InvestWELL Financial Inc. - Markets This Week

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August 04, 2007 Dear Member, We hope you are doing well. The market is currently experiencing a quite overdue healthy correction. We believe that the market has yet to find its bottom as investors start to realize that market risk should be considered at all times. Our next InvestWELL Report will be released on September 8, 2007 . (following the Labor Report which is generally recognized as a "market mover"). Derek Polcyn, President In This Issue: Investment Idea Quiz Our Results Market Highlights Behavioral Finance Indicators Answer to the Quiz

Investment Idea Question: What is a market correction? Answer: Reverse movement in prices at a magnitude of 10 – 20%. Corrections are usually temporary, marking an interruption in the upward trend. Some corrections are actually healthy for the market as they make investors aware of the risks of investing. In some literature, researchers also claim that corrections help move money from "weak hands" to "strong hands".


Quiz What should an investor do during a 10% correction? A) Sell everything and run for cover B) Listen to the media for an explanation of the correction C) Wait it out D) Buy more equities Answer to the Quiz at the bottom of the newsletter


Our Results (Cumulative %) InvestWELL Picks has managed to maintain its sizeable gains of 15.4% vis-à-vis the S&P 500 index. In fact, our portfolio is handling the downside of the current correction very well. Investment Strategy – MEMBER SECTION Chart 1.


Market Highlights During the last month, the US equity market has experienced a correction (Chart 2 & 3). It is quite normal to go through a correction after a long period of upward movement. Many investors are asking themselves if the current correction could become a bear market Charts 2 & 3. S&P 500: 3 Years and Last Month Charts courtesy of StockCharts.com During the last month, the Canadian market has declined in tandem with its US counterpart (Charts 2 & 3). Charts 4 & 5. TSX Canada: 3 Years and Last Month Charts courtesy of StockCharts.com Last month, US employers added 92K new jobs, while the unemployment rate edged up to 4.6%. The spill-over from the housing market is believed to be responsible for the disappointing labor data. The Labor Report for the Canadian economy will be released next week. So far this year, the Canadian economy has been able to generate more new jobs (proportionally) than the US labor market Stocks have been plummeting on evidence losses in the mortgage market may slow the economy and reduce bank profits. The media reports: "The sell-off wiped out $2.1 trillion in value from global equity markets last week". This dramatic statement is actually incorrect. The value of financial assets fluctuates all the time so it cannot be estimated with certainty. If the stock market surges ahead, the media does not tell us "The value of global equities jumped up by $2.1 trillion last week". Once again, the value of something is in the eye of the beholder. There are contradictory signs coming from the real estate market in the US. The pending home sales rose strongly but foreclosures went up a massive 55% in comparison with the previous year. All of it may signal that more and more home owners are not able to pay their bills while new buyers are starting to emerge. Asian stocks continue to fall on concern the U.S. sub-prime loans crisis is spreading to the region's financial companies. This is yet another reminder of how financial markets are interconnected within the global economy. Opportunities and Risks – MEMBER SECTION


Behavioral Finance Indicators (see explanation) Here is a direct quote from the Behavioral Section in last month's Member newsletter: "Overall, there is a considerable probability of the market correction in the coming months." Our call on the market was quite correct and also lucky. MEMBER SECTION Charts 6 - 8: Advancing/Declining Line, AAII and Equity Put/Call Ratio Charts courtesy of StockCharts.com and DecisionPoint.com

Answer to the Quiz C is correct. The worse thing to do is to sell when prices are down. Staying put is a good option but less risk-averse investors may also consider adding more equities to their portfolios (option D).

Thank you for reading InvestWELL Report. Invest WELL Financial.com


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