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Best Dressed List -- 2013

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Preview

Each year at about this time we publish the Best Dressed List, showcasing the best examples ofclassical charting principles from the just-completed year.

The Best Dressed List illustrates the types of trading situations that Factor LLC has sought over theyears in its proprietary account. These types of trading situations are the main focus of Factor LLCstrading.

To qualify for the Best Dressed List, a market must meet the following criteria:

1. A clearly defined (no doubt about it) classical chart pattern at least 12 weeks in duration on thedaily and weekly charts in a tradable market.

2. A decisive breakout with little or no pattern retesting. Secondary breakouts are consideredwhen an initial earlier breakout failed.

3. A sustained trend to the implied target.

Whether or not Factor LLC successfully captured the pattern is not a criteria for inclusion (at least notconsciously). The list is broken down into three sections:

Best Dressed List Honorable Mention List Promising Best Dressed Charts for 2014

Historically, our challenge has been to limit the list to only 10 market situations. This year, for the veryfirst time, we had difficulty coming up with our list. This is due, in our opinion, to the choppy nature offutures markets in 2013.

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Best Dressed List

Market Pattern(s) Date completed Target(s)Corn (Dec. 2013) 5+ mo. H&S top 12/26/2012 at 598 541 on 3/7

512 on 5/21After a 30-month bull trend in Corn, the December 2013 contract topped in early 2013 with a classic H&Spattern. Of significance, the nearby continuation chart topped in August 2012. This fact added credibility tothe top in the December 2013 contract.

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Market Pattern(s) Date completed Target(s)Aussie $ 23-mo. triangle and 9-

mo. rectangle5/9 at 1.0067 .9019 on 7/3

The over the edge of the cliffdecline in the Aussie in May completed a 9-mo. rectangle and a 23-monthtriangle. The initial target of .9019 was met in July. A further target of .8050 exists on the weekly graph.Perhaps a continuation pattern in 2014 will put the Aussie on next years Best Dressed List.

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Market Pattern(s) Date completed Target(s)Japanese Yen (futures) 26-mo. H&S top 12/12 at 1.2010 1.0403 on 3/8

The decline in December 2012 completed a massive H&S top in the Yen futures (a bottom in the spotUSD/JPY). Note that the 26-mo. top was ignited by a 3-week pennant. This is not unusual. Often times ahuge pattern is launched by a smaller configuration.

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Market Pattern(s) Date completed Target(s)Gold 18-mo. rectangle 4/12 at 1501 1262 on 6/26

The crash decline of April 12 completed a historic rectangle top in Gold. The target was met in June.

Market Pattern(s) Date completed Target(s)Gold 10-wk. pennant 6/20 at 1325 1206 on 6/27

A pennant developed after Golds first downward thrust. This 10-week pattern was completed on June 20,leading to the final down leg in the metal.

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Market Pattern(s) Date completed Target(s)Live Hogs June 6+ mo. H&S top 2/6 at 95.50 90.50 on 2/25

The only livestock market traded by Factor LLC with any regularity is Lean Hogs. We have found Live andFeeder Cattle to be undependable charting markets. The decline in Hogs in February completed a H&Stop, the target of which was quickly reached.

Market Pattern(s) Date completed Target(s)Live Hogs July 3-mo. horn 5/31 at 94.10 99.00 on 6/10

Following the attainment of the target from the H&S top (see top box), Hogs formed a 3-month hornpattern, also called a sloping bottom.

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Market Pattern(s) Date completed Target(s)Eurodollars Dec. 2017 12-mo. H&S top 5/28 at 97.36 96.75 on 6/20The decline in late May completed a massive H&S top. After retesting the neckline for a week or so themarket fell away.

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Market Pattern(s) Date completed Target(s)Cocoa Possible 20-mo.

Compound fulcrum and

3-mo. H&S

8/7 at 2402 2643 on 9/17

It was apparent in July that Cocoa was building a possible compound fulcrum on the weekly chart. Acompound fulcrum is basically a complex continuation H&S top that serves as a bottom. The daily chartprovided the ignition by completing a 3-mo. H&S bottom in August. The target of this pattern was met inSeptember. The compound fulcrum has an unmet target at 3370.

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Honorable Mention List

Market Pattern(s) Date completed Target(s)Copper 18-mo. triangle 3/18 at 341.15 300.20 on 6/24

The decline in mid-March completed an 18-month triangle in Copper. Note the bull trap in early February.The market reached its target of 300 in June, but only after a 35+ cent rally in May.

Market Pattern(s) Date completed Target(s)Silver 19-mo rectangle 4/12 1650

The bottom boundary of this pattern was very well defined with and the breakout was clean and decisive.There is one reason Silver is only an honorable mentionits target of 1650 was not met. Yet, even if amarket does not travel directly to a target, a decisive breakout of a pattern provides traders with a variety ofoptions.

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Best Dressed List candidates for 2014

A question we always ask ourselves when analyzing charts for a possible trade is thisDoes the chartand market in question have the potential to become a member of the Best Dressed List. A number ofpatterns currently under construction are possible candidates for the 2014 list.

Market Pattern(s) Date completed Target(s)

RBOB Gas 32-month rectangle ? TBDThe RB Gas has been in a broad trading range since April 2011. We do not believe this will be apermanent trading range.

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Market Pattern(s) Date completed Target(s)Copper 9-mo. H&S bottom ? ?

