The S&P 500 traded in a narrow 10 point range today. The pit was very quiet. As previously chronicled here, the big money has been ominously quiet during this equity run up.

The bond has been trading in a narrow range of late. However, it is trading at the high end of that range as I write.

ZN_F 120 Minute Chart

Shortage Of Short Paper (Zero Hedge)

“All we need now is illiquidity in the bond market to follow the joke that equity liquidity has become to put a cherry on top of this utterly broken market. Either way, this will make it even more fun for the Fed to follow through with its QE [Quantitative Easing] strategy.”

QUESTIONS ABOUT GOLDMAN SACHS’ ROLE IN MARKET (New York Post)

“SOMETHING smells fishy in the market. And the aroma seems to be coming from Goldman Sachs.”

“According to the latest numbers put out by the New York Stock Exchange, Goldman did twice the number of so-called big program trades during the week of April 13.”

Mr. Know-It-All on Conspiracies (Wired)

There’s hope, but your cogent arguments are unlikely to hasten any shift in your brother’s thinking. In fact, your strenuous efforts at dissuasion could end up reinforcing his views.

Peace

In today’s edition of Trader Art, I present the S&P 500 Index. As noted on the chart, the same setup from May of last year is taking place this year.

History doesn’t repeat, but it often rhymes.

If history has taught us anything, it’s that history teaches us nothing.

The Setup

Peace

North American pork hit with bans on flu scare via Reuters

Below is the weekly chart of Lean Hogs. You need not listen to government statements and denials. The market price of Lean Hogs will tell the story. The swine flu is having ramifications on the market for Lean Hogs. The ramifications will be measured precisely by the price of Lean Hog futures. It looks to me as though Lean Hog futures will trade much lower. I will continue to monitor this situation.

Lean Hogs

This will also have ramifications for Feeder Cattle. Feeder Cattle looks like a safer short here. They have not sold off as much as Lean Hogs. Yet!

Feeder Cattle

Peace

Back at the office, my traders and I were discussing the bond market, specifically the Ten Year Treasury Note and it’s rate.

I don’t watch CNBC. One of my traders keeps an ear on it for me. He alerted me to the rumor Rick Santelli spoke of today: The Treasury would start to sell a 50 year bond. Rick Santelli is one of the only people on CNBC worth listening to. After all, who else on that channel has been in and around the trading pits since 1979?

In my post from April 22nd, I laid out my thesis on how the Ten year will be moved higher. I said that the FED would halt sales of the 30 year, exactly as they did in the year 2001. This action would then spike demand for the Ten Year. If US bonds are a safe haven, and you cannot buy 30 year US bonds, the safe haven becomes the Ten year.

Rick and I agree. The Ten Year goes higher. Rick thinks they’ll halt the 30 Year and offer a 50 year. I think this is possible. One thing that gives me pause is how embarrassing the UK’s offering of 40 year gilts (bonds) was in March. I don’t think it would look too good for the FED to offer a 50 year to a tepid response.

Whether they offer a 50 year or not, I don’t know. I do know that rates must go lower. Markets don’t move, they are moved. As the FED moves the Ten Year to new highs, the rate will move to new lows.

Below is a chart of the Ten year and the rate on the Ten Year. Notice the inverse movement. Notice the red line at the bottom. Rates will go below there. They have no choice. The mathematics are irrefutable.

Inverse

Peace