August 22 - 26, 2011

Monday's action had a morning rally that once again did not hold. However, the pullback had exceptionally high minus tick with a culmination of almost a minus 1500 tick. The key S&P number is a close above 1154. All rallies have fallen short of that as the weight was on for the Jackson Hole Wyoming Bernanke speech. The bonds have quieted down into a narrowing range with less and less volatility. We did not exceed the 141 level in the overnight or the day session. Therefore the energy is slowly dwindling. On Tuesday the bonds put in a quick accelerated thrust move just as the earthquake news hit the wires. This registered the high of the day and then we recoiled 1 ½ points. Wednesday had a very strong early morning rally that gave up gains as the day progressed to a neutral day. However in the early afternoon the S&P once again reasserted its strength and rallied sufficiently to make the breakout appear credible. The next plateau area would be a close above 1200 on the S&P futures. All the bear raids this week have been averted with rallies in the proper nick of time. However there is still a panic sentiment just beneath the surface of this market. Strong price action closing us above 1200 would allay fears and start a very constructive market formation. The bonds will begin sinking by closing below 135. The market exhibited volatility Thursday. The swings were wide after an early morning announcement that a purchase of a Bank of America was made by an investment group. The remainder of the day saw prices ebb and flow as several instances of minus tick were seen. The minus 1200 ticks were support areas that provided strong rebounds of upwards of 10 points. This enabled us to reach our profit objective on our day recommendation. The bonds had a rally today following a very severe downside move yesterday. We are into an extremely overbought market whose strength has taken a considerable amount of time to wane. Friday morning a higher low was made and turned almost 50 points to the upside. A key psychological would be a close above 1200 on the S&P futures. The next area would be a 200-point rally from the lows made this month at 1077. The severe oversold makes it likely that 200 points can be obtained. The bonds did not have asset allocation, but rather rallied which makes me suspicious the Fed is artificially buying the 30-year bond.