5.8 PBCT PEOPLE'S UNITED FINANCIAL Thrifts & Mortgage Finance 12-Dec 4.5

AAPL APPLE INC Technology Hardware, Storage & 16-May 648.1 ACN ACCENTURE PLC-CL A IT Services 12-Dec 55.0

MSFT MICROSOFT CORP Software 16-May 389.7 ADS ALLIANCE DATA SYSTEMS CORP IT Services 1-Aug 17.6

INTC INTEL CORP Semiconductors & Semiconductor 10-Oct 176.6 MSI MOTOROLA SOLUTIONS INC Communications Equipment 1-Aug 15.1

YHOO YAHOO! INC Internet Software & Services 14-Nov 48.0 CA CA INC Software 14-Nov 13.4

BRCM BROADCOM CORP-CL A Semiconductors & Semiconductor 5-Sep 25.0 LLTC LINEAR TECHNOLOGY CORP Semiconductors & Semiconductor 10-Oct 10.9

AVGO AVAGO TECHNOLOGIES LTD Semiconductors & Semiconductor 1-Aug 25.4 HRS HARRIS CORP Communications Equipment 10-Oct 7.3

EA ELECTRONIC ARTS INC Software 14-Nov 14.1 FSLR FIRST SOLAR INC Semiconductors & Semiconductor 14-Nov 4.3

Telecom LVLT LEVEL 3 COMMUNICATIONS INC Diversified Telecommunication 14-Nov 16.0 T AT&T INC Diversified Telecommunication 11-Apr 167.6

SRE SEMPRA ENERGY Multi-Utilities 11-Apr 26.7 AES AES CORP Independent Power and Renewabl12-Dec 9.4

NI NISOURCE INC Multi-Utilities 5-Sep 12.6 TE TECO ENERGY INC Multi-Utilities 5-Sep 4.5

Source: Oppenheimer Asset Management & Bloomberg.

Consumer

Staples

Health Care

Financials

Technology

Utilities

Top 50 Buy Ideas (S&P 500) Top 50 Sell Ideas (S&P 500)

Energy

Materials

Industrials

Consumer

Discretionary

Technical Analysis

16

Broadcom (BRCM): Buy

Semiconductors & Semiconductor Equipment is one of our favorite industries for 2015, and within the industry we recommend buying BRCM in anticipation of a test of $50. This idea includes the potential for a long-term breakout at this important resistance. BRCM is also in the process of reversing three years of underperformance vs. the S&P 500.


BRCM vs. S&P 500

Broadcom (BRCM): Buy

Technical Analysis

17

Berkshire Hathaway (BRK/B): Buy

The Diversified Financials industry is one of our favorite industries for 2015. We used October volatility to add BRK/B to our Buy List, and we continue to recommend the shares. Note that the stock is breaking higher from a multi-year sideways range vs. the S&P 500. We believe this relative strength argues for continued leadership in 2015.


BRK/B vs. S&P 500

Berkshire Hathaway (BRK/B): Buy


Technical Analysis

18

Hospira (HSP): Buy

HSP was added to our S&P 500 Buy List in August, and we continue to expect higher highs following the stock’s breakout above $60, now support. A three-year base-and-breakout vs. the S&P 500 also argues for continued outperformance in 2015.


HSP vs. S&P 500

Hospira (HSP): Buy


Technical Analysis

19

Delta Air Lines (DAL): Buy

We continue to expect Airlines to trend higher in 2015 based on industry tailwinds. Specifically, we view the Airline industry within a decade-long bullish reversal vs. the S&P 500. DAL was added to our S&P 500 Buy List in June and should remain a source of leadership, in our view, because the stock recently notched confirming absolute and relative highs.


DAL vs. S&P 500

Delta Air Lines (DAL): Buy


Technical Analysis

20

Starbucks (SBUX): Buy

Our bullish narrative on SBUX started here (10/29) and then here (11/26), and we are accordingly adding the stock to our Buy List this week. We view the stock’s breakout above $82 resistance, now support, as a resumption of its long-term uptrend. We’re also encouraged because the stock is reversing higher from a year-long downtrend vs. the S&P 500.


