Market Analysis Comment Technical Analysis

Market Analysis | United States 04 May 2009

Breakouts are global

Mary Ann Bartels +1 212 449 8038 Technical Research Analyst MLPF&S „ Equity market recovery is global [email protected] The breadth of rally from the March lows has improved as more indexes across Stephen Suttmeier, CFA, CMT +1 212 449 8813 the globe participate in the market recovery (side bar). Many of these indexes Technical Research Analyst MLPF&S show short to intermediate-term bases. The MSCI Emerging Markets Index, [email protected] Brazil, China, Korea, India, and Malaysia have breakouts from these bases and represent leadership for this rally. Australia, Hong Kong, Japan, Mexico, Russia, and Singapore are positioning for upside breakouts from these bases. While Global market recovery broad-based Europe is showing signs of bottoming, the major equity averages in this region are Our weekly global advance-decline line, lagging many of those in the rest of the world. which is based on 38 country indexes, has What about the US? broken out. This improvement in global breadth points to a more broad-based The US has seen a strong recovery confirmed by market breadth, accumulation recovery for the global equity markets. (rather than just short covering), and strong intermediate-term momentum readings. The NASDAQ is leading with a breakout from a short to intermediate- Global advance-decline line – Jan 07 to present term base, while the S&P 500 and DJIA remain below their early January highs. Year-to-date, the NASDAQ is up 9.0% while the S&P 500 and DJIA are down 2.9% and 6.4%, respectively. Importantly, the stocks versus bonds ratio broke to the upside now favoring stocks (see page 4). The sectors showing leadership are technology, materials, and consumer discretionary – these sectors also show the strongest bases off the November and March lows.

Levels to watch – potential to higher resistance levels We maintain that within the rally from the March low, pullbacks or consolidations are likely to remain modest. While the S&P 500 continues to challenge the 880 area as resistance, the index has buy signals on both the daily and weekly point Jul-07 Jul-08 Jul-09 Oct-07 and figure charts. These signals project into higher levels of resistance. The daily Oct-08 Jan-07 Apr-07 Jan-08 Apr-08 Jan-09 Apr-09 signal counts to 935 and the weekly to 1000, which coincides with our 915-965 Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg resistance as well as the lower end of the post-October low range highs in the 1000-1050 area. We maintain that a 50% retracement of the downtrend from May 08 to Mar 09 is highly possible and targets 1050-1055. Key support is now 845- 825, which is above our 715-780 support area. Support and resistance levels Support Levels 1st Support 2nd Support Up April = positive bias for May S&P 500 845-825 815-780 The S&P 500 was up 9.4% in April, which was the fourth best showing for April. DJIA 7900-7750 7435-7260 NASDAQ Comp 1600-1560 1483-1400 Only April 1933 (33.9%), 1939 (15.1%), and 1935 (9.8%) showed higher returns Resistance Levels 1st Resistance 2nd Resistance for the month. Since 1928, a positive April for the S&P 500 has preceded an S&P 500 840-880 915-965 average gain of 0.53% for May (vs. an average loss of -0.02%). This also exceeds DJIA 8300-8405 9000-9300 NASDAQ Comp 1750-1775 1905-1948 the average loss of -0.88% in May that follows a negative April. In summary, an Source: Banc of America Securities-Merrill Lynch Market Analysis up April has a tendency to neutralize a negative seasonal bias in May. This implies that the market rally can continue.

This report is an extract of a report of the same name published on 04 May 2009. Merrill Lynch does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 28 to 29. Analyst Certification on Page 27. 10834687

Market Analysis Comment 04 May 2009

Contents

Market VIM & VIGOR strengthen 3

Daily NYSE A/D Line breaking out 3

S&P 500 point & figure buy signals 4

Stocks vs. bonds ratio favors stocks 4

Rally not driven by short covering 5

Oil Services strong vs AMEX Oil Index 6

Global indexes with breakouts 7

Global indexes in double bottoms 9

Global indexes building bases 10

Europe base-building, but lagging 11

Net Tab at +1 (from +2) 12

Net Tab Bands remains at -2 13

MZM money supply growth slows 14

Sector OBOS relative price model 15

S&P 500 OBOS industry model 17

Top S&P 500 stocks by market cap 18

S&P 500 OBOS top & bottom “tails” 19

Most Attractive Buy (MAB) List 22

Oscillator Methodology 24

Footnotes 25

2 Market Analysis Comment 04 May 2009

Market VIM & VIGOR strengthen So far, more buyers than sellers points Accumulation solidly above distribution to a strong rally. VIGOR closes above 16 Jan 09 high, a positive sign Bank of America Securities-Merrill Lynch Volume Intensity Model (VIM) and VIGOR Our Volume Intensity Model (VIM) gauges whether a market or sector is seeing 100 VIM distribution line accumulation (buying) or distribution 90 (selling). With VIM accumulation above 80 the VIM distribution since March 18, this 70 indicator is confirming the US equity 60 market rally off early March lows. 50 40 VIM accumulation line VIGOR has risen since March 19 and is also 30 confirming the market rally. On Friday, VIGOR closed above the lower top from 3700 3200 Jan 16. We would like to see a sustained 2700 breakout above this lower top to indicate 2200 a more meaningful shift from distribution 1700 1200 VIGOR to accumulation for the stocks in the 700 NYSE. 200

Jul-08 Jul-07 Jan-09 Jan-08 Mar-09 Mar-08 Sep-08 Nov-08 Sep-07 Nov-07 May-09 VIGOR is a cumulative line of the spread May-08 between VIM accumulation and VIM Source: Banc of America Securities-Merrill Lynch Market Analysis, FactSet distribution. It is an intermediate to longer-term indicator of accumulation relative to distribution. Daily NYSE A/D Line breaking out Now both the daily and weekly A/D lines have breakouts Improving market breadth is positive for the US equity market S&P 500 stocks advance-decline line – daily This is encouraging and suggests that the rally is becoming more broad-based, but we would still like to see breakouts on the stocks only advance decline lines for the NYSE and the S&P 500 (see chart on left). NYSE Cumulative Advance – Decline Line – daily chart, January 2007 to present

No breakout yet for the S&P 500 advance- decline line. This is a measure of common stock breadth. Jan-07 Jan-08 Jan-09 May-07 Sep-07 May-08 Sep-08 May-09

Source: Banc of America Securities-Merrill Lynch Market Analysis, FactSet Unlike the S&P 500 and DJIA, the daily NYSE A/D line has broken above the downtrend from last May and the early January high. Jul-08 Jul-07 Oct-08 Oct-07 Jan-09 Apr-09 Jan-08 Apr-08 Jan-07 Apr-07

Source: Banc of America Securities-Merrill Lynch Market Analysis, WSJ.com

3 Market Analysis Comment 04 May 2009

S&P 500 point & figure buy signals Daily & weekly buy signals count to 935-1000 Key supports at 845-825 S&P 500 Point & Figure chart – weekly Daily signal valid while 845 holds; weekly signal valid while above 825 traditional 3 box reversal chart Corresponding point and figure chart levels for the DJIA are supports at 7900- 7750 and bullish counts to 8650-8900.

S&P 500 Point & Figure chart –daily traditional 3 box reversal chart

Source: Stockcharts.com Stocks vs. bonds ratio favors stocks Stocks vs. Bonds – 2 year daily chart with MACD

Strong positive divergences on daily momentum for the stocks vs. bonds ratio support the case for a breakout in favor of stocks. Weekly momentum (not shown) also shows strong positive divergences.

