Friday’s smash through a key midpoint support at 158^14 has significantly shortened the odds of a further correction to at least 154^11, or possibly to 150^07. I stress the word ‘correction’ here despite the prolonged severity of the selling, which began in late January. Many portfolio managers are unwinding bond positions that would be hazardous indeed, were the Fed to actually raise rates. And although I’ll continue to insist that the U.S. economy will never strengthen sufficiently to withstand higher interest rates, you can’t blame the supposed smart money for not wanting to buck the Fed. This raises the question of what it would take to cause all the money that is fleeing bonds now to reverse direction. My guess is that we’d need a full-blown recession — one that may be in its incipient phase, actually, with last week’s announcement that the economy had grown by a meager 0.2% in the first quarter. ______ UPDATE (May 6, 11:10 p.m.) Houston, we have a problem. The futures breached the major Hidden Pivot support at 154^11 noted above, then went on to close below it. We’ll give a minor pivot at 153^14 a chance to turn this brick around, but if it too gives way easily, odds of more downside to 150^07 will shorten. _______ UPDATE (May 7, 11:21 a.m. EDT): The futures have trampolined off a low at 153^00. The rally seems impressive and warrants a bullish trading bias for the time being. However, we should be extra cautious because it has come from an odd place, well below our Hidden Pivot target at 153^14.