SBUX vs. S&P 500

Starbucks (SBUX): Buy


Technical Analysis

https://opco2.bluematrix.com/sellside/EmailDocViewer?encrypt=0fdb99ed-2fbb-45c7-8f53-75479a60a3d2&mime=pdf&co=Oppenheimer2&[email protected]&source=mail

https://opco2.bluematrix.com/sellside/EmailDocViewer?encrypt=0f928451-037f-47d9-9e02-d277d8a9b864&mime=pdf&co=Oppenheimer2&[email protected]&source=mail

21

CVS Health (CVS): Buy

CVS provides a terrific trading lesson. In October, while some attempted to buy deeply oversold Energy stocks despite broken support levels, CVS had pulled back to its rising 200-day m.a. in an orderly manner with good relative strength. During the subsequent rally, CVS was leadership and energy stocks lagged; sometimes the easiest trade is the best trade. CVS has been on our Buy List since April and is likely to continue to trend higher, in our view.


CVS vs. S&P 500

CVS Health (CVS): Buy


Technical Analysis

22

Sempra Energy (SRE): Buy

SRE maintains one of the steadiest uptrends within the Utilities sector and consequently possesses one of the strongest relative trends vs. the S&P 500, in our view. We view the stock’s near-term pullback to $108 support as a tactical opportunity to buy.


SRE vs. S&P 500

Sempra Energy (SRE): Buy


Technical Analysis

23

Tesoro (TSO): Buy

TSO was added to our S&P 500 Buy List in October as a “pre-breakout” idea below $66 resistance, and this breakout is now support. We consider TSO as the only stock in the S&P 500 Energy sector with a positive relative trend vs. the S&P 500.


TSO vs. S&P 500

Tesoro (TSO): Buy


Technical Analysis

24

Sealed Air (SEE): Buy

SEE was added to our Buy List in November on the expectation that the stock was in position to see momentum accelerate following the major breakout above 15-year resistance at $33. We’re encouraged that the stock is reversing a ten-year downtrend vs. the S&P 500 too.


SEE vs. S&P 500

Sealed Air (SEE): Buy

Technical Analysis

25

Sector & Industry Snapshot─Week of December 12

Our Sector & Industry Snapshot is a current and concise overview of the leaders and laggards throughout the equity market. As a proxy for trend and momentum, this tool screens a comprehensive list of broad market indexes, S&P sectors (relative to SPX), and all GICS level 3 industries relative to their respective sector. It is designed to be a differentiated performance table and an unbiased starting point to help generate trend-following or mean-reverting ideas.

Mo. measures the level of RSI (14-week). RSI calculates the avg. gain / avg. loss in a security over a specified period. High readings (colored red; above 60) mark overbought and low readings (colored green; below 40) mark oversold. Neutral readings are colored yellow (between 40 and 60).

As a proxy for Trend we use the crossover between the 50-day and 200-day moving average. A positive percentage (colored green) indicates how far the 50D is above the 200D and a negative percentage (colored red) indicates how far the 50D is below the 200D.

Absolute Price Momentum Mo. Trend Industry (GICL3) vs. Sector (GICL1) Mo. Trend Industry (GICL3) vs. Sector (GICL1) Mo. Trend

U.S. Dollar Index (DXY) 72 6% Containers & Packaging 72 2% Biotechnology 63 7%

S&P 500 Index 57 3% Paper & Forest Products 70 5% Health Care Providers & Services 56 0%

Gold spot 47 -5% Chemicals 61 1% Health Care Equipment & Supplies 50 -1%

10-Year U.S. Treasury Yield 38 -9% Construction Materials 43 -2% Life Sciences Tools & Services 39 -6%

WTI Crude Oil future 12 -20% Metals & Mining 20 -5% Health Care Technology 37 -3%

Pharmaceuticals 34 -2%

Relative to S&P 500 Mo. Trend Industry (GICL3) vs. Sector (GICL1) Mo. Trend

NASDAQ-100 67 3% Airlines 76 12% Industry (GICL3) vs. Sector (GICL1) Mo. Trend

Dow Jones Industrial Average 49 0% Air Freight & Logistics 75 5% Diversified Financial Services 65 4%

S&P 500 Equal Weight 48 -1% Building Products 67 2% Real Estate Investment Trusts 56 1%

