September 6 – September 9

Europe used to follow the US stock market now it appears that it is a front running influence. The fact that European stock markets were hit heavily Monday flowed into our market particularly Tuesday morning. The fact that we have had muted selling pressure as evidenced by few minus 1000 ticks today denotes the resiliency of the US market. Tuesday could be a historical precedence day. The10 year bond is at the 60 year low on interest rates paid. The panic that was created with the European sell off created a blow off highs that was not exceeded in Tuesday’s action. The market was able to progress in a fear environment with the old adage climbing the wall of worry. We did not register any high minus ticks Wednesday, but did register several plus 1000 ticks. This is a prodding upward market, which generally has a continuation pattern. The next hurtle would be a close above 1230. The bulls have the ball in their court now. Can they score? The bonds are tough to read since they are being incredibly manipulated. My experience is that manipulation can be maintained for extended periods of time but eventually the market will journey to its equilibrium point or more. It appears that many traders stayed on the sidelines Thursday, afraid of the risk of Bernanke’s and Obama’s speeches in the evening. The volume was lower. The institutions did not seem to be as forthcoming to buy. Moreover, we witnessed numerous minus 1000 ticks today, which actually is neutralizing the plus ticks on the rally days. Bernanke’s speech itself was very vague and few specifics and almost no details. He also had a Q&A session but was very political in his answers. It appears that he was instructed to not steal any thunder from Obama’s presentation. On Thursday, the bonds had a day much like the sail of a sailboat in a multifaceted cross wind. The winds blew from the North, from the South, from the East and from the West. The overall posturing was inconclusive other than the bonds once again held the support at 139. Bernanke and Obama’s speeches did little to create any enthusiasm for the short term. Also, I do believe that the 10-year anniversary of 911 is creating some anxiety. The advisory trade recommendation: Buy the S&P on a minus 1200 tick for 4 points was executed profitably on Friday. My long-term cumulative tick has been on a buy signal for nearly one month now as we are into an environment that is fear driven. We need an S&P close above 1225 to capitulate this market into a stabilized price area. New fears of Europe’s condition have surfaced once again. This probably drove new buyers into our US treasuries. Common sense would tell any old experienced trader that this bond market is incredibly overbought. The longer we maintain these lofty prices without a sizeable correction the greater the bubble burst will be.