Fear Day events and bond portfolio hedging candidate performance

1 www.indexstrategyadvisors.com

Supplement Contents:

3 JNK Correlation to the S&P 500 during the analysis period

4 Fear Day events and hedging candidate performance

Homepage: http://www.indexstrategyadvisors.com

Address: Index Strategy Advisors, Inc. 2001 Holcombe Blvd. 25th Floor - Suite 2502 Houston, TX 77030

Telephones: 1-800-984-0268 1-832-586-8329 (fax)

http://www.indexstrategyadvisors.com/



JNK Correlation to the S&P 500 during the analysis period



8/11/2010 Federal Reserve announces plan to buy govt. debt

Date Situation Description

Trend Dates

Algorithm Alert Type

S&P 500 Performance

Summary


8/11/10- 9/1/10

Catalyst Sell; Technical Sell

-7.3% The Fed's concern about growth triggers massive selling and purchasing of put options across all equity sectors --pushing the dollar to a 15 year low against the yen. Consolidation and failure to achieve and cross the 1130 resistance level on the S&P 500 promotes the first aggressive selling in August a month notorious for institutional program selling.

Symbol Prev. close Close Chg 1-day Chg 3-day Chg 5-day Chg

JNK 39.28 38.9 -0.97% 38.67 -0.59% 38.99 0.23% 39.06 0.41%

GLD 117.73 117.34 -0.33% 118.77 1.22% 119.73 2.04% 120.22 2.45%

TLT 99.94 101.28 1.34% 101.03 -0.25% 104.85 3.52% 104.53 3.21%



Trade Summary Net cost 1-day ($ return)

1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT AUG 2010 98 Call @1.69 $16,900 $2,250 13.31% ($7,350) -43.49% ($31,850) -188.5%

Buy to open 434 JNK @38.9 $16,883 ($91) -0.54% ($35) -0.21% ($35) -0.2%




6/22/10 Fibonacci Retracement Failure; 200 day MA Breach


Trend Dates


S&P 500 Performance

Summary


6/21/10-7/1/10

Technical Sell -11.9% The new 52 week high set on 4/26/10 and the subsequent (twice set) 2010 low at 1040 created an extremely important Fib 50% retracement level at 1130.58. On 6/21/10 extremely frenetic trading (likely HFT algorithms) pushed the index to one standard deviation beyond the key level (1131.23); and violent selling ensued after the trade crossed. The 6/22/10 session marked both a key cross below the 200day Moving Average as well as a second consecutive close below the critical Fib level.


JNK 38.71 38.49 -0.57% 38.28 -0.55% 38.41 -0.21% 38.02 -1.22%

GLD 120.39 121.45 0.88% 120.95 -0.41% 122.76 1.08% 121.27 -0.15%

TLT 97.41 98.57 1.19% 99.24 0.68% 99.05 0.49% 101.07 2.54%




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT MAY 2010 92 Call @1.885 $18,850 ($4,150) -22.02% ($21,150) -112.20% ($21,150) -112.2%

Buy to open 478 JNK @39.38 $18,824 ($296) -1.57% ($650) -3.45% ($650) -3.5%




5/4/10 Floor Trader 2nd Support Level Broken


Trend Dates


S&P 500 Performance


4/26/10-6/8/10 Technical Sell -17%


JNK 39.92 39.35 -1.43% 38.76 -1.50% 38.02 -3.38% 38.53 -2.08%

GLD 115.73 114.87 -0.74% 115.09 0.19% 118.27 2.96% 120.66 5.04%

TLT 91.69 93.34 1.80% 93.89 0.59% 95.58 2.40% 93.36 0.02%

Summary

Two major support levels were broken on the major indices (prior to the 5/6/10 flash crash). The first, a major technical support level of 1181 on the S&P 500 was

tested following the 4/27/10 sell off in response to the downgrade of Greek debt to junk status. While significant that event did not push the index below the 52

week high set on 4/1/10 of 1178.10. On 5/4/10 this level was violently crossed in the first hour of trading after breaking through the second major support level --

