Each day I analyze the tick to judge the true internals of the market. Comparably the recent movement in the S&P has not had much significant tick. Monday had the majority of the trading day in the plus tick column with many instances above plus 500 tick. This means that much energy was expended to recover from the pullback this morning. The market had manipulation Tuesday but in a very different form than usual. We have finally found something more powerful than Bernanke, that would be a hacker. What a ride the market had. With much volatility and a huge one bar wonder, we were able to reach our profit objective. We went from 1573.25 to 1556.25 in a matter of minutes then recovered quickly and made a climb back up from 1557 to the level of 1574. We recovered to the levels the Fed had been maintaining all day in this market. With wide swings and high volume this was definitely a day of volatility thanks to a hoax. The bonds were in a drizzle down all day from its overnight highs at 149 ‘6 until the hoax hit. The bonds were at 147 ’31 and they quickly made a thrust up to 149 ‘2 and recovered back down to 147 ’31. It is interesting though that even with the hoax, it could not reach the overnight highs.
We are into a rally that has pushed prices toward the old highs of 1595. This rally has encompassed approximately 45 points and it has created a short term overbought once again. I am wondering if the end of April will still have stock buying or has the money been almost entirely invested? I think the next three days will be important for the intermediate term. Wednesday’s hacking that created the AP White House bombing scare could change the mood of the market. Keep in mind that anytime a new event transpires it creates uncertainty. Therefore probabilities are lessened because the normal environment has changed.
I always measure energy as the precursor to the price movements. There was a rally that promoted price increases of approximately 45 points unabated. Therefore the first sign that the rally is losing steam would be a lack of energy denoted by lessening volume, lessening price increases and plus tick eroding. The tightness of bond’s range is a sign of building energy. This tightening pattern will eventually be ruptured and this will attract the players from the sidelines. Do not forget the bonds are incredibly overbought and a 3 to 5 point correction should be the minimum correction and a high probability, but it may take longer than expected.
It has taken an extreme amount of energy for Thursday's S&P rally off the lows that we hit below 1540. This is clearly an intervention of the Federal Reserve as the activities surrounding this up move do not support that there is any institutional buying of significance. And, the tightness of the bond range was still scary. It is obvious that the Federal Reserve is trying to juggle 2 balls to keep in the air simultaneously, the bonds and the equities. However, the bonds got a shot of adrenaline Friday as they approached their old highs. This is showing the abnormality of the market as we are seeing an uptrend day that is not correlating to stock prices.