Jackson Hole Speech: August 27 - 31

I always watch for an S&P market to have a lasting trend move as we near month’s end. Monday’s lack of energy did not generate high plus tick, even in a positive environment. It fell far short of 1420 so this market is like an aging centarian trying to run in the Olympics. The confines of a narrowing intermediate range are becoming clearer every day. The bonds ticked just slightly above 149.  They were able to register a plus day while the S&P was registering in the plus columns as well. This distortion too is becoming very dangerous. The pendulum should swing shortly. The slowness of Tuesday’s market reached a totally stalled environment. This type of market drives traders to the sidelines, creating more thinness. When there is thinness it gives an opportunity for volatility to manifest itself. We saw some plus tick, but once again no excessiveness. It was indeed waiting for a cue. The manipulation is about as flagrant as I have seen. There is no shame in the way the Fed buys bonds. They are totally unregulated and therefore create disparity and distortions with no conscious. Once again the bonds were up while the S&Ps were also in the plus column. The indirect correlation has been massively overridden by Fed manipulation. Once the Fed computers are shut off we could see a downside of reckoning.

Thursday and Friday were the last two trading days of August and just before the holiday. Bernanke is set to talk and all these ingredients will lead to more volatility. It is amazing that we are seeing less than 10-point daily ranges. This is too tight my friends. It seems as though a rescue mission was put into play after the 5 Year Auction. The morning obviously did not have the computers turned on. This brought a slow oozing downward, but in mid afternoon the breaks were applied.

The S&P probed the box floor at 1395 today and then bounced. We also did not see significantly high minus tick as we penetrated 1400. Therefore the institutions not only are not buying but they are not selling this market. Do not forget that the box is still intact until a close is registered below the floor or above the ceiling. We are seeing more distortion once again between the stock prices and the bond prices with the bonds being more exhaustive to the upside.

Bernanke made the Jackson Hole speech on Friday. The impasse between the bulls and the bears has stymied volatility. Therefore once this is put in the rearview mirror, the market can concentrate on other things. I expect September to be a more tradable month with much more volatility and opportunity. The true successful trader looks at the big picture to make his small picture decisions. This past month I saw two wannabes that could not see the forest through the trees regarding a trading career. A true trader waits for opportunities but does not try to create them. It is interesting to me how few amateurs can trade a box concept because it requires patience, while the pro traders wait for these high probabilities opportunities and reacts.