Russell 2000 44 -3% Road & Rail 60 8% Real Estate Management & Dev 54 0%

S&P 600 Small Cap 43 -3% Aerospace & Defense 55 0% Capital Markets 51 1%

S&P 100 Index 41 0% Professional Services 51 -2% Commercial Banks 43 -1%

S&P 400 Mid Cap 40 -2% Industrial Conglomerates 48 0% Consumer Finance 42 -2%

MSCI Emerging Markets 25 -6% Commercial Services & Supplies 43 0% Insurance 41 -1%

MSCI EAFE Developed Markets 21 -8% Trading Companies & Distributors 32 -4% Thrifts & Mortgage Finance 28 -5%

Machinery 27 -4%

Relative to S&P 500 Mo. Trend Electrical Equipment 26 -6% Industry (GICL3) vs. Sector (GICL1) Mo. Trend

Health Care 75 5% Marine 26 -5% Semis & Semi Equipment 61 1%

Financials 67 1% Construction & Engineering 17 -10% Computers & Peripherals 58 7%

Technology 64 2% Software 49 1%

Consumer Staples 60 2% Industry (GICL3) vs. Sector (GICL1) Mo. Trend IT Services 43 -3%

Utilities 58 2% Speciality Retail 77 6% Electronic Equipment 41 -7%

Consumer Discretionary 57 -1% Multiline Retail 64 4% Internet Software & Services 41 -3%

Industrials 47 -1% Distributors 62 4% Communications Equipment 39 -6%

Materials 32 -4% Textiles, Apparel & Luxury 62 3% S&P 1500 Telecom

Telecom 29 -3% Diversified Consumer Services 53 2% Industry (GICL3) vs. Sector (GICL1) Mo. Trend

Energy 14 -11% Household Durables 51 1% Diversified Telecom 48 0%

Media 45 -1% Wireless Telecom 47 -5%

Relative to S&P 500 Mo. Trend Auto Components 43 -4% S&P 1500 Utilities

S&P 500 Low Volatility 62 1% Hotels, Restaurants & Leisure 43 -1% Industry (GICL3) vs. Sector (GICL1) Mo. Trend

S&P High Yield Dividend 58 0% Automobiles 34 -9% Electric Utilities 69 1%

Russell 1000 Growth 54 0% Internet & Catalog Retail 33 -7% Water Utilities 48 -1%

Russell 2000 Growth 50 -2% Leisure Equipment & Products 32 -5% Multi-Utilities 47 0%

S&P 500 High Beta 42 -1% Gas Utilities 46 -1%

Russell 2000 Value 38 -4% Industry (GICL3) vs. Sector (GICL1) Mo. Trend Independent Power Producers 23 -10%

Russell 1000 Value 38 -1% Food & Staples Retailing 67 1%

Household Products 56 0%

Industry (GICL3) vs. Sector (GICL1) Mo. Trend Tobacco 48 1%

Oil, Gas, & Consumable Fuels 78 1% Food Products 42 -2% As of 12-Dec-14

Energy Equipment & Services 22 -5% Beverages 37 1%

Personal Products 24 -10%

Styles

S&P 1500 Consumer Staples

S&P 1500 Energy

Source: Oppenheimer Asset Management & Bloomberg.

S&P 1500 Health CareS&P 1500 Materials

S&P 1500 Industrials

S&P 1500 Consumer Discretionary

S&P 1500 Financials

S&P 1500 Technology

Key Market Indexes

Broad Market Equity Averages

S&P 500 Sectors

Technical Analysis

26

Stock prices of companies/ETFs mentioned in this report (as of 12/12/2014):

