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Equity Market Review


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Summary Comments

Subtly market internals continue to slip underneath the surface. Additionally, high beta and other risk on barometers continue to underperform risk off benchmarks such as, utilities, consumer staples and healthcare. Typically, when these two events occur it is a precursor to a corrective wave. Add in seasonal trends, which tend to turn negative as we approach May, and clearly the odds favor a correction as opposed to a continued rally. On the economic front, todays non-farm payrolls number will only feed investor angst and itchy trigger fingers. Copper, an important economic metal, recently scoring a technical breakdown will only add fuel to the fire for those who worry the real economy is slipping. From a strategy standpoint we continue to believe this will not be a deep correction, but rather, the typical spring/summer ritual of rallies and dips with a general downward bias. However, one thing is clear the rally has narrowed and fewer stocks are participating. From a portfolio perspective, its time to be more selective, honor risk disciplines and let your defense take over while the offense takes a well deserved breather. Remember, no one has a crystal ball and every big correction starts out as a little one, thus, you always have to respect when market internals slip.

S&P 500 Index (SPX)

The S&P 500 broke a minor channel (red lines) and looks to be heading for a retest for the 1st support zone in the 1,540 1,532 zone (green lines). This area also coincides with its up channel (purple band). With divergences occurring under the surface on many indices is it clear the odds of Broad swath of groups a corrective wave are higher, than a continued rally.

participating, which is good weaker groups are generally defensive in nature.

All U.S. indices New Highs - New Lows - Daily Chart

As seen in the chart above raw new highs new lows is below the zero line (red line) again, while the 10 day moving average (green line) is also rolling over.

Fusion Risk On/Risk Off Index - Daily Chart w/ 21 & 50 Day Mov. Avgs.

The 50 day MA of Risk On (red line) vs. Risk Off has peaked and is turning Broad of groups down. Additionally, the faster 21 day MA (green line) isswath below the 50 day participating, which is and also sloping down. Typically broad markets generate flat to down performance while these conditions exist. good weaker groups are

generally defensive in nature.

NASDAQ Composite (CCMP) - Daily Chart

The NASDAQ Composite will likely test a key support zone (orange band) in the 3,200 3,185 area today. Additionally 3,200 is the up sloping 50 day moving average (red line) and up trending channel (green band). The next support down is 3,120 3,100 area (purple lines).

U.S. Non-Farm Payrolls

Non-Farm Payrolls are slipping. Job growth is key to durable rallies. While the next reading can change and turn up, this drop is enough to cause some anxiety in the marketplace, which could help aid a corrective wave.

Continuous Copper Futures - Daily Chart.

Copper is an economically sensitive metal given its broad usage. It is hard to ignore the multi-year triangular range breakdown.