August 29 – September 2

Monday was a very strong up day that has carried prices above 1200 on the S&P futures. The very severe oversold condition on the CCT gave us an alert that this rally was possible. The psychological impact of a close above 1200 would start to allay many fears of the stock market. The damage that was created in the early part of August is now starting to be repaired. The bonds are trading very abnormally. If our government is the source of this buy bidding for these bonds it is a severe breach of what free markets should be allowed to do. The FOMC minutes were released Tuesday. The statements made were vague and inconclusive. This market has had a rally of approximately 130 points so far but we need to see some outside buyers coming into this market to expand breath and participation. It seems that the common sentiment is that this rally will not be able to hold. I want to point out that we are seeing perhaps one of the greatest distortions between the bonds and stocks. This market depicts the insanity that has been created by the Federal Reserve distorting all aspects of our economy. We will see a different trading environment as we enter into September. The month of August will go down in history as a month of pure panic with extreme volume and sell programs. The trade recommendation to sell at 1219 was profitable. Generally the first day of the month has cash infusions into stocks. Therefore you can expect many plus 1000 ticks and a duration of plus tick consistently. Thursday was just the opposite with many instances of minus 1000 tick. The plus tick was very restricted, which means that monies were not flowing into stocks. They were exiting. This could mean that intuitions are worried about stock redemptions. It appears that the beginning of the month monies were going into bonds even thought they are extremely overbought. The unemployment report Friday morning fell far short of expectations. We saw the worst unemployment numbers since 2010, yet the S&P is considerably above the last pullback low. I remember vividly how the stocks in the first quarter of the year 2000 had a bubble formation. The bonds are showing the exact same type of formation.