Friday, March 5, 2010

Markets Headlines and Technical Updates $SPY

Markets Headlines

·         PT desk update - 1.07 to 1 better to sell - strong flow today; Large Cap 68% and Mid Cap 24% of total Market Cap; Consumer Discretionary, Energy, Financials, and Information Technology better to sell; Consumer Staples, Health Care, and Materials better to buy. 

·         Derivatives color - US Indices: Unlike single stocks, index vol remained well supported throughout the day, though came off late in the afternoon to mostly unchanged. Longer dated vol space unchanged. Most of the large prints were related to expiry cleanup and rolls, ie march to june put spreads. In ETFs Jan11 vol was bid in sectors while the short dated sold off much like single stocks. 

·         SP500 technical update from M Krauss - Inside day continues to stall below Wed’s 1125.64 one-month high, and the 1130 Jan range break/interim barrier. Expect period of consolidation below the latter. Day support is Tues’ 1115.71-1116.51 hourly gap. ST support: 1112, then 1107-1105. The 1086 Sept 25 low held the Feb 5 50% retr, and 1076.75-1079.13 Feb 17 hourly bull gap. Feb 26 confirmed an upside reversal month above 1074 (Mon already met min “higher high”). The 1044.50 Feb 5 low held the 1043 July 38% retr/4th-wave obj. The 1150.45 Jan 19 peak neared four targets at 1145-1159. The S+P has neither seen its high (nor low) for this year. The NYSE cumulative A-D line reached an all-time high on Mon & Tues. Cyclical bull markets tend to top 6-8 months later. Our 2010 Outlook suggests a range view between a 950/1000 low and a 1150/1200 high, with a best case to 1229/1240.

·         Credit strategy commentary – from JPMorgan’s E Beinstein - High Grade bond spreads were steady this week ahead of Friday’s payroll report. Economic data was moderately better than the prior week and new issue supply remains modest. In our most recent survey, investors reported a more bullish outlook compared to last month, although cash balances declined somewhat.  Significant paydowns from MBS will inject cash into the hands of credit investors, providing further support for all credit asset classes over the next few months. We maintain our bullish outlook on credit, expecting spreads to move inversely with Treasury yields in the near term and to trend tighter over time.  

·         US equity strategy – from JPMorgan’s T Lee -  A Strategic Guide to Reorgs – a look at companies/stocks emerging from Chpt 11 bankruptcy reorg - Based on our review of public records, we have identified 12 reorgs.  We have identified some summary statistics, including debt reduction and revised leverage, and we have included the company’s financial projections as discussed in their disclosure statement. The tickers are: CIT, CCMM, LEA, PPC, DEXO, SPEB, SPMD, EPL, VRML, PMUG, GDMN, and CNRN. 

·         Equity flows - Total equity fund flows (excluding ETFs) were negative, with outflows of $64 mm, compared to $811 mm of inflows last week. Domestic equity funds had $857 mm of outflows compared to $283 mm of inflows in the prior week.  In terms of sectors, Consumer and Real Estate sector funds generated the strongest sales, with inflows of $9 mm each. Tech sector fund flows were the weakest, with $22 mm of outflows.  Worthington. 

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