I expected a change in personality of the market after Labor Day. Therefore refocus your thought process to more volatility and more volume as we enter into the month of September. We should see bounces back and forth that could create great trading possibilities in the next week or so. Keep in mind that the more time that is spent in a box, the more reliable the box set up becomes. Today we touched the floor once again and held. Therefore the containment is still intact. For you who have taken my seminars, you know the reliability of the box setup. The current situation falls within the box formation and now we must wait for the alert signal to act. Early Tuesday morning saw the bonds rally to 151 ¾ on the December contract. This area was probed several times before the reversal pulled prices below 151. Therefore today’s 151 ¾ day session highs could be an intermediate resistance. There weren’t institutional players participating early in the trading week. As we move farther from the Labor Day holiday, normal activities increase while holiday influences decrease. Thursday and Friday of this week should be more indicative of the market moving in normal trading patterns with increased volume and volatility. The tape displayed a heavy bond market that seemed to have no buy players beside the Federal Reserve. It is obvious when the computer buy programs are disconnected because there are hardly any buyers left. The general public has little interest in purchasing US Treasuries including international buyers. The heaviness of the tape is showing that the stress on the bulls AKA Bernanke is heavy.
Thursday’s news gave an energy boost to stop prices. The power move came as the wind hit the sails with Europe and the US providing some economic hope. Technically we moved through the key box top resistance at 1425. We are still not seeing institutional presence but that may be in the future. The Standard & Poor’s popped through the ceiling top at 1425. I was looking for a close above that number. I believe the market registered a new 2012 S&P high. A close above 1425 would provide a confirmation box breakout. The bonds got a strong dose of reality, by having all the Fed rhetoric artificially and physically push bonds upward. Once again we made a lower high in the long term so now the bonds have shown that even with the Fed intervening the heaviness is overwhelming.
The jobs disappointment with revisions on previous numbers that now makes the economy appear listless if not hopeless. It is quite an irony that this jobs report gave the DNC the conclusion it did not want. The stock market was able to absorb the news but shows its resiliency. We will see how much more power it has to the upside. How long can the institutions afford to be on the sidelines? We are at a breakout of a box top that has created the highest S&P prices of 2012. What a market this is that is participation to the upside while the institutions sit on their fingers. We will have to see some very high plus tick to denote institutional participation. Friday represented a news blow off rally with no staying power. We also made a lower high even with the backdrop of the less than stellar employment report. Our bond market is built on quicksand, as apparently Bernanke and the Fed haven’t decided that a concrete foundation needed constructed.