Fusion Research - Equity Market Review for April 17th 2013

7/28/2019 Fusion Research - Equity Market Review for April 17th 2013

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April 17, 2013

Equity Market Review

Fusion Analytics Research Partners LLC 2013 All Rights Reserved

Kevin Lane Phone: 1-212-661-2022

Email: [email protected]

The depth of the recent sell-off, coupled with the horrific and cowardly Boston Marathon bombing, seems to have

shaken the confidence of the bulls a bit. The next few days will be important in regards to near term direction . We do

not want to see yesterdays lows violated as it will suggest, at least temporarily, buying power is exhausted. In our

opinion, especially with the historically weaker month of May rapidly approaching, the market needs to rebound and

recapture lost ground very soon otherwise, the long awaited correction may be at hand.

Anecdotal sentiment, which had the pendulum stuck on skeptical for most of this rally, seems to have taken a bit of a

swing back to the complacency of late. We even note the title of our last market note, Teflon Market as first hand

evidence on the subtle comfort the upward market action has given us all. Market breadth, which has improved, has

started to deteriorate again, and now looks more like a bump form short covering than a continuation of the durable

and strong breadth seen earlier in the advance.

We still believe any setbacks on a trend break will be shallow (5% - 10%), however depending on your personal

investing/trading style, time horizon and risk tolerance a mild correction to one, maybe deep to another. Clearly, day

and swing traders live in a different world than professional PMs and longer-term investors.

That said below we will look at various key levels and indicators to look at how the current picture sets up.

Market Outlook


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April 17, 2013



New high in S&P 500 and new support zone in the 1,540 -1,530 area.

S&P 500 Index (SPX)- Daily Chart

The S&P 500 is still holding above trend (red band), a support zone in the 1,540 1,530 area (green

band) and its 50 day moving average (blue line). Mondays sell off was followed by a bounce back

Tuesday, however the jury is still out as to whether it was enough. A move below yesterdays low

would violate the uptrend intact since Dec 12. The line in the sand however between corralling this

recent pullback and a further correction is the aforementioned support zone.


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April 17, 2013



All U.S. Exchanges New Highs-New Lows Index - Daily Chart

The strong surge back up in new highs, just a few days back, has rapidly deterioratedback below the zero line (red circle).

This surge and collapse illustrates fast money and short covering at work, and makes us

suspect the quality of the aforementioned S&P 500 trend and support levels.


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April 17, 2013



S&P 500 (SPX) vs. S&P 500 Equal Weight Index (SPW)- Daily Chart

When the 21 day moving average (green line) of the SPX/SPW is below the

50 day (purple line) and both are trending down markets typically do well as

it suggest more stocks are participating in the move, as opposed to a narrow

swath of heavily weighted components.

While these conditions presently exist, this ratio could see a reversion soon.


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April 17, 2013



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Fusion Research - Equity Market Review for April 17th 2013