The bonds have literally gotten hammered over the past several weeks. Once again the resulting lower lows show that the Federal Reserve buying program is either non-effectual or is diminishing or both. These bonds appear to have slowed if not stopped their intermediate decline. The lows at 142 early in the week were not been retested quickly and the volume has abated somewhat on Tuesday’s decline. This means that the pressure selling is not as zealous to achieve lower lows.

Lately, the S&P futures reminds me of pushing a loaded wheelbarrow. Pushing on level ground is not a daunting task and if you become tired you can sit the wheelbarrow down and rest. This market reminds me of pushing a wheelbarrow up hill. The exhaustion occurs and you cannot sit the wheelbarrow down because it will slide down the hill. We are now in a market environment whereby the hill is steepening. Healthy markets will have to have a pullback to cleanse themselves of the stress of manipulation. The lack of volatility is a danger signal because low volatility builds energy which has to be released. And, there is a possibility that a firm reliable box formation is formulating, which is noteworthy.

Now that our first week of trading has passed the institutions have probably invested most of the new monthly inflows of money. Despite the S&P flirting with it’s 2013 highs several days of the trading week, this aspect of the bullish environment is passing. We have not yet seen a minus 1000 tick in 2013. Overall the bonds trading environment was oversold so now we have to see how much energy can be generated. Typically from an oversold condition that we just experienced should push prices at least 3 points. Failure to be able to accomplish this would mean the bears would make another vicious attack on the bulls.

 

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