Daily MACD shows a strong positive divergence.

Source: Stockcharts.com Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

4 Market Analysis Comment 04 May 2009

Both our short interest data and Volume Rally not driven by short covering Intensity Model indicate that the market Advance shows significant accumulation (buying) not just short covering rally from the early March lows has been The S&P 500 index has rallied 12.6% between March 15 and April 15; over the driven more by accumulation (buying) same period adjusted short interest (ASI) remained nearly unchanged. If we rather than short covering. break out ASI by sector, we see the sectors with the highest price returns over this period-Financials and Industrials-gaining 34% and 20%, respectively also saw a 12.1% and 1.6% increase in ASI. Though there has been covering in other sectors, it indicates to us the rally has been based on significant accumulation (buying) rather than just short covering.

March 15- April 15 % change in ASI and % returns by sector

40 % Financials have risen even as ASI

30 % increased - suggesting rally not driven by covering. 20 % 10 %

0%

-10%

-20%

Energy Utilities

Materials Financials Industrials Health Care Health Information Techno logy Co nsumer Discretionary Services Co nsumer Staples

Telecommunication Price returns ASI

Source: Banc of America Securities-Merrill Lynch Market Analysis

Elevated shorts = potential floor for financials

Improvement in financials is part of a bigger basing process Financials are nearly 1/3 of total adjusted short interest in the S&P 500

S&P 500 Financials – 1 year daily chart

Financials are still the locus of shorting activity as well as the rally. Nearly a third of total ASI in the S&P 500 is now concentrated in Financials and in particular the mega cap Diversified Financials Services. This is a contrarian bullish as shorts should help provide a floor on prices in this volatile sector.

Neckline

Shoulder Shoulder Head

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

5 Market Analysis Comment 04 May 2009

Oil Services strong vs AMEX Oil Index PBOE Oil Services is positioned to outperform AMEX Oil

Daily Relative Chart of PBOE Oil Service Index vs AMEX Oil Index The PBOE Oil Services index has successfully tested an important support relative to the AMEX Oil Index that goes back to 2001. Oil services stocks are in position to outperform integrated oils and the PBOE Oil Services is set up to eventually test the range highs relative to AMEX Oil.

The move out of oversold levels for our OBOS relative price model confirms a reversal in this relative ratio that favors PBOE Oil Services vs. AMEX Oil. The quick move to overbought levels is a sign of strength for the PBOE Oil Services relative to the AMEX Oil.

Stochastics has just moved out of oversold territory, generating a buy signal that favors the PBOE Oil Services vs. the AMEX Oil.

The deviation from the 75-week moving average recently reached the most oversold levels since 2001, supporting the case for PBOE Oil Services to outperform AMEX Oil. This indicator has reverted to the mean and can see an overshoot to +2 standard deviations before becoming overbought.

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bats Trading, FactSet

6 Market Analysis Comment 04 May 2009

Global indexes with breakouts MSCI Emerging Markets Index – 2 year daily chart

With breakouts from short to intermediate-term bases, the MSCI Emerging Markets Index, Shanghai Composite (China), and KOSPI Index (Korea) have provided leadership for the global market rally off the early March low. In fact, all three of these indexes have a series of higher lows off the October, November, and March lows.

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

China - Shanghai Composite – 2 year daily chart

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

Korea - KOSPI Index – 2 year daily chart

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

7 Market Analysis Comment 04 May 2009

Global indexes with breakouts With breakouts from short to India – BSE 500 Index – 2 year daily chart intermediate-term bases, the BSE 500 Index (India), Bovespa (Brazil), and the MSCI Malaysia Index have also provided leadership for the global market rally off the early March low.

The BSE 500 appears to have a double bottom in place.

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

Brazil - Bovespa – 2 year daily chart

The Bovespa shows a series of higher lows off the October, November, and March lows.

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

Malaysia – MSCI Malaysia Index – 2 year daily chart

Malaysia appears to have broken out from a triple bottom.

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

8 Market Analysis Comment 04 May 2009

Global indexes in double bottoms Japan – – 2 year daily chart

In Asia, the Nikkei 225 (Japan), Hang Seng Index (Hong Kong), and the Straits Times Index (Singapore) are building potential double bottoms. Upside breakouts are still required to confirm these short to intermediate-term bases as well as the potential for upside into higher levels of resistance.

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

Hong Kong - Hang Seng Index – 2 year daily chart

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

Singapore – Straits Times Index – 2 year daily chart

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

9 Market Analysis Comment 04 May 2009

Global indexes building bases Australia – S&P/ASX 200 Index – 2 year daily chart The S&P/ASX 200 Index (Australia), Mexican Bolsa Index, and the Russian Depository Index are building short to intermediate-term bases. Upside breakouts are needed to confirm these bottoms and the potential for rallies into higher levels of resistance.

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

Mexico – Mexican Bolsa Index – 2 year daily chart

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

Russia – Russian Depository Index – 2 year daily chart

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

10 Market Analysis Comment 04 May 2009

Europe base-building, but lagging United Kingdom – FTSE 100 Index – 2 year daily chart

The FTSE 100 Index (United Kingdom), CAC 40 Index (France), and DAX Index (Germany) did break decisively to new bear market lows in March. Similar to the S&P 500 Index, weekly momentum on these three indexes did not confirm new lows in March, setting up strong positive divergences off the October / November and March lows. This is a sign of base- building for these major European Indexes.

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

France – CAC 40 Index – 2 year daily chart

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

Germany – DAX Index – 2 year daily chart

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg

11 Market Analysis Comment 04 May 2009

Net Tab at +1 (from +2) Recent buy signal suggests rally has legs But, S&P 500 still below May 2008 downtrend line The Net Tab moves to +1 from +2 the prior week. The recent move out the oversold +3 to +6 range generated a buy signal and suggests that the market rally has legs. The Net Tab has also broken above downtrend resistance from the June 2007 high confirming the strength of this rally. The only missing ingredient is a breakout for the S&P 500 through its downtrend line from May 2008.

What to watch now is how high the Net Tab can go. During a bull market, history suggests that, following a confirmed reversal out of the buy signal area of +3 to +6, the Net Tab tends to move to the -3 to -6 sell range. During bear markets or weak rallies, the indicator may not make it past -2. With the S&P 500 under the downtrend lines from May 2008 and October 2007, the risk is the Net Tab will have difficulty moving into the overbought -3 to -6 sell range.

The Banc of America Securities-Merrill Lynch Net Tab Index Level Current Wk Last Wk Change

S&P 500: 877.52 11.29 NYSE Stocks over 200-DMA: 33% 0 1 -1 5-week A/D Diffusion: 58.1% -1 -1 Investment Services Bearish: 37.2% 0 0 ML Short Term Sentiment: 25.3% 0 0 30-Day Arms Index: 1.19 11 25-day CBOE Put/Call: 84.6% 1 1

This Week Net: 1 Last Week Net: 2 Source: Banc of America Securities- Merrill Lynch Market Analysis

S&P 500 Index with Traditional Net Tab – January 2002 to present, weekly chart

1600 1500 1400 1300 1200 1100 1000 900 800 700 600

-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09

Source: Banc of America Securities- Merrill Lynch Market Analysis

12 Market Analysis Comment 04 May 2009

Net Tab Bands remains at -2 Bands above May 07 downtrend line This indicator suggests the market rally has legs The “Bands” Net Tab remains at -2 and is on a buy signal after the recent move out of the oversold +3 to +6 buy range. In addition, the Bands has broken above its downtrend line from May 2007 high. This is a signal that suggests the rally from the 666 low on the S&P 500 has legs.

