1/20/11
Bonds were absolutely crushed today falling nearly two full points again in yet again a repeat of the pattern that we have now been spectator to for the last month. They are unloaded whenever it appears that the global economy is entering a period of rising interest rates only to be artificially manipulated higher by the Fed’s QE purchases which then cause an almost immediate rebound from off the lows as bond traders anticipate the next entry by the Fed into the bond market. As said many times over the last month, the market is a joke with everyone on the planet being able to see the game being played by the Fed. Specs came in and sell them lower only to then have a certain crowd jump in and bid them right back up in front of the Fed with more specs then waiting to unload their freshly purchased bonds into the hands of the Fed and then repeat. Lather, rinse, repeat. I am going to watch and see if the bonds immediately move higher on the reopen of trading early this evening. That has been the pattern and will reveal that the crowd is once again expecting them to come in and put another floor under the market.
Bonds were absolutely crushed today falling nearly two full points again in yet again a repeat of the pattern that we have now been spectator to for the last month. They are unloaded whenever it appears that the global economy is entering a period of rising interest rates only to be artificially manipulated higher by the Fed’s QE purchases which then cause an almost immediate rebound from off the lows as bond traders anticipate the next entry by the Fed into the bond market. As said many times over the last month, the market is a joke with everyone on the planet being able to see the game being played by the Fed. Specs came in and sell them lower only to then have a certain crowd jump in and bid them right back up in front of the Fed with more specs then waiting to unload their freshly purchased bonds into the hands of the Fed and then repeat. Lather, rinse, repeat. I am going to watch and see if the bonds immediately move higher on the reopen of trading early this evening. That has been the pattern and will reveal that the crowd is once again expecting them to come in and put another floor under the market.
It will continue to work until it doesn’t. Heaven help us all if 118^20 gives way on big volume. Then again, with a total commitment of $600 billion in freshly created “money” to be thrown at the market, it is difficult to imagine that. For now we play the game with the rest of the crowd and do the bidding of our monetary masters. This is what particularly galls me whenever I read comments from public US officials who have the temerity to lecture the Chinese on the level of the yuan.
The Dollar was resuscitated right on schedule today as it is attempting to recapture important chart support near the 79 level on its daily price chart. Technicals are pointing lower however. What is amazing is that one can lay a chart of gold over the chart of the Dollar and the two markets have had nearly identical chart patterns since November of last year. I am not sure what to make of this just yet. One would expect a breach of support in the Dollar to garner buying interest in gold but that has not been the case for the last two months.
By Dan Norcini
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