So here we find ourselves midweek and surprise, surprise, surprise- US government auctions $94 billion of notes this week and bonds are selling. NY Composite volume seemed to hit a short term exhaustion near 8.2 Billion shares traded on Feb 20 as we saw breakdown and liquidation/shakeout selling into Nov 2008 (also 2002 Bear Market) demand area. This was followed by a stopping point and subsequent consolidation. Today, we saw large volume especially in the small cap ETF (IWM) and crude ETF (USO) coinciding with the attempts to auction higher. While volume skews in equity futures remain essentially neutral, it may be wise to pay close attention to the action of bond market participants. We have noted the 124 supply area in the 10year remaining an area to contend with and therefore the expectation going forward of a test of longer term demand at/near 120 would be reasonable to infer. A breach of support at 120 and there is a significant vacuum down to the next real demand area at/near 112. Eventually, professionals will turn attention from risk to pending inflation due to government bailout, intervention, and rampant money printing. The intermediate term data suggests those who are long risk (long bonds) are late to the party. IF we should see continued liquidation in treasuries along with some positive action in late contraction period SP sectors Consumer Discretionary (XLY), Tech (XLK), and (Industrials), THEN we could infer this consolidation zone from the Nov lows to likely be bottom formation. It is an interesting challenge in light of the complete destruction of the Financials sector and their business model. 

A wise man recently said, "Credit is not equal to Capital"....