A Complacent Market Sets In

Ordinarily the first day of a new quarter has in influx of monies to purchase equities. The trading week's opening witnessed the highs and then a slow decline on light volume. Ordinarily the volume is higher and many high plus ticks are registered. This is a classic example of no follow through from the all time highs made last week. I do believe that a slow evolution is occurring in the atmosphere of the stock market. It should be evident by week’s end if the buying that propelled stocks to all time highs in the first quarter of 2013 will start to cool. There is complacency that is second to none now in this environment. Generally complacency of this magnitude takes a long time with a significant erosion to change the tone. The mindset clearly is that buying on any dip is a correct procedure and that has to be destroyed to change the mood. Please be prepared to be more aggressive in shorting this market. We are within a day or days of what I believe will be a major reversal. The tape appears very heavy and if the money from the beginning of the quarter is spent, the foundation that the bulls have tried to construct will fall like matchsticks. The bonds had an entirely different appearance after Monday's overnight rally slipped away as the next day progressed. The afternoon S&P pullback was unable to energize the bonds as there was a perpetual seller present virtually all afternoon as any rally was absorbed. The bond range is entirely too tight so we could see a big movement especially if the asset purchases are lessening. There was a potential long term top in place with Wednesday’s S&P 500 action. There was a possibility for a set up formation of the cross through the box. A close below 1555 would mean the box has once again been entered and this is a very rare setup. Generally it occurs twice per year.

Each and every day I monitor the tick on a chart basis. Thursday the majority of the time was spent in minus tick. This is indicative of the institutions not participating. The tepid rally was able to push prices into the plus column but with the tick in the minus column this market is very suspect. The tighter the range becomes, the greater the movement becomes will be when the break occurs. The bonds are incredibly short term overbought. This week they have been receiving monies and each day accumulating greater volume. The bonds volume was at the high end of exuberance and we have a support at 144 needing to be penetrated to even bring the bonds close to being neutralized. The bond market appears to be like a rocket ship with too much fuel propelling its trajectory. Fuel must be jettisoned to get this crazy rocket back on course. The Fed has created a monster that perhaps is too big for any chains. ‘Insanity are us’ is the theme of the current bond prices.

Isn’t it interesting that Bernanke has been pounding the table that the Federal Reserve’s actions would create jobs. Instead the numbers are worse than expected. The news this morning did not punish the stocks as much as they ordinarily should have been which means the Federal Reserve is buying the stock market. We are seeing distortions that are even greater than we saw at the millennium. What a wicked web we weave when we practice to deceive.