S&P 500 Index with “Bands” Net Tab – January 2002 to present, weekly chart

1600 1500 1400 1300 1200 1100 1000 900 800 700 600

-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Source: Banc of America Securities- Merrill Lynch Market Analysis, FactSet

Bands is a companion to the traditional Net Tab. It also has six components (retaining five from the original Net Tab), but the overbought/oversold readings are dynamic, not constant, reflecting the fact that the market is dynamic. The overbought/oversold extremes are based on a one standard deviation envelope around the 208-wma of the indicator being analyzed. The 208-wma was chosen to be in harmony with the well-known and well-regarded Four-Year Cycle.

Five of the six components are the same as the traditional Net Tab; the exception is that we have replaced the Five-Week Advance Decline Diffusion Index with the McClellan Summation Oscillator.

As is the case with the original Net Tab, buy readings are +3 or higher, and sells are in the -3 to -6 range. Both types of signals tend to occur as one time events or as a cluster of such readings. Trend lines are also important.

Market bottoms tend to be more emotional than tops and take less time to develop. In order to help confirm a buy signal, we usually also want to see the indicator reverse from buy readings of +3 or higher to neutral readings of +2 or lower. We also like to see a confirming reversal through a dominant downtrend line.

During a bull market, history suggests that, following a confirmed reversal from a buy signal of +3 or higher, the Net Tab tends to move to the -3 to -6 sell range. During bear markets, the indicator may only achieve a reading of -2.

13 Market Analysis Comment 04 May 2009

MZM money supply growth slows

The $3.5 trillion Money Mountain Annualized 13-week growth rate now 3.6% Total money market funds, which consist of retail YoY growth of 10% is positive for financial assets and institutional money funds, reached a record Federal Reserve and global central bank liquidity injections have supported global high of $3.547 trillion on 09 March, 2009. Record equities. A global coordination of central banks to combat the credit squeeze is money market fund levels represents cash on the also supportive. The annualized 13-week rate-of-change for MZM money supply sidelines from both retail and institutional investors. growth is 3.6% and the YoY growth of 9.7% remains strong, reflecting Fed This cash is a future source of demand for US liquidity injections. This, combined with Fed rate cuts and global coordination equities and a contrarian bullish signal for the US among central banks, bodes well for a continued market rally. equity market. M1, M2, and MZM rate of change (annualized) 13Wk ROC 6M ROC 1Y ROC As of: M1 2.2% 13.6% 13.1% 4/20/09 Weekly retail money market fund levels ($b) M2 1.0% 7.5% 8.1% 4/20/09

$1,200 MZM 3.6% 13.8% 9.7% 4/20/09 October 20, 2008 record high: $1.082 trillion Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg, Federal Reserve Bank of St. Louis $1,000

$800 MZM annualized 13-week ROC continues to slow The annualized 13-week ROC for MZM has moved back below +1.5 std dev and $600 reverted back to the mean. Now below the mean, MZM is set up for a test of the - $400 1.5 std dev. This is a negative reading.

$200

$0 MZM rolling 13-week ROC (annualized) – October 1983 to present Jan-80 Jan-84 Jan-88 Jan-92 Jan-96 Jan-00 Jan-04 Jan-08 30% Source: BAS-ML Market Analysis, Federal Reserve 25% Weekly institutional money market fund levels ($b) 20% $2,500 April 20, 2009 record high: $2.513 trillion +1.5 std dev 15% $2,000

$1,500 10%

$1,000 5%

$500 0% Annualized Rate of Change (%) $0 -1.5 std dev Jan-80 Jan-84 Jan-88 Jan-92 Jan-96 Jan-00 Jan-04 Jan-08 -5%

Source: BAS-ML Market Analysis, Federal Reserve -10% Oct-83 Oct-85 Oct-87 Oct-89 Oct-91 Oct-93 Oct-95 Oct-97 Oct-99 Oct-01 Oct-03 Oct-05 Oct-07

Source: Banc of America Securities-Merrill Lynch Market Analysis, Bloomberg, Federal Reserve Bank of St. Louis

14 Market Analysis Comment 04 May 2009

Sector OBOS relative price model Consumer Discretionary and Financials now overbought Consumer Discretionary completed a relative base and is attempting a breakout from a base on the absolute price chart. Discretionary is testing longer-term relative downtrend resistance – a break above this would continue the outperformance for this sector. Financials broke out from a short-term base on both an absolute and relative basis. Our OBOS relative price model confirmed this breakout. While this is a positive tactical signal for financials, the sector still has plenty of overhead resistance. However, a good tactical rally for this group is favored and part of a larger basing process for the financials.

Materials and Technology near overbought Both materials and technology are breaking out from bases on their absolute price charts. Materials broke out from a short-term relative base vs. the S&P 500 after briefly undercutting major relative uptrend support. Materials can outperform on a tactical basis and may have even reclaimed its longer-term leadership status. While technology remains in a longer-term relative range with plenty of overhead resistance, this sector can continue to outperform on a tactical basis.

Energy, Health Care, and Utilities near oversold Both energy and utilities are correcting longer-term relative uptrends vs. the S&P 500. Health care has pulled back after failing to sustain a relative breakout. The overall relative pattern for health care is weaker than those in energy and utilities.

Sector relative price oscillator rankings as of 30-Apr-09 Rank Sector Overbought > 1, Oversold < 0 1 S&P 500 Consumer Discretionary 1.220 Overbought 2 S&P 500 Financials 1.020 Overbought 3 S&P 500 Materials 0.861 Near Overbought 4 S&P 500 Technology 0.850 Near Overbought 5 S&P 500 Telecom 0.491 Neutral 6 S&P 500 Industrials 0.400 7 S&P 500 Consumer Staples 0.241 Neutral 8 S&P 500 Energy 0.054 Near Oversold 9 S&P 500 Health Care 0.038 Near Oversold 10 S&P 500 Utilities 0.000 Near Oversold Source: Banc of America Securities-Merrill Lynch Market Analysis

Historical sector ranks The table below shows weekly ranks of the 10 sectors within the S&P 500 by relative momentum (1=highest 10=lowest). A sector that rises in rank indicates improving relative momentum and vice versa.

Sector rankings: current and historical 30-Apr-09 23-Apr-09 16-Apr-09 8-Apr-09 1-Apr-09 25-Mar-09 18-Mar-09 11-Mar-09 4-Mar-09 S&P 500 Consumer Discretionary 1 1 2 2 3 6 4 6 3 S&P 500 Consumer Staples 7 6 6 5 7 7 6 7 5 S&P 500 Energy 8 9 8 8 6 4 8 4 8 S&P 500 Financials 2 3 5 9 9 9 9 10 10 S&P 500 Health Care 9 8 7 6 5 5 3 3 2 S&P 500 Industrials 6 7 10 10 10 10 10 9 9 S&P 500 Technology 4 2 1 1 1 1 1 1 1 S&P 500 Materials 3 5 3 4 2 3 5 2 6 S&P 500 Telecom 5 4 4 3 4 2 2 5 4 S&P 500 Utilities 10 10 9 7 8 8 7 8 7 Source: Banc of America Securities- Merrill Lynch Market Analysis

15 Market Analysis Comment 04 May 2009

Sector OBOS relative price model „ Industrials have corrected sharply and are oversold. There has been a material breakdown in the relative ratio of industrials versus the S&P 500. The sector is likely to benefit from a market rally but stock selection is important.

