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Market Bulletin 17th June 2010

Is it right to buy the S&P?

The Technical Traders view:
S&P 500 Stock Index CME Jun 10 1450

1400
Minimum move of the H&S pattern 1219.05 1350 WEEKLY JUN10 CHART
1300
Prior Low resistance 1235.50
1250
0.0%
1200
The context of the present
1150 situation in the market is
23.6%
1100
clearly illustrated here: the
1050
Head and Shoulders Reversal
1000
formed at the end of 2008 and
950

the beginning of 2009 drove

900

the market up as far as the

850
measured minimum target of
800
1219.
750

700
That level coincided with the
resistance from the low in
650
2008 at 1235.50.
250000
200000
150000
100000 Both these factors topped the
50000

2008 Aug Sep Oct Nov Dec 2009 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 Feb Mar Apr May Jun Jul Aug Sep market out and sent it down to
the 23.6% retracement
support. There it has dithered.

Now look closer.

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This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
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S&P 500 Stock Index CME Sep 10 1225
1220 DAILY SEP10 CHART
1215
1210
1205
1200
July 2008 Prior
High1201
1195
1190
The pull-back in detail reveals
(continuation 1185

chart) 1180
1175
the creation and completion of
1170
1165
1160
a clear Double Bottom.
1155
1150
61.8% 161.8% 1145
1140
1135
Note too, the coincidence of
1130
1125
1120
the completion level with the
1115
1110
1105
Fibonacci cluster just above.
38.2% 100.0%
1100
1095
Highs 1090
1098-1100 1085
1080 The break up though the two
1075
1070
1065
together is important and
1060
1055
1050
establishes powerful support
1045
1031 Low from Feb 2010 1040
1035
beneath the market.
1030
1025
1020

70000
60000
The minimum move for the
50000
40000 market is easily measurable
30000
20000
10000 up as far as 1165 or so.
12 19 26 3 10 17 24 1 7 14 21 28
May June July

But note well the fib cluster at

1143 which may make the
market pause.

The market is well set and

ripe for buyers

The Macro Traders view:

The S&P500 along with other global equity markets has suffered a deep correction over recent
months which erased all the gains made from the beginning of February this year.

The sell-off was driven by the spread of the Sovereign debt crisis, which began as a local
Greek problem, but expanded to engulf the entire Euro zone, with traders fearing the global
economy could be at risk through contagion.

For now, those fears have eased. The EU/Euro zone authorities have taken several major
steps to ward off default:
- Their first act was to launch a US$1.0T rescue fund,
- next they announced deep cuts to their budget deficits, and

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 in association with
- The latest action is an attempt by the French and Germans to put in place an EU-wide economic
government.

In the US equity traders had their own reasons for withdrawing from risky assets. The US
authorities had pledged to reform the financial sector so that a financial crisis like the one that
has recently swept through the global economy, could never happen again.

Some of the reforms caused major concerns on Wall Street and also fuelled the weakness of
the S&P500. But over recent days, the market has shown signs of recovery, but how durable is
it?

We are long-term bulls of equities. We judge the major economies including the US economy
are in recovery, but because the UK and Euro zone have begun a period of fiscal
retrenchment, the global recovery could lose some of its dynamism over the short/medium
term as those countries economies adjust to the new fiscal reality.

In the US, the administration remains convinced that the best way to fight economic weakness
is to keep spending and borrowing with the US debt to GDP ratio heading for 100% in the next
few years on current plans.

So while Europe tries to get its fiscal house in order, the US is acting as something of a counter
weight. But recent US data has been disappointing. Indeed the most recent non-farm payroll
report was clearly weak. Retail sales reported last week, were also surprisingly weak. This
week has seen some very disappointing Housing starts and Building permits data resulting
from the expiry of a tax credit designed to help home buyers.

So is this a good time to buy into the S&P500 or should we wait?

If we are right and the steep sell off was indeed only a vicious correction, then this and other
equity markets should recover fully. But the circumstances that brought about the sell-off in the
first place are still in play. Despite everything the EU/Euro zone has done in recent weeks to re-
assure markets about the health of sovereign risk, Spain is reported to have sought help from
the IMF, since denied, but it is clear that traders remain nervous about the fiscal health of
several Euro zone economies.

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 in association with
We judge fiscal retrenchment is all very well, but it needs to go hand in glove with growth
promoting policies. The US recognizes the need for growth, but the President doesnt yet
accept he needs to reduce spending. And the EU seems unable to grasp the need to generate
growth in the Euro zone periphery. Germany has announced big deficit cuts, thereby passing
on an opportunity to act as a powerful locomotive for the Euro zone economy.

All of these events lead us to remain cautious about stocks. We do not want to sell, that isnt
our view, but we are not yet ready to buy either, so we remain square but looking for signals to
encourage us to believe the sell-off is indeed over.

Mark Sturdy
John Lewis
Seven Days Ahead

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.