Back to Bonds...

The Dow retreated 72 points today as investors rushed back into the safety of bonds.

Investors rushed back into the 10yr bond auction today in the face of this extremely short term overbought market and depressed bond yields across the board. Options traders also returned from a strong call options bias to a more balanced put call ratio on today's market retreat. In fact, this is the strongest single day retreat the Dow has made since this strong rally begun back in March.

From the magnitude of today's retreat, a healthy pullback to the 10,750 level seems imminent. Yes, the market needs a nice little pullback such as this one in order to set the stage for more buying. Most investors who are bullish in the mid and long term won't want to enter when the market is this extended on the short term. As such, a pullback is necessary ingredient to encourage buying and higher highs.

For now, the Dow remains in short term neutral trend, intermediate bull trend and primary bull trend.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!