A big nothing from the Fed.

Just as we expected, talk loudly and don’t even bother pretending you have a stick.

We had fun in the intraday as we realized the initial reaction was unwarranted but, unfortunately, I had to go and missed the rally, which was bigger than I expected but a very nice 100-point snap back from the initial reaction.  Anyone who thinks the market is an efficient pricing mechanism should take a look at the swing in the Dow from 13,350 to 13,280 to 13,365 to 13,310 to 13,380 that occurred between 2:15 and 2:45 today as this is an interesting sort of efficiency.  This is reason number 11 of why I hate hard stops…

I don’t like the fact that most of our big gains are just based on M&A mania, now coupled with the commodity bubble to bring us amazing moves in companies like RTP, which gained $11Bn in market cap on the rumor that BHP will buy them to create a $250Bn mining operation.  The fact that RTP denies getting a $100Bn plus offer to buy the company for 3 times it’s 2005 value didn’t dissuade 400,000 shares from changing hands at close to $300 per share.

Oil fell another .71 to $61.55 with very few barrels being cancelled and a last minute .50 rally…

That wasn’t very exciting…

I missed most of the day but everything ended up pretty much where I left it but we expected weakness ahead of the Fed.  I’m getting a little worried now as sentiment is changing and pretty good earnings DIS, CVS, MVL, TAP, TM…  are being met with less than entusistic responses.

The Dow has had an amazing 1,000 point run with just 3 down days out of 27, a feat not managed since the Summer of 1927 when Babe Ruth set the single season home run record.  In one of those cosmic circle things, it looks like this will be the year that Barry Bonds sets the all-time home run record but, like the Dow’s dollar deflation, that record may be tainted by steroids.

The Dow, now 24 and 4, is batting .858 - still very respectable and a 3-point loss is nothing to cry over and it’s interesting to note that 7 of the 10 greatest rallies in history occurred between May and July so "sell in May and go away" may not be the winning plan they make it out to be.  Of course all of those mega-rallies, except this one, came before 1957 so there’s been half a century of summer fizzles

It’s hard to tell ahead of the Fed but it’s possible that, after $2 Trillion in mergers and acquisitions already this year, that the market is just exhausted.  We held my 13.250 mark and the even the SOX held 500 so, on the whole, it was a good day:

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I told my kids a scary bed-time story tonight.

It was about a stock market that went down!  That’s right, one day the market did not set a new record, did not close at an all-time high and the people just did not know what to do…

Needless to say that was pure fiction, we know that our market will never go down (at least in dollar-relative terms).  My little girls can lay down their heads and rest assured that there is no danger of a dollar comeback in the near future.  My first grader even managed to stump me today with the question: "what’s a penny for?" Today the dollar fell to a decade low against the Ringgit (Malaysia), the Rand (South Affrica), the Peso (Philippines), the Rupiah (Indonesia) and the Rupee (India).  Asia was our last holdout and when you are trading down against currencies you haven’t even heard of - that’s a problem!

Fortunately Malaysia stepped in and bailed us out by buying back $600M at 3.414 ringgits to the dollar.  The Philippine Central Bank stayed out - "It would be useless to go against the trend," said a trader at a local bank in Manila.  We hit a one-year low against the Korean Won today but the Bank of Korea has indicated they will step in to bail us out (this is the part where we start humming "Proud to be an American").

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25 points from a new S&P record!

There’s nothing sexy about a 1,527 hat but I’ll sure wear one as we get close.  Breaking that March 2000 record would mean a lot more than Dow 13,500 but the two will probably come on about the same day.

Today the market seemed invulnerable as even the transports gapped up and held it for the day.  Biotech was market Kryptonite today with CELG disappointing but following our rule that companies with p/e’s of 336 really have a hard time beating expectations.  Speaking of not living up to expectations - TSO finally had to show us the money and it was a little short.  Profits at everybody’s favorite refiner zoomed up from .61 a share last year to $1.67 a share for Q1 but 20 analysts who follow this stock had expected an average of $1.86 (and I’d love to meet they guys who were on the high side!).  The stock fell $8.88 for the day after failing to break back up from a consolidation at 10:…

Japan was open today, our markets went up.

Japan will be closed tomorrow but the Hang Seng and the BSE will be open.  The Hang Seng is an international market, the Shanghai Exchange is closed for the week and I think this is a great time to see where our money really comes from. 

We had a pretty busy day today and after hours we had great news from SYMC and not so great news from LVS, but not as bad as it sounds as this is just another company being punished for making investments that don’t pay off in the same quarter.  Carl Icahn is punishing MOT for the same behavior so I guess investors won’t be satisfied until US corporations stop doing any R&D or capital investing and simply drain the registers through dividends and buybacks until they implode.  Oh wait, we did that already - but that was 20 years ago so I guess it’s time to go again now that we have a whole new generation of suckers to get left holding the bag.

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This market just keeps going and going and going!

We took a little more of the table today but, on the whole, we didn’t trigger too many of our trailing stops, a sign of market strength.

At this point in a rally it is good to maintain trailing stops, especially when you are heavily net bullish as we are.  The stops work both ways though as we also dropped half our DIA $131 puts on the morning dip, which worked out well as we also pared down the number of positions they were protecting.  TSO finally gave us a break and we got half out of that one with a 20% loss - at this point we’ll be thrilled to end up even and try again next month!

Our morning selection, ABX, reported the kind of earnings that really confuse people as the company chose to spend 63 cents a share to get out of hedged contracts, leaving them free to sell gold at spot prices.  This caused them to report a loss of .18 a share against a .35 profit expected by analysts.  This is not a reason to sell!  Barrick produced 2M ounces of gold at $313 per ounce but had to sell it at $386 an ounce under the contracts they just cancelled.  "It’s great news that they have reduced their hedges, because that was an albatross around their neck," said John Ing, analyst sand president of Maison Placements.  ABX, like NEM will become much more sensitive to the price of gold but anything over $600 an ounce will put more gold in shareholders’ accounts.

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What was that?

We had a sudden, very broad-based drop-off at 2:17 and there was no clear indication as to what caused it.  Luckily, I didn’t like the market at 9:47 when I said: "I think we have a buy opportunity on semis if the broader market holds up but meanwhile - 20% of profit stops as we need to lighten up anyway."  I added: "AMZN doesn’t care, JDSU doesn’t care, HPQ and Dell don’t care, GOOG doesn’t care - could be time for tech if the SOX can shake it off. If the companies I just mentioned start tanking, then we run away!"

Well it turned out to be an excellent time to run away as we had a nice run-up in the morning that let us stop out of a lot of our positions ahead of where we were at Friday’s close.  We got stopped out of 17 positions in the end including a lot of big winners that we just couldn’t leave on the table: