End of the Quarter

Market Action:
As the market opened on Thursday, the players were ready to party as stocks pushed up at the bell.  The good news???  Well, let’s see, GDP for fourth quarter was revised up from 2.2% annual growth to 2.5%.  Oh, and with it, the PCE deflator was up 1.8%.  You may recall our mentioning the deflator in previous posts.  It’s how the GDP gets inflation taken out of it, by deflating the amount by the deflator.  

We have written many times that this is a way to make the GDP look however you want it to.  OK, we aren’t saying that the GDP would be manipulated in any way…We are saying that the price deflator probably doesn’t take the full amount of inflation into account and therefore shows a larger increase in the GDP than, say, we would calculate, given the opportunity.  

The Dow shot out of the blocks and was quickly up 85 points but that was the high for the day.  After three days of downside, the Dow was ready to stretch its wings and fly a little, but it then fell out of the sky.  At one point during the day, the Dow was down about 30 points, but the NASDAQ indexes were down nearly a full percent.  From those lows, the market staged a remarkable rally to end the day with the Dow up about 48 and the NASDAQ indexes about even.  

After hours, DELL was in the news again, with bad news again.  According to the WSJ, Dell said that it had found evidence of misconduct and that it also found a number of accounting errors and deficiencies in the financial control “environment”.  DELL said the investigation was not complete and would have to delay filing its 10-K about two weeks.  DELL was down about 2.5% in after hours trading.  Just for reference, Michael Dell took over running the company day to day about two months ago…

Opinion/Analysis:
We note that the NASDAQ indexes were considerably weaker than the Dow and the SP 500.  This is something that we thought would happen.  The large cap stocks tend not to lead going up or down.  So, as the NASDAQ starts to weaken, the large caps will be a bit of a safe haven for a short while.  

We are not recommending staying in the large caps but they are going to provide some relative shelter.  The key word there is relative so if the NASDAQ indexes drop 10%, the large caps might only drop 7%, big consolation, don’t you think?

The market is trying not to go down.  It’s almost like a toddler who is so tired they can’t keep there eyes open but they refuse to close their eyes and sleep.  We know that the end of the quarter needs to play out and we may indeed see some more upside on Friday but it’s only a matter of time.

Our Moves:
We didn’t pull the trigger early enough this morning but did manage to get a trade off before the market went down in earnest.  We purchased the QQQRS puts at a price of 1.87 and then watched them go up to 2.30.  We should have taken that nice profit but we didn’t.  Maybe Mr. Market will be nice to us on Friday and not have that end of the month rally.  Then again, probably not.

Have a good weekend and sleep well.

Dow Industrials:  12,348.78  +48.39
VIX: 15.14
HUI:  338.50
QQQQ:  43.57
QQQRR: 1.46 bid
QQQRS: 1.99 bid
QQQRT: 2.64 bid
RYVNX:   17.16
RYAIX:  21.66
RYCWX:  36.52
TLT:  88.45
BEGBX:  13.86