Vous êtes sur la page 1sur 5

October 25th, 2012

Equity Market Review

Summary
Markets have been in sell-off mode following the violation of the key technical supports we highlighted in Mondays Fusion Equity Market Review. Weakening market internals such as; the number of new 52 week highs, the percentage of issues above their 50 day moving average and other internal measures, continue to breed a lack of confidence. The recent risk on trade of improving performance by; higher beta issues, cyclicals, banks and emerging markets, in favor of safer havens such as; utilities, health care and consumer staples has reversed trend. Currently, neither risk on, nor risk off is working, leaving long only money no place to hide, except on a relative basis, which is a bit different from other recent corrective periods, where some groups provide absolute returns during the corrective wave. A lackluster start to earnings season, and the possibility of a fiscal cliff, are being cited as the popular culprits behind the recent market weakness. However, major U.S. indices are trading down towards their first support levels, thus we may see some stabilization soon. Additionally with the dearth of bad earnings and warnings likely to moderate as the earnings season progresses, we may see selling pressure abate. Market sentiment, which has been decidedly neutral and disengaged, may also provide a cushion to falling stock prices soon. Using the AAII Bullish Sentiment Survey, as a proxy, we see the number of bulls has been below 30 % now for two weeks straight, while its 5 week average is 31.69 %. These are low numbers and you would be hard pressed to find big sell-offs, historically speaking, when AAII Bull readings are this low. At the end of the day how one tactically deals with corrective activity, depends on individual risk tolerances. Some investors like to lead the charge, of course, a lot of them get bloodied or worse in the process. On the other hand, some investors choose to wait and see how the battle is progressing before jumping in. The latter approach, when the odds of a victory become more clear, while more conservative, in our opinion tends to be the best tact to take. While you give up a little performance by not catching the lows, or near lows, you increase the probability of catching a real turn, as opposed to a dead cat bounce. That said we are waiting for internals to improve enough to signal its time to aggressively reengage the long side. While an oversold bounce can occur at any point, especially with sentiment so low, there has been enough internal deterioration to suggest its not worth trying to play the bounce game, unless your focus is very short-term trading. Below we take a look at technical levels on the S&P 500 and other indices.

October 25th, 2012

Equity Market Review

S&P 500 Index (SPX) - Daily Chart

As seen in the chart above the S&P 500 Index failed three times to overtake the 1,475 - 1,460 area (red arrows) then subsequently broke its uptrend line (black arrow and green shaded lines) at 1,430. The index then broke the 1,430 - 1,420 support zone (orange shaded lines) and the last three days is trying to bounce off minor support (purple line) near 1,408. Given the three failures to move to new highs, and the subsequent trend line and support breaks we believe the index will need to go lower, maybe1,375, before really firming up.

October 25th, 2012

Equity Market Review

NASDAQ Composite Index (CCMP) - Daily Chart

The NASDAQ Composite has taking it on the chin harder than other markets of late after breaking its up trend (green line) near 3,130 and then the support zone (red shaded line) in the 3,040 - 3,030 area. The index now is deeply oversold and at its 200 day moving average (purple line and arrow), so if it is going to make a stand and catch a bid, it is here. Below the 200 day your looking at 2,800 next. My guess is to create an intermediate term low the NASDAQ may need to break that 200 day to create a mini wash out condition.

October 25th, 2012

Equity Market Review

Transportation Index (TRAN) - Daily Chart

The Transportation chart, above, continues to be range bound between support (green shaded lines) and resistance (red shaded lines). The resolution of the range will go a long way to determining where the economy is headed, unfortunately from a directional standpoint, the trannies arent cooperating with bulls or bears.

Equity Market Review

Important Disclosures

This communication is for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. All market prices, data and other information are not warranted as to completeness or accuracy and are subject to change without notice. Any comments or statements made herein do not necessarily reflect those of Fusion Holdings LLC, its subsidiaries and affiliates. This transmission may contain information that is privileged, confidential, legally privileged, and/or exempt from disclosure under applicable law. If you are not the intended recipient, you are hereby notified that any disclosure, copying, distribution, or use of the information contained herein (including any reliance thereon) is STRICTLY PROHIBITED. Although this transmission and any attachments are believed to be free of any virus or other defect that might affect any computer system into which it is received and opened, it is the responsibility of the recipient to ensure that it is virus free and no responsibility is accepted by Fusion Holdings LLC., its subsidiaries and affiliates, as applicable, for any loss or damage arising in any way from its use. If you received this transmission in error, please immediately contact the sender and destroy the material in its entirety, whether in electronic or hard copy format. FusionIQ (FIQ) is not registered as an investment adviser with the SEC or any state securities agency. Rather, FIQ relies upon the publishers exclusion from the definition of investment adviser as provided under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. The site content and services offered thereon are bona fide publications of general and regular circulation offering impersonalized investment-related information to users and/or prospective users (e.g., not tailored to the specific investment needs of current and/or prospective users). To the extent any of the content published as part of the site or services offered thereon may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.