„ Consumer Discretionary & Staples: We believe investors should stay positioned in Consumer Staples versus Consumer Discretionary. The consumer staples sector is a broad beneficiary of the mega-cap multi- national theme. However this rally is being led by cyclicals and tactically they are expected to continue to do well. Near-term Discretionary is expected to outperform Staples.

„ Financials: We maintain our view that the sector is in a secular “bear market” where the stocks over the next year are expected to have relative underperformance. Short-term the sector is in a strong tactically rally that is expected to continue. Invest with caution in this sector.

„ Health Care: This is a defensive sector but is not exhibiting leadership characteristics. In a market rally we expect this sector to lag. Stock selection is important and we would concentrate on the mega-cap multinational companies.

„ Technology has exhibited relative improvement and the sector did not break its November low. We do expect this sector to lead a market rally. Stock selection remains important, particularly in large caps.

„ Energy has corrected sharply with long-term trend lines remaining intact. We remain long-term bulls. For yield focus on the intergrated stocks and MLP’s for tactically performance in a rally services is expected to outperform.

„ Materials have sold off sharply following the decline in commodity prices. We remain long-term bulls on commodities and materials are benefiting from the near-term improvement in China as select commodities rally. We expect materials to continue to rally.

„ Telecom has improved in terms of relative strength. We favor this sector long term. The large telecom stocks are attractive especially given their current dividend yields.

„ Utilities: This sector provides coupon for investors seeking stable to improving dividends. We would approach this sector selectively.

16 Market Analysis Comment 04 May 2009

S&P 500 OBOS industry model 17 industries overbought, 12 oversold Overbought bias at the industry level S&P 500 Relative Price Momentum Oscillator for 30-Apr-09 Improving or weakening Rank Industry Overbought > 1; Oversold <0 Sector 2 Yr. Max 2 Yr. Min 1 Automobiles 2.694 Overbought Consumer Discretionary 2.694 -0.631 2 Auto Components 1.430 Overbought Consumer Discretionary 1.430 -0.325 3 Multiline Retail 1.212 Overbought Consumer Discretionary 1.227 -0.318 4 Internet & Catalog Retail 1.114 Overbought Consumer Discretionary 1.470 0.093 5 Capital Markets 1.100 Overbought Financials 1.779 -0.343 6 Diversified Financial Services 1.034 Overbought Financials 1.996 -1.066 7 Specialty Retail 0.990 Near Overbought Consumer Discretionary 1.025 0.077 8 Chemicals 0.953 Near Overbought Materials 1.005 -0.112 9 Textiles Apparel & Luxury Goods 0.925 Near Overbought Consumer Discretionary 1.078 0.146 10 Consumer Finance 0.918 Near Overbought Financials 1.016 -0.552 11 Commercial Banks 0.897 Near Overbought Financials 2.878 -0.792 12 Paper & Forest Products 0.885 Near Overbought Materials 1.189 -0.402 13 Household Durables 0.873 Near Overbought Consumer Discretionary 1.055 -0.031 14 Wireless Telecommunication Services 0.817 Near Overbought Telecommunication Services 1.443 -0.110 15 Software 0.816 Near Overbought Information Technology 0.960 0.196 16 Media 0.809 Near Overbought Consumer Discretionary 0.809 0.013 17 Computers & Peripherals 0.808 Near Overbought Information Technology 1.103 0.069 18 Communications Equipment 0.762 Neutral Information Technology 0.924 0.255 19 IT Services 0.716 Information Technology 1.116 0.081 20 Semiconductors & Semiconductor Equipment 0.703 Information Technology 1.001 0.177 21 Internet Software & Services 0.674 Information Technology 0.966 0.234 22 Machinery 0.670 Industrials 0.904 -0.366 23 Personal Products 0.651 Consumer Staples 1.126 -0.247 24 Trading Companies & Distributors 0.646 Industrials 0.876 0.247 25 Metals & Mining 0.644 Materials 1.313 -0.618 26 Air Freight & Logistics 0.642 Industrials 1.202 0.056 27 Electronic Equipment & Instruments 0.622 Information Technology 0.892 -0.111 28 Containers & Packaging 0.602 Materials 1.333 -0.024 29 Energy Equipment & Services 0.601 Energy 1.237 -0.409 30 Hotels Restaurants & Leisure 0.570 Consumer Discretionary 0.930 0.240 31 Distributors 0.546 Consumer Discretionary 1.437 -0.004 32 Insurance 0.541 Financials 0.752 -0.529 33 Food & Staples Retailing 0.530 Consumer Staples 1.314 0.354 34 Life Sci Tools & Svs 0.516 Health Care 0.969 0.083 35 Building Products 0.503 Industrials 1.216 -0.466 36 Electrical Equipment 0.479 Industrials 1.162 -0.107 37 Thrifts & Mortgage Finance 0.458 Financials 0.771 -0.639 38 Industrial Conglomerates 0.427 Upgraded Industrials 0.979 -0.803 39 Diversified Telecommunication Services 0.424 Telecommunication Services 1.555 0.209 40 Real Estate Investment Trusts 0.423 Upgraded Financials 1.130 -0.634 41 Airlines 0.392 Industrials 1.355 -0.181 42 Road & Rail 0.387 Industrials 1.173 -0.106 43 Beverages 0.362 Consumer Staples 1.366 0.271 44 Multi-Utilities 0.333 Utilities 0.956 0.326 45 Construction & Engineering 0.328 Industrials 1.004 -0.086 46 Office Electronics 0.315 Information Technology 0.739 0.015 47 Aerospace & Defense 0.288 Industrials 0.838 0.237 48 Tobacco 0.274 Consumer Staples 0.847 0.238 49 Leisure Equipment & Products 0.241 Consumer Discretionary 1.089 0.040 50 Health Care Providers & Services 0.228 Health Care 1.164 -0.063 51 Construction Materials 0.200 Neutral - Upgraded Materials 1.443 -0.323 52 Ind Power Producers & Energy Traders 0.197 Near Oversold Utilities 0.798 -0.464 53 Biotechnology 0.192 Near Oversold Health Care 1.081 0.112 54 Commercial Services & Supplies 0.185 Near Oversold Industrials 1.016 0.052 55 Health Care Tech 0.164 Near Oversold Health Care 1.044 -0.439 56 Household Products 0.153 Near Oversold Consumer Staples 1.462 0.080 57 Gas Utilities 0.130 Near Oversold Utilities 1.468 -0.582 58 Pharmaceuticals 0.096 Near Oversold Health Care 1.350 0.040 59 Health Care Equipment & Supplies 0.052 Near Oversold Health Care 1.317 -0.106 60 Food Products 0.048 Near Oversold Consumer Staples 1.241 0.006 61 Diversified Consumer Services -0.018 Oversold Consumer Discretionary 1.297 -0.079 62 Oil Gas & Consumable Fuels -0.022 Oversold Energy 1.264 -0.177 63 Electric Utilities -0.051 Oversold Utilities 1.121 -0.069 Source: Banc of America Securities- Merrill Lynch Market Analysis

17 Market Analysis Comment 04 May 2009

Top S&P 500 stocks by market cap Top 100 stocks ranked by OBOS relative price momentum 100 stocks by market cap within the S&P 500 has slight oversold bias

