Morning Comments-
SPZ- We saw yesterday the test of 937 not 935 as I thought should have been the case- it held to that test very well. We were not able to take out 948 a bit of concern but a double close over 940 makes that a credible support- I will expect today an assault to 955 area, I saw the development of cyclicals sharging ahead as a significant issue, in my opinion market is now buying low yields and trying to value them. Here I see an anamoly- we cannot have this I hope bonds and Markets move in tandem- if bonds gradually back off that\ will be good for markets but if market like yesterday build this price premium and rally strong we are in a very difficult area any strong economic number can shave 2 points off bonds as far as market has not built the low interst in its levels we see no problem but if 955 or 960 is taken out and we move upto 980 quickly we will a perfect dichotmy and play on down side. I expect during course of next few days bonds to settle and we move up gradually a broad market movement.
I think I will only worry now on down side if I have a close below 928- until then I am scot free- I will try to trade long if 940 is again testd with 3 point stop loss at 936.6-
SOX intraday broke my level of 295 but came right back and closed slighlty lower, I remain conviced that SOX will make a test of 309 and 320 soon this will be associated with 960 on SPZ a break of 955 is on the cards and with it rationalisation of bonds.
Bonds- Yield curve is strange - 3 year at 5,7 and 30 at 6,00 where is the risk premium- this is called a flattening of yield curve unsustainable until rate cuts arrive- that is not a chance so will Fed try to raise rates to cut the bonds down may be- a preemptive strike but AG will wait for some confirmation that affects on US economy from ASEA are not very profound. Chances of bonds going lower are far greater then going higher- yesterday contract high was reached at 119,15 and moved upto 119,20 - 120 remains the target however exemplary self discipline of the market not to buy this raly of bond will pay this market big if bonds quietly settle, in my opinion perfect scene of DOW and Bond divergence is setting up- Japan is playing a key role as 'flight to quality ' slows down, a strong economic number will shave a ot from bond however market will after intial selloff will take different path.Japan needs a strong show for next few weeks and I expect that to happen.
Bellwethers- For me earnings expectations are so badly bsttered that HWP phenomeno of missing the earnings and not being beaten is going to be the key syndrome, the mountain of irrational exuberance is off and now we see lot od uncertaninty settling I see a clearer picture emerging and expect that markets will move forward slwly and steadily not much left to take market supports off, every thing was thrown on this market and the market has confounded most serious of its critics.
Bi BI and See you tomorrow morning- Ike. l |
