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Market Bulletin 18th March 2010

The S&P
The Technical Trader’s view:
Some analysts have alarmed bulls by pointing out the relative underperformance of the Nasdaq and the
Russell indices, the failure to make new highs in key S&P leadership stocks and, yesterday, the 14day RSI
registering its highest overbought level since 1971…

We think a pause is possible even a small set back but note that major patterns are still driving the market
forward and don’t look exhausted – yet.
WEEKLY CHART
S&P 500 Stock Index CME Jun 10 1450

1400

Minimum move of the H&S pattern 1219.05 The chart illustrates the period 1350

of the credit crunch – the fall 1300

Prior Low resistance 1235.50

1250
to the 2002 low of 767.
1200
1141.70 High
1150

1100
There market got down there
1050
and then, eventually, having
1000
formed a Head and Shoulders
950
Reversal, bounced.
900

The reward was the rally

850

throughout 2009 and on (with

800
a blip) into 2010.
750

700
Notice that the minimum
move indicated buy the
150000
pattern is still somewhat
100000

50000
higher that present levels.
2008 Aug Sep Oct Nov Dec 2009 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 Feb Mar Apr May Jun

There is life in the market yet.

Observe too, that the 1219

minimum target is very close
to a horizontal resistance so
that will be difficult to break up
through – when the market
gets there.

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believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
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S&P 500 Stock Index CME Jun 10 1175 DAILY CHART

1170
1165 If the medium and long-term
High 1152 1160

1141 High
1155 charts still have life in them,
1150
1145 so too has this daily chart.
1140

1135
1130

1125 But, the small, badly-formed,

1120
1115 Head and Shoulders Reversal
1110

1105 has almost achieved its

1100

1095 minimum target of 1175.

1090

1085

1080

1075 That target is not a resistance

1070

1065
level but is frequently
1060

1055
accompanied by a pause at
1050

1045
the very least.
1040

1035

1030 The bulls will also rightly point

1025

to the way the market has

50000

superseded the Prior High at

7
December
14 21 28 4
2010
11 19 25 1
February
8 16 22 1
March
8 15 22 29
April
1141 – bull trends ratchet
themselves better by finding
Prior Highs to be good
support. Which incidentally, it
already has been.

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This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
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CBOE Volatility Index Continuous

75
DAILY CHART
70

65
Bears of the market may not
60
have had all their anxieties
55
allayed.
50

45
But the path of the VIX over
40
the whole credit crunch period
35
(nearly a mirror of the long-
30
term S&P) has led to levels
25
close to pre-crisis levels.
20

15
(Indeed, the March 10
10
contract fell steeply yesterday
5
to 17.45.)
0

30000
20000
So downside protection is
10000

2005 2006 2007 2008 2009 2010

cheap and may get cheaper
still…..

The Macro Trader’s view:

Last week was mainly dominated by two events:
- The strong US retail sales report out last Friday, and
- The FOMC rate decision and policy statement released on Tuesday this week.

The retail sales report was important because it showed strength despite some of the worst
snow storms to hit the US for a very long time and bodes well for Q1 GDP due to be released
next month.

The FOMC rate decision and policy statement re-assured markets that the Fed still intends
holding policy at current low levels for an extended period, even though policy makers see
clear signs of improvement in the economy.

So what does all this mean for the markets and especially US equities which are our focus for
this week?

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This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
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We judge the correction that hit the S&P in the early part of this year is now over. The sell off
was driven mainly by fears arising from the Greek government debt crisis. That crisis began to
be tackled by the Greek government implementing a tough austerity package backed by
pledges of financial support from other EU/Euro zone leaders. And although that assistance
still looks vague, traders have relaxed and turned once more to riskier assets, namely equities.

But the S&P also benefited from two further developments:

- The run of US data has turned stronger after a period of ambiguity, and
- Concerns have abated that a Greek debt default could have led to a domino effect on
other highly indebted developed economies, including the US and UK.

So now we have an US environment in which consumer spending is holding up well, business

spending is improving and the labour market could be on the brink of turning.

Add to this a benign inflation environment as evidenced by Wednesday’s PPI report which
showed that the Fed does have the luxury of time. Time to wait before monetary policy needs
to be tightened.

Although we currently think that tightening could begin later this year, low interest rates and
strengthening growth should provide the back drop for the S&P to rally further.

Mark Sturdy
John Lewis
Seven Days Ahead

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.