December 5 - December 9

It is always best to secure profits than risk a news item that can derail a rally in a moment’s notice. The fact that we are experiencing diminishing energy is worrisome. This makes the market vulnerable to less than stellar news items. The market has had some fuel of a favorable nature from Europe, but perhaps that is running into a change. It could be starting with a warning by the S&P rating agency that the European nations are on watch for a possible downgrade. We are into a move that has encompassed almost 120 S&P points upward and that is becoming overextended for the short term. Perhaps Monday was the short-term top. Bonds have severed their relationship with equities at least for the short-term. We are re-challenging the highs that were made previously at just shy of 1265. This week I conducted my final trading seminar of the year. The group and I witnessed a market that has shown staying power and also a resiliency to ward off bear raids. The rate of ascent has become more labored which is still a concern as momentum seems to be abating. It is very noteworthy to see the divergence in the chart pattern of the bonds versus the equities. We are experiencing highs on equities while the bonds are far from previous lows. Therefore the bonds are not experiencing the sell pressure that a normal inverse correlation would demonstrate. Any equity pullback should provide a bounce possibility for bonds that could carry 2 points or more upward. Wednesday had instances of selling pressures that pushed prices downward but the market was able to deflect the selling and absorb the blows. We are now establishing a potential block formation. The downside is being contained between 1240 -1245 and the ceiling at 1265 - 1270. Therefore more times that we journey to these numbers and repel, the more validity the box has once it is broken to the upside or downside on a closing basis. This market has the sweeps like a pendulum swath but so far is in a clear defined pattern. Wednesday was a stellar day for the bulls as the bonds rallied even in the face of the equities rallying. The normal indirect correlation between equities and bonds was disjointed. This means that the bonds had a bullish agenda and an underlying bidder that overcame any asset allocation selling. Numerous times we crossed above 1260 during the trading day and slipped below with a movement that depicted sliding on an ice mountain. Thursday the bulls not only slid, but also became an avalanche as the mountain cascaded down on top of the bulls. Previous lows during the days were thwarted at the 1240 to 1245 price area. The bonds are running low on fuel and perhaps are due for a rounding top or a spike top that is put in place for a long period of time. We could be approaching a monumental topping action for the long term. We need to see some normalcy return to the stock market. On Friday the plus 1000 ticks did not pull back as they normally do. Instead we saw a climb higher, which demonstrates manipulation of prices. We are into the weekend environment with the European meeting and that should have caused some trepidation. It did not. The bonds did not quite get to our sell point but did reverse significantly which demonstrates that we are in a topping pattern. The crucial 143 area was not penetrated and we are now into a reversal. Can the 139 be penetrated on a closing basis in the next several days?