June 12th, 2012

Equity Market Review

Summary

In the following note, we take a look at some of the widely followed U.S. indices. As seen below, most of these indices have a similar pattern, broken and bouncing along near support. As they say, a picture is worth a thousand words and the story this picture tells is certainly a story that U.S. markets are still reeling, despite their recent bounce. Yesterday’s trading activity was a bit discouraging as it appeared to be the classic buy the rumor (buy the Spain bailout), then sell the news. This “sell the news” session occurred for most indices right at overhead resistance. As we have said for a while now, with summer seasonality, sporadic - and at times - conflicting news flow out of Europe, U.S. indices would likely have a summer very similar to last year. Given the technical damage that many of these indices have suffered, we will need more evidence, in the form of bases forming, before we can suggest a real turn has occurred. That said, in the absence of proper bases at present, tactical trading will likely be the most successful strategy. Stated another way, hit and run strategies seem to make more sense at present, as opposed to getting comfortable and setting up a base camp. In trading environments like these it doesn’t pay to be a hero or first one on the battlefield, but rather, it pays to wait for reinforcements and ground to be gained, before jumping in the fray. Bottoms tend to be a process, not a singular event, and typically occur when everyone becomes exhausted from trying to call them and being wrong. At present, investors continue to look for the bottom with every tick down. Consequently, we don’t think we’ve seen one yet. That said don’t fret you’re going to be late to the party, for if a real and durable move is about to occur, not catching the low won’t put you at a disadvantage. S&P 500 resistance remains in the 1,336 to 1,340 zone, while support lies in the 1,270 level. Meanwhile, over on the NASDAQ Composite, resistance remains in the 2,900 to 2,890 area, with support at the 2,725 level. Now let’s move to the major indices on the pages below.

Fusion Analytics Research Partners LLC

©2012 FusionAnalytics

P 212-661-2022

June 12th, 2012

Equity Market Review

KBW Bank Index (BKX) - Daily Chart

The Bank Index hit lower support zone (green shaded lines) near 40, had a nominal bounce, but remains far below support. Unless something horrific comes down the pike, we would expect the banks to build a base in and around this support level or just slightly lower. $ flow trends remain distributive

Dow Jones Transportation Index (TRAN) - Daily Chart

The Transportation Index is locked in a range below resistance 5,100 to 5,200 (red shaded lines) and support 4,800 to 4,700 (green shaded lines). A breakout above or below support will tell us a lot about where the U.S. economy is tracking. $ flow trends remain distributive

Fusion Analytics Research Partners LLC

©2012 FusionAnalytics

P 212-661-2022

June 12th, 2012

Equity Market Review

Morgan Stanley Consumer Staples Index (CMR) - Daily Chart

The Consumer Staples Index is also range bound. The Index is locked in a range below resistance 790 to 780 (red shaded lines) and support 760 to 750 (green shaded lines) $ flow trends remain distributive

AMEX Broker Dealer Index (XBD) - Daily Chart
The AMEX Broker Dealer Index has been one of the weaker indices and recently broke support, which has now become resistance, in the 90 to 88 area (red shaded lines). The next real support is the fall 2011 lows near 76 to 74 (green shaded lines)

$ flow trends remain distributive

Fusion Analytics Research Partners LLC

©2012 FusionAnalytics

P 212-661-2022

June 12th, 2012

Equity Market Review

Philadelphia Oil Service Index (OSX) - Daily Chart
Commodity related equities like the Oil Service Index components have really been taken out back and shot. The OSX is testing support in the 198 to 190 zone (green shaded lines) and needs to hold, otherwise its next stop is the fall 2011 lows.

$ flow trends remain distributive

AMEX Natural Gas Index (XBD) - Daily Chart

Not much differentiation on the AMEX Natural Gas Index, which is trading below resistance (red shaded lines) in the 610 - 600 area. No real support exists here until the fall 2011 lows.

$ flow trends remain distributive

Fusion Analytics Research Partners LLC

©2012 FusionAnalytics

P 212-661-2022

June 12th, 2012

Equity Market Review

Morgan Stanley Health Care Payer Index (HMO) - Daily Chart
The HMO Index broke support and has now been below this area for several weeks. This broken support in the 2,350 to 2,300 area now serves as resistance (red shaded lines). The next real level of support below the market is near 2,000.

$ flow trends remain distributive

Philadelphia Utility Index (UTY) - Daily Chart

The Utility Index has been the only strong group on the tape of late, as it recently broke out above resistance near 480 (red line). The cautionary note is that utilities tend to be a late cycle leadership group.

$ flow trends positive but moderating

Fusion Analytics Research Partners LLC

©2012 FusionAnalytics

P 212-661-2022

June 12th, 2012

Equity Market Review

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Fusion Analytics Research Partners LLC

©2012 FusionAnalytics

P 212-661-2022

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