Tape Action

As of mid-week we still had not seen a 30 point down day which means the pressure is intense. It may take a catalyst for a true selling pressure to win over the manipulators. The bonds gave a big yawn last Wednesday at the 10 Year Auction. It is one of the most benign movements seen in the backdrop of a 10 year auction. I am beginning to wonder if these auctions are losing their influences as they have had in previous months. Yes the Federal Reserve is the big buyer so therefore much of the mystery is reduced. It is important to always read the tape but this week was very important. I had said that we saw a 25 point pullback from the highs and that created a rally that has now moved 15 points upward. The key is watching the tape to see if the manipulators are consistent by buoying prices. We should stop short of the old highs at 1705 but the wait and see is perhaps the most prudent way to observe the tape. We are establishing more and more lines in the sand now than we have had in weeks.

I always advise keeping diaries as that is important to see unfolding circumstances. Thursday we saw a rare occurrence whereby the S&P had a straight down 12 point erosion in early morning and then a turnabout of straight up 12 points. This means that more volume was required to accomplish these movements and also that the lethargic action seen previous days have given way to more volatility. The bonds absorbed the 30 year auction results which were less bullish than expected. The results prompted a quick sell off but the bonds were able to regain and still held their plus numbers for the day.

Paying close attention to the tape action each and every day is vital. We have seen this week an entity that has triggered buy programs that has sustained prices. However it is very clear that when these programs are not in force, the heaviness of this market pulls prices down. We went more than a week without a plus or minus 1000 tick which means that we are into a very controlled environment. Eventually the control aspect will be broken and the true market will be seen.