Daily Market Update – October 23, 2014




Daily Market Update – October 23, 2014 (9:15 AM)

Since we always look for answers to everything, it’s most likely that the events in Canada influenced the market’s unexpected downturn yesterday, but it’s also not likely that was the case.

While it was unusually slow in being reported and events developed slowly, the market really didn’t have too much of a reaction until early in the afternoon.That reaction may have also been influenced by the continuing slide in oil prices.

This morning the futures are acting as if yesterday was an aberration.

On the other hand it may be possible that once again earnings are taking center stage as a number of good earnings were reported this morning, with the industrial side of things continuing to look good.

One of those companies reporting this morning, Caterpillar, may be a little like the kind of market leader that IBM used to be. These days when Caterpillar does well, it’s also taken as an indicator that China is doing well and increasingly China is where so much of our focus needs to be.

Yesterday was a disappointing one as I was hoping for some chance to sell covered calls in a rising price environment.

That didn’t happen, but with today’s early indication, perhaps today will be the day, although the volatility continues to fall as the market shoots higher and makes it less appealing to either take DOH related risks or less appealing to look at extended weekly trades.

The morning begins with the S&P 500 about 4% below it’s September highs and while it’s nice seeing the early morning indication higher, it does remove some of the inclination that I found myself with as yesterday’s market was coming to a close. I now feel less inclined to add positions as the increase just adds another layer of uncertainty.

While the net result of the week thus far has been decidedly positive, the ease of the reversal lower, as seen yesterday is a reminder that the climb back from 9% lower may have some unsteadiness in it.

Although I certainly don’t mind watching net asset value increase as the market moves higher it’s really not the same if you’re not deriving some real and tangible benefit from the market’s actions.

So far this week there have been scant few trades and so there has been scant little income derived. While I would love to see that change during the remainder of the week, I just don’t know if that will be the case and with little to no assignments for the week the coming week may be one that continues the recent trend of little to no activity, especially on the new position purchase end of things.

That puts more reliance on the ability to rollover and sell new option positions.

Sooner or later w
e’ll get some more clear idea of what is really going on right now.

Are we climbing back from a 9% correction or is this just a trap?

Other than in hindsight there is just no way to know. Other than looking at data points from the past that strongly suggest that very large moves higher are illusory, there’s little to give an indication of what days like today mean. Certainly the previous 200 and 300 point gains over the past few weeks haven’t had the kind of short term impact that we would have expected or liked.

But maybe today will be different?