Schaeffer’s Daily Bulletin Online User’s Guide

Introduction
Welcome to Schaeffer’s Daily Bulletin, a service that each morning provides you with the
most important market-moving news to begin your day. Bernie Schaeffer and his
research staff survey the landscape of the market, from any Federal-Reserve
announcements to earnings news to analysts' upgrades, and deliver this news to you,
along with daily stock picks that comprise an ongoing portfolio. The report is delivered
each morning before the opening bell, so you are able to begin the trading session with
the morning's important news and indicators already digested.

Schaeffer's Daily Bulletin Contents

· Bullish/Bearish List
Schaeffer’s Daily Bulletin provides a minimum of two stocks every day in our bullish and
bearish list of potential trading opportunities. These stocks are designed as a starting
point to find the best opportunities.

· Fed Fodder
More than just the intermittent news on Federal Open Market Committee meetings, this
section covers the day-to-day action of the Federal Reserve, including any public remarks
from Ben Bernanke as well as the local Federal Reserve Bank officials. "Fed Fodder"
also reports on the movement of federal funds futures, which gauge the likeliness of
future rate hikes.

· Stat of the Day

The "Stat of the Day" is an interesting tidbit from the world of finance. Previous
stats of the day have included data on automobile sales, news on cell phone usage,
and changes in Internet-search habits, to name a few.

· Sentiment Readings
Sentiment analysis is the backbone of our unique Expectational Analysis ®
methodology (which is covered in more detail below). "Sentiment Readings"
includes analysis of Market Volatility Indices, breakdowns of investor surveys,
and information on mutual-fund flows.

· Technical Talk
The "Technical Talk" section of Schaeffer's Daily Bulletin looks at the major
market averages each day from a technical analysis standpoint. This includes the
study of moving-average trendlines, retracement levels, and historical support and
resistance levels.

· Commodity Connection
Crude oil and precious metals are the focal point of the "Commodity Connection." This
section reports on the day-to-day price action of crude oil, unleaded gasoline, gold, silver,
and other issues of note. When applicable, the section summarizes the weekly inventory
reports from the Energy Information Administration.

· Sector Watch
"Sector Watch" is a daily look at the best- and worst-performing sector indices
and exchange-traded funds (ETF), along with any big news that might be directly
impacting these sectors.

· Overseas Markets
While the American markets sleep, traders are busy with overseas action. The
"Overseas Markets" section of Schaeffer's Daily Bulletin covers the Asian
markets at their close, and comments on the midday action in Europe, featuring
any notable news that is affecting the action of global markets.

· Economic News
The "Economic News" section summarizes the economic reports of the day, from
jobless claims and durable-goods orders to consumer sentiment and
manufacturing indices.

· Earnings News
"Earnings News" highlights the major earnings reports of each trading session, listing the
reporting companies along with relevant information on positive and negative earnings
surprises.

· Research Notes
The "Research Notes" section tracks the upgrade and downgrade activity of the major
brokerage firms. It also mentions when a brokerage house initiates new coverage on a
security.

· Featured Stock
From our list of bullish and bearish equities, Schaeffer’s Daily Bulletin provides one
"Featured Stock" every day. This section uses our Expectational Analysis ®
methodology to discuss the rationale underlying the bullish or bearish pick. If we
choose to make a stock recommendation, we provide target and stop-loss levels.
Expect an average of four to six trading recommendations per month.

Along with the featured stock of the day, we typically provide an analysis of the options
on that stock to identify profitable trading opportunities. Based on whether the options
are fairly (or cheaply!) priced, our target price for the featured stock, and the duration of
the expected move, we may recommend an option play if we determine the profit
potential is sufficient relative to the risk taken. One benefit of the Schaeffer’s Daily
Bulletin service is that we are not limited to one type of option strategy. To provide you
with a range of opportunities, strategies, and levels of risk, we may recommend one of
the following types of option trades:
 Straight put or call – This is the most frequent type of recommendation
and involves the simple purchase of an uncovered call or put option. We
provide you with a maximum price to pay for the recommended option.

Put Selling - Put selling involves selling out-of-the-money puts on a

quality stock that the investor would be willing to buy if the stock took a
temporary plunge. However, in cases where the puts expire worthless,
the investor pockets the premium without ever having to buy the stock.
This strategy is designed to rival a stock-trading portfolio because it
offers two methods for generating profits: collecting premium by selling
out-of-the-money options and acquiring a stock at a reduced price.
While there is a margin requirement when selling puts, the cash outlay is
substantially less than the outright purchase of the equivalent number of
shares. (Please see the Education section of SchaeffersResearch.com for
more on put selling.)

· Option Update/Open Stock Positions Update

These sections simply list the current open stock and options positions, with
updated target and stop-loss levels. The "Open Stock Positions Update," in table
form, offers a place in which to quickly review the current holdings of the
Schaeffer's Daily Bulletin portfolio.

Bernie’s Unique Methodology

The cornerstone of Bernie’s unique analytical approach that underlies the picks in
Schaeffer’s Daily Bulletin is what we call Expectational Analysis ®, a methodology that
analyzes technical and fundamental factors within the context of market sentiment. The
key to this approach is accurately gauging investor expectations through various
sentiment indicators.

Why are expectations so important? Because the price of a stock represents investors’
perceptions of reality and often these perceptions are excellent contrary indicators. A
stock with relatively low expectations stands a good chance of rallying, as skeptical
investors (and their money) wait on the sidelines, ready to bolster a stock’s appreciation
by buying up the supply from profit-takers. Conversely, high expectations usually mean
that most of the sideline money has already been committed to a stock. Buyers are now
scarce and selling will predominate on any perceived negative news, resulting in a price
decline.

One of the most important tenets of Bernie’s Expectational Analysis ® approach is that the
power of a contrarian indicator is much greater when the underlying sentiment runs
counter to the direction of the stock. For example, pessimism (e.g., a high put/call ratio,
high short interest, fewer analyst “buy” ratings) would be an expected reaction to a
downtrend and thus would not be a valuable contrary indicator. On the other hand, such
skepticism on a rising stock is a powerfully bullish combination, as tops aren’t usually
seen until optimism reaches extreme levels. Using the same contrarian perspective, a
declining stock viewed in a positive light (e.g., lower put/call ratio, low short interest,
high percentage of “buy” ratings) supports a bearish outlook due to these high
expectations potentially translating into selling pressure.

For Schaeffer’s Daily Bulletin trades, we use a vast array of sentiment indicators and
filters to search for low-expectation securities that sport strong technicals and/or
fundamentals. For example, a stock that is outperforming the broad market (strong
technicals) but has high short interest and a high put/call open interest ratio (negative or
skeptical sentiment) would be an ideal portfolio component. Why? Because skepticism
toward the stock will eventually unwind as investors jump aboard the stock’s bandwagon,
which adds more buying pressure to keep the uptrend intact.

A Final Word
If you have any questions about Schaeffer’s Daily Bulletin, please call our Customer Care
department at (800) 327-8833.

We wish you the best of luck in your trading.