Company Ticker

Primary

Exchange

Last

Price Company Ticker

Primary

Exchange

Last

Price

CHEVRON CORP CVX New York 102.6 TRANSOCEAN LTD RIG New York 16.7

SCHLUMBERGER LTD SLB New York 80.7 DIAMOND OFFSHORE DRILLING DO New York 33.5

EOG RESOURCES INC EOG New York 85.9 NOBLE CORP PLC NE New York 14.8

KINDER MORGAN INC KMI New York 39.3 ROWAN COMPANIES PLC-A RDC New York 19.9

SPECTRA ENERGY CORP SE New York 33.9 DENBURY RESOURCES INC DNR New York 6.5

TESORO CORP TSO New York 74.4 PEABODY ENERGY CORP BTU New York 7.5

INTERNATIONAL PAPER CO IP New York 53.9 PRAXAIR INC PX New York 124.5

SEALED AIR CORP SEE New York 40.9 MOSAIC CO/THE MOS New York 44.7

INTL FLAVORS & FRAGRANCES IFF New York 100.5 EASTMAN CHEMICAL CO EMN New York 72.7

MEADWESTVACO CORP MWV New York 44.2 ALLEGHENY TECHNOLOGIES INC ATI New York 30.8

UNION PACIFIC CORP UNP New York 114.6 GENERAL ELECTRIC CO GE New York 25.1

FEDEX CORP FDX New York 176.4 BOEING CO/THE BA New York 121.0

DELTA AIR LINES INC DAL New York 48.1 PRECISION CASTPARTS CORP PCP New York 230.2

CSX CORP CSX New York 35.3 EATON CORP PLC ETN New York 65.3

SOUTHWEST AIRLINES CO LUV New York 41.8 FASTENAL CO FAST NASDAQ GS 46.1

C.H. ROBINSON WORLDWIDE INC CHRW NASDAQ GS 72.3 FLUOR CORP FLR New York 57.9

WALT DISNEY CO/THE DIS New York 92.0 MCDONALD'S CORP MCD New York 90.8

STARBUCKS CORP SBUX NASDAQ GS 83.7 JOHNSON CONTROLS INC JCI New York 46.7

CHIPOTLE MEXICAN GRILL INC CMG New York 657.6 DISCOVERY COMMUNICATIONS-A DISCA NASDAQ GS 34.0

UNDER ARMOUR INC-CLASS A UA New York 69.6 BORGWARNER INC BWA New York 53.3

TIFFANY & CO TIF New York 105.0 SCRIPPS NETWORKS INTER-CL A SNI New York 77.2

LENNAR CORP-A LEN New York 42.9 HARMAN INTERNATIONAL HAR New York 105.2

CVS HEALTH CORP CVS New York 90.9 PHILIP MORRIS INTERNATIONAL PM New York 85.0

REYNOLDS AMERICAN INC RAI New York 64.5 GENERAL MILLS INC GIS New York 52.2

ARCHER-DANIELS-MIDLAND CO ADM New York 50.6 BROWN-FORMAN CORP-CLASS B BF/B New York 87.9

MEAD JOHNSON NUTRITION CO MJN New York 98.1 CAMPBELL SOUP CO CPB New York 44.0

CONSTELLATION BRANDS INC-A STZ New York 91.4 COCA-COLA ENTERPRISES CCE New York 43.6

GILEAD SCIENCES INC GILD NASDAQ GS 105.9 PFIZER INC PFE New York 30.9

UNITEDHEALTH GROUP INC UNH New York 99.3 MERCK & CO. INC. MRK New York 58.2

ALEXION PHARMACEUTICALS INC ALXN NASDAQ GS 190.0 BAXTER INTERNATIONAL INC BAX New York 72.0

INTUITIVE SURGICAL INC ISRG NASDAQ GS 507.0 AGILENT TECHNOLOGIES INC A New York 40.1

EDWARDS LIFESCIENCES CORP EW New York 130.4 LABORATORY CRP OF AMER HLDGS LH New York 102.8

HOSPIRA INC HSP New York 61.3 PERKINELMER INC PKI New York 41.8

BERKSHIRE HATHAWAY INC-CL B BRK/B New York 148.1 AFLAC INC AFL New York 58.6

CITIGROUP INC C New York 53.4 LOEWS CORP L New York 39.6

GOLDMAN SACHS GROUP INC GS New York 188.8 LEUCADIA NATIONAL CORP LUK New York 22.0

MORGAN STANLEY MS New York 36.4 PLUM CREEK TIMBER CO PCL New York 41.6

