Daily Market Update – January 20, 2015 (Close)




Daily Market Update – January 20, 2015 (Close)

After a really tumultuous week last week that saw wild gyrations in metals, precious metals, currencies, fixed income, oil and stock markets, this week may be a little quieter. At least that’s the view you get when looking at the small number of scheduled economic report releases for this week.

The good news is that our own stock market had no reason to follow yesterday’s Shanghai market in its 7.7% plunge, as for the most part that plunge was seen as having resulted from good intentions. In that case there were significant changes made to the manner in which margin could be used to fuel speculation and that took a lot of wind out of distant sails, much in the same way as when futures markets here change their margin requirements periodically in response to large uni-directional price moves.

The big news story for the week is the same as the world has been awaiting for months and maybe longer.

There’s renewed speculation that this will finally be the week that the ECB President Mario Draghi finally announces some form of European Quantitative Easing.

It’s hard to know what the reaction will be, either way. We’ve become so accustomed to the disappointment of not getting that announcement that we may be completely numb to anymore of the same. By the same token, if it is finally to become a reality there may just be lots of shrugged shoulders and wonderment about what all of the fuss was about.

Ultimately, if it ever does become reality the ECB’s Quantitative Easing will probably not be helpful for our own markets, just as our QE helped US markets and not European ones.

While the US markets have, to some degree been the only game in town for the past few years, that may change as the ECB injects liquidity into the market.

We’ll see.

For now, it’s the second week of earnings and after the banks disappointing reports, which were continued this morning by Morgan Stanley, everyone is waiting to hear whether there’s really evidence of good things to come from steep energy price drops that will begin showing up in raised guidance.

That is the only likely candidate to actually give our markets good reason to move higher after having created an unusual triple bottom over the past month. The real impetus for that to happen will have to wait until the major retailers are on tap to present earnings, but that is still about 5 weeks away, although sometimes it’s hard to keep good news all bottled up inside and altered guidance could pop up between now and then.

Having had a few assignments last week I’m happy to have the cash reserves replenished a little, but would still like to see that level grow some more.

Despite having liked to have seen that, it was hard to resist making some purchases to start the week, that as it is, only has 4 days of premium to give.

As it was, with only 3 positions set to expire this week and serve as potential candidates there wasn’t too much too be in a position to replenish those cash reserves, even if all were to be assigned on Friday. While there is already a fair number of positions set to expire during the last week of the February 2015 monthly cycle, there is very little in-between.

Since I was already in a frame of mind to make those purchases, it was relatively easy to get back into the frame of mind that hasn’t been in place for a while, although I wasn’t expecting the market to so quickly give up its early gains, especially in the absence of news and well before what would turn out to be a sharp decline in oil prices.

AS expected, those new purchases used this Friday’s expiration and hopefully there will be enough good news this week to keep them in contention for assignment, or at least easy rollover.

With those purchases out of the way, though, I’d love to get back to the real priority of seeing existing uncovered positions finally begin to earn their keep.

Disappointingly, that wasn’t the case last week, as the first 4 days of trading took the market much lower. Even with Friday’s 200 point gain the market finished 1.2% lower, making it the third consecutive losing week.

At least this week, which initially looked as if would get off to a nice start, didn’t end up taking a big step backward and so at least for the remaining 3 days left this week there may still be some more opportunities than last week’s incredibly slow trading that left me lucky seeing any rollovers, much less assignments.