Top 100 S&P 500 stocks by OBOS reading as of 30-Apr-09 ID Name Rank ID Name Rank 1 AXP AMERICAN EXPRESS CO 1.664 Overbought 51 WMT WAL-MART STORES INC 0.453 Neutral 2 GS GOLDMAN SACHS GROUP INC 1.331 Overbought 52 TRV TRAVELERS COS INC 0.448 3 BAC BANK OF AMERICA CORP 1.029 Overbought 53 MRO CORP 0.438 4 CCL CARNIVAL CORP/PLC (USA) 1.014 Overbought 54 HPQ HEWLETT-PACKARD CO 0.416 5 JPM JPMORGAN CHASE & CO 1.013 Overbought 55 COST COSTCO WHOLESALE CORP 0.412 6 USB U S BANCORP 1.012 Overbought 56 WLP WELLPOINT INC 0.411 7 AMZN AMAZON.COM INC 0.989 Near Overbought 57 T AT&T INC 0.411 8 DD DU PONT (E I) DE NEMOURS 0.970 Near Overbought 58 KO COCA-COLA CO 0.397 9 PX PRAXAIR INC 0.937 Near Overbought 59 EMR EMERSON ELECTRIC CO 0.395 10 TGT TARGET CORP 0.879 Near Overbought 60 DHR DANAHER CORP 0.390 11 SCHW SCHWAB (CHARLES) CORP 0.868 Near Overbought 61 MON MONSANTO CO 0.383 12 EBAY EBAY INC 0.864 Near Overbought 62 GE GENERAL ELECTRIC CO 0.379 13 NWSA NEWS CORP 0.855 Near Overbought 63 BNI BURLINGTON NORTHERN SANTA FE 0.351 14 WFC WELLS FARGO & CO 0.820 Near Overbought 64 NEM NEWMONT MINING CORP 0.348 15 HD HOME DEPOT INC 0.794 Neutral 65 WYE WYETH 0.333 16 SGP SCHERING-PLOUGH 0.778 66 MO ALTRIA GROUP INC 0.332 17 MSFT MICROSOFT CORP 0.751 67 UTX UNITED TECHNOLOGIES CORP 0.332 18 GLW CORNING INC 0.744 68 LMT LOCKHEED MARTIN CORP 0.310 19 MA MASTERCARD INC 0.737 69 HON HONEYWELL INTERNATIONAL INC 0.305 20 AAPL APPLE INC 0.733 70 BA BOEING CO 0.289 21 WAG WALGREEN CO 0.730 71 OXY CORP 0.283 22 UPS UNITED PARCEL SERVICE INC 0.726 72 GILD GILEAD SCIENCES INC 0.280 23 MS MORGAN STANLEY 0.712 73 AMGN AMGEN INC 0.279 24 DELL DELL INC 0.701 74 MHS MEDCO HEALTH SOLUTIONS INC 0.274 25 TXN TEXAS INSTRUMENTS INC 0.694 75 CELG CELGENE CORP 0.269 26 SLB SCHLUMBERGER LTD 0.680 76 KMB KIMBERLY-CLARK CORP 0.266 27 IBM INTL BUSINESS MACHINES CORP 0.674 77 CL COLGATE-PALMOLIVE CO 0.253 28 YHOO YAHOO INC 0.670 78 MDT MEDTRONIC INC 0.252 29 GOOG GOOGLE INC 0.659 79 XTO XTO ENERGY INC 0.251 30 NKE NIKE INC 0.656 80 APA APACHE CORP 0.249 31 CVS CVS CAREMARK CORP 0.654 81 PEP PEPSICO INC 0.240 32 CSCO CISCO SYSTEMS INC 0.653 82 GD GENERAL DYNAMICS CORP 0.236 33 INTC INTEL CORP 0.641 83 MCD MCDONALD'S CORP 0.206 Neutral 34 DTV DIRECTV GROUP INC 0.639 84 MRK MERCK & CO 0.193 Near Oversold 35 EMC EMC CORP/MA 0.634 85 JNJ JOHNSON & JOHNSON 0.168 Near Oversold 36 MET METLIFE INC 0.612 86 BMY BRISTOL-MYERS SQUIBB CO 0.164 Near Oversold 37 CAT CATERPILLAR INC 0.583 87 PG PROCTER & GAMBLE CO 0.161 Near Oversold 38 APC ANADARKO PETROLEUM CORP 0.570 88 LLY LILLY (ELI) & CO 0.134 Near Oversold 39 QCOM QUALCOMM INC 0.564 89 CVX CHEVRON CORP 0.122 Near Oversold 40 UNP UNION PACIFIC CORP 0.560 90 PFE PFIZER INC 0.105 Near Oversold 41 HAL HALLIBURTON CO 0.535 91 DVN DEVON ENERGY CORP 0.105 Near Oversold 42 MMM 3M CO 0.529 92 UNH UNITEDHEALTH GROUP INC 0.091 Near Oversold 43 LOW LOWE'S COMPANIES INC 0.525 93 BAX BAXTER INTERNATIONAL INC 0.022 Near Oversold 44 ORCL ORACLE CORP 0.523 94 PM PHILIP MORRIS INTERNATIONAL 0.014 Near Oversold 45 CMCSA COMCAST CORP 0.494 95 EXC EXELON CORP 0.010 Near Oversold 46 TWX TIME WARNER INC 0.493 96 SO SOUTHERN CO 0.007 Near Oversold 47 BK BANK OF NEW YORK MELLON CORP 0.481 97 COP CONOCOPHILLIPS -0.019 Oversold 48 FPL FPL GROUP INC 0.481 98 ABT ABBOTT LABORATORIES -0.051 Oversold 49 DIS DISNEY (WALT) CO 0.479 99 XOM EXXON MOBIL CORP -0.099 Oversold 50 VZ VERIZON COMMUNICATIONS INC 0.454 Neutral 100 KFT KRAFT FOODS INC -0.160 Oversold Source: Banc of America Securities- Merrill Lynch Market Analysis

18 Market Analysis Comment 04 May 2009

S&P 500 OBOS top & bottom “tails” 46 overbought stocks vs. 23 oversold stocks Overbought bias for the S&P 500 at the stock level