the floor trader secondary support level of 1176.5, an extreme level that became a resistance point for the rest of the session (with three subsequent failed attempts

to cross prior to the close). While the selling on this day automatically triggered a sell in response to the short term view, there was also a long term trend line

factored into this sell decision: 1181 was a pivotal support level during a critical phase of the financial crisis -- on 9/29/08 institutions largely turned off buying

orders and markets plunged in response to the congressional rejection of the initially proposed wall street rescue package. This key level broken then resulted in the

largest two day decline in 20 years -- what many believe was the 'shock and awe' factor leading to the eventual bailouts. 1181 was also the key support level broken

leading up to the dot.com crash and pre 9/11 market correction. Failure to close above this level triggered institutional selling leading to a 25% market correction

between 8/27/01-9/21/01, and a 48% correction between 3/19/02-10/10/02. 1181 was not reached and held again until 10/28/05. With only two more events at

this key level with the aforementioned 9/29/08 event and the cross on this day 5/4/10.




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT JUL 2010 98 Call @1.60 $16,000 ($4,050) -25.31% ($1,350) -8.44% ($1,350) -8.4%

Buy to open 415 JNK @38.49 $15,973 ($8) -0.05% ($274) -1.71% ($203) -1.3%




1/21/10 White house proposes Volcker Rule


Trend Dates


S&P 500 Performance

Summary


1/21/10-2/5/10

Catalyst Sell, Technical Sell

-10% The "Volcker Rule“, a proposed plan to curb proprietary trading within banks provokes violent selling in the largest financial institutions leading to a break of support at key 1131.85 level. S&P drops 2.46% following the announcement; the Dow 2.3%


JNK 39.63 38.99 -1.61% 38.62 -0.95% 38.9 -0.23% 38.97 -0.05%

GLD 108.94 107.37 -1.44% 107.17 -0.19% 107.56 0.18% 106.53 -0.78%

TLT 91.74 92.16 0.46% 92 -0.17% 91.61 -0.60% 91.51 -0.71%




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT FEB 2010 92 Call @1.025 $10,250 $500 4.88% $500 4.88% $3,250 31.7%

Buy to open 263 JNK @38.99 $10,254 ($97) -0.95% ($97) -0.95% ($24) -0.2%




10/27/2009 Low Consumer Confidence Reading


Trend Dates


S&P 500 Performance

Summary


10/21/09- 11/02/09

Catalyst Sell -6.9% The consumer confidence index fell to 47.7 vs. leading economists prediction of 53.5. This was a significant disappointment and followed a second consecutive Dow close below the psychologically important 10,000 level. The prior trend Fibonacci midpoint retracement level of 1060.65 was breached during today's session triggering a short-term sell.


JNK 38.54 38.37 -0.44% 37.85 -1.36% 37.99 -0.99% 37.79 -1.51%

GLD 101.86 101.85 -0.01% 100.73 -1.10% 102.53 0.67% 106.46 4.53%

TLT 93.72 95 1.37% 95.45 0.47% 95.78 0.82% 94.1 -0.95%




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT NOV 2009 94 Call @1.875 $18,750 ($2,250) -12.00% ($4,250) -22.67% ($4,250) -22.7%

Buy to open 488 JNK @38.37 $18,725 ($254) -1.36% ($185) -0.99% ($185) -1.0%




10/1/2009 ISM Contraction


Trend Dates


S&P 500 Performance

Summary

10/1/09 ISM Contraction 9/23/09-10/2/09

Catalyst Sell -5.9% The ISM index fell to 46.1 for the Chicago region. Following a quarter that witnessed the largest gain in 11 years institutional selling pressured stocks lower 2.4% triggering a (near 52 high) protective trailing stop sell.


