Why Indices Are Flat On Dismal GDP Report

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Why are the major indices flat on a day when Q4 GDP came in so dismal? You do have to wonder...it's no surprise there are conspiracy theorists out there.

But the answers aren't hard to understand:

  1. there's been big momentum in stocks that is not easily reversed,
  2. a poor GDP number makes it likely the Fed will continues its stimulus programs, and
  3. the market tends to rise on Fed days.

Most traders know the market tends to rise on Fed days, but here is statistical data from Laszlo Birinyi: on days when the Fed meet, the S&P 500 is up 65% of the time with an average gain of 0.43%.

Here's what's annoying: the following day, the S&P 500 is down 61% of the time, with an average loss of 0.42%.

In other words, on average the two days are almost a wash.

A second point about the midday action: don't just look at the Dow Industrials. Breadth is poor, and several sector leaders this month are much worse than the Dow: Transports down 1.1 percent, Russell 2000 down 0.5 percent, MidCap Index down 0.3 percent, and housing stocks (ITB) down 0.9 percent.

So how's the Big Bull Trade of 2013 doing? Pretty good, so far. I told you a few weeks ago that bulls were pushing a simple trade for 2013: short Treasuries, go long cyclical stocks, and long copper.

Here's how it looks:

The Big Bull Trade of 2013

Not bad. I'll keep you up to date.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.