30-Year Bond Auction & Federal Reserve Intervention

Once again there is almost no plus tick lately, but yet the S&P still holds in the plus column. The bonds appeared as a blood donor. They are giving blood to maintain the life of the stock market. Virtually every day the bonds sacrifice their blood meaning prices, and shortly thereafter, there is a rally in the S&P futures. The interesting aspect of the blood donation is that the vitality the S&P receives is diminishing with each dose. The S&P is not in need of blood anymore, but perhaps is deluged. This has been a week where the master computer has been very active and dominant. Take a look at the chart and you will see the slow topping formation that is rounding a top. The computer has pushed prices but is doing less and less incline in the chart even with the computer buying. This market has very little slats to hold the foundation in place. The bonds are trying to gain footing to hold above 141. They are not able to sustain rallies as once again it appears they are donating blood to the S&P. I am very surprised that the Federal Reserve is pulling money from the bonds so quickly as a 30- Year Bond Auction day took place, which generally creates Federal Reserve intervention with heavy buying. They always reward their buyers with instant profits as a matter of course that should be illegal but isn’t.

Ordinarily I recommend staying on the sidelines on Expiration Friday. Friday I made an exception. It is important to realize that the market will have a sharp correction. The length of the staying power can be totally attributed to the Federal Reserve but if they step to the sidelines at any time, the market is an anvil trying to float in midair. Many times tops take an incredible amount of time to fully distribute. This is what we are seeing in this environment. The heaviness is evident. We need to see the bonds start to hold their gains which means they are not bleeding assets from the bonds to finance the S&P rally.