GDP and Oil

by Larry Levin

Today's big news revolved around GDP first then oil; both causing the market to rally. However, when the S&P ran into overhead resistance it gave back about half of it gains rather easily. Furthermore, when the market was rallying, the volume was quite low so I wonder how much more of a rally is left in it.

The early rally, that was very volatile due to the light volume, was driven by an "as expected" GDP report that was slightly higher than the original release. It wasn't great, however, since the data showed the economy was held back by the biggest slump in housing in 26-years and the first decline in final domestic sales in 17-years. As long as it wasn't negative, I guess the market was going higher.

This so-called "strength" was due to higher levels of exports, war-related spending and a small change in inventories, not to strong domestic consumption and investment. Final domestic sales fell 0.1%, the first decline in domestic demand since the recession of 1991. So if it weren't for bogus inflation reporting, war spending, and a plummeting US dollar, the data would have been negative to be sure.

"The U.S. economy is neither in the throes of a deep and painful contraction nor in the midst of a robust expansion. Instead, the U.S. economy is muddling along," wrote Richard Moody, chief economist for Mission Residential. "The longer term outlook is for a prolonged period of below-trend real GDP growth, which we see persisting at least through mid-2009."

Again I must state that even this not-so-rosy statement can only be made due to the fraudulent inflation data. In fact, the report even stated that the government revised inflation LOWER to get to this illusory .9% figure. And this comes the day after the CEO of Dow Chemical said his company's costs just soared (umm, that's inflation folks) by 42.0% last quarter, which is the same period the government revised inflation LOWER to fool you again.

By the way, the real GDP figure was actually 0.225%, which is the quarterly data, but it's geared up to an annual rate to make it look better.

And oil finally hit a wall. Although there was a massive draw of 9-million barrels of crude inventories, oil still plummeted over $4 today.

Real Time Trading Signals*for

Trade Date: 5/29/08

E-Mini S&P Trades*
(before fees and commissions):

1) Engf buy @ 10:05am at 1397.75 = b/e (1 lot)

2) Several Secrets trades were narrowly missed during the low volume

3) Algorithm trades (10)...combined total...+8.75

E-Mini Russell Trades*
(before fees and commissions):


1) Buy @ 9:12am at 738.7 = +.4 (1 lot)

2) Sell @ 1:52pm at 749.8 = +1.5 (1 lot)

3) Sell @ 2:20pm at 746.8 = +1.1 (1 lot)...+$300


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