Last Monday, the bonds were unable to push through to higher highs even with the manipulators holding prices. The afternoon saw a slow erosion that put the prices back to overnight lows. Are the bonds running out of buying power? The federal reserve has that answer. In the S&P 500, the previous highs were 1593 and today we fell just shy of that. There has been an incredible amount of manipulation for the stocks. Perhaps this is the most manipulated month I have ever seen in my career. There has still not been a 5 % correction but should see a 10% to 20% correction sometime to correct this overbought.
Isn’t it interesting that the S&P was at the highs for the month of April the last day? This I guess is the politically correct for our government to have the statements of stocks in people’s portfolios to reflect the best prices on the very last day. I think it is sad that free capitalism that once was the bastion of Wall Street is gone. The bonds also hit their ceiling high of 2013 Tuesday. This makes me shake my head as the bonds have an overbought condition in a manipulated world that will eventually make people forget about the tulip bulb bubble that many of you read in history. Bubbles deflate several ways but none of them every regain the spherical nature they had before they deflated. Ever see a balloon once all the air was gone, it ain’t pretty.
The only reason the market does not go down is because the Fed intervenes with purchases and this has held prices. The bonds took an overbought situation and made it into critical mass. This means that the overheating on the prices will create a dangerous environment for the bulls once the slats are kicked from underneath this market. Wednesday made a higher high as there was a concerted buy program prior to the Fed announcement. We saw the S&P move down quickly Thursday morning to just shy of our advisory trade profit objective and then turn to the upside. There is no doubt that this was an intervention of a sizable buyer or buyers. We are taking a market that is overbought into the bubble phase. We are now at the all time highest margin interest on the NYSE. Other notable times when the margin was this high was in 2000 and 2007. We all know well how that turned out.
I have mentioned several times that the complacency issue is a very concerning indicator at this time. I would add that the non-fear issue is even more concerning. It has been an incredibly long time since we are seeing a 5% correction and give the overbought situation now a full 10% correction has become a high probability.