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Daily Market Update – May 22, 2014 (8:45 AM) It still seems very odd to me that the market came off of its large drop on Tuesday and recovered the loss on a Wednesday, but did so ahead of the FOMC statement release and subsequently did little afterward. While yesterday marked about the 6th consecutive month with no expected surprises in the statement and none delivered, that hasn’t changed the pattern of trading. Hesitancy prior to the release and then incoherent reactions afterward was a fairly predictable pattern. Yesterday was completely against long established script. Given the uncertainty that has been permeating the market and the final realization that earnings really haven’t been that great, especially on the retail level, it’s surprising that investors would have gone counter to Tuesday’s large downward move, which itself was already counter to a Tuesday trend. With the FOMC now out of the way and earnings season slowing down I’m not certain what the next catalyst will be, particularly as the situation in Ukraine also seems to be mitigated, although there is the little matter of a planned election on Sunday, which may bring out some emotions. Depending on your perspective having a market vacation on Memorial Day may either be a good thing or bad thing for investors as the uncertainty that may attend Sunday’s elections makes itself known. Either we will be behind the eight ball having to wait an additional day to react or that additional day would allow some time to calm and digest. Some may even use tomorrow as an opportunity to lighten up a little bit in advance of a long weekend, but that hasn’t been the case for the past couple of years. Uncertainty going into a weekend alone hasn’t been enough to derail bullish sentiment and the fear of missing out on a Monday rally. Another day like yesterday will have us at another new record and anything is entirely plausible. The pre-open appears to be pointing to a flat open, but just as yesterday’s pre-open provided absolutely no indication for what was to transpire when the bell rang, today could be no different. The late Mark Haines always used to say that the pre-open was meaningful of nothing, except when there was a very large move based on some unexpected news. We haven’t really had any of those for a long while. Instead, we’ve gotten fairly accustomed to early gains in the pre-open fading within about an hour or so and moderate losses in the pre-open foretelling nothing. So this morning is another kind of sit back and watch, with the hope that there woun’t be a repeat of the past two weeks when many positions that were rollover candidates saw their prices deteriorate as the markets went much lower. This week has a large number of rollover candidates as the low volatility continues to make it unappealing to diversify by time of expiration. Hopefully a fair share of those will be assigned or rolled over, as currently appears to be the case. Unfortunately, despite knowing better, and the past two weeks should have reinforced that knowledge, I continue to count those chickens before their hatched. However, there does seem to be a slightly optimistic tone after yesterday’s trading and thus far, nothing seems to be on the horizon that is likely to upset things. With Monday being a market holiday, there is a chance that some new purchases may still be made this week in an attempt to get a full week’s premium from call sales, as opposed to just 4 days that would be reflected in the prices. Not what I usually do on Thursdays or Fridays, but it’s my small way of celebrating. Otherwise, I’d be perfectly content to see the market keep share prices where they are or a bit higher and execute those rollovers today or tomorrow and simply enjoy a nice three day weekend.
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