Daily Market Update – March 17, 2015 (Close)
Yesterday was really a surprise and a reminder that sometimes those surprises can be good.
Today was another surprise and a reminder that sometimes they’re not so good.
Lately, at least for the last 2 or 3 months the trading in the days right before the FOMC Statement release have been really cautious, whereas in the months prior it tended to be very strongly bullish.
Yesterday was a throwback to those longer ago days, probably reflecting some optimism that whatever will be the decision of the FOMC regarding how they signal their interest rate intentions, it will be more clear than is currently the case.
Today was a much more reasonable way to be trading ahead of a day of uncertainty, except that there shouldn’t be too much uncertainty about the meaning of whatever decision the FOMC will make.
Last week I believed that no matter the outcome of the FOMC Statement, whether the wording was changed or not, it would be a positive for equity markets. While that may or may not be true these alternating moves of sufficient magnitude may be good for volatility, but they’re not very good for markets.
When markets can consistently have such large moves and be entirely directionless that generally indicates lots of nervousness.
At the moment, given where we really are in an economic cycle, there’s not too much reason for that kind of nervousness. This most current cycle has been one of very measured growth and without any of the usual fires that accompany the thing that we’re usually rightfully afraid of.
That’s inflation. But right now, a little bit of inflation would likely be a good thing as it would represent continuing growth and prospects for profits.
The fact that the US Dollar is much stronger than anyone expected is a diversion and interest rates, even if headed higher are still bargains. Besides, in an age of multinational corporations, companies in the need of capital can now easily turn to overseas markets where the rates are heading lower as our may be teetering higher.
This morning the market was looking to return to that more recent form of normal before tomorrow’s FOMC Statement release and looked like it would be giving back some of yesterday’s gains.
That appearance never changed, as there was never really any attempt to beat back the bears today.
I was happy to have had some opportunity to create some income from the sale of options on uncovered positions yesterday, but will still likely continue to hold some resistance toward spending down any of the available cash, as I would like to see some more assurance of some assignments at the end of this week that could replenish anything spent.
Since yesterday was really a surprise and was another in a string of days that didn’t really follow the pre-opening futures, it was still anyone’s guess how today would have progressed, so I wasn’t entirely closed to the idea of any new purchases. However, despite the broad price declines there was nothing appealing enough to spend any of the pile down.
Interestingly, housing starts were just reported and they were down this month, likely due to weather, but that’s still another piece of data just in time for today’s FOMC meeting and can be part of the equation as to whether the economy is heating up sufficiently to warrant some gentle braking.
My guess is that we’re going to see another market rally sometime after Janet Yellen gives her press conference and I don’t mind sitting it out with new purchases in mind, as long as there continues to be some opportunity to sell new call positions, get those rollovers as the monthly cycle ends this Friday or see some assignments.
Sometimes passively awaiting is the only way to go when you seem to have a fifty – fifty proposition awaiting you.