Daily Market Update – July 9, 2014




Daily Market Update – Jul 9, 2014 (9:15 AM)

The CEO of Wal-Mart made an observation yesterday that seemed to come as a surprise to most everyone.

He commented that despite increasing jobs numbers there hasn’t been any real improvement on the consumer spending level.

How could that possibly be the case if the economy was actually improving? The stock market has certainly been advancing in reflection of that belief, although it’s probably just a coincidence that the market had a decidedly negative day yesterday.

After all, why would they begin to focus on rational thought and reality now?

I’ve been asking that seemingly obvious question for at least the past two earnings seasons, wondering why retail sales, other than at the very high end, were continuing to disappoint everyone. It just doesn’t make sense if people are actually going back to work and increasing their ability to make discretionary purchases.

Somehow, there has been a disconnect and increasing employment statistics may not be translating into what it traditionally meant.

Add to that, or better yet, subtract from it the two revisions of GDP for the first quarter of 2014 and you really do have to wonder what economic expansion people are talking about. Ultimately any economic growth is only as good as the ability for it to improve the lives of everyday people who are given the opportunity to contribute to that expansion

The weakness in retail, insofar as it seems to have lagged increasing employment levels, preceded the winter’s horrible weather and succeeded it, as well. Still, there has been money to be made in the retail sector, despite the  continuing lack of good news.

Imagine what may await retail sales if and when the consumer does return, although then you have to deal with those who will sell on the news, in the belief that the market had already discounted sales growth.

No matter what happens and no matter what the issue, there’s always a ready answer and a ready opposing view.

While the Wal-Mart CEO’s question was digested yesterday, today seems to be ready to get off to a mildly positive start heading into the afternoon’s FOMC release.

Again, while it’s not likely that there will be anything surprising in the statement, you can ne
ver tell what the reaction will be, especially in the early days of summer. Following yesterday’s sell-off there may also be additional reason to see an exaggerated reaction to news or even the lack of news.

As with the last couple of days, I’ll be looking for any opportunity to do additional rollovers in an attempt to reduce exposure to any adverse market response to the FOMC prior to this week’s expiration. As a nice side effect that also creates some income without having to dip into cash reserves, as there’s enough uncertainty in the air to be hesitant about spending too much while the market is still so close to those all time highs of last week.

So far, the rollovers for the week have all bypassed next week’s monthly expiration and have used the July 25th contract date. I would like to populate next week’s list of expiring positions a little better, but the monthly contract doesn’t usually offer as wide of a selection of strike prices as do the weekly options, so that has limited the ability to create rollovers with strike prices delivering decent dividends.

That may change on Thursday when some new strike levels may be added for the coming week, but with the FOMC today, I’ll still be looking for the opportunities wherever they may end up.

So, it’s just another day of sitting back and seeing what may develop. While the money is available for new purchases I’m not expecting to add any new positions today, but if anything can change on a dime its the gap between expectations and actions.