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Daily Market Update – June 2, 2015 (Close)
Last week was one that had absolutely no direction, although there wasn’t too much reason for it to have taken any direction from what few events were occurring. If anything, the bias was to the downside, but that could be understood simply on the basis of the increasing weight of the market and with nothing obviously being recruited to help support that increasing weight. This week has the same dearth of information and if this morning’s pre-open futures was going to be any indication of what may be ahead, there’s a reversal to yesterday’s very modest increase awaiting. And that is exactly how the day played out, although the trading range for the day was a little wider than we’ve recently seen. Just like last week the singular big economic news item won’t occur until Friday morning. That leaves time for lots of speculation and ambivalence. Friday’s Employment Situation Report is in a position to confound markets if it is too good or worse than expected, especially after last week’s disappointing GDP data. Just like last month, what would probably suit the market the best and lead to a positive feeling, would be an employment picture that’s just right in line with expectations. If that’s the case that delays even having to think about when the FOMC will begin to increase interest rates. That essentially puts June off the table and maybe gets people to bypass September, getting us closer and closer to 2016. For more than a year, ever since Janet Yellen became Chairman of the Federal Reserve we’ve been delaying the realization that an increase in interest rates is likely to be a positive thing for everyone. What people still think about are those days of red hot inflation and interest rate changes that couldn’t keep up with inflation. While that’s certainly bound to happen sometime in the future, where is the reason to believe that it’s in our future? Like so many things in life, sometimes it’s just much better to get it over with and move on with life. If the past is any indication, when that day comes and the market panics over that first in a series of interest rate increases, it will just as quickly recover in the realization that the economy is finally doing what an economy is supposed to do. People with jobs and the ability to spend money is a good thing. With 3 new positions opened yesterday, all counting on their dividends, I don’t think that there will be too much more to do this week as far as spending money goes. After being in suspended animation last week, having even 3 trades seems like being on fire, but hopefully there’s more to be done during this week with existing positions. The pre-opening futures weren’t giving too much confidence in that regard, but at least they are only very mildly lower, so anything was still possible as the day was set to unfold. I was actually surprised and happy to take advantage of some strength in Abercrombie and Fitch to do an early rollover, even though continued strength could have led to an assignment. At this point I would rather lock in any of those premiums than let them get away, especially as it’s relatively cheap to buy back a deep in the money option these days if the price does really quickly accelerate. Yesterday’s slow erosion of gains heading into the closing bell was disappointing, but it did put an end to 3 consecutive days of losses. The last of those days was based on the GDP report and could easily have had a lingering impact, but didn’t. I look at that as a small positive in a sea of no positive news and all it ever takes is a spark. Today’s recovery from an early triple digit loss and actually venturing suddenly into positive territory at noon time may have been another small positive. As long as no one throws some cold water on things, the market is still within 1% of its recent all time high and could easily look to re-visit after a few days of resting while waiting for that spark. |
