Erasing Gains

Such a bizarre environment where the strength of the market appears to be invincible and then slowly the market erodes. Monday's complacency of the bulls is giving confidence that any declines are buys. Therefore look out, this is setting up for a rip to the downside. The FOMC started Tuesday. We are seeing how he is plotting his strategy as I believe he has more and more animosity building even within his own ranks regarding his failed QE program. I mentioned that it is failed because only the stock market has had a good year while the economy languishes and real estate is about at tepid and anemic as you will see. America was built on capitalism but I guess Bernanke has a better idea and that idea is to create an artificial bubble in stocks. It is incredible that an ego as strong as Bernanke's is never allowed to be reined in as he refuses to allow his program to be stopped. The bonds are a window to the future of what the stock market will be over the next 6 months. I have been waiting for the day that Ester George finds a buddy. That day has come as there were two dissenters against Benny’s plans. We experienced a minus 1500 tick  as his news conference obviously did not send any confidence into the stock market. The overall tone of his news conference was stammering and stuttering. He is losing control and that means we are close to the tapering beginning. The bonds had a pullback on the news conference as they have become taboo for investors. It just shows how the US Treasuries have become a joke to the world, even with the Federal Reserve stating they are buying Treasuries. Are they lying to us or worse, ineffectual on maintaining bond price? Either answers are incredibly scary.

We have now seen all S&P 500 gains of the past two months eroded. The overall situation within the fed is probably more derisive than we imagined and perhaps pugilistic. The last support areas were destroyed by Thursday. The next area would be an erosion to 1515 on the S&P futures. Margin calls began entering into expiration Friday. It appears that the distain for US treasuries continues as we have now eroded more than 10% from the highs seen less than two months ago. The bonds are short term oversold but that does not mean lower prices are not in the immediate future. We still have not seen any type of washout or capitulation in the S&P futures. We have now corrected approximately 6 percent from the all-time high reached earlier this year. Do not forget that an environmental change creates a whole new trading atmosphere as the transition from bullishness to bearishness is completed. We are still in the transition phase.