Wednesday: Getting Past the Fed

Includes: DIA, IFN, INP, SPY
by: David Fry

After the fact analysis is easy: the stock market was short-term overbought, the Fed delivered what was priced-in, but traders sold the news.

Some think the Fed didn’t go far enough. Bonds rallied since the Fed didn’t make a larger cut while also moving inversely to stocks. The dollar index was relatively unchanged [although there was movement within various currencies], while gold sold off having been bid up in anticipation of a currency-busting 50 bps interest rate cut.

Since all the numbers probably haven’t been posted, I don’t yet know if this was a 90/10 down day. It was probably close.

The problem children in detention are below:

Now the Fryguy can have a little fun since “one” observation seems to be gathering some market attention. [I mean take it when/where/while you can, ya know!] The major India stock index [BSE Sensex Index] reached a record high last night up 1.8%. As readers know we’ve been pointing out the disparity in premium/discount between INP [Barclays India ETN] and closed-end fund IFN. Greg Newton picked this story up and posted some comments on his blog. You should read that since he, as usual, adds greatly to the conversation.

So with INP at over a 20% premium, IFN climbing to a single-digit discount from nearly 10%, and both funds with similar constituent holdings, shorting the former and/or going long the latter seemed a lay-up.

Like I said, stock markets were overbought coming into the Fed meeting and sold the news. I suppose there were some wanting a 50 bps cut, and like a stock with earnings, that didn’t beat expectations and those folks were disappointed. It’s just one day right?

Disclaimer: Among other issues the ETF Digest maintains positions in: IEF, GLD, DBC, UDN and IFN.