Seminar Week: August 20 - 24

Our advisory trade profit objective was reached early in the week. I felt extra happy for those who attended my seminar this past week because the trade helped defray their cost. It was a great start! We are into a period of time in late August whereby old seasonal tendencies mature. We could see a full reversal of this uptrend if we close below 1400. Monday’s high at just shy of 1425 means that we could be seeing an intermediate top formulating. The bonds have been squished in the last several weeks. However, they exhibited the best bounce witnessed since this decline started. Therefore we are into a recognition that perhaps a short term oversold is going to present a bottom. We have resistance at 147 ¼ and 149 ¼. Pay close attention to the loose correlation between the bonds and the S&Ps. Ordinarily an up day on the bonds corresponds to a down day on the stocks. Instead we are seeing both the stocks and the bonds in the plus column. Also the bonds are registering an extreme plus move up with the S&P being more muted on its movements. This type of action is abnormal and will have to be brought to equilibrium. The S&P made a high at 1425 Tuesday. This was a reversal point and the resulting pullback so far has been approximately 20 points. This is not enough correction to offset the overbought market. It is still a critical pivot area to close below 1400 and the next pivot is 1380. Keep these in mind once news of the FOMC minutes becomes old. Tuesday’s lows on the bonds, at just above 145 were a retest of several days ago lows just above 145. This next rally will be important to visualize the amount of bounce this market can generate from a short term oversold. The next resistance is 149 ¼. Failure to reach that level would really signify that the bonds are running low on fuel.

We saw the FOMC notes become a catalyst for Wednesday’s move, but the S&P reversed all the way and actually moved lower. I have mentioned that the 1400 represents a key reversal price area. If we close below 1400 then we are reversing the uptrend and establishing a breakdown from a distribution top. We did not have any type of sufficient rallies indicating that the bull market still has energy. The bulls should be very disappointed indeed. Once Labor Day passes we will see a new environment. Sometimes this environment materializes sooner rather than later. It is a mature bull market. Furthermore, the noticeable absence of plus 1000 ticks denotes no institutional buying. On Friday’s bond trading action it journeyed into the 149 price, but was unable to push higher; just shy of notable resistance. I thought perhaps the Jackson Hole jargon would be able to infuse some energy but it did not.