Markets Headlines/Desk Color

· SP500 technical update – from M Krauss - Lift from Fri’s 1044.50 upside reversal day lowfinally overlaps the 1071.59 Jan 29 low. A step in the right direction, after the interim
decline from the 1150.45 Jan 19 peak held the 1043 July 38.2% retr/4th-wave obj, and Jan
channel low (now 1031). Short term bullish divergences increase the odds for a complete a-bc
correction. Market becomes more constructive above the 1080 Jan channel high, 1082 Feb
2 62% retr, and 1083 hourly c=a. Significant resistance remains at 1105, 1115 Jan 22 break,
and 1130 Jan range break. Keep a 2010 range view: 1000-950 low, 1150-1200 high. Short
term bears would reclaim below 1056, for MT support: 1035 10% drop, 1029 Nov low, 1026
Jan-Feb c=a, 1021 200 day MA, and 1019 Oct trough.

· PT desk color update - 1.63 to 1 better to buy - Moderate Flow; Large Cap 69% and Mid
Cap 20% of total Market Cap; Financials better to sell; Consumer Discretionary, Health Care,
Industrials, and Information Technology better to buy. ETF's 6% of sector flow. We started
out the day better to sell, as we witnessed some clients raising some cash early on in the
morning session. After news of support for Greece hit the tape, the market rallied about 1.6%.
During the spike, we started to see large buy programs from long only clients that switched
our bias for the day over to the buy side. Later on in the afternoon, we saw a large sell side
program.

· US derivatives desk color - US Indices: Although spot had a meaningful move on waning
sovereign debt fears, vols were mostly unchanged. Divs were bid across the curve but didn't
print meaningfully higher. SPX longer dated variance remains well offered. We are seeing
better buyers of Russell vol.

Short Interest Update (data from Bloomberg)
· SP500 SI came in -1.07%; NYSE SI was +0.58%

· SP500 sector changes: energy -3.4%, materials -7.16%, industrials -6.2%, discretionary -
3.93%, staples +2.4%, HC -3.7%, financials +2.4%, tech -2.6%, telecom services +13%,
utilities -1.7%.

· Telecoms: SP500 Telecom SI continues to ramp higher – it increased 13%+ as of the most
recent reading and stands at the highest level in more than 1 year. Note that telecom was the
weakest performing group in ’09 and is already the weakest performing group in ’10.
Worries about wireless pricing/margins have weighed hard on the space.

· Industrials: saw a steep 6% decline in SI in the most recent reading; aggregate SI in the
space falls to lowest level in several months. Largest SP Industrials SI declines: SNA, DOV,
HON, UPS, DHR, NSC, FLR, AVY, BNI, CMI, GR, FLS, PH, RSG, GE, UTX, CAT

· SP500 members: largest SI increases: DGX, FIS, CPWR, SE, NBL, KFT, GNW, S, STR,
CFN, NOVL, TSS, CTL, EIX, AMAT, AYE, TGT, GIS, BSX, OXY, SII, GS, PCG, NVLS,
POM