Consolidation

Since the last time I did a blog post the market has changed fairly dramatically as equities have been falling like a hot knife through butter . I came into today expecting some sort of bounce in the early part of this week. We had a gap down at the open and I covered some within the first hour of trading. Well we bounced but it was the most pathetic worthless bounce I may have ever seen. The lightest cumulative NYSE volume day of the year, including holidays. We sold off into the afternoon. Now the S&P future volume wasn't nearly as bad which I tend to thinks drives more of the action. Anyway, by the end of the day, while I think the odds are still for us to move higher, the potential to miss something on the downside I felt was to great so put right back on all the short exposure I took off. Very rarely I trade like that but even if we do a several day pop I do think we are headed lower. Anywhere between 1090 and 1110 is very possible for a bounce. I will be shorting most likely if we do get there.

This week is a light week for economic data which should also add to the bullish bias. Tomorrow has several economic releases but looking back to July and not terribly important. Wednesday has virtually nothing. Than you have Thursday with jobless claims and Friday with another regional manufacturing index in the Philly Fed release. That last Philly Fed release is important because it looks at August data. The jobless claims number is extremely important. We have had two gooseggs in a row. Another goosegoog and move towards 500k jobless claims could start the next move down in a serious way. Anyway, would not be surprised at a sideways action or up action for another day or two but I don't want to be to cute and potentially miss out on that not happening.

The fireworks going on lately hasn't been the equity market but the bond market. Massive gap up in bonds. So massive in fact I wonder if it wasn't some sort of exhaustion gap that you see occasionally in equities. Either way it seems to be screaming a warning to equities which try to play deaf some times.

My bigger question is if the markets can really break down before labor day or if much of Wall St being on vacation will keep the market propped a little longer as people making big money decisions just won't be around to sell if the economic data looks really bad.