Markets Headlines/Desk Color
· Derivatives - Vols were mostly unchanged in the morning, but sold off as the market squeezed higher. The short dated space was hit especially hard, and March is now ~17 vol. Variance was better bid relative to fixed strike as vols came in. RUT vols were bid vs SPX.
· PT desk color - 1.29:1 better to sell; Large Cap 62% and Mid Cap 19% of Sector Flow; Consumer Staples and Materials better to buy; Remaining sectors better to sell with Financials/Info Tech leading the way; ETF'S 5% of sector flow
· SP500 technical update – from JPMorgan’s M Krauss - Firm day pushes deeper into short term upside targets at 1105 (Feb 2 peak), and 1110 Jan 19 61.8% retrace). This zone is the first key resistance in the post-1044.50 Feb 5 low rally. Again, we’d be careful of a failure. Day support 1097/1095. Breaking Tues’ 1076.75-1079.13 bullish hourly gap would imply a 1045 retest, if not a 1029-1019 lower- low in March, before the bull resumes. Medium term resistance rests at the 1115 Jan 22 flush, and 1130 Jan range break. The 1150.45 Jan 19 peak neared four big targets at 1145-1159. Short term support rests at Last week based above 1060, after Feb 5 held the 1043 July 38% retrace/4th-wave obj. Created strong daily momentum bullish divergences, amid pessimistic sentiment measures. Upside reversal month in Feb above 1074. MT support: 1035 10% drop, 1029 Nov low, 1026 Jan-Feb c=a, 1026 200 day MA, and 1019 Oct trough. Our 2010 Outlook suggests a range view between 950-1000 and 1150-1200, with a best case to 1229/1240.
· Equity fund flows - Total equity fund flows (excluding ETFs) moderated to outflows of $108 mm compared to $2.0 bn of outflows last week. Domestic equity funds had $39 mm of outflows compared to $1.3 bn of outflows in the prior week. International and Global equity funds lost $69 mm of assets compared to outflows of $654 mm in the prior week. K Worthington
· Junk bond funds see further outflows - Junk-Bond Mutual Funds Have $614 Million Net Outflows for Week; The previous week the outflow was $1.12 billion, the biggest since the period ended Aug. 30, 2006 – Bloomberg
· US corporate issuance fell to just $3.5B this week - The sales compare with $8.03 billion the week before and an average of $26.1 billion this year – Bloomberg
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