Even as we prepare this document, Copper is challenging the neckline of a possible H&S bottom. Thebelabored duration of the right shoulder is a caveat for us. Yet, a decisive close above the neckline wouldspeak for itself. The target would be 377.

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Market Pattern(s) Date completed Target(s)Japanese Yen futures 6-mo. symmetrical

triangleNov. 21 at 9887 Initial target of 9639 met

on 12/13Extended target is 8841

The attainment of 8841 will qualify the Yen futures for the 2014 Best Dressed List

Market Pattern(s) Date completed Target(s)Mexican Peso 6-mo. coil or triangle ? ?

This pattern could go either way. This is a carbon copy pattern of the triangle completed in the Topix inNovember 2012. The monthly charts would suggest a downward move ahead.

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Market Pattern(s) Date completed Target(s)Eurodollars (Dec. 2017) 12-week H&S top and

29-mo. H&S top12-wk top completed on

12/19 at 96.7296.15 on 12-wk pattern

The 12-week H&S top will be on the 2014 Best Dressed List if the target of 96.15 is met. Yet, a massive29-mo H&S top is developing.

Market Pattern(s) Date completed Target(s)Canadian Dollar (futures) 45-mo Mtop ? .8200

The Loonie is attempting to penetrate support at .9350 to .9400. A decisive close below .9350 could usherin a significant bear trend.

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Market Pattern(s) Date completed Target(s)Topix (JSE) 7-month half-mast coil ? 1730

The Topix is attempting to complete a 7-month triangle. Based on the monthly chart (top), our guess is thatthis triangle will become a half-mast coil.

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Market Pattern(s) Date completed Target(s)German Bobl 24-mo H&S top ? ?

The charts would indicate that the Bobl yield will go from .9% to 2.35%, perhaps starting within the nextcouple of months.

Market Pattern(s) Date completed Target(s)Aussie $ Completed triangle top 5/9 at 1.0067 .8049

The massive triangle top in the Aussie has an unmet target. I am hoping for a continuation pattern to takethe market to its target. A rally toward 91.50 to 92.50 would put the market into a sell zone for Factor.

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Market Pattern(s) Date completed Target(s)British Pound 5-year triangle ? ?

This ever-narrowing trading range in the Cable is sure to be resolved at some point. A decisive closeabove 1.7000 would establish a possible target of 2.0000.

Market Pattern(s) Date completed Target(s)Heating Oil 33-mo continuation H&S top ? ?

The entire right shoulder from the Oct. 2012 high displays a H&S bottom formation.

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Market Pattern(s) Date completed Target(s)S&Ps 13-year rectangle May 2013 3250 semi log

2345 arithmeticI believe the end-of-society-as-we-know-it-perma-bears have it all wrong in the U.S. stock market. Thesustained advance during 2013 completed a multi-year rectangle. Depending upon whether a semi-log orarithmetic scale is used, the target ranges from 2345 to 3250. A correction toward 1600 is a major buyingopportunity.

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Market Pattern(s) Date completed Target(s)Gold 7+ month double bottom ? 1675

Double tops and bottoms are the most misdiagnosed chart pattern. According to Edwards and Magee, adoublepattern has very strict criteria in terms of time duration and height. Gold would fulfil the definitionof a double bottom with a decisive close above 1450 or so. Something to watch in 2014.

Market Pattern(s) Date completed Target(s)

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Review

So, what is the point of the annual Best Dressed List? It depends! If you are a casual user of charts in yourtrading this document will be an interesting read, but not much more. And that is ok. Similarly, if you are aswing or scalp trader this document will have only passing interest.

But, if you rely primarily on classical charting principles and if your goal is to catch the really big and

significant chart patterns, this document can become a point of reference.

A study of the Best Dressed List trading situations is a reminder that the most profitable major patternshave several things in common.

There is no hurry to get aboard early. It is best to wait until the real move begins (although maturepatterns often give an advance warning). An urge to preposition often ends in getting chopped upand then missing the real move when it comes

Breakouts are decisive. While a process of retesting can occur, a well-timed entry is seldom putinto a serious loss

Even though a market can be oversold or overbought at the point of breakout, there is actually verylittle risk at entering at the breakout

The moves to the targets can be most often sudden and quick. Patterns that take months to

develop can deliver their profits in a matter of days As a general rule it is best to exit at the target and then avoid any temptation to reenter the same

market any time soon

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Factor LLC

Colorado Springs, CO 80903Email plb.factorco@gmail.com www.PeterLBrandt.com

Factor LLC Best Dressed List 2013

Market Pattern Date

completed

Breakout

price

Profit

goal at

target per

contract

Worst

Intraday

loss per

contract

Worst

closing loss

per contract

Best Dressed

December Corn 5+ mo H&S top 12/26/12 598 $2,850 ($325) ($100)

Aussie Dollar 9-mo rectangle 5/9 1.0067 $10,480 ($220) ($0)

Japanese Yen 26-mo H&S top 12/12/12 1.2010 $19,750 ($350) ($0)

Gold 18-mo rectangle 4/12 1501 $21,400 ($700) ($0)

Gold 10-wk triangle 6/20 1325 $11,900 ($400) ($0)

Live Hogs 6+ mo H&S top 2/6 95.50 $2,000 ($120) ($0)

Live Hogs 3-mo horn or

sloping bottom

5/31 94.10 $1,960 ($360) ($200)

Eurodollars

(Dec 2012)

12-mo H&S top 5/28 97.36 $1,525 ($475) ($175)

Cocoa 3-mo H&S

bottom

8/7 2402 $2,380 ($130) ($0)