Thursday, July 28, 2016

After Fed Market Not So Goldmansachsilocs, INDEXSP:.INX

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*We were unimpressed by the amount of change in this FOMC report versus the last report.
*The market (short squeeze) was very excited about the jobs change on July 8th. We're still not.
*We think the Fed's language could mean that GDP continues slow.
*That would be a stock market negative.
*Oh by the way we'll know about GDP on Friday.
As we wrote in the last two weeks, we thought the recent Wall Street Journal ("WSJ") article was a Fed plant. The Fed was amazingly silent except for that article. We expected a nice change in language this time in the FOMC statement based on the WSJ piece. That said, we were unimpressed with much change despite the huge jump in July 8th's labor number. The Fed clarified that number for us as well.
We would guess that the change in language that didn't change could mean that Friday's GDP number could be weak. The economy may not pick up in jobs and GDP. Inflation is picking up however. We think that underlying fundamental backdrop is for stock market risk (NYSEARCA:SPY).
Let's review what we see as the major change to the Fed statement.
This time they said, "economic activity has been expanding at a moderate rate."
Last time they said, "economic activity appears to have picked up."
Wait a minute, wasn't there just a monster jobs number July 8th? Should that "picked up" be something a little more exciting this time like "wow?" Nope. All we got is zzzzzz "moderate rate."
That's not good. How much is moderate to you? I would say .5%-1.5% is moderate. 2%-3% is decent and if they said "barn-burner" in their release I would say 3.5%. Fair?
Let's look at GDP and let's consider there will be an estimate of GDP reported on Friday. They may have had that number in hand when meeting this time. It's only two days away and very important.
Here's GDP so far. It's slowing.
I'm going to ask you, with that July 29th GDP number in your hand what would "moderate" mean? 1%, 2% max?
Estimates are for 2.6% this Friday.
Graduate school level question: Does 2.6% GDP up from 1.1% equal "moderate?"

Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS