October 10 - October 14

Monday did exceed Friday’s high, which was a monumental short term feat. A close above 1175 marks another plateau reached. We are within sight of the 1200 price area, which psychological could allay more fears of the bulls and instill confidence for buyers to come off the sidelines. Monday was probably one of the most interesting days I have seen regarding the 30 year bonds futures in trading. It was a Federal holiday and that placed the banks on the sidelines. The result was a very bearish decline in prices, which carried us below 139. Could this mean that the Fed was not participating and therefore the buyers were noticeable absent? We are not experiencing any sell programs that have long duration or a deep capitulation. This is a sign that this market is healing. The bonds were unable to hold their rally Tuesday morning. The fact that this is a day whereby it appears the manipulators are holding prices demonstrates that there is a definite heaviness to this market. Being above the 1200 area, within sight of the 1230 is paramount for the bulls to have regained the hill. There has been quite a battle being fought over the past 3 weeks between the bulls and the bears. Each time the bulls tried to retake the hill the bears were able to drive them to the bottom. The bulls have 3 days to accomplish the penetration of 1230 or they will have been knocked back down the hill. I equate the recent bond action to a very large balloon that got a pinprick and has a slow leak and now has lost all of its flotation gases. The balloon will go flat if we can cut more than 10% off the high prices of 147. The 1215 area on the S&P was a ceiling Wednesday. This needs to be penetrated on a close but first the psychological 1200 needs to become a floor for further ascensions. Thursday’s 30 year bond auction was better than recent auctions and this provided strength to prices in anticipation, however after the news the bonds were unable to hold their rally. The S&P’s lack of high minus tick indicates how the short term selling pressure has diminished and many fears are not as acute as 2 weeks ago. Also, the bonds have not seen a capitulation downward move even though we have already corrected over 9 points.