Wall Street vs. Main Street

Wall Street was disappionted at FED's 25 basis point rate cut and investors started dumping their shares, causing 300 points ups and downs on the Dow. But Main street is looking okay, the newly released holiday sales number is good, 1.2% jump which is the best in 6 month. Lehman Brothers reports record net revenues and earning beats the Wall street expectation. So what went wrong? When we are confused, we should look at how the big guys digest the news and how to put their bets.
My computer contracted some kind of virus and haunted me for a week, and I missed the COT report, which basically indicated that the institutional investors (smart money) increased their holding on S and P -- we can see the result in the pre-FED announcement the market was up; at the same time those guy mysteriously bought a lot of call option contract for VIX index -- which prepared them to dump shares after the FED announcement. The headline showed up in the media was Fed only cut interest rate by 0.25, instead of 0.50 the market expected. Did the Smart Money know this ahead of time or their computer was so good that allowed them to calculate the odds for this to happen and formulated the winning strategy accordingly? I don't have the answer to this and your guess is as good as mine. But the fact is the fact, the clue was there, everything happened just like they follow the script. Amazing, isn't it?
A lot of the volatility was caused by the institutional program trading and day traders following suit, so don't worry about them too much.
Oh, another thing, the Smart Money also reduced their short positions on oil (or bought oil contract), predicting that the cold weather would sweep the Mid-West, which let the Oil price jumped at least $5 to plus $90 per barrel.
If you like the data and graphs, please leave your comments and I will post them later.

Here is the table of Commercial positions published on Dec. 7th of 2007:

Index	Trader Group	12/2/2007	12/7/2007	Difference	Open-int
Dow	Commercials	1197	2421	1224	36127
Nasdaq	Commercials	7471	8359	888	52715
Russ	Commercials	5421	4992	-429	38287
S&P 500	Commercials	29720	46177	16457	657039
Oil	Commercials	-54002	-45283	8719	1382526
VIX	Commercials	3894	12603	8709	59689

Thank you and I am open for discussion on the resutls

Market Swimmer