· Trading color –“the action in the yen and Treasuries over the past several months signaled extreme risk aversion on the part of investors”

· Trading color – Fri’s action was encouraging, but not so much for what occurred in stocks.
As weak as equities have been, the action in the yen and Treasuries over the past several
months signaled extreme risk aversion on the part of investors – if both those assets can
“normalize” and continue to weaken in the coming days, than people will be comfortable
reembracing risk. That said, one day doesn’t make a trend, and there a lot of landmines
coming up this week (inc. the manufacturing PMIs from China and the US, along w/the Fri
US labor report) that stock investors would like to see favorably resolved before really
jumping back in. Trends on the whole remain very technical – the only time stocks saw a
bounce this week came after we tested and held the key 1040 support level. Groups are
rallying on the realization of real bad news as shorts take their profits (like the semis after
INTC and the builders after the existing and new home sales) but there isn’t a lot of genuine
buying occuring. “Real” long-only vanillas haven’t been big participants, even on Fri; most
of the buying has come from shorts covering (and quicker traders “renting” exposure for a
few days).