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Daily Market Update – September 18, 2014 (Close) The initial response to yesterday’s FOMC statement was confusion. While there’s usually some kind of knee-jerk reaction, this time traders really didn’t know what to do as the wording, just as Jon Hilsenrath of the Wall Street Journal had said would be the case, remained unchanged. The market went back and forth with the release but ultimately found reason to be positive during Janet Yellen’s press conference, which was longer than most, having had an unusually long prepared statement portion read before questioning began. Some may have come to the realization that the dissenting votes in this month’s statement came from those who will no longer have a vote in just four months. What was clear during the follow-up to the statement’s release was that the more Janet Yellen spoke the more comfortable the market became. Almost immediately as the press conference ended the market started coming down from its highs and ended up closing the day with only a mediocre gain. But still a gain. Getting past the FOMC eliminates one of the hurdles for the week. Today’s hurdle, which really has its impact tomorrow, will be the results of Scotland’s independence referendum, in which 16 and 17 year olds have been newly enfranchised to vote. While they can get married and serve in the military at those ages, they cannot vote in general elections, but will be able to do so today. Reportedly, that group is overwhelmingly for Scotland’s independence, which probably shouldn’t come as too much of a surprise. What is surprising is that their support is said to be as a result of their concern that under continued British rule the social safety net, including health care, that they have come to view as an entitlement may be put into private hands or eliminated. Whether an independent Scotland can continue to provide the same kind of social services isn’t part of the equation, at least for some and could help the “Yes” vote predominate. That could make Friday a very interesting day. WHat it did do, for another one of those inexplicable reasons, was to make today an unusually strong day in advance of tomorrow’s joint events. With the independence vote seeming to be so close there’s not too much likelihood that any outcome has already been reflected in the market’s pricing. Currency traders know of the impact of the uncertainty, but thus far, our own equity markets have been standing by and awaiting an outcome and then an understanding of what either outcome can really mean in the short and long terms. I have no clue, other than to know that uncertainty is almost always a bad thing and the only outcome that really brings uncertainty is very possibly in the hands of 16 and 17 year olds. Having once been at that stage in life that doesn’t give me too much confidence. This morning the market appeared to have some confidence as it awaitsedScotland’s decision and then the manner in which the Alibaba IPO would be executed, as well as its reception. With yesterday’s challenge having been met today’s challenge was to decide whether to roll over any positions that still have a chance to be assigned, in order to eliminate the chance that they might get taken down by any untoward market response tomorrow. As the morning began I was disinclined to do so but hoped to get some opportunity to rollover those positions that have a lower likelihood of being assigned. That didn’t happen, although a couple of new covered positions were created and used some forward weeks in a feeble attempt to get some diversification in time. At any rate, waking up tomorrow morning will be interesting and the futures trading tomorrow may be the kind that has follow through for the rest of the day, as opposed to the mundane kind of daily trading that we normally see. Hopefully the close of the September option cycle won’t be marred by the constellation of events colliding in the next 24 hours or so and then further marred by our imperfect interpretations of what goes on around us.
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