Daily Market Update – October 7, 2014




Daily Market Update – October 7, 2014 (9:15 AM)

It’s hard to say whether yesterday was a disappointment or not.

While it’s true that the early morning gain never quite survived, neither did it give way to any kind of tangible profit taking.

This morning appears ready to start exactly where yesterday left off. The market was pretty ambivalent yesterday and had a hard time deciding whether to finish higher or lower. This morning it looks as if there will be a mildly lower opening with no real news to fuel anything.

While yesterday had the Hewlett Packard news which by all appearances was a dizzying spin of why the split up was a reflection of Hewlett Packard’s success, today has nothing.

Other than all of the scheduled speakers this wek and tomorrow’s FOMC Statement release, that pretty much describes the rest of the week.

In the meantime the market is sitting just short of the mid-way point for its 2 year pattern of mini-corrections. It is currently about 2.3% below its high from a few weeks ago, so it really is anyone’s guess where the next stop will be.

With the anticipation for the last FOMC Statement being so focused on the phrase “considerable time,” as it was being used to describe when the increase in interest rates would start, somewhere along the line will come the realization that with each passing month, by definition that “considerable time” has been shortened by a month.

Sooner or later there will be no time left and rates will go higher.

Although it shouldn’t come as a surprise, you can be reasonably assured that the market will react as if it was a surprise and then will bounce back from the shock that should never have been a shock.

But that scenario may not have to play out for some considerable time.

What will play out almost immediately will be earnings, that really get going tomorrow, even though the traditional leader of the season, Alcoa is no longer in the DJIA.

This earnings period will be interesting because the likelihood is that retail will have some good news, but energy will have some bad news, especially as it gives forward guidance.

If you asked anyone what the future would hold for the energy sector, given all of the geo-political risk, they would have had to have been crazy to not believe that the future for profits was incredibly bright. But this period in time is markedly different, as even with all of the world’s craziness energy prices (and precious metals) are plummeting.

They will surely go up at some point, but as the expression goes “if not now, when?”

After a couple of purchases yesterday, I wouldn’t mind adding some others for the week, but am not committed to it. If anything, I may be interested in buying back some of last week’s assigned positions, but I’m not too convinced that I’ll have much interest to break out beyond those names at the moment.

As has become the pattern of late, unless there’s a spike higher to open the session, giving an opportunity to sell calls, the likelihood is that sitting back and watching to see how that early trading evolves is the way to go.

With the exception of last Friday when the market indicated higher and stayed that way, these early morning trading patterns have had very poor predictive value. Lower opening trading hasn’t offered much in the way of value and higher opens haven’t led to higher closes, for the most part.

I suspect that the typical FOMC pattern will be in play today, unless, as last month, someone thought to have an inside track, such as the Wall STreet Journal’s Jon Hilsenrath, offers an opinion on what tomorrow will bring. Otherwise, there’s very little reason to suspect any kind of accentuated movement in either direction, as most traders are playing very conservatively now.

Most of the time that’s not too bad of an idea.