Very docile, low volume trading began the week. It represented an almost nonexistent trading atmosphere. However, trading opportunities are always present, it is our job to find them! The institutional activity was minimal and the corresponding swings were muted. Do not be lulled into complacency as this type of activity precedes volatility. The bonds are bucking their normal correlation once again. The upside that the equities have been able to pursue should have correlated with a minus in bond prices. Instead we are seeing a rally creating a divergence that is straining at equilibrium. Are the bonds telling us that equities are going to succumb to a correction? This type of environment is a distortion that creates pressure that will in turn create volatility. There is a big distortion between the bond futures and S&P futures. We are seeing the equities experience a breather, as we talked about in the Wednesday morning advisory. They have seen no energy by the bulls today, but this is far less of a decline than the indirect correlation of the bonds rallying would seem to indicate. We are into a period whereby the majority of the institutions will be adjusting their situation, which will result in both buying and selling. We need to see clear signs of institutional leanings to either the bullish or the bearish case. Technically, the S&P’s held and had a very positive December. The distortion that I mentioned above created a more than 2-point rally in the bond futures contract Wednesday. We are seeing what crosscurrents and end of the year maneuvering can be effecting prices. The bonds are creating an overbought condition without completing a much needed correction cycle. I will once again tell you that the bonds are into a bubble phase. The longer they experience a bubble, the more drastic the pop is when the bubble burst! We are not seeing much volatility, which means a standing bid is being presented to firm equity prices. Generally, once this bid is pulled some sharp moves on the downside are seen in a short burst of time. There is almost no energy in this market in either direction. The bulls are having a siesta while the bears are just plain sleeping. It has not been a very exciting trading week. The Dow Jones Industrials is clearly in the plus column for 2011. Is this good enough for Bernanke? I think we will see a totally different environment in 2012. Traders need to have an understanding of what could potentially happen and construct their business-trading plan to for a road map to deal with the infinite possibilities. Have a Happy New Year!