Bears Leverage FOMC Statement

The FOMC released the minutes from their last meeting, and the bears used it as a good opportunity to step up the selling pressure on the market. Remember, the market was overdue for a pullback anyway, so this is just the news that is breaking with the cycle.

Here is a summary of the FOMC comments:

• Fed minutes still project economic pickup later this year
• Fed says the increase in subprime mortgage delinquencies could slow recovery in housing sector
• FOMC says housing demand 'leveling out'; no subprime spillover
• Fed minutes say persistence of inflation at recent rates could eventually have adverse effect on economy
• Fed says labors markets remain 'relatively tight'
• Fed minutes say all FOMC members agreed predominant policy concern remains inflation
• FOMC says data have cast doubt whether inflation on downward path
• Fed says due to growth, inflation uncertainties, their statement no longer solely cites chance of more firming
• FOMC says downside economic risks increased between Jan and March
• FOMC dropped the words "additional firming" from statement amid 'increased uncertainty'
• Fed minutes say FOMC agreed 'further policy firming' might be needed to foster lower U.S. inflation

The market sold off further on the comments about inflation, which I fully expected. The selling has caused many of the sentiment indicators to spike higher on the day. To wit, the VIX is spiking +9%; the ARMS Index is above-average at 1.17; and the CBOE put/call is elevated at 0.97.