Selling Pressure

We certainly know when to pick our days to turn bullish. Yesterday in our commentary we noted that the equity markets didn't really want to move lower - they just seemed to feel obliged to do so. And right on cue, equity prices slipped shrply from Tokyo to Paris to New York - seemingly just to prove us wrong!

But NYSE volume was light at 2.8 billion shares - about half of the 2009 daily average of 5.7 billion shares. And the market closed about half way up its daily range, recoiling from much deeper intraday losses.

Other tell tale signs that this is not really a move based upon solid conviction appears in the performance of the dollar and the yield on 10-year notes. The dollar rose, but by the end of the trading day was well off its early morning highs when equity prices were under maximum strain. The euro, which fell to $1.4830 during the day closed above $1.49 and is hardly a sign of increasing risk aversion, which would automatically boost the dollar.

The yield on the 10-year note stayed still at 3.35%. If investors were more convinced that the liquidity-driven equity market bull run was bogus, we think that 10-year yields would move sharply lower. Instead the money is pouring into shorter-dated maturities and causing a steepening of the yield curve.

Of course the downgrade of chip-makers by Bank of America forced the basket of companies to lose 4.1% on the day - that's a fairly standard reaction as investors rotate.

We wonder how long it will take this mornng for the market to get over Dell's after-hours profit drop, suggestive of a loss of market share rather than consumers failing to buy.

The Supreme Council of the Secret Order of Jurojin

Tyche Research

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