ALLSTATE CORP ALL New York 68.0 TORCHMARK CORP TMK New York 52.7

EQUITY RESIDENTIAL EQR New York 71.8 ZIONS BANCORPORATION ZION NASDAQ GS 27.1

LEGG MASON INC LM New York 51.0 PEOPLE'S UNITED FINANCIAL PBCT NASDAQ GS 14.6

APPLE INC AAPL NASDAQ GS 110.5 ACCENTURE PLC-CL A ACN New York 82.5

MICROSOFT CORP MSFT NASDAQ GS 47.3 ALLIANCE DATA SYSTEMS CORP ADS New York 275.5

INTEL CORP INTC NASDAQ GS 36.5 MOTOROLA SOLUTIONS INC MSI New York 62.8

YAHOO! INC YHOO NASDAQ GS 50.6 CA INC CA NASDAQ GS 30.1

BROADCOM CORP-CL A BRCM NASDAQ GS 42.2 LINEAR TECHNOLOGY CORP LLTC NASDAQ GS 45.6

AVAGO TECHNOLOGIES LTD AVGO NASDAQ GS 100.5 HARRIS CORP HRS New York 69.7

ELECTRONIC ARTS INC EA NASDAQ GS 45.4 FIRST SOLAR INC FSLR NASDAQ GS 42.6

LEVEL 3 COMMUNICATIONS INC LVLT New York 47.5 AT&T INC T New York 32.3

SEMPRA ENERGY SRE New York 108.5 AES CORP AES New York 13.2

NISOURCE INC NI New York 40.0 TECO ENERGY INC TE New York 19.2

Technical Analysis

27

Important Disclosure Footnotes for Companies Mentioned in this Report that Are Covered byOppenheimer & Co. Inc:Stock Prices as of December 15, 2014Apple Inc. (AAPL - NASDAQ, $109.73, OUTPERFORM)Analog Devices (ADI - NASDAQ, $55.92, OUTPERFORM)Alexion Pharmaceuticals (ALXN - NASDAQ, $186.90, OUTPERFORM)American Tower Corp. (AMT - NYSE, $98.58, OUTPERFORM)Avago Technologies (AVGO - NYSE, $99.20, OUTPERFORM)Boeing Company (BA - NYSE, $120.77, PERFORM)Broadcom Corporation (BRCM - NASDAQ, $41.64, OUTPERFORM)Citigroup Inc. (C - NYSE, $53.40, OUTPERFORM)CA Inc. (CA - NASDAQ, $29.86, PERFORM)C.H. Robinson Worldwide (CHRW - NASDAQ, $72.29, PERFORM)Chipotle Mexican Grill (CMG - NYSE, $657.67, OUTPERFORM)Chevron Corporation (CVX - NYSE, $102.38, OUTPERFORM)EOG Resources, Inc. (EOG - NYSE, $86.37, OUTPERFORM)Express Scripts Inc. (ESRX - NASDAQ, $82.88, OUTPERFORM)Eaton Corp. (ETN - NYSE, $64.72, PERFORM)FedEx Corporation (FDX - NYSE, $175.79, OUTPERFORM)General Electric (GE - NYSE, $24.89, PERFORM)Gilead Sciences (GILD - NASDAQ, $104.13, OUTPERFORM)Goldman Sachs Group (GS - NYSE, $188.82, PERFORM)Halliburton (HAL - NYSE, $37.93, OUTPERFORM)Hess Corporation (HES - NYSE, $66.53, OUTPERFORM)Intel Corp. (INTC - NASDAQ, $36.23, PERFORM)Laboratory Corp. of America Holdings (LH - NYSE, $101.92, PERFORM)Linear Technology Corp. (LLTC - NASDAQ, $45.41, OUTPERFORM)Level 3 Communications, Inc. (LVLT - NASDAQ, $47.54, PERFORM)McDonald's Corporation (MCD - NYSE, $90.62, PERFORM)Morgan Stanley (MS - NYSE, $36.25, PERFORM)Microsoft Corporation (MSFT - NASDAQ, $46.95, OUTPERFORM)Starbucks Corporation (SBUX - NASDAQ, $83.25, OUTPERFORM)Schlumberger Limited (SLB - NYSE, $80.00, OUTPERFORM)Symantec Corporation (SYMC - OTC, $25.26, PERFORM)AT&T, Inc. (T - NYSE, $32.16, OUTPERFORM)Tiffany & Co. (TIF - NYSE, $104.07, OUTPERFORM)Tesoro Corporation (TSO - NYSE, $74.41, PERFORM)Under Armour, Inc. (UA - NYSE, $68.83, PERFORM)UnitedHealth Group, Inc. (UNH - NYSE, $98.76, OUTPERFORM)Yahoo! Inc. (YHOO - NASDAQ, $50.24, OUTPERFORM)

