August 15 - 19, 2011

The S&P gap area between 1190 and 1197 was filled on Monday. This represents a sign of stability as well as a confidence builder amongst the bulls. The bonds still seem to have an underlying bid and are holding artificially high prices. Both the bond market and equity market has exhibited distortions that are historic in nature lately. Tuesday’s press conference involving leaders of the European community threw shock waves into our market at midday. This resulted in severe minus tick almost reaching minus 1400, which carved out the day's bottom at just below 1177.50. The bonds received a shot of adrenaline with the news conference in Europe. Wednesday’s comments by the Fed members created waves of selling. Midday saw a selling wave that pushed prices to the eventual low more than 25 points from today's high. This action demonstrates the volatility and also the behemoth battle between the bulls and the bears. This market is still a wounded entity so bad news will affect it quickly. We are not witnessing a normal bond environment, but rather a bubble that is making a correction of great magnitude more likely each day. All the economic news was dismal on Thursday. European markets being down over 5% poured over into a ramped panic in the US market. We did see a minus 1500 tick, which once again is an extreme capitulation moment in time. We saw the second blow-off spike in the last two weeks on bond prices. The euphoric volcanic eruption blew through 141 on a print high.  Friday was expiration day with wide swings and less speed in the moves. We observed numerous minus 1000 or greater tick. We are into an area now that should provide some support. The technicals of this market are into an area from 1115 to 1130 has provided bounces earlier this week. Each time that it appears that stability is introduced into this market another wave of selling hits. We must see rallies that can hold. This market is oversold and due for a massive rally. A day where there are few if any minus 1000 ticks and a 30 to 50 point rally should happen in the near future. The bonds are not having the volatility that we have seen recently. My indicators are showing the most overbought situation, which I have been keeping for over 15 years. I am trying diligently to focus on just the facts and away from emotions.