Daily Market Update – December 4, 2014 (Close)




Daily Market Update – December 4, 2014 (Close)

Ahead of this morning’s scheduled ECB policy statement the market didn’t look as if it was expecting too much.

At some point markets may give up on expecting anything tangible to come from Mario Draghi, but so far, that hasn’t been the case as his assurances have always sent markets higher. If news from the Bank of England this morning would have been any indicator there wouldn’t be any change coming out from the ECB today, either.

As far as predictors go, the Bank of England may be as good as any, at least when the ECB may be involved.

If and when the day comes that some substantive moves toward a European version of Quantitative Easing are actually made there’s going to be a big reaction, but it’s always a question of what direction that reaction will take us. A weak central currency and stalled economic growth would seem like the kind of things that a central bank would want to address with more than just words, but the longer the ECB delays action the better the situation is for the US economy and probably markets, as well.

Today, when it was all settled, turned out to be another quiet day as the ECB did nothing to heat things up and professional traders looked to position portfolios ahead of tomorrow’s Employment Situation Report. That may have explained the larger than usual trading range of late, but there really wasn’t much to explain the market’s early decline and then its subsequent recovery. What there was, was lots of confusion over where Mario Draghi stood, as he seemed to give conflicting messages.

For hedge fund managers the need to position portfolios before potentially important news generally that means to place hedges on portfolios in order to protect gains, but as 2014 is winding down there aren’t too many gains to be seen by those traders and reports are coming that predict a record year for closure of traditional hedge funds.

Yesterday was also another quiet day, coming off the previous day’s surprise move higher. Whatever it was that outgoing voting Federal Reserve Governor Richard Fisher said during his speech yesterday evening, it isn’t getting any media attention and isn’t seeming to have any impact on this morning’s future trading. Fisher may simply be falling into irrelevancy, as this month he will cast his final vote or perhaps he just had nothing to add to the conversation that could shake things up a bit the way he customarily did.

Fortunately, even with a relatively flat day yesterday there were some unexpected opportunities to sell calls and rollover positions and it would certainly have been nice to be able to do the same today and be left in good position to end the week.

Somehow, that’s how today worked out, as from an activity perspective it was almost a replay of yesterday, but also included the surprise of adding a new position in more shares of Sinclair Broadcasting

Unless there is some kind of precipitous move tomorrow the remaining positions expiring this week have reasonable prospects of either assignment or rollover, although I would prefer not to rollover the lone outstanding DOH position and instead see the position expire. As I mentioned yesterday, I’m inclined to prefer rollovers at the moment, and try to accumulate premiums, but still wouldn’t mind adding to cash reserves.

While I initially thought that today might be a day of simply being a passive observer, I’m glad that even in the environment of a stable market, despite further deterioration in the energy sector, there were some opportunities to generate more premiums..

Now with the non-event ECB issue having been moved out of the way early this morning, all that remains for the week is to see how tomorrow morning’s Employment Situation Report is received and to look forward to a weekend as calm as the week preceding it.