Stock Market YTD: NEGATIVE: May 29 – June 1

The pain in Spain became even more acute in Tuesday’s trading session. There was a downgrade in the credit rating, which throttled the S&P 500 rally in the morning. However, this is a line in the sand for the short-term. The market is showing resiliency, which eventually will lead to a sticking rally. Pay attention to subtleties. I sense a mire of fear from the market. Conversely, this mire is comes from a place where prices are actually ascending not descending, showing the internals of the market are strong. A rally with legs would be two to five days of higher highs and higher lows. It should attract more volume as the bears will finally lose their grip. It is very noteworthy and yes, incredible that the fear builds as different stories unfold throughout Europe sending shock waves throughout the world, yet the incredibly overextended bond market bubble is not able to increase its size nor hold gains. Keep in mind the 145 price must be penetrated on a close to burst the bubble.

Traders are spectating a great example of what fear can do when it is the focal point of markets. All day long Wednesday the S&P tried to rally, but each time was driven back by selling. I wonder if there is another shoe to fall in Europe.  The Spanish situation seemed to reach a crescendo. The market appears to be in a war of the world. Everything happening seems to have an international reason. The true technicals of the market eventually win out, but fundamental news announcements can create havoc for short periods of time. I think it is very interesting that Ben Bernanke has been so silent for several weeks now. What happened to transparency? The bonds are at a critical stage. They are like a nuclear power plant built up ready for an implosion. I have seen many bubbles and this one could become quite memorable when it is all said and done.

The last day of the month has many crosscurrents. Strength gave way to heavy selling with no minus NYSE tick of any significance–indicative of the crosscurrents. It feels like the stock market is impervious to European problems. The lows of early May are far away. A residual bullishness able to withstand all kinds of rumors is still being demonstrated. Keep in mind, Thursday was not a reliable indicators since it was the last day of the month. June could be a paramount indicator for the long term. Excessive volatility and volume is indicative of an out-of-control market. Time to roll over to the September contracts.

All the work the bulls tried to accomplish for 2012 is gone. The loss is quite a psychological impact as we wait to see whether the Federal Reserve has any bullets left in its chamber. Fear is the primary motivation now.