Monday's S&P 500 lows 1553.25 became a short term potential support area, but if violated on a close anytime in the near future would be monumental to a bearish environment. The breakdown area of 1595 is a paramount resistance for the short term and intermediate term. Devastation is the word that bond fund managers are using to describe their two month debacle. The bonds have corrected almost 17 full points. The bonds technically have shown no resiliency on this decline. Therefore this is a Fed induced rally that probably will not hold for any length of time. Please note that we experienced no plus 1000 ticks Tuesday, even when we saw a gain of more than 16 points at the highs. This is abnormal. The antithesis of Monday's abnormal which was an incredible amount of plus 1000 ticks. Therefore it represented a one day wonder manipulated by the Federal Reserve. The bonds are in an environment whereby all the auction results are dismal. This is creating an ominous hew over prices whereby rallies cannot sustain. The Wednesday push was a phony move that is not building any foundation for the longer term. The overall move did not have a 20 point correction yet since Monday's lows. The bonds were able to absorb another bond auction and make a move upwards afterwards.
Thursday's S&P highs at 1614.25 are a reference point for a potential intermediate top. Energy is always very important so what we are seeing is a dissipation of energy that has not yet infected stock prices. A pullback could start as early as tomorrow as we wind down the end of the quarter. We are seeing a fearful market as the bonds have turned from a beauty queen to a hideous looking monster to investors in the past 6 months.
This 2nd quarter has seen a different environment as the S&P had its greatest correction of the year. The pullback brought some reality to investors. The Federal Reserve is doing more talking than they ever have done to try and substantiate their monetary policy. This has created more volatility in the market rather than less. Be aware that the 3rd quarter could be very tradable with a lot of opportunity as the swings become much more volatile. The bonds seemed to have a savior in place. They have had one of the most dismal quarters in years, which generally prompt portfolios to dump them dramatically. We should see an exciting July to trade. The market has had a June that finally showed a correction regarding increasing volatility. However, there is much more to be had so we should see a “traders delight” in July.