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Thursday Thump

Well, we got exactly what we expected from the Fed:

"Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector. The economy seems likely to continue to expand at a moderate pace over coming quarters.

"Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.

"In these circumstances, the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."

This was just what we were expecting, a Goldilocks view of the economy but tougher language on inflation.  It was not what the markets wanted as most seemed to expect the Fed would continue to pretend that non-core inflation didn't exist.  What really bothers me about this statement is that Bernanke seems to have drunk the low expectation Kool-Aid as the GDP just came in a .7% and they are calling this "moderate growth."  Gosh remind me to stock up the fallout shelter if we ever get into "low growth!"

Meanwhile it ain't over 'till it's over as we have a huge data day tomorrow with Personal Income expected to be up .6%, up from -.1% (inflationary) and Personal Spending expected to outpace it at .7%, up from .5% (imaginary) along with Core PCE Inflation expected to hold .1% for all you non-food, non-energy, non-consuming types.

The Chicago PMI comes out just after the market opens and has the low expectation of .58, down from 61.7 last month and May Construction Spending will sound good up .2% expected but look what we're comparing it to:

They won't tell you this on CNBC, they'll just tell you how great it is that spending is picking up and try to get the builders to rally out of the pit they have fallen into but remember that when they are all trapped down there in the pit, sometimes the only way out is for them to step on each other – so watch out for a few casualties in the homebuilder industry at this point.  Also at 10 am we get the fabulous Michigan Consumer Sentiment (revised), which will probably not be revised at 83.7.

We had lots of fun during the day playing with the wild Dow swings and were in and out of puts and calls all day.  Even after the Fed, we played the swing trading game to good effect, as the market simply couldn't decide whether this was good news or bad (and isn't that exactly what the Fed wants?).  In the end, I decided it was bad and we took a fairly bearish stance into the close.  We had a daily almost double on RIG and a 2-day double on the DIAs but $70 oil made us a little trigger happy on our oil puts and we have few left on the table.

 

Description Cost
Basis
Open Sale
Price
Sold Gain/Loss
$
Gain/Loss
%
10 JUL 75.00 VLO PUT (ZPYSO) $ 2,010.00 6/28 $ 2,490.00 6/28 $ 480.00 23.9 %
20 JUL 55.00 TSO PUT (TSOSK) $ 2,010.00 6/28 $ 2,799.00 6/28 $ 789.00 39.3 %
30 JUL 100.00 RIG PUT (RIGST) $ 1,810.00 6/28 $ 3,140.00 6/28 $ 1,330.00 73.5 %
20 JUL 170.00 OIH PUT (OIHSZ) $ 3,010.00 6/28 $ 4,990.00 6/28 $ 1,980.00 65.8 %
200 JUN 134.00 DIA CALL (HLKFD) $ 7,010.00 6/27 $ 14,990.00 6/28 $ 7,980.00 113.8 %

RIMM had fantastic results and 30% raised guidance after the bell and, oh yeah, a 3:1 stock split so that should be fun tomorrow.  PALM was the anti-RIMM with lower profits and lower guidance and their attempt to blame Apple for their problems looks pretty darned silly next to RIMM's report.  COMS also put up poor numbers, which used to matter a lot but I'm not even sure this will rate a mention by the MSM.

 


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