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Daily Market Update – August 5, 2015 (Close)
It was nice to wake up this morning and to see the futures heading nicely higher. They were nearly 100 points higher on the DJIA and those kinds of moves tend to have some staying power. The word “tend” has some leeway built into it and today all of that leeway was necessary, as that triple digit advance disappeared at 10:30 AM, immediately after the Oil and Gas reports were released. This morning it was the ADP Employment Report that added to the already impressive gains seen in the futures trading. It did so by putting forward disappointing numbers reflecting job decreases in the energy sector. So what did the futures market do? It simply added about 50% to those earlier gains. With that somewhat bad news the market reverted back to its “bad news is good news” mentality, as the initial thought must now be that those kinds of employment statistics would likely mean a further delay in an interest rate increase, even when Federal Reserve Governors are increasingly saying that it’s time for that increase. It’s too bad that is still the way of interpreting news. At some point the market has to get to the more healthy way of accepting news for its real meaning and simply discounting the first order of events 6 months down the road. Instead, the market is discounting second order events 6 months into the future. That’s a good way to discover disappointment and to realize that crystal balls get cloudy when you expect too much of them. It is predicting that the bad news will delay an interest rate increase and then it is further predicting that such a delay in interest rates will be good for the stock market that’s just a bit too much of a stretch. That’s just too much to try and predict. It also forgets that there’s lots of data that is still going to be released between now and the September FOMC meeting and those scales can easily be tipped, especially if those FOMC members are getting anxious to finally do something after 9 years of not having had a rate increase. Maybe the morning’s energy report brought the market back to a more normal way of thinking, although historically anything that drives down the price of oil and gas has been good for the stock market. It’s only been during this recent slide over the past 9 months that the market has reacted in such a strange sort of way. That still leaves Friday’s Employment Situation Report and an expectation that if the numbers are light that the market may again exhibit some inappropriate rejoicing. While the flurry of futures buying didn’t continue into the actual trading session today, it came within the context of DJIA component Disney down nearly 5%, which alone took away about 60 points from the DJIA. It also came with a continuing weak Apple, which is now officially in correction mode, despite having recovered from its additional 1% loss in the futures trading. I’d would have l;ked to have seen those gains continue and hopefully leave expiring positions this week in better shape for either assignment or rollover, so I still can’t complain about the disappointment of losing the day’s gains. There was also an all too rare opportunity to sell some calls on an uncovered position, but it’s going to take some sustained gains to see more of those happen and the staying power of advances hasn’t been very good of late. We’ll see if bad news can end up being the new good news and take us to the new highs that we’ve started believing is our destiny, even if the masses are left behind.
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