The SPX (S&P 500 Index) shook off three consecutive losing sessions to finish last week, and the first quarter of 2012 above 1400 (the official close on Friday was 1408.47), registering a 12.13% gain in the first quarter.

We saw the SPX fall below 1400 on several occasions last week, but as our market technician David Chojnacki has noted recently, there is technical support at 1388 as well as 1397-1400, and even a novice chart reader will note that equities have rallied off of these levels recently after any temporary setbacks.

There is overhead technical resistance however, both at 1412 and 1425. Late last week in one of our daily client notes, David noted that “All three major indices dropped below key near term support levels during the session, but recovered by the final bell. This pattern is not atypical during this year’s rally, as we have had weak or sideways action, and then a burst to the upside.”

From a sector standpoint, Technology and Financials continue to show leadership, as has been the case throughout this quarter and we have pointed this out regularly. Financial Select Sector SPDR (NYSEArca: XLF) for example, finished up 21.37% to end the quarter and the NDX (Nasdaq 100 Index) was up 20.98% during this timeframe.

Another leading sector in terms of performance during the quarter, Homebuilders (as XHB has rallied 24.73% year to date) are within striking distance of a multi-year high that was touched earlier last week but size put buyers emerged late last week and this could be a sign of a potential top forming.

From a fund flows standpoint, SPY led the pack with over $2.6 billion entering the fund via creations, and followed by iShares 20+ Year Treasury Bond (NYSEArca: TLT), which attracted more than $300 million in assets. We pointed out the presence of bearish speculators in ETF products and options (i.e. TBT inflows and call buyers, TLT put buyers, and TMV inflows) tied to longer dated U.S. Treasuries for the past several weeks, as TLT cratered rapidly earlier in March, eventually finding support on its 200 day moving average.

Last week for the most part TLT resumed its uptrend until a vicious sell off on Friday, where it gave back nearly 2%.

Other fixed income products including iShares TIPS Bond (NYSEArca: TIP) as well as SPDR High Yield Bond (NYSEArca: JNK), and iShares High Yield Corporate Bond (NYSEArca: HYG) were also among the leaders in inflows last week, reeling in $270 million, $165 million, and $153 million respectively.

Other ETFs that were active on the inflows side last week included Vanguard Emerging Markets (NYSEArca: VWO), SPDR Gold (NYSEArca: GLD), Vanguard Dividend Appreciation (NYSEArca: VIG), and infrequently traded iShares MSCI All Country Asia ex-Japan (NasdaqGM: AAXJ), taking in a cumulative  $856 million in new assets.

On the outflows side, assets left both Small and Mid Cap based U.S. equity funds, as nearly $1 billion flowed out of iShares Russell 2000 (NYSEArca: IWM) and $750 million left SPDR S&P Midcap 400 (NYSEArca: MDY).

A number of sector specific U.S. equity funds as well as country specific ones also saw substantial net outflows last week to end the quarter.

SPDR Industrials (NYSEArca: XLI), iShares MSCI Brazil (NYSEArca: EWZ), SPDR Energy (NYSEArca: XLE), iShares DJ U.S. Real Estate (NYSEArca: IYR), iShares MSCI Hong Kong (NYSEArca: EWH) andiShares MSCI Germany (NYSEArca: EWG) lost $1.5 billion in assets via redemptions.

Finally, the VIX itself was very volatile on an intraday basis last week as equities gyrated between gains and losses. After dipping below the $15 level early last week, VIX nearly touched its 50 day moving average on two occasions, peaking near $17.50 before falling right back to close at $15.50 on Friday. Thus, even though absolute levels of the VIX are still in benign territory, the “volatility of the VIX” itself remains rather high and will be watched closely in the coming week.

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