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Bond Auction Could Spark Real Rally?


Could be just the right fuel to stoke the market's fire.

Just a friendly reminder: Please remember how important tomorrow's 10-year auction will be for near-term equity direction. And with regard to Thursday's 30-year auction: The market will extrapolate how that will go based on tomorrow's 10-year results.

If the auction goes well (i.e. no large yield tails, a good bid to cover, a good amount of indirect bidders), and bonds mount a nice rally, then the S&P should react in kind -- and you'll see 950 in the rearview mirror. A breach of 950 will then set up a test of target levels (at 980).

The market -- and, more importantly, the banks (e.g. Wells Fargo (WFC), JPMorgan (JPM), Bank of America (BAC), Citigroup (C), etc.) -- have been chopping wood for the better part of a month. In order to justify higher prices at the moment, the market needs some fresh meat -- meat that it doesn't immediately reject as a subjective lagging indicator that's already "priced in."

And speaking of being priced in: Keep a close eye on how the rest of the names in the Texas Instruments (TXN) space trade today, given its recent parabolic moves.

Given the impact that rates (and currency moves) are starting to have on businesses, mortgages, and housing, a reversal in the recent rate trend would likely qualify as a nice cut of filet mignon -- or, to be more politically correct, one awesome slice of tofu. If a reversal of rates fails to occur, I fear there may not be much else on the menu until we near the end of the quarter.
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