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[TTHQ Staff]

Equity Index Update Wednesday May 24, 2006 "One minute you're up half-a-million in soybeans, the next they've repossed your bentley and your kids can't go to college." So was the tale for those long the index markets yesterday afternoon. For the second session in a row a seller out of Mlynch's desk hit the SPM aggressively in the final hour of trading. This time, there were no takers as players pulled bids and ran in front of the selling all the way down. When the dust had settled the markets were devasted by the lack of early follow to the upside and a whiplash settlement on the lows of the day. In my opinion, this feels very "margin callish" to create my own term...Having traded through similar periods of hedge fund problems - from last springs GLG issue, to the Long Term Capital situation, this market has the same feeling. We will never know - until its too late - who is stuck...all a trader not in the know can do is stay in the flow and operate under the assumption that something very unusual is at play in the domestic equity markets. Overnight action was wide as the SPM traded as low as 1247 and as high as 1259...expect potential outlier trades on both sides of that range by the time the dust clears today. In addition, keep a close eye on the bond market. The USM contract has been the place of safe haven during this equity decline...it will be a reinforcement indicator throughout the trading today. In other words...if USM is ticking lower, players are taking risk premium out of the index market, which should allow for higher pricing.' Finally, with the severity of the breakdown yesterday afternoon, keep a close eye on the 1265 to 1268 level. I would treat this zone as a GAP trade. In other words, the selling was so severe that the logical move is to test this resistance zone and treat it as a gap fill if we get towards the top end of the zone. Typically, that will be the spot to fade any updraft. Good trading to All, Brad Sullivan