Large-cap stocks ranked by relative price momentum for 30-Apr-09 Rank Ticker Company Sector Overbought > 1, Oversold < 0 1 F FORD MOTOR CO Consumer Discretionary 3.235 Overbought 2 XL XL CAPITAL LTD Financials 2.611 Overbought 3 HOG HARLEY-DAVIDSON INC Consumer Discretionary 1.860 Overbought 4 STT STATE STREET CORP Financials 1.760 Overbought 5 IPG INTERPUBLIC GROUP OF COS Consumer Discretionary 1.738 Overbought 6 AXP AMERICAN EXPRESS CO Financials 1.664 Overbought 7 COH COACH INC Consumer Discretionary 1.635 Overbought 8 JAVA SUN MICROSYSTEMS INC Information Technology 1.609 Overbought 9 WYN WYNDHAM WORLDWIDE CORP Consumer Discretionary 1.587 Overbought 10 AN AUTONATION INC Consumer Discretionary 1.551 Overbought 11 DHI D R HORTON INC Consumer Discretionary 1.513 Overbought 12 JNS JANUS CAPITAL GROUP INC Financials 1.498 Overbought 13 MHP MCGRAW-HILL COMPANIES Consumer Discretionary 1.443 Overbought 14 BIG BIG LOTS INC Consumer Discretionary 1.440 Overbought 15 WFMI WHOLE FOODS MARKET INC Consumer Staples 1.398 Overbought 16 CBG CB RICHARD ELLIS GROUP INC Financials 1.374 Overbought 17 THC TENET HEALTHCARE CORP Health Care 1.347 Overbought 18 MDP MEREDITH CORP Consumer Discretionary 1.335 Overbought 19 GS GOLDMAN SACHS GROUP INC Financials 1.331 Overbought 20 JCI JOHNSON CONTROLS INC Consumer Discretionary 1.319 Overbought 21 FITB FIFTH THIRD BANCORP Financials 1.303 Overbought 22 JWN NORDSTROM INC Consumer Discretionary 1.296 Overbought 23 EMN EASTMAN CHEMICAL CO Materials 1.271 Overbought 24 SBUX STARBUCKS CORP Consumer Discretionary 1.269 Overbought 25 S SPRINT NEXTEL CORP Telecommunication Services 1.246 Overbought 26 KBH KB HOME Consumer Discretionary 1.228 Overbought 27 GT GOODYEAR TIRE & RUBBER CO Consumer Discretionary 1.206 Overbought 28 PBG PEPSI BOTTLING GROUP INC Consumer Staples 1.204 Overbought 29 EXPE EXPEDIA INC Consumer Discretionary 1.195 Overbought 30 JCP PENNEY (J C) CO Consumer Discretionary 1.180 Overbought 31 MAR MARRIOTT INTL INC Consumer Discretionary 1.170 Overbought 32 HSP HOSPIRA INC Health Care 1.145 Overbought 33 PCAR PACCAR INC Industrials 1.138 Overbought 34 VIA.B VIACOM INC Consumer Discretionary 1.126 Overbought 35 CRM SALESFORCE.COM INC Information Technology 1.092 Overbought 36 MTB M & T BANK CORP Financials 1.069 Overbought 37 M MACY'S INC Consumer Discretionary 1.055 Overbought 38 CCE COCA-COLA ENTERPRISES INC Consumer Staples 1.038 Overbought 39 BAC BANK OF AMERICA CORP Financials 1.029 Overbought 40 CCL CARNIVAL CORP/PLC (USA) Consumer Discretionary 1.014 Overbought 41 JPM JPMORGAN CHASE & CO Financials 1.013 Overbought 42 USB U S BANCORP Financials 1.011 Overbought 43 FCX FREEPORT-MCMORAN COP&GOLD Materials 1.008 Overbought 44 MWV MEADWESTVACO CORP Materials 1.007 Overbought 45 TROW PRICE (T. ROWE) GROUP Financials 1.005 Overbought 46 AMP AMERIPRISE FINANCIAL INC Financials 1.004 Overbought 47 AKAM AKAMAI TECHNOLOGIES INC Information Technology 0.991 Near Overbought 48 AMZN AMAZON.COM INC Consumer Discretionary 0.988 Near Overbought 49 IR INGERSOLL-RAND CO LTD Industrials 0.982 Near Overbought 50 TJX TJX COMPANIES INC Consumer Discretionary 0.981 Near Overbought 51 PXD PIONEER NATURAL RESOURCES CO Energy 0.980 Near Overbought 52 DD DU PONT (E I) DE NEMOURS Materials 0.970 Near Overbought 53 MCO MOODY'S CORP Financials 0.966 Near Overbought 54 TIF TIFFANY & CO Consumer Discretionary 0.955 Near Overbought 55 HST HOST HOTELS & RESORTS INC Financials 0.946 Near Overbought 56 PX PRAXAIR INC Materials 0.937 Near Overbought 57 RL POLO RALPH LAUREN CP -CL A Consumer Discretionary 0.936 Near Overbought 58 AFL AFLAC INC Financials 0.929 Near Overbought

19 Market Analysis Comment 04 May 2009

Large-cap stocks ranked by relative price momentum for 30-Apr-09 Rank Ticker Company Sector Overbought > 1, Oversold < 0 59 LTD LIMITED BRANDS INC Consumer Discretionary 0.911 Near Overbought 60 KLAC KLA-TENCOR CORP Information Technology 0.905 Near Overbought 61 HOT STARWOOD HOTELS&RESORTS WRLD Consumer Discretionary 0.903 Near Overbought 62 WY WEYERHAEUSER CO Materials 0.895 Near Overbought 63 GPS GAP INC Consumer Discretionary 0.890 Near Overbought 64 CMI CUMMINS INC Industrials 0.889 Near Overbought 65 AMD ADVANCED MICRO DEVICES Information Technology 0.889 Near Overbought 66 SNI SCRIPPS NETWORKS INTERCT-SPN Consumer Discretionary 0.883 Near Overbought 67 IRM IRON MOUNTAIN INC Industrials 0.881 Near Overbought 68 TGT TARGET CORP Consumer Discretionary 0.878 Near Overbought 69 ICE INTERCONTINENTALEXCHANGE INC Financials 0.871 Near Overbought 70 SCHW SCHWAB (CHARLES) CORP Financials 0.867 Near Overbought 71 EBAY EBAY INC Information Technology 0.864 Near Overbought 72 PNC PNC FINANCIAL SVCS GROUP INC Financials 0.857 Near Overbought 73 NWSA NEWS CORP Consumer Discretionary 0.854 Near Overbought 74 RHI ROBERT HALF INTL INC Industrials 0.854 Near Overbought 75 DOW DOW CHEMICAL Materials 0.842 Near Overbought 76 BBBY BED BATH & BEYOND INC Consumer Discretionary 0.840 Near Overbought 77 SWK STANLEY WORKS Consumer Discretionary 0.838 Near Overbought 78 OMC OMNICOM GROUP Consumer Discretionary 0.828 Near Overbought 79 CMA COMERICA INC Financials 0.827 Near Overbought 80 APD AIR PRODUCTS & CHEMICALS INC Materials 0.824 Near Overbought 81 DRI DARDEN RESTAURANTS INC Consumer Discretionary 0.821 Near Overbought 82 WFC WELLS FARGO & CO Financials 0.819 Near Overbought 83 IVZ INVESCO LTD Financials 0.817 Near Overbought 84 BMC BMC SOFTWARE INC Information Technology 0.815 Near Overbought 85 JBL JABIL CIRCUIT INC Information Technology 0.813 Near Overbought 86 FLS FLOWSERVE CORP Industrials 0.807 Near Overbought 87 NWL NEWELL RUBBERMAID INC Consumer Discretionary 0.805 Near Overbought 88 FHN FIRST HORIZON NATIONAL CORP Financials 0.803 Near Overbought 89 ADBE ADOBE SYSTEMS INC Information Technology 0.803 Near Overbought

