While bonds may be trying to bounce (and doing so with volume thus far), gold is sending a louder message of late. Last night, for instance, it broke below $1300 -- odd behavior for the recent narrative that the taper will be small. If it dips below 1271.80 for any reason, it will leave a three-wave corrective structure and target 1100. That will end the taper debate immediately.
Meanwhile the equity markets keep rising as the internals stink. Price is price, however, and until it reverses from a strong up day, new all-time highs are possible, with the 1720 area (the trendline is rising each day and is now roughly 1724) and 1778 being the most viable targets unless things change.
The structure since the 12th and 13th of September is open to multiple interpretations. About all I will do today is buy any spike lower using SPY 170 calls which I dumped yesterday. I'd be more than happy to see them go out worthless.
Wall Street sounds increasingly anxious that there may be more under the hood than anyone realizes. The strength of the housing market is becoming a nagging question. Mortgage rates are rising. The unemployment rate is suddenly "too good" (meaning more taper).
It also seems that Taper is seen as inevitable and that the next concern is the budget deal and the debt ceiling. Obama struck me as borderline belligerent during his speech the other day. Strange behavior for someone looking for a deal, but understandable for a president nursing a very public black eye from a losing chess game with Russian president Putin.
Perhaps this is why bonds are moving with conviction and equities and running on fumes: once again, I'm betting that bonds have it right. And I've got my eye on 1271.80 in gold.
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