Daily Market Update – January 5, 2015




Daily Market Update – January 5, 2015 (8:45 AM)

The first week of 2015 may be a busy one with economic news.

Although it always seems as if we just had an FOMC Statement release this month there will actually be two of them to ponder.

The one this week is followed by an Employment Situation Report on Friday and either one can move markets, although at this point it’s hard to imagine how either could really move markets forward very much, as the pattern now seems to be pretty clear for each.

The FOMC is now just teasing us as far as when interest rates will increase and the Employment Situation Report gives us good news about growing employment, making us wonder when wage inflation will finally become a reality,

The FOMC will be especially interesting as since the last one there has been some indication that the GDP will be growing at a much faster than expected rate due to the drastically lowered energy prices. That may be the kind of data that causes the FOMC to start thinking more seriously about interest rate increases as the previous FOMC statement finally changed the wording from “considerable time” to “patience,” with regard to when those rate increases may begin.

Another strong Employment Situation report, though, could very conceivably set the stage for the second of the month’s FOMC Statements to  put forward a more hawkish kind of  position on the prospects of higher rates, which would be reasonably expected to cast a short term pall on the market’s climb.

This week we’re also left to wonder what ever happened to December and where the Santa Claus Rally went?

While doing that there can also be all kinds of speculation as to what may motivate investors to begin 2015.

It seems as if it has been a couple of years since “The January Effect” has actually occurred and some of those dogs in the DJIA have been dogs for more than just the one year that they were supposed to be in the doghouse.

With no assignments last week and no new cash added to reserves, I’m not overly enthused about committing new money this week. I would much rather see some assignments to begin the first week of the year and have a chance to see what, if any, theme gets us started.

For now there doesn’t look as if there is any new theme, as low oil prices continue to be the major story, even though they are no longer the primary forces in moving the market from one day to the next.

The morning futures aren’t doing to much to give me hope for being able to simply sell c
alls on existing uncovered positions, as that would still be my preference this week as it has been now for quite a while.

With four positions set to expire this week it does at least offer some more income generation opportunities than the previous week, which may have been the slowest such week in the past 5 years.

Looking a week ahead, with a fair number of positions set to expire as the monthly cycle comes to its end, any new purchases this week are more likely to consider the use of weekly options, where available, rather than the extended ones, especially as the volatility continues to make the extended weekly premiums less appealing.

In the event, however, that the FOMC does introduce some kind of rally, as has been the case for the day before the FOMC Statement release the past few months, there may be reason to try and lock in some premiums on that kind of good news through the use of the expanded weeklies or even heading into the February cycle, as earnings season will also be at hand very soon.