420 LXK LEXMARK INTL INC -CL A Information Technology 0.199 Near Oversold 421 ZION ZIONS BANCORPORATION Financials 0.199 Near Oversold 422 MRK MERCK & CO Health Care 0.193 Near Oversold 423 EQT EQT CORP Utilities 0.192 Near Oversold 424 HIG HARTFORD FINANCIAL SERVICES Financials 0.189 Near Oversold 425 ED CONSOLIDATED EDISON INC Utilities 0.186 Near Oversold 426 KR KROGER CO Consumer Staples 0.184 Near Oversold 427 EQR EQUITY RESIDENTIAL Financials 0.183 Near Oversold 428 ALL ALLSTATE CORP Financials 0.180 Near Oversold 429 EIX EDISON INTERNATIONAL Utilities 0.179 Near Oversold 430 CB CHUBB CORP Financials 0.174 Near Oversold 431 PBCT PEOPLE'S UNITED FINL INC Financials 0.173 Near Oversold 432 TE TECO ENERGY INC Utilities 0.171 Near Oversold 433 FRX FOREST LABORATORIES -CL A Health Care 0.170 Near Oversold 434 JNJ JOHNSON & JOHNSON Health Care 0.168 Near Oversold 435 RX IMS HEALTH INC Health Care 0.164 Near Oversold 436 BMY BRISTOL-MYERS SQUIBB CO Health Care 0.163 Near Oversold 437 PG PROCTER & GAMBLE CO Consumer Staples 0.160 Near Oversold 438 SWY SAFEWAY INC Consumer Staples 0.158 Near Oversold 439 WMI WASTE MANAGEMENT INC Industrials 0.153 Near Oversold 440 HUM HUMANA INC Health Care 0.150 Near Oversold 441 VLO CORP Energy 0.147 Near Oversold 442 MCK MCKESSON CORP Health Care 0.143 Near Oversold 443 SJM SMUCKER (JM) CO Consumer Staples 0.142 Near Oversold 444 CNP CENTERPOINT ENERGY INC Utilities 0.139 Near Oversold 445 LLY LILLY (ELI) & CO Health Care 0.134 Near Oversold 446 APOL APOLLO GROUP INC -CL A Consumer Discretionary 0.134 Near Oversold 447 HCN HEALTH CARE REIT INC Financials 0.129 Near Oversold 448 KEY KEYCORP Financials 0.123 Near Oversold 449 CVX CHEVRON CORP Energy 0.121 Near Oversold 450 AYE ALLEGHENY ENERGY INC Utilities 0.120 Near Oversold 451 GENZ GENZYME CORP Health Care 0.107 Near Oversold 452 PFE PFIZER INC Health Care 0.105 Near Oversold 453 DVN DEVON ENERGY CORP Energy 0.105 Near Oversold

20 Market Analysis Comment 04 May 2009

Large-cap stocks ranked by relative price momentum for 30-Apr-09 Rank Ticker Company Sector Overbought > 1, Oversold < 0 454 CPB CAMPBELL SOUP CO Consumer Staples 0.097 Near Oversold 455 R RYDER SYSTEM INC Industrials 0.094 Near Oversold 456 FTR FRONTIER COMMUNICATIONS CORP Telecommunication Services 0.091 Near Oversold 457 UNH UNITEDHEALTH GROUP INC Health Care 0.090 Near Oversold 458 STR QUESTAR CORP Utilities 0.088 Near Oversold 459 ITT ITT CORP Industrials 0.083 Near Oversold 460 AIV APARTMENT INVT &MGMT -CL A Financials 0.080 Near Oversold 461 PGN PROGRESS ENERGY INC Utilities 0.072 Near Oversold 462 WIN WINDSTREAM CORP Telecommunication Services 0.069 Near Oversold 463 NU NORTHEAST UTILITIES Utilities 0.054 Near Oversold 464 GIS GENERAL MILLS INC Consumer Staples 0.051 Near Oversold 465 SLE SARA LEE CORP Consumer Staples 0.048 Near Oversold 466 RSG REPUBLIC SERVICES INC Industrials 0.038 Near Oversold 467 D DOMINION RESOURCES INC Utilities 0.033 Near Oversold 468 STZ CONSTELLATION BRANDS Consumer Staples 0.032 Near Oversold 469 AEP AMERICAN ELECTRIC POWER CO Utilities 0.025 Near Oversold 470 BAX BAXTER INTERNATIONAL INC Health Care 0.022 Near Oversold 471 PNW PINNACLE WEST CAPITAL CORP Utilities 0.021 Near Oversold 472 WEC WISCONSIN ENERGY CORP Utilities 0.019 Near Oversold 473 PM PHILIP MORRIS INTERNATIONAL Consumer Staples 0.013 Near Oversold 474 DTE DTE ENERGY CO Utilities 0.013 Near Oversold 475 EXC EXELON CORP Utilities 0.009 Near Oversold 476 SO SOUTHERN CO Utilities 0.006 Near Oversold 477 COV COVIDIEN LTD Health Care 0.002 Near Oversold 478 AET AETNA INC Health Care -0.00 Oversold 479 ETR ENTERGY CORP Utilities -0.00 Oversold 480 COP CONOCOPHILLIPS Energy -0.01 Oversold 481 BCR BARD (C.R.) INC Health Care -0.01 Oversold 482 HRB BLOCK H & R INC Consumer Discretionary -0.01 Oversold 483 GM GENERAL MOTORS CORP Consumer Discretionary -0.02 Oversold 484 KIM KIMCO REALTY CORP Financials -0.02 Oversold 485 TWC TIME WARNER CABLE INC Consumer Discretionary -0.02 Oversold 486 SCG SCANA CORP Utilities -0.03 Oversold 487 ABT ABBOTT LABORATORIES Health Care -0.05 Oversold 488 BDX BECTON DICKINSON & CO Health Care -0.05 Oversold 489 LNC LINCOLN NATIONAL CORP Financials -0.06 Oversold 490 HRS HARRIS CORP Information Technology -0.07 Oversold 491 FE FIRSTENERGY CORP Utilities -0.07 Oversold 492 XOM EXXON MOBIL CORP Energy -0.09 Oversold 493 SLM SLM CORP Financials -0.13 Oversold 494 KFT KRAFT FOODS INC Consumer Staples -0.15 Oversold 495 SUN INC Energy -0.17 Oversold 496 GCI GANNETT CO Consumer Discretionary -0.19 Oversold 497 EK EASTMAN KODAK CO Consumer Discretionary -0.30 Oversold 498 AEE AMEREN CORP Utilities -0.43 Oversold 499 POM PEPCO HOLDINGS INC Utilities -0.43 Oversold 500 TEG INTEGRYS ENERGY GROUP INC Utilities -0.47 Oversold Source: Banc of America Securities- Merrill Lynch Market Analysis

21 Market Analysis Comment 04 May 2009

Oscillator Methodology The overbought/oversold oscillator is a relative price model, which means we calculate the ratio of the index of each industry group to the Index by dividing the current industry index value by the current Index value. We then take a 13-week rate of change of the ratio and compare with its historical trading pattern. An industry group is “overbought” or “oversold” relative to its historical levels when the ratio is +/- 2 standard deviations (square root of the variance) away from its mean. We normalize the data to adjust for volatility so we can compare high- volatility industry groups such as technology to low-volatility industry groups such as utilities.

For the Top 500 Stocks, we apply the same methodology, but use the stock price relative to the Index. How to read the Oscillator An industry group is “overbought” when the oscillator is greater than 1.0 and “oversold” when the oscillator is below 0. A group is “near overbought” between 0.8 and 1 and “near oversold” between 0.2 and 0. Those groups in between the range are ranked neutral.

A stock is overbought when the oscillator is greater than 1 and oversold when the oscillator is below 0. A stock is near overbought between 0.8 and 1.0 and near oversold between 0.2 and 0. Those stocks in between the range are ranked neutral. How to interpret the Oscillator Under the Oscillator model, when an industry group or stock has a statistically significant move away from its historical normal trading pattern relative to the market, a mean reversion is generally anticipated, provided the fundamentals of the industry group have not been significantly altered. Therefore, we are flagging those industry groups and stocks that have moved or are close to moving +/- 2 standard deviations away from their historical mean.

