November 28 - December 2

A bounce was expected at the beginning of the week since the market was so exceedingly oversold. Therefore the shorts are covering, but we need to see new money purchasing stocks. The Europe situation needs to be gradually subdued and more attention paid to the US economic situation. I do believe that eventually the Europe situation will become second to the US economy but for now that is not the case. The bonds are demonstrating their fickleness. The technicals were pointing toward a sharp decline, but the bulls always use an excuse, which were European concerns. The prices are incredibly distorted and this will eventually result in equilibrium. Monday’s lows at 141 ’25 now become a definitive line in the sand. There is an incredible amount of money on the sidelines that have not been committed to buying. Generally this type of environment keeps people on the sidelines until they simply cannot resist the temptation to participate. The higher the mark journeys the stronger the urge becomes. Therefore the next 50 S&P points could act as a magnet to pull monies from the sidelines. The bonds are demonstrating a lack of commitment to the buy or the sell side in a continuum. The news of the central banks providing liquidity for Europe did create a very explosive rally Wednesday morning. The afternoon held in a sideways pattern as we were into a very exuberant rally day for the last trading day of November. Will this exuberance continue or is it a one-day wonder? It is always important to note the prices just before a major news announcement is released. The S&Ps were trading at 1204 just prior to the central bank news announcement that created more than a 20-point S&P rally immediately. This 1204 now becomes a support line in the sand that if penetrated would be bearish. If the rally continues, the news item could be viewed as a catalyst to build a bullish rally that could be sustained for additional time. Do not forget that last week we became very oversold on the Daily CCT and this created a condition whereby a rally had resources to fuel its development. The bonds had a pullback coinciding with the rally of the stock market. However the pullback was not as significant as the stock rally was. It is imperative for the bears to close the bonds below 141 ½. Ordinarily the first day of the month has more volatility and excitement and rapidity in movements than what we have had today. The March contract is now the front month for the 30-year bond futures. They showed additional weakness Thursday morning, but have not stayed at the lows but have stabilized throughout the day. It is still very noteworthy that we have closed below the 141 ½ price area, which denotes a technical roll down in prices. The next area that needs to be penetrated is 139. We locked in profit on half of our intermediate position Friday--80 points. It was the 2nd highest points profited on any single position for the year! Now we need to see if the next three trading days provide a move above 1263. This would once again reenergize the market. Furthermore, we still have not seen sideline money pulled into this market. Subscribers should stay tuned for updates!