December 19 - December 23

The S&Ps appear to be stuck in the mud at just above 1204 price area. Every time they attempt to rally from this area, they are sucked back into a bog. This is like an area of quicksand that pulls prices like a captive sink spot. We came within a whisker of our minus 1300 tick buy, but did not register on our TradeStation trading platform. The bonds are incredibly overbought, but they are being manipulated which creates an artificial environment. This must be addressed as part of the discipline of trading as we have moved through a resistance and are journeying into prices not seen since early last fall. We saw a powerful rally that has now carried prices 40 S&P points from Monday’s lows. This market is now exhibiting the Santa Clause rally, but the true test will be if it can continue another day or more to the upside. It is disconcerting that the bonds moved through a resistance area on a closing basis and then reversed to the downside with a vengeance Tuesday. However, we should see additional weakness as this market is incredibly overbought to the degree that a 3 to 5 point pullback is a high likelihood. Wednesday’s lows at 1223 are very important since this represents an area that was a resistance previously. The ability for this market to hold is a demonstration that news items and European chronic fears have not been able to damage this market continuously. Therefore the 1240 price area becomes that much more important as a plateau that must be attained by the bulls to help it offset the technical oversold condition. The bonds are demonstrating what happens when the manipulators are not present to buy bonds. The heaviness of this market is a glaring obvious condition that shows that outside investors both domestic and international are not participating in the buying frenzy. The Federal Reserve orchestrates this entire situation. The St. Nick rally appeared early, as it was able to maintain and actually make higher highs as Thursday’s trading day progressed. It was a classic textbook move that dipped below 1240 in the morning, enabling our long execution. Then the upward progression generated a 6-point profit for us. The backdrop of the rally gave higher lows and higher highs, which were also accompanied by some high plus tick. All and all Santa Claus brought gifts for the bulls. The bonds were in the plus column today while the stocks were also in the plus column. This is demonstrating a divergence that will eventually be corrected. If the bonds were not held up by artificial bids their heaviness would have brought them down to lower lows once again. They will eventually correct this divergence and become in sync with equities in their indirect correlation shortly. Next week I will be writing a special advisory for your 2012 trading experience. The market needs to be constantly researched to find the best way to make money. I have always found that there is a way to make money, you just must develop a strategy that will unlock that opportunity to its fullest. I will be emphasizing some particulars that must be followed to maximize returns and minimize emotions. I have seen different styles of trading that have yielded the best results from very unorthodox approaches. A true understanding of the workings of the market is needed to allow an approach to become consistent and build confidence. Remember if you trade you will make money. Give the situation time. Merry Christmas!