Sea Lion Capital Management LLC Chart Book

Volume 1, Issue 1 06/24/2011

Negative Sentiment but Prices are Holding

If you watch or read the business news you cannot help but notice the negative sentiment. Concerns over European Sovereign Debt, Libyan oil, U.S. debt ceiling, U.S. unemployment, and negative revisions to U.S. GDP has given them much to talk about. In spite of this prices for SPY (ETF tracking the S&P 500) have been moving largely sideways since May 9th (see chart below). The market I believe has discounted itself for the risk but not for the result. Prices have come down 7.7% from the 5/2 high but have not gone much lower from here because the market hopes resolution will come. If no resolution comes on many of the aforementioned issues prices will fall further but until then we are on the sidelines. Next week the Greek parliament will meet to see if the austerity program required by the IMF and ECB can be pushed through parliament. This result will serve as a catalyst in one fashion or another.

Chart #1SPY, SPDR S&P 500

Chart Notes
New Higher Low made on 6/22 downward channel intact. Possible horizontal support level from 126.35 to 126.66

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Chart Notes:
Bearish Channel Resistance holds and the down trend continues although resistance was quickly retested after a brief retracement. Horizontal support between 77.20 and 77.90 holding.

Chart #2IWM, iShares Russell 2000

The Russell 2000 ETF continues to outperform the S&P 500 ETF. A support from 77.20 to 77.90 was reached on 6/16 and prices are higher since then. While the downward channel is intact the recent rally to overhead channel resistance was more bullish than normal. Prices never completely retreated to the channel median and returned to resistance quickly. Investors clearly prefer the agility of smaller companies over large ones. Perhaps this is due to their limited exposure to over regulation and macro issues such as sovereign debt.

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Page 3 Chart Notes:

Bearish Channel Resistance holds and the down trend continues although resistance was quickly retested after a brief retracement. Resistance

Chart# 3EUR/USD, Eurodollar

The Euro has been the center of attention for quite some time and has perplexed many. If sovereign debt concerns are so important why is the Euro so strong? The truth is the U.S. has been aggressively devaluing the Dollar and the ECB is simply not following as aggressively. At the moment we are trendless since the 6/22 breakdown. The breakout of 6/21 was a bull trap as we failed to establish 3 points of higher highs and higher lows. Instead price broke down and retested the 6/17 low which we now identify as support. Short term politics are heavily influencing the Euro and no trend is currently apparent.

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