Most Bearish Week of 2012 for S&P 500: April 2-5

The beginning of the month influx of money generated some high plus NYSE tick as well as long duration. This is typical for starting out a month. The big question is, “Will it be able to persevere for a very long time?” The old S&P 500 highs at 1420 came in as a possible resistance early in the week. Early Monday morning saw a strong bond rally that carried prices to 138 ’22. It resulted in a slow decline from there that almost gave up an entire point. The early morning buyer lost its traction and the resistance of 139 to 139 ¼ wasn’t penetrated with the day’s lower high. The bonds were not showing stamina. The FOMC Minutes were not as expected. There can be several ways for them to be interpreted with the jargon, but the fact is that the stock market got a reality check on the second trading day of April. The stock market is running out of time and fantasy. If the Fed is starting to be a little more constrained instead of relaxed, there is a higher chance of a correction. The first trading week of the new quarter has a holiday environment, which has a tendency to be abnormal.

Meanwhile, the advisory trade recommendation was successful! It rang the cash register with a profit of several points. The bonds were positively destroyed after the FOMC minutes. They went from a positive trading environment probing towards resistance just shy of 139 to devastation. An eventual close below 135 would clearly break the bonds’ backbone!

By Wednesday the S&P lacked plus NYSE tick, so the beginning of the month buying is done. Instead there were numerous occurrences of high minus tick along with negative numbers. The bonds can always be judged by the way they rally, not the way they decline. Weak rallies show that the bounce has no energy and staying power.

In the S&P, Thursday afternoon was sloth-like. Traders obviously started their holiday. The morning rally in the intraday session erased the overnight losses. The afternoon became sideways movement. The result of the overnight losses and the day gains neutralized to virtually a zero effect. The overnight lows printed to 1384 representing approximately a 35-point decline from the recent highs sub 1420. Will this be the new defined range or is this market going to have different path in mind? A close below 1380 would be a complete breakdown or a close above 1420 a complete breakout. Keep these numbers in mind. To finish out the trading week, it was the worst week of 2012 for the Standard & Poors.

There was a fascinating bond market on Thursday. It had unique price movement with an early morning euphoric rise to 139. Then followed by a cancerous decline, which persisted and dropped prices more than 1 ¼ point. However, the cavalry was released to save the day and a resulting rally carried prices ¾  of one point upward. This type of volatility will deplete energy as the swings had volume in overnight and early morning. Will the bonds have a new agenda or are they in a battle between the bulls and the bears? Have a Happy Easter!