Slow Ebbs & Flows: October 1 – 5

This market has exhibited an intermediate course that has shown resiliency. The S&P pullback from 1470 to 1425 has now been warded off and a building pattern appears to be in place. There is strength in the rallies as we are generating short term higher lows. Let’s keep in mind that the Fed is very amenable to the stock market, so it is difficult for the sellers to mount any consistency. Monday represented another extraordinary maladjusted reaction to an S&P’s rally. All of this has been orchestrated by the Fed, which should never have been allowed to reach these proportions. S&P movements have been slow in materializing with ebbs and flows. The fact that we are not experiencing heavy minus tick in excess of minus 1000 indicates that the institutions are not wholesale dumping. This lightening of position situations that is currently the scenario is probably more attributable to redemptions in funds. It appears that the Fed is still doing their manipulative function without regard for normal trading patterns. This type of movement is atypical for a healthy market.

The parameters of the ceiling to the floor are becoming a tighter and tighter containment. Patience is always a virtue in trading especially when patience is implored to use restraints in entering before all signals are in place. Keep this in mind. The tightness of the daily ranges are dissipating the volume dramatically. A truly genuine market would search for bids, which means a correction. The heaviness at these lofty levels should provide an eventual erosion. The disappointment regarding Ben Bernanke’s latest QE unlimited is now starting to surface in financial news print. On a high note of the week, our advisory trade recommendation was reached in the S&P on Wednesday.

The resulting rally that we had covered approximately 40 full S&P points. This is probably a situation whereby the tick is telling us much more than prices are. The fact that we had better than expected news regarding unemployment dropping below 8%, but yet did not mount high plus tick denotes the upside is succumbing to gravity. We could be into the beginning of a more extended down turn. The bonds showed where the truth lies internally. There literally is not buyers except the Federal Reserve. The Fed is obviously taking a 3 or 4 day weekend. All the up movements lost their zest and we now have corrected almost 3 full points from the recent highs. The real interest rates are going to climb regardless of what the Federal Reserve does or says.