Daily Market Update – March 18, 2015 (Close)
Well, at the very least we were to find out today what was in the FOMC’s mind, although even after the Chairman’s press conference we may still not have any greater sense of where our own sentiments are going to be on where the next set of worries is going to come from.
Other than the Employment Situation Report from a few weeks ago there really hasn’t been very much reason to believe that the economy is firing up. Job numbers have been growing, but wage growth hasn’t exactly been spectacular and there hasn’t been evidence that the job market is tightening, which is what begins an upward and inflationary spiral.
In fact, with the strength of the US Dollar at such highs, there’s every reason to believe that consumer prices will head lower, as imports become much more competitive. Of course, as gas prices still stay well beneath last year, although not part of the inflationary calculation, you can be certain that a data driven FOMC takes that into consideration, as well, as they may also be wondering why retail sales have fallen all during the period that gas prices have been going down.
Add to that the fact that the bond market seems to be betting in the opposite direction and you wonder where the fear has been coming from and what has been driving the market in March to act the way it did in January. Neither of those months were very good, as far as performance goes, but that’s much easier to accept when there appears to be a good reason.
Or any kind of reason.
Lately, there just hasn’t been any reason behind this large moves up and down. The fact they have taken on an alternating basis isn’t something that inspires lots of confidence when it comes to making any kind of decision to spend money. But it also doesn’t inspire confidence if you’re looking to sell stocks, either.
I’d still like to think that there’s some chance of making a purchase or two this week, but there would have to be something very compelling to do so before the FOMC report.
Nothing really compelling came before the FOMC’s release, but the 300 point turnaround to take markets higher was really an eye-opener.
What’s really amazing is that most people were looking for an interest rate hike as soon as June and what the FOMC said was that no rate hike would come until after the April meeting.
So I’m not sure where all of that unbridled joy came from, but I’ll happily be a recipient going forward.
With this out of the way, at least until the next bit of data gets someone afraid of inflation, a central story continues to be energy as those prices are again testing those lows form a few weeks ago, but this time around the market isn’t finding a way to capitalize on what would logically be considered as good news on a net basis.
Like the stock market, oil and precious metals also had signicant reversals today and headed higher after today’s FOMC, just as the 10 Year Treasury rates plummetd, but we’ll see what tomorrow will bring.
At this point of the week, as we were getting ready to approach the FOMC Statement release, at what is the mid-pont of the week’s trading, I would have just been very happy to have a repeat of Monday and have the chance to sell some more calls on currently uncovered positions. I think I would prefer that to putting any additional money at risk, as we await the end of the monthly option cycle just 2 days later.
At least today’s surge saw some paper gains and a rollover of a position that I didn‘t think would get a chance for a rollover this week, so there’s a little less to think about as this week now is getting ready to come to its end.
With always an eye on future weeks I wouldn’t mind being able to start populating some advance weeks with options, but would still really like to see the volatility climb higher.
While the past couple of weeks have been volatile on a daily basis, they haven’t been very volatile on an intra-daily basis and the latter is the kind that really helps to move volatility levels higher. So with all of this back and forth the net change in that volatility level hasn’t been very large, which makes it somewhat less advantageous to commit to longer term contracts.
This morning’s pre-open futures didn’t appear as if there was going to be too much opportunity to do much with regard to selling new option contracts before the FOMC Statement release, as that trading continued yesterday’s senseless negativity which followed Monday’s senseless positivity.
The turnaround after the release may have been just as senseless, but we may have better idea about that at this time tomorrow.
Today, hopefully the dulcet and somewhat monotonous tones from Janet Yellen will put some at enough ease to get us prepared for an April that will be more like February, in the realization that the best part of this economic expansion still awaits.