I do think the Federal Reserve is pulling all their resources to keep stock prices up while the public, including hedge funds, mutual funds, etc. are selling into this. The uptrend rolls on, but the heaviness in the S&P will eventually erode prices. The bonds showed a steamroller effect whereby the bulls had the throttle wide open Monday morning as a full one-point reversal from the lows was experienced. Then just as quickly the throttle was pulled to idle and the steamroller started slowly, methodically rolling down the hill. The pullback resulted in three quarters of a point being reversed. Therefore the bonds exhibited a tale of two tapes. The Nasdaq’s superstar stock: Apple eclipsed $500 on Monday and its shares flew higher on Tuesday. I wouldn’t count on it losing its wings anytime soon. With the release of the iPad 3 in the very near future it’s stock should keep rising.
In the S&P, once again a box between 1325 to 30 and 1350 to 55 is being carved out. The close below 1325 or above 1355 would establish the box trade. The market is still overbought with a duration component that is skewing prices enormously. A very notable bear wedge has developed and a correction needs to be administered to get the market back into equilibrium. The bonds showed some vitality on Tuesday. They penetrated a resistance at 143 ½.
Wednesday was full of news items: Empire State Mfg Survey, Industrial Production, Housing Market Index and FOMC Minutes. It is always interesting for me to read the excerpts from the FOMC Minutes. I pay more attention to what is not said than what is said. Do not be mislead, the minutes are very skillfully crafted and written politically correct. They are not what they should be. Wednesday’s unveiling showed some deep seeded problems within the group. There is derision from many different interpretations of correct action. The internals of the market are always more true than the cosmetics of price action. There is more NYSE minus tick each and every day, signaling the bulls are losing their handgrip. Could the bonds have topped out? They are not able to maintain rallies. This is equivalent to a mountain climber wearing smooth street shoes on an icy rock shelf, falling is inevitable.
It is very rare for an overnight Globex session to make lower lows and be resting near the lows of the night session going into intraday trading and then reversing completely, which was the case Thursday. The bonds took a real whooping. They once again failed at the 143 ½ area and regressed.
On Friday, the Dow Jones got close to 13,000--a humongous psychological barrier. Last time it was at this height was before the U.S. economy circled the drain. Both the Dow Jones industrial average and the Standard & Poor's 500 set a record close for the year. When will this juggernaut uptrend stop?
Crude-oil gained 4.6% this week. It closed at over $103 a barrel on the New York Mercantile Exchange--oil’s highest since May. The Euro rose on the Dollar while the Greek bailout should come soon.
It was obvious many traders started their 4-day weekend early as volatility went out of the market quickly on Friday. Options expiration increased share volume, but the amount of shares exchanged on the NYSE was well under 1 billion. Although there was enough volatility to where rallies pulled back and gave us our short-term profit objective.
The bonds have been victimized by an S&P that has rallied this week. This has pulled monies from the bonds, but they did start to stabilize. President’s Day could initiate the formation of a new trading environment once the holiday atmosphere has concluded.