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Daily Market Update – August 27, 2015 (7:30 AM)
This has been a week of some really jaw dropping moves, but still, in percentage terms, nothing like some of the plunges, surges and then more plunges that we saw in 2008 and the early part of 2009. Some people are mentioning that, but they treading very softly. They’re not saying the unsaid. That is that all of those incredibly stunning moves higher were more than offset by stunning moves lower, in addition to death by a thousand cuts. Ib addition to the really large moves higher, back in 2008 and 2009, as well as late 2007, there were lots of smaller moves that simply added up to move markets significantly lower. What was missing were the same kind of smaller moves strung together to bring the market higher. I was happy to be able to get some trades in yesterday to take advantage of some of the strength, but the options market is