I think we are seeing a monumental indication of conflict within the Fed’s voting members. Esther George is a new voting member and she voted against the crowd. This signifies to me that a new member that is willing to vote against Ben Bernanke shows that an overall tone has changed. The Fed is not the Fed of old. Maybe the policy is being stated as the same but the internals are changing.
The overall market has been very abnormal for the month of January, so expect February to work itself back into more normal trading patterns including sell programs. Thursday’s lows were not challenged Friday as it appeared that the manipulator was present to ward off any sizeable selling. It is interesting that even with the Federal Reserve buying 25 billion in US treasuries this month, the net result was a full 4 point decline in prices since December 31st. I cannot emphasize enough the importance of going the entire month of January without a minus 1000 tick. This is setting a rare precedent because Januarys generally have higher concentration of plus and minus 1000 ticks. This is a prime example of how computers have control over normal market action. Believe me they are not big enough always. Eventually, the Standard & Poor’s will get away from the computer organized, strategized and manipulated programs. It will only take an instant or perhaps a mood swing, but this type of environment is a breeding ground for a sharp, heavy, surprising downdraft. This S&P market is still vulnerable. Keep this in the forefront of your mind.
The beginning days of each month most generally has an influx of new monies to be invested. Therefore Friday’s rally is a normal event but the magnitude of the rally is stronger than usual. It is almost as if they are cramming price movements into a narrowing of issues. This type of action is a very maturing market. An aged market is only waiting a time for the rest as the energy of an elderly market is not near what it is in its infancy bull stages. The bonds had full reversal day by amping up & reversing to break through the lows. This was done with much volume on the early morning rally but also much volume on the decline. This bond market is a focus of many entities in contrasting blocks.