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November 28th 2012

Equity Market Review

Summary Comments

Prior to yesterday heavier volume sell-off, volume on most major markets during the snap back had been anemic, making us suspect that a solid low was not in place. Yesterdays failure on the S&P 500 occurred on a rally back into the 100 day moving average, while the NASDAQ stalled and reversed off its overhead 200 day moving average. At this juncture it appears this recent rally was a typical reaction low, oversold bounce. Absent a capitulatory sell-off we remain skeptical that a lasting bounce can occur just yet. Yesterdays trading activity only reinforced the idea that sellers are still the aggressors, as volume remains heavier and with more consistency on down sessions than up sessions. As we said in other recent writings, durable rallies are built on liquidity and the confidence that higher prices can be achieved. In this type of environment stocks reside in the hands of strong-handed buyers, who typically have lengthier holding horizons. However, in corrective periods these conditions reverse, as confidence wanes and stocks fall into the hands on hot potato traders, who take opportunist stabs to generate alpha. However these hot potato traders are more the dating type, as opposed to the marrying kind, thus its a love em and leave em fast mentality. This aforementioned condition is why rally attempts in a correction dont last, as demand is temporary and fleeting. The lasting bottoms occur when all the selling is washed out and the strong-handed buyers find levels where they are willing to make a stand and go all in with their liquidity. So far we havent seen conditions materialize to suggest we are there just yet. Now this is the electronic age and things can change in short order, especially given the proper catalysts, however we they havent come to the surface yet. That said for those who can be tactical and/or noncommittal it makes sense to watch the fray from afar and coming in once the battle has been decide via a wash out or the subsequent, post washout, internals improvement phase. Now I am not saying you have to make new lows for a bottom to occur, but clearly you dont go from recent conditions where internals break down, new lows surge then just flip right back to going up, up, and away. Bottoms, like tops are a process, not a singular event. Below we take a quick look at the S&P 500, as a market proxy, in greater technical detail.

Fusion Analytics Research Partners LLC

535 Fifth Ave 25th Floor New York NY 10017

2012 Fusion Analytics

November 28th 2012

Equity Market Review

S&P 500 Index (Daily Chart)

As seen in the chart above, the S&P 500 Index stalled at resistance (red shaded lines and arrows) after a low volume oversold bounce. Shares are now testing the back side of a recently eclipsed downtrend line (purple dotted line) and may try to stabilize here in the short run. Action in the S&P 500 appears to be part of a classic retesting phase.

Fusion Analytics Research Partners LLC

535 Fifth Ave 25th Floor New York NY 10017

2012 Fusion Analytics

November 28th 2012

Equity Market Review

S&P 500 Index (Daily Chart) - w/ 200 Day Mov. Avg.

As seen in the chart above, the S&P 500 Index is getting a bit of a bounce here early morning off its 200 day moving average (red line). This is most likely attributable to short covering and long side nibbling. If the 200 day is breached, which we think is likely, as part of a retesting sequence, then 1,371 becomes the next potential downside support area.

Fusion Analytics Research Partners LLC

535 Fifth Ave 25th Floor New York NY 10017

2012 Fusion Analytics

November 28th, 2012

Equity Market Review

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Fusion Analytics Research Partners LLC

535 Fifth Ave 25th Floor New York NY 10017

2012 Fusion Analytics