April 17, 2013

Equity Market Review

Kevin Lane Email:

Phone: 1-212-661-2022 klane@fusioninvest.com

Market Outlook
The depth of the recent sell-off, coupled with the horrific and cowardly Boston Marathon bombing, seems to have shaken the confidence of the bulls a bit. The next few days will be important in regards to near term direction. We do not want to see yesterdays lows violated as it will suggest, at least temporarily, buying power is exhausted. In our opinion, especially with the historically weaker month of May rapidly approaching, the market needs to rebound and recapture lost ground very soon otherwise, the long awaited correction may be at hand. Anecdotal sentiment, which had the pendulum stuck on skeptical for most of this rally, seems to have taken a bit of a swing back to the complacency of late. We even note the title of our last market note, Teflon Market as first hand evidence on the subtle comfort the upward market action has given us all. Market breadth, which has improved, has started to deteriorate again, and now looks more like a bump form short covering than a continuation of the durable and strong breadth seen earlier in the advance. We still believe any setbacks on a trend break will be shallow (5% - 10%), however depending on your personal investing/trading style, time horizon and risk tolerance a mild correction to one, maybe deep to another. Clearly, day and swing traders live in a different world than professional PMs and longer-term investors. That said below we will look at various key levels and indicators to look at how the current picture sets up.

Fusion Analytics Research Partners LLC 2013 All Rights Reserved

April 17, 2013

Equity Market Review

S&P 500 Index (SPX) - Daily Chart

The S&P 500 is still holding above trend (red band), a support zone in the 1,540 1,530 area (green band) and its 50 day moving average (blue line). Mondays sell off was followed by a bounce back Tuesday, however the jury is still out as to whether it was enough. A move below yesterdays low would intact since Dec 12. The linezone in the sand however between corralling this Newviolate high the in uptren S&P d 500 and new support in the 1,540 -1,530 area. recent pullback and a further correction is the aforementioned support zone.

Fusion Analytics Research Partners LLC 2013 All Rights Reserved

April 17, 2013

Equity Market Review

All U.S. Exchanges New Highs-New Lows Index - Daily Chart

The strong surge back up in new highs, just a few days back, has rapidly deteriorated back below the zero line (red circle). This surge and collapse illustrates fast money and short covering at work, and makes us suspect the quality of the aforementioned S&P 500 trend and support levels.

Fusion Analytics Research Partners LLC 2013 All Rights Reserved

April 17, 2013

Equity Market Review

S&P 500 (SPX) vs. S&P 500 Equal Weight Index (SPW) - Daily Chart

When the 21 day moving average (green line) of the SPX/SPW is below the 50 day (purple line) and both are trending down markets typically do well as it suggest more stocks are participating in the move, as opposed to a narrow swath of heavily weighted components. While these conditions presently exist, this ratio could see a reversion soon.

Fusion Analytics Research Partners LLC 2013 All Rights Reserved

April 17, 2013

Equity Market Review

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