Prague Twin

Friday, July 28, 2006

Market Brief

Very simply, Q2 preliminary GDP came in at 2.5%, .5% lower than expectations. This means that it is unlikely that the DJIA will break through the 11,200 level and will probably start a pretty decent slide.

A couple of weeks ago, bad data was good for the market because bad data indicated that the Fed might pause. Now that the market is pricing in a 50% chance of a pause anyway, bad data is just bad data.

This poor GDP number indicates that the economy is slowing and I predict that will have the bears out in fairly decent numbers.

Expect the DJIA to drop about 100 points today. I will update later to see if I was right. (I can't always be right you know!)

UPDATE: Stocks are higher, sharply. I suppose they believe that the Fed will pause on its interest rate cycle, but I believe they are living in a fantasy world. Inflation data is going to burst the bubble later this month. Having said that, breaking this 11,200 level is a very good thing for the market.


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