Shall we analyze it?
Now, for the meat of the matter (salmon, of course!). Yesterday the FED did it’s thing and sparked a big rally going into the close. The FED utterly failed, however, to exceed 1125 and especially to CLOSE ES above critical resistance at 1130. As my friend purache mentioned earlier this morning, I indicated that today’s close was much more important than yesterday’s close, and we had to let the market declare itself in terms of future direction.
The FED’s credibility and effectiveness are on the line today and the rest of this week! If this market has lost faith in the FED, which it is certainly strongly hinting at overnight, then we could see lower prices ahead. As I mentioned repeatedly, yesterday afternoon and last night, however, that can only be determined by how the market closes from here. I have to often remind myself that the FED (and the treasury) essentially have unlimited funds with which to move the market if and when they want to. When their words don’t calm, there is always pumping money into prices to give the appearance. It will be beyond interesting, indeed it will be crucial, to see whether the “market forces” who rally this market can stave off the bears today!
The corral parameters for ES have been solidified over time. The south forty is boundaried by 1100 and the north forty by 1130. Yesterday was a failure of 1130 on the most positive day the bulls could possibly have seen. Will we test the 1100 boundary today? We have already seen the ridiculously close price of 1101.25 be printed overnight, and yet even then the market was not allowed to close the gap and finally clean up that mess on aisle 3 at 1100.50. Will the mops finally arrive this morning? And then will they get carried away and mop up the entire store?? We will see, as again, this day is of paramount importance………we need to watch the CLOSE today as it could be extremely important to future direction if we close outside the corral.
The bond market demonstrated unrealistic euphoria yesterday ( or is that unreasonalbe irrationality?) as bond prices shot to the moon on the FED’s statement that it would be buying treasuries going forward. Those with an analytical eye, and a proper intuition, know that this has already been going on for a while now, as the FED is trying it’s last “kitchen sink” effort to try to stimulate the economy………….I can imagine their distress, and their prayers, for something, anything, to turn unemployment and the economy around. Apparently they do not understand that more liquidity to the banksters will only mean more market trading with no impact on economic problems. It is amazing that the guy who said something about doing the same things and expecting different results now engages in the very folly that he made fun of during the campaign.
In any event, holding treasury prices up to fund escalating national debt is, in my humble view, creating a bond bubble akin to what was accomplished in early 2000. When this bubble breaks, we could see bond prices fall 10 to 15 basis points in a matter of weeks. Those who watched the demise of the bond bubble in 2008 know how far bonds can fall once they exhaust the oxygen in statospheric atmospheres above! This is a key day for bonds, in that regard, as well! IF we do not see higher prices than yesterday’s spike high of 130-23, then the FED likely has created two more problems for itself, instead of one.
I will be trading today on a limited basis but only if 95% probability or better setups develop. The remainder of the day, I will be waiting with bated breath (or is that baited breath – fishing pun intended!), to see if the market jumps out of this corral and begins to run naked and free in the pasture!
Good luck today…………and all the best!!
p.s. Sorry for the length……..it underscorse the importance of this day!
- Fishhook