Technical Analysis

28

Important Disclosures and Certifications

The research provided in this report is based on technical analysis provided by Oppenheimer Asset Management Inc., a nonmember affiliate of Oppenheimer & Co. Inc. Technical analysis is the study of price and volume and the interpretation of tradingpatterns associated with such studies in an attempt to project future price movements. Technical analysis does not considerthe fundamentals of the underlying corporate issuer and may offer an investment view that may appear inconsistent with otherresearch generated by Oppenheimer Asset Management Inc. This report does not constitute research regarding fundamentalfinancial information. The investments discussed in this report may not be suitable for all investors. Investors should usetechnical analysis as one input into formulating an investment opinion and should consult with their Financial Advisor.Additional inputs should include, but are not limited to, the review of other research reports generated by Oppenheimer AssetManagement Inc., and looking at the fundamentals of the underlying corporate issuer.

Analyst Certification - The author certifies that this research report accurately states his/her personal views about the subjectsecurities, which are reflected in the substance of this report. The author certifies that no part of his/her compensation was,is, or will be directly or indirectly related to the specific recommendations or views contained in this research report.

Potential Conflicts of Interest:Technical analysts employed by Oppenheimer Asset Management Inc. are compensated from revenues generated by thefirm. Oppenheimer Asset Management Inc. generally prohibits any research analyst and any member of his or her householdfrom executing trades in the securities of a company that such research analyst covers. Additionally, Oppenheimer AssetManagement Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member ofa company that such analyst covers. In addition to 1% ownership positions in covered companies that are required to bespecifically disclosed in this report, Oppenheimer & Co. Inc. may have a long position of less than 1% or a short position ordeal as principal in the securities discussed herein, related securities or in options, futures or other derivative instrumentsbased thereon. Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specificdisclosures set forth below, may at times give rise to potential conflicts of interest.

Third Party Research DisclosureOppenheimer & Co. Inc. has a research sharing agreement with Oppenheimer Asset Management Inc. to provide third-partyresearch services to Oppenheimer & Co. Inc. customers. Oppenheimer & Co. Inc. does not guarantee that the informationsupplied is accurate, complete or timely, nor does Oppenheimer & Co. Inc. make any warranties with regard to the researchproduct or the results obtained from its use. Oppenheimer & Co. Inc. has no control over or input with respect to OppenheimerAsset Management Inc. research opinions. Oppenheimer Asset Management Inc. is a non-member affiliate of Oppenheimer& Co. Inc.

Company Specific Disclosures

Oppenheimer & Co. Inc. makes a market in the securities of AAPL, ALXN, AVGO, BA, BRCM, C, CA, CHRW, CVX, DAL,DISCA, EA, ESRX, FSLR, GILD, INTC, ISRG, LLTC, MSFT, SBUX, SYMC, T, UA, YHOO, CINF, FAST, PBCT, QQQ and ZION.

Oppenheimer & Co. Inc. expects to receive or intends to seek compensation for investment banking services in the next 3months from ATI, C, EMN, GE, LVLT and UA.

In the past 12 months Oppenheimer & Co. Inc. has received compensation for investment banking services from C.

In the past 12 months Oppenheimer & Co. Inc. has managed or co-managed a public offering of securities for C.

In the past 12 months Oppenheimer & Co. Inc. has provided investment banking services for C.

Additional InformationPlease write to Oppenheimer Asset Management Inc., 85 Broad Street, New York, NY 10004. Attention: ComplianceDepartment.

