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Daily Market Update – March 5, 2015 (8:30 AM)
With the ECB announcing that it was leaving its rates unchanged early this morning and with the pre-open futures once again trading listlessly, you would think that not much would be in store for the regular trading session. With the first 3 days of this week having traded identically to this morning, perhaps only differing in direction, each of those days saw wide trading ranges once the opening bell rang and closed with relatively large changes for the day. What’s most notable is that there really hasn’t been any kind of news to account for the daily and intra-day swings. That may change during this morning’s ECB press conference, as Mario Draghi has shown the ability to move stock markets, usually higher, but there shouldn’t be too many surprises in anything that he will have to say, as we all expect the ECB version of Quantitative Easing to begin shortly. The one surprise may be the realization that there aren’t as many bonds available for purchase as there is demand from the ECB. That would be interesting. Meanwhile, while we await his words and responses to questioning, those market swings haven’t been limited to just stocks. Oil, metals and to a lesser degree interest rates have also been undecided in their direction the past few days and have also made some large moves without any news. In that kind of environment it’s hard to justify putting too much new money at risk. For me, it’s easier to justify recycling money from assignments and perhaps holding some back. Despite yesterday’s sell off and first triple digit loss in quite a while those positions that are set to expire this week weren’t disadvantaged, with the exception of the Gold Miners ETF put, but if you’ve had a long position in that ETF you can understand why I wouldn’t mind taking assignment, if necessary, as the volatility in precious metals and its proxy, the miners, has made that ETF a very frequent trading vehicle over the past few months. For the next two days I just hope that nothing upsets the status quo as I would very much like to see a preponderance of assignments, but wouldn’t necessarily be upset if some of those hoped for assignments became rollovers, instead, as was the case last week. Because that latter possibility is definitely better than the alternative to the contracts simply expiring out of the money if there is some sign of deterioration in pricing today, knowing that there is a potentially significant event tomorrow morning, there may be reason to jump the gun a little bit and make rollover trades, where possible. Tomorrow’s Employment Situation Report isn’t expected to offer much in the way of surprises, especially after Wednesday’s ADP number was in line with expectations, so there’s not too much reason to think that there will be a decided increase in risk. However, with the first 3 days of this week having set the tone, it’s probably not a bad idea to be prepared for any kind of reaction, even in the event of no real news worthy of reaction.
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