Daily Market Update – May 27, 2015 (8:00 AM)
It’s still hard to understand what exactly happened yesterday.
Sometimes on the first day back after a holiday weekend of the kind that’s not celebrated elsewhere in the world, our markets can have a gap up or gap down if there was some kind of large move in European or Asian markets.
But that wasn’t the case. It was a quiet 3 days all over the world and our own futures market was predicting more of the same.
With most major companies having already reported earnings, the price of oil stabilizing and the US Dollar getting a little less precious in foreign exchanges there really wasn’t much threatening in the air, other than the fact that we were right near all time highs and haven’t had a real correction in 3 years.
Maybe that’s enough.
Within minutes of the opening bell the market began telling a very different story from what the futures had portended. While those muted futures performances don’t necessarily have great predictive value, it is unusual to see the market diverge so strongly and so quickly from the futures.
The real emphasis on that last line goes on just how quickly the market turned negative and turned its back on the futures.
With most of my new position trades typically occurring on Mondays and Tuesdays and most rollovers usually on Thursdays and Fridays, this really has the makings for being a very unusual week.
While there have been two or three weeks over the past 3 years that have not had any new positions opened, there has never been a week without either a new position being opened or some position being rolled over.
This could be that week.
The only positive thing about yesterday was that volatility, which has been plummeting lately, at least got a little bit of a boost. Even so, it still has a long way to go to make things interesting again.
This morning’s futures were again looking as if it would be a quiet day, this time with a little bias to the upside, but the relative calm doesn’t feel very inviting. As with previous weeks I would still like to see the cash reserve pile being bigger than it is at the moment, especially if there are some more days like yesterday ahead.
With the early assignment of Lexmark this morning to capture its dividend, I do feel a little better about having some more cash available, though, especially since it meant keeping the entire month’s option premium and still having another 3 weeks to put that money to work. But even then, I’d like to see some more cash in that pile.
Unless there’s an unexpected purchase opportunity with an expiration for this week, that’s not too likely, so without much to focus on for this week, as there’s only one position possibly up for assignment or rollover, the focus shifts to next week.
AT least there are already some positions set to expire next week and maybe between now and then there may be a little more clarity ahead and some more clear signal as to whether it makes sense to dip into cash.
Not to mix metaphors too much, but while that cash does burn a hole in my pocket, I’d rather feel that heat than see it go down the drain.