JNK 38.49 37.25 -3.22% 37.29 0.11% 37.78 1.42% 37.9 1.74%

GLD 98.85 97.89 -0.97% 98.37 0.49% 102.28 4.48% 103.64 5.87%

TLT 98.66 99.7 1.05% 99.01 -0.69% 98.04 -1.66% 98.15 -1.55%




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT OCT 2010 99 Call @2.60 $26,000 $4,500 17.31% $4,500 17.31% $9,750 37.5%

Buy to open 698 JNK @37.25 $26,001 $28 0.11% $28 0.11% $370 1.4%

10/1/2009 ISM Contraction



9/1/2009 ISM/Housing Expansion


Trend Dates


S&P 500 Performance

Summary


8/28/09- 9/2/09

Behavioral Sell -4.7% An 11.3% spike in the VIX following the announcement of a positive ISM report (52.9% vs. 50.5% expectation) triggered a major sell off and an automatic sell.


JNK 36.64 36.08 -1.53% 35.48 -1.66% 36.02 -0.17% 36.23 0.42%

GLD 93.40 93.90 0.54% 96.19 2.44% 97.53 3.87% 97.08 3.39%

TLT 96.6 96.06 -0.56% 97.46 1.46% 95.21 -0.88% 94.43 -1.70%




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT SEP 2009 97 Call @.95 $9,500 ($6,000) -63.16% $5,250 55.26% $5,250 55.3%

Buy to open 263 JNK @36.08 $9,489 ($158) -1.66% ($16) -0.17% ($16) -0.2%






Trend Dates


S&P 500 Performance

Summary


8/7/09-8/18/09 Technical Sell -3.8% The key 992.40 support level is broken on the S&P September futures contract, triggering an automatic sell.


JNK 36.55 35.6 -2.60% 36.09 1.38% 36.31 1.99% 36.3 1.97%

GLD 93.00 91.61 -1.49% 92.06 0.49% 92.27 0.72% 92.34 0.80%

TLT 93.35 94.73 1.48% 94.18 -0.58% 95.74 1.07% 95.47 0.78%




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT SEP 2009 95 Call @1.825 $18,250 $3,500 19.18% ($2,250) -12.33% $7,250 39.7%

Buy to open 512 JNK @35.6 $18,227 $251 1.38% $363 1.99% $450 2.5%




6/22/2009 VIX Extreme Gap-up


Trend Dates


S&P 500 Performance

Summary


6/11/09- 7/8/09

Behavioral Sell -9.9% Following a World bank Global economy report that made a downward revision of 2009 contraction from 1.7% to , the VIX opened with a 8% gap. Triggering automatic sell orders across commodities, and the energy sector. The S&P broke all floor trader pivot support points including two levels in the first half hour, Ultimately closing at the low for the day.


JNK 35.03 34.58 -1.28% 34.46 -0.35% 34.62 0.12% 35.12 1.56%

GLD 91.90 90.54 -1.48% 90.92 0.42% 92.31 1.95% 92.04 1.66%

TLT 91.69 92.58 0.97% 93.67 1.18% 94.43 2.00% 94.73 2.32%




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT JUL 2009 92 Call @2.275 $22,750 ($500) -2.20% ($675) -2.97% ($800) -3.5%

Buy to open 657 JNK @34.58 $22,719 ($79) -0.35% $26 0.12% $171 0.8%




5/13/2009 Retail Sales Lagging


Trend Dates


S&P 500 Performance

Summary

5/13/09 Retail Sales Lagging 5/8/09- 6/1/09

Catalyst Sell -5.5% Retail sales in April were reported at a decline of 0.4% vs. the expected 0.1%. The news triggered a sell off across all sectors and resulted in the breach of the S&P 500 Fib 50% retracement level of 907.09.


JNK 34.11 33.41 -2.05% 33.60 0.57% 33.54 0.39% 34.38 2.90%

GLD 90.70 91.09 0.43% 91.03 -0.07% 90.36 -0.80% 92.25 1.27%

TLT 96.64 97.69 1.09% 98.07 0.39% 96.52 -1.20% 97.02 -0.69%




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT MAY 2009 97 Call @1.05 $10,500 ($1,250) -11.90% $100 0.95% $100 1.0%

Buy to open 314 JNK @33.408 $10,490 $60 0.57% ($144) -1.37% $41 0.4%






Trend Dates


S&P 500 Performance

Summary

1/14/09 Retail Sales Lagging 1/6/09- 3/6-09

Catalyst Sell -29% Retail Sales in December declined 2.7% versus an expectation of 1.2% Leading to a broad based sell off -- including a drop below the key 851.53 S&P support level within the first half hour of trading.


