As much as everyone and their brother has been looking for a market top in stocks, the reality is it just ain’t so. Up 70% to 100% from the March 2009 bottom, depending on the index or individual stock you’re looking at, one would think a major correction is near. Even with good reasons abound; Greek insolvency, Goldman Sachs fraud allegations, China’s slowdown, health care reform, financial reform, and more taxes coming our way than you can shake a stick at, the trap door just won’t open.
Just when Goldman looked to be on the ropes, they reported earnings that blew away the street. $5.59 versus analysts expectations of $4.01 is not a bad quarter. Apple and Yahoo will release today after the close. Wait until you see Apple’s numbers. What we’re seeing here is an unwind of the flight to quality bond buying that happened Friday and early Monday.
Treasuries have been volatile the last 24 hours with traders more than willing to sell any strength. From our technical view, the selling has followed a typical pattern of forced buying (rally) followed by corrective action that trades to retracement levels. Currently, we sitting on the 62% retracement represented by a 3.82% yield on the 10 year note. Mortgage backs took it on the chin for 8/32’s yesterday and are off another 2/32’s as we speak. Nothing huge but then again we see no reason for a rally. This type of overlapping, corrective price action often times leads to a triangle or large range pattern, one that the bulls need to defend and hold at 3.83% or lower.
With no news until Thursday, we’ll take a back seat to stocks and most likely go the opposite direction. Don’t go to sleep out there, that’s when the market can pick your pocket!