Monday sell off

Today, we saw the first big sell off in month.  Equities have been trading in the 920-950 (S&P) range since May 29.  Multiple attempts to break through 950 have been shot down and today, the market briefly broke through 920, only to recapture the support level moments later.  This is like a heavyweight fight with the bulls and bears  battling to gain traction.  Neither have been victorious thus far and it looks like the fight will come down to the wire.  With mixed economic data the past couple of weeks, neither side has seen the catalyst that will send the market one way or the other.  

With options expiration this Friday, and quarter end only ten trading days away, volatility will be sure to pick up starting tomorrow with turnaround Tuesday.  Treasury rates have seen a steady decline since last Thursday's 30-yr auction.  The dollar has been seen some strength the past few sessions which has helped ease rates.  Last week's auction in the 30-yr saw 49% of indirect bidders.  This shows that FCB's (foreign central banks) may not be as reluctant as they pose to be, when it comes to buying long dated Treasuries.  

This brings to life a couple of questions.  It has been known that China has been stockpiling commodities.  Now that those commodities have risen in price, did China use some of their dollars to purchase Treasuries?  There have been reports that China has under-utilized many of the commodities they purchased.  Did they buy the commodities because they actually need them or because the value presented was too good to pass up?  Has the strength of the Chinese economy been a red herring for an economic green shoot?  Just a couple ideas to keep chew on.  

While each day in the capital markets is exciting, the past three weeks or so, has seen markets trading in a pretty tight range.  This has lulled some people to sleep, but the market has a way of making violent moves when people become complacent.  While all may seem calm on the surface, I think a pretty  big move about 950 or below 920 is in store for the next two trading weeks.  This is a good time to rebalance your portfolio and make sure you're hedged for movements in either direction.  Good luck!