Premarket 8-9-05

Good Morning.

Overseas markets were up with the exception of the Hang Seng. There was no economic news to speak of this morning except for basically inline Productivity. However, it shouldn't matter much because all eyes, ears, nose and throats, are on the Fed.

US Futures have been strong all morning which has no real implications due to the looming FOMC meeting. Whenever a big event is on the days agenda, traders are not willing to make significant bets in either direction. However, the underlying tension is thick as we must decide to position ourselves going into the "big bad event". This is always a function of forecasting the news and measuring expectations for that news.

You're friendly neighborhood Kcap Team believes that due to strong growth with only a slight pickup in wage inflation coupled with still solid productivity growth, will likely keep the Fed on the same trajectory; .25% hike no change in language. The question is how much of this is "baked in the cake". We believe due to the recent decline in the market that a relief bounce would be likely should the Fed deliver these results. We also believe that the newly energized Bears would let the Bulls play temporarily before throwing them over by the horns. Therefore, we are considering re-entering a temporary long-side QQQQ trade prior to the meeting with intentions of partially exiting that position into expected strength later in the day. Whether we carry any of the position overnight will depend on how the market internals are looking into the close.

-Good Trading-

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