JNK 32.88 31.3 -4.81% 30.60 -2.24% 31 -0.96% 31.82 1.66%

GLD 80.88 79.79 -1.35% 80.39 0.75% 84.52 5.93% 84.58 6.00%

TLT 114.02 115.9 1.65% 116.09 0.16% 114.28 -1.40% 108.54 -6.35%




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT FEB 2009 116 Call @2.875 $28,750 ($1,500) -5.22% $8,000 27.83% $8,000 27.8%

Buy to open 918 JNK @31.30 $28,733 $83 0.29% ($367) -1.28% $294 1.0%




11/6/2008 Retail Sales Lagging, ISM Underperformance


Trend Dates


S&P 500 Performance

Summary


11/5/09-11/21/08


-35% Retail Sales posted the worst October sales results in 35 years and an unprecedented 9.5% decline from the prior reporting year. October same-store sales, or sales at stores open at least a year, fell 0.7% and were much worse than an initial forecast of a 0.3% drop. The November ISM non manufacturing reading was 37.6 (the lowest level recorded at any point during the financial crisis).


JNK 31.78 31.95 0.53% 31.85 -0.31% 31.27 -2.13% 30.8 -3.60%

GLD 72.80 72.22 -0.80% 72.5 0.39% 72.05 -0.24% 72.15 -0.10%

TLT 94.45 94.88 0.46% 94.26 -0.65% 95 0.13% 93.32 -1.64%




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT NOV 2008 95 Call @1.20 $12,000 $2,750 22.92% $2,750 22.92% $2,750 22.9%

Buy to open 375 JNK @31.95 $11,981 ($38) -0.31% ($38) -0.31% ($41) -0.3%




9/4/2008 Jobless Claims Surprise


Trend Dates


S&P 500 Performance

Summary

9/4/08 Jobless Claims Surprise 8/11/08-9/18/08


-15.8% Following an unexpected jump in the number of people filing for jobless benefits and a report by ADP Employer Services showing U.S. private employers slashed 33,000 jobs in August, all 3 Key Indices traded below key S1, S2, and S3 floor trader pivot levels.


JNK 42.52 42.45 -0.16% 42.01 -1.04% 42.5 0.12% 41.95 -1.18%

GLD 78.89 78.39 -0.63% 78.98 0.75% 76.49 -2.42% 73.08 -6.77%

TLT 94.77 95.53 0.80% 95.48 -0.05% 96.83 1.36% 96.18 0.68%




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT SEP 2008 95 Call @1.15 $11,500 $500 4.35% $500 4.35% ($9,750) -84.8%

Buy to open 271 JNK @42.45 $11,504 ($119) -1.04% $41 0.35% $16 0.1%

9/4/2008 Jobless Claims Surprise



5/23/2008 Existing Home Sales Lagging, Oil Resistance Broken


Trend Dates


S&P 500 Performance

Summary

5/23/08 Existing Home Sales Lagging, Oil $135 Resistance Broken

5/19/08-7/15/08


-19.90% S1 Broken on S&P 500; 5% Rise in Oil crossing previous resistance.


JNK 45.89 45.3 -1.29% 45.30 0.00% 45.54 0.53% 45.45 0.33%

GLD 90.98 91.23 0.27% 89.36 -2.05% 86.51 -5.17% 87.96 -3.58%

TLT 91.37 91.77 0.44% 91.15 -0.68% 89.69 -2.27% 90.30 -1.60%




1-day (% return)

3-day ($ return)

3-day (% return)

5-day ($ return)

5-day (% return)

Sell to open (-100) TLT JUNE 2008 92 Call @2.175 $21,750 $0 0.00% $0 0.00% $6,500 29.9%

Buy to open 480 JNK @45.3 $21,744 ($38) -0.18% $278 1.28% $72 0.3%

5/23/2008 Existing Home Sales Lagging, Oil Resistance Broken


Economy & Finance

Fear Day events and bond portfolio hedging candidate performance