7 Small Words, But What an Impact

The FOMC statement was issued with little surprise yesterday. Hawkish statements on inflation remained, bulls hopes were crushed, and a large number of traders and funds put on short positions in the last hour of trading. Now the shocker! The statement was issued incomplete. One little sentence was omitted, but what a sentence to omit! “Longer-term inflation expectations remain well contained.” Understand that it positions were put on based on this statement that was in the original report: "Pressures on inflation have picked up in recent months and pricing power is more evident," which heavily implies that the Fed is no where near finished with the rate hikes. The omitted sentence heavily modifies this short-triggering sentence and since it was issued after the close a lot of shorts are likely to get caught in a bad position today. They really know how to keep us guessing. Scans turned up a neutral to negative picture today with a few, very few, areas of bullish interest. Stocks that have been trending lower and breaking down into 52-week lows are showing signs of continued deterioration and there just isn’t much evidence of accumulation taking place at the present levels to start predicting a turning point in this relentless downtrend. Bulls may open the market today on the Fed misstatement, but there is a reasonably good chance that bears will close it. The old stock trader’s adage “Sell in May, but don’t go away,” looks to ring true yet again.