Friday, June 11, 2010

· SP500 technicals update· Fund Flows-US Equity Strategy FLASH

Markets Headlines

· SP500 technicals update – Krauss - S+P 500 Cash Index closed at 1087. Sharp bounce up to 1088 June 8-9 c=a improves the tone from Wednesday’s weak close. Daily momentum shifts to buy mode, as the market stays in the 1041-1106 May-June range. Follow through past 1092 and the 1098-1100 hourly gap could set up another retest of the 1108 200 day moving average and other key resistance in the low 1100s. Day bulls keep the agenda above 1072.  Short term levels- Nearby resistance is 1092/1095, then the hourly gap at 1098-1100, followed by 1107-1114 clustered resistance including the 1108 200 day moving average. Nearby support is 1082/1078, then 1052 and 1045/1042/1041.

· US Equity Strategy FLASH: The case for equities based on relative value: Another reason to remain slow buyers – T Lee - Case for relative value: Corporate bond yields vs. equity valuations. Two methods suggest fair value for S&P 500 is 1361-1377, consistent with our 1300 YE target.  Buy groups sold off hardest. As we noted last week, May plunges have brought June lunges (8 of 9 times, June-July was up and up 9.4% across 10 worst Mays). If similar to ’87, worst-hit groups should rise most. Since April, the worst-hit groups are cyclical (Building Products, Energy Equipment, Paper) or heavily exposed to Eurozone (Autos, Auto Components).   

· Fund Flows - US equity funds (including ETFs) saw outflows this week of -$1.7b.  US equity funds (including ETFs) have now seen net outflows of -$21.9b over the past four weeks, and YTD outflows are now -$16.0b.  Excluding the impact of ETFs, US equity funds saw outflows of -$1.8b.  This set of data excluding ETFs has now seen outflows for five consecutive weeks totaling -$11.4b.  US equity funds (excluding ETFs) have now seen net outflows of -$10.5b YTD

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