9/03/10 – 8:15 – A relief of sorts as yesterday was rather quiet but with a downside bias. The cash markets made new lows below those of Wednesday while the futures didn’t but all closed lower in front of the jobs data due out at 8:30. Volume wasn’t great but considering the small range, it wasn’t that bad either. When you examine the volume on a day by day basis, it does seem that the buyers have backed away much more so than the sellers. The rally days have not been accompanied by good volume but the ranges have stayed large which indicates that the buy orders are dwindling but they are being met with fewer sellers allowing prices to advance without much ‘resistance’. The big down days have been well subscribed meaning that the buyers haven’t shown up there either allowing for the large range days down. While the action since the highs last week looks corrective, beyond that aspect of the wave analysis there are numerous warning signs that the treasuries could be putting in a top of some degree.

The stocks, meanwhile, rallied right into the close and through the 50% retracement level in the SPX leaving 1095/1100 as the only likely barrier to new highs above the 1129 print from early August. The high in the Dow at 10,320 was just 8 points below the 50% level there so like bonds, the next move of significance may be determined early today. Break points below are not nearly so clear.

As you can see from my support numbers, I have a lot of what I consider to be strong support not far away but the levels that will be of most concern to me should they be broken are 123-20+ in futures and to a lesser degree, 2.713 in cash. Until those levels give way, a resumption of the bull trend is entirely possible. At the end of this report is a chart of the 10-year which shows a trend-line coming up from the July lows with a current value of 123-20+, the 38% retracement target of the rally out of the 14^th of last month at 123-30+ which has already held once shown in blue and the wave equality target coming off the highs at 123-22+ shown in magenta. In such a volatile environment, those are 3 important support areas in very close proximity to one another and I would use them as my ‘must-hold’ area at last for today. At the same time, the middle of the range since the highs is at 125-00 and I would think that any trades above that area would likely chase sellers away and leave the up-trend intact for at least another day. Rather than go back over all the same analysis that I have been going over for the past week, in front of such potentially important news, I’m going to keep it simple and watch how things unfold after the number letting the above chart be my guide. If there is a large move in stocks or bonds worth re-addressing, I will post another update but I will be out of the office by 11:00 so if it is to come, it will be in the next 2 hours. Last week’s close was at 124-11 and a close below there would represent the third consecutive lower weekly close, just one more sign of a top of some degree. Have a great holiday weekend.

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