Technical Analysis

29

Other DisclosuresThis report is issued and approved by Oppenheimer Asset Management Inc, a registered investment advisor, to its affiliates Oppenheimer& Co. Inc., Oppenheimer Europe Ltd. and Oppenheimer Investments Asia Limited. This report may be further distributed by Oppenheimer& Co. Inc., for informational purposes only, to its institutional and retail investor clients. Oppenheimer & Co. Inc. transacts business on allprincipal Exchanges and is a member of SIPC. This report does not constitute an offer or solicitation to buy or sell any securities discussedherein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitablefor all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of anyparticular client of Oppenheimer Asset Management Inc. or its affiliates. Recipients should consider this report as only a single factor inmaking an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution forthe exercise of independent judgment of the merits and risks of investments. The analyst writing the report is not a person or companywith actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decisionwith respect to any security recommended in this report, the recipient should consider whether such recommendation is appropriate giventhe recipient's particular investment needs, objectives and financial circumstances. We recommend that investors independently evaluateparticular investments and strategies, and encourage investors to seek the advice of a financial advisor. Oppenheimer Asset ManagementInc. will not treat non-client recipients as its clients solely by virtue of their receiving this report. Past performance is not a guarantee offuture results, and no representation or warranty, express or implied, is made regarding future performance of any security mentioned inthis report. The price of the securities mentioned in this report and the income they produce may fluctuate and/or be adversely affected byexchange rates, and investors may realize losses on investments in such securities, including the loss of investment principal. OppenheimerAsset Management Inc. accepts no liability for any loss arising from the use of information contained in this report. All information, opinionsand statistical data contained in this report were obtained or derived from public sources believed to be reliable, but Oppenheimer AssetManagement Inc. does not represent that any such information, opinion or statistical data is accurate or complete (with the exception ofinformation contained in the Important Disclosures section of this report provided by Oppenheimer Asset Management Inc. or individualresearch analysts), and they should not be relied upon as such. All estimates, opinions and recommendations expressed herein constitutejudgments as of the date of this report and are subject to change without notice. Nothing in this report constitutes legal, accounting or taxadvice. Since the levels and bases of taxation can change, any reference in this report to the impact of taxation should not be construed asoffering tax advice on the tax consequences of investments. As with any investment having potential tax implications, clients should consultwith their own independent tax adviser. This report may provide addresses of, or contain hyperlinks to, Internet web sites. OppenheimerAsset Management Inc. has not reviewed the linked Internet web site of any third party and takes no responsibility for the contents thereof.Each such address or hyperlink is provided solely for the recipient's convenience and information, and the content of linked third partyweb sites is not in any way incorporated into this document. Recipients who choose to access such third-party web sites or follow suchhyperlinks do so at their own risk. The S&P 500 Index is an unmanaged value-weighted index of 500 common stocks that is generallyconsidered representative of the U.S. stock market. The S&P 500 index figures do not reflect any fees, expenses or taxes.This research report may also be distributed in the UK and elsewhere throughout Europe, as third party research by Oppenheimer EuropeLtd, which is authorized and regulated by the Financial Conduct Authority (FCA). This research is for information purposes only and is not tobe construed as a solicitation or an offer to purchase or sell investments or related financial instruments. This research is for distribution onlyto persons who are eligible counterparties or professional clients and is exempt from the general restrictions in section 21 of the FinancialServices and Markets Act 2000 on the communication of invitations or inducements to engage in investment activity on the grounds thatit is being distributed in the UK only to persons of a kind described in Article 19(5) (Investment Professionals) and 49(2) High Net Worthcompanies, unincorporated associations etc) of the Financial Services and Markets Act 2000 (Financial Promotion) Order2005 (as amended). It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. In particular, thismaterial is not for distribution to, and should not be relied upon by, retail clients, as defined under the rules of the FCA. Neither the FCA’sprotection rules nor compensation scheme may be applied. This report or any portion hereof may not be reprinted, sold, or redistributedwithout the written consent of Oppenheimer Asset Management Inc.This research report may be distributed in Hong Kong by Oppenheimer Investments Asia Limited (OIAL) to professional investors, personswhose business involves the acquisition, disposal or holding of securities, whether as principal or agent. OIAL, an affiliate of OppenheimerAsset Management Inc., is regulated by the Securities and Futures Commission for the conduct of dealing in securities, advising onsecurities, and advising on corporate finance. Professional investors in Hong Kong should contact [email protected] for all mattersand queries relating to this report. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consentof Oppenheimer & Co. Inc. Copyright © Oppenheimer & Co. Inc. 2014.

This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Oppenheimer & Co. Inc. Copyright© Oppenheimer & Co. Inc. 2014.

Technical Analysis

mailto:[email protected]

Documents

December 15, 2014 Technical Analysis: Inflection Points · Technical Analysis Ari H. Wald, CFA, CMT Technical Analysis (212) 667 -5279 [email protected] December 15, 2014 Technical