It is important each day to assess the energy. A particular up day should have more plus tick than minus tick. The more the progression and prices upward, the more accompanying high plus tick should occur. This was not the case Monday as rare instances reached 500 but nothing excessive even with almost a 10 point gain. Therefore this market is running on fumes and that generally precedes hard price moves downward with heavy minus tick. An important aspect of the big picture is the fact that we made a lower low in prices on the bonds for 2013 but the S&P is 50 points shy of previous highs as of Monday. This is important to add to your diary because the bonds have been the fuel for the S&P but it has taken more fuel as the miles per gallon efficiency in the stock market has become a gas guzzler. I want to emphatically call to your attention that the S&P is starting to trade more as a capitalistic vehicle and not a government manipulation. We are seeing an ebb and flow with reversals and counter trends associated with volume. That is why our recommended short term trade worked as it is a high probability in a free market. We may have seen a “V” bottom with Tuesday’s action in the bonds. The reversal from the lows carried prices more than one and a half points upward. Also, the pit close is near the highs of the day, thus completing a minus day to a plus day. We should see the bonds try to claw their way upward from this oversold condition, but the million dollar question is “How much strength will they have?”
In the S&P 500, there could be some heavy selling occur if we journey below 1560. The fact that this market cannot hold rallies is a totally different trading environment than we have seen in 8 months. The 10-Yr US Treasury Auction was less than awe inspiring. It is well known that the Federal Reserve buys the majority of the issue. If this is all that the Federal Reserve can muster with unlimited buying potential, look out.
The tape was far from normal Thursday, as the ebb and flow was not present. There was constant buying presence that overpowered any selling. The big question I have is why is this allowed to occur. We saw much energy being utilized with numerous plus 1000 tick and very high plus tick present for long durations of time. There seems to be a unified front to buy the S&P any time it dips below 1600 and brings much money into a market that is very much overvalued. The clarity that the Federal Reserve claims they will use looks more like blatant overstepping of the Federal Reserve mandate. The bonds today absorbed another less than stellar 30 year bond auction. I think it is so incredible that a bond auction is bad when the Federal Reserve is buying the majority of the issues.
Friday had an early attempt by the computers to generate a plus price numbers, but the erosion of the heaviness of this market became obvious as the day progressed. Advisory subscribers probably had both trading positions executed and made 15 points profit in the S&P. The bonds seem to be very tired after all their volatility this past week. The range today was contracted and concentrated. The volume also has become less than we saw earlier this week. Any rallies that the bonds seem to be able to muster, has little energy and less staying power. They definitely have body odor and repel investors.