Industry groups and stocks with good fundamentals that are oversold or approaching oversold could be candidates for adding to a portfolio, while those groups and stocks that are overbought or approaching overbought with deteriorating fundamentals could be candidates for profit taking.

We do caution that: (a) The Oscillator is a quantitative model and its results may not coincide with Merrill Lynch’s fundamental research opinion on the subject security. This model is best used in conjunction with fundamental analysis; (b) The Oscillator model attempts to measure relative price performance and, thus, even when successfully implemented, may result in returns that are negative in absolute terms; (c) Groups and stocks may remain overbought or oversold for several weeks or at times for months after such conditions are identified by the model; (d) the Oscillator model does not consider commissions or other transaction costs that may negatively impact investment returns.

Due to the nature of quantitative analysis, the issuers or securities recommended or discussed in this report are not continuously followed. Accordingly, investors must regard this report as providing stand-alone analysis and should not expect continuing analysis or additional reports relating to such issuers and/or securities.

24 Market Analysis Comment 04 May 2009

Footnotes #/ One or more analysts responsible for covering the securities in this report owns such securities.

/b/ MLPF&S or one of its affiliates acts as a market maker for the equity securities recommended in the report.

/g/ MLPF&S or an affiliate was a manager of a public offering of securities of this company within the last 12 months.

/i/ The company is or was, within the last 12 months, an investment banking client of MLPF&S and/or one or more of its affiliates.

/j/ MLPF&S or an affiliate has received compensation from the company for non- investment banking services or products within the past 12 months.

/o/ The company is or was, within the last 12 months, a securities business client (non-investment banking) of MLPF&S and/or one or more of its affiliates.

/p/ The company is or was, within the last 12 months, a non-securities business client of MLPF&S and/or one or more of its affiliates.

/q/ In the US, retail sales and/or distribution of this report may be made only in states where these securities are exempt from registration or have been qualified for sale.

/r/ An officer, director or employee of MLPF&S or one of its affiliates is an officer or director of this company.

/s/ MLPF&S or an affiliate has received compensation for investment banking services from this company within the past 12 months.

/v/ MLPF&S or an affiliate expects to receive or intends to seek compensation for investment banking services from this company or an affiliate of the company within the next three months.

/w/ MLPF&S together with its affiliates beneficially owns one percent or more of the common stock of this company. If this report was issued on or after the 10th day of the month, it reflects the ownership position on the last day of the previous month. Reports issued before the 10th day of a month reflect the ownership position at the end of the second month preceding the date of the report.

/x/ Customers of MLPF&S and BAS in the US can receive independent, third- party research on companies covered in this report, at no cost to them, if such research is available. Customers can access this independent research at http://www.ml.com/independentresearch or can call 1-800-637-7455 to request a copy of this research.

/z/ The country in which this company is organized has certain laws or regulations that limit or restrict ownership of the company's shares by nationals of other countries.

/A/ One of the analysts covering the company is a former employee of the company and, in that capacity, received compensation from the company within the past 12 months.

25 Market Analysis Comment 04 May 2009

/B/ MLPF&S or one of its affiliates is willing to sell to, or buy from, clients the common equity of the company on a principal basis.

/C/ Merrill Lynch is affiliated with an NYSE specialist organization that specializes in one or more securities issued by the subject companies. This affiliated NYSE specialist organization makes a market in, and may maintain a long or short position in or be on the opposite side of orders executed on the Floor of the NYSE in connection with one or more of the securities issued by these companies.

/N/ The company is a corporate broking client of Merrill Lynch International in the United Kingdom.

/O/ MLPF&S or one of it affiliates has a significant financial interest in the fixed income instruments of the issuer. If this report was issued on or after the 10th day of a month, it reflects a significant financial interest on the last day of the previous month. Reports issued before the 10th day of a month reflect a significant financial interest at the end of the second month preceding the date of the report.

26 Market Analysis Comment 04 May 2009

Analyst Certification I, Mary Ann Bartels, hereby certify that the views expressed in this research report about securities and issuers accurately reflect the research model applied in such analysis. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or view expressed in this research report.

27 Market Analysis Comment 04 May 2009

Important Disclosures

FUNDAMENTAL EQUITY OPINION KEY: Opinions include a Volatility Risk Rating, an Investment Rating and an Income Rating. VOLATILITY RISK RATINGS, indicators of potential price fluctuation, are: A - Low, B - Medium and C - High. INVESTMENT RATINGS reflect the analyst’s assessment of a stock’s: (i) absolute total return potential and (ii) attractiveness for investment relative to other stocks within its Coverage Cluster (defined below). There are three investment ratings: 1 - Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster; 2 - Neutral stocks are expected to remain flat or increase in value and are less attractive than Buy rated stocks and 3 - Underperform stocks are the least attractive stocks in a coverage cluster. Analysts assign investment ratings considering, among other things, the 0-12 month total return expectation for a stock and the firm’s guidelines for ratings dispersions (shown in the table below). The current price objective for a stock should be referenced to better understand the total return expectation at any given time. The price objective reflects the analyst’s view of the potential price appreciation (depreciation). Investment rating Total return expectation (within 12-month period of date of initial rating) Ratings dispersion guidelines for coverage cluster* Buy ≥ 10% ≤ 70% Neutral ≥ 0% ≤ 30% Underperform N/A ≥ 20% * Ratings dispersions may vary from time to time where BAS-ML Research believes it better reflects the investment prospects of stocks in a Coverage Cluster. INCOME RATINGS, indicators of potential cash dividends, are: 7 - same/higher (dividend considered to be secure), 8 - same/lower (dividend not considered to be secure) and 9 - pays no cash dividend. Coverage Cluster is comprised of stocks covered by a single analyst or two or more analysts sharing a common industry, sector, region or other classification(s). A stock’s coverage cluster is included in the most recent BAS-ML Comment referencing the stock.

Due to the nature of strategic analysis, the issuers or securities recommended or discussed in this report are not continuously followed. Accordingly, investors must regard this report as providing stand-alone analysis and should not expect continuing analysis or additional reports relating to such issuers and/or securities. Due to the nature of quantitative analysis, the issuers or securities recommended or discussed in this report are not continuously followed. Accordingly, investors must regard this report as providing stand-alone analysis and should not expect continuing analysis or additional reports relating to such issuers and/or securities. Due to the nature of technical analysis, the issuers or securities recommended or discussed in this report are not continuously followed. Accordingly, investors must regard this report as providing stand-alone analysis and should not expect continuing analysis or additional reports relating to such issuers and/or securities. BAS-ML fixed income analysts regularly interact with sales and trading desk personnel in connection with their research, including to ascertain pricing and liquidity in the fixed income markets.

Other Important Disclosures

Merrill Lynch Research policies relating to conflicts of interest are described at http://www.ml.com/media/43347.pdf. "Merrill Lynch" includes Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") and its affiliates, including BofA (defined below). "BofA" refers to Banc of America Securities LLC ("BAS"), Banc of America Securities Limited ("BASL"), Banc of America Investment Services, Inc ("BAI") and their affiliates. Investors should contact their Merrill Lynch or BofA representative if they have questions concerning this report. 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