Truth is stranger than fiction, but it is because Fiction is obliged to stick to possibilities; Truth isn’t.

Mark Twain

The COT index number this week has strengthened to +14.6%. As I said last week we have a period over the next four weeks where there is a fair probability that the number will be positive, thus providing some buying support for the market.

Last week was a volatile week, but buying support did come in at the lows and the market closed marginally higher.

Treasury Market

The volatility extended into the bond market Friday with a swoon in the yield before it picked up again. It would seem that yields are moving higher. For stocks, currently, this is not an issue. It may in fact be the reason that stocks can move higher as the money rotating out of bonds finds a place in stocks. Bond trends are long lasting, years into decades. If this is the start of the trend higher, it is just the start, and rates will move higher. This of course will steepen the curve. This is the question really, if the long end of the curve moves higher, and the Fed hold the short end, how far really will the curve steepen? Will the Fed let go of the short-end?

No-one really knows.

Geo-political Risk

With Congress [probably] going to deny Obama access to military action, the whole Syria issue looks to becoming a non-issue as far as the market is concerned.


The market closed in neutral territory, which means that there is no particular bias to Monday’s open. I would expect the early part of the week potentially into Wednesday a slightly bullish bias at least to the upper area of short term resistance at $167.50 on the 10day. The 5day actually has a lot more scope for movement higher, but I would be paying attention to the 10day at the moment as it currently frames the price action more accurately. Support on the 10day is at $165.oo.

Market Internals

Seem to be finding a bottom as far as advance/decline numbers indicate. The Put/Call ratio indicator for the moment seems broken, but, if it were assigned weight, it would indicate that the market is due for a serious correction. It generally pays for a definite turn in the trend with this one, that has not happened [yet].

Overall I remain market neutral with a very slight bias to the bullish side with a few extra calls in XXX and XXX. At some point the market will tip its hand. The winners will be those that can hold their positions without being forced out by false signals. Market neutral lets you ride the fluctuations without having to constantly honour stops etc.

There is no trade this week as there were no particularly attractive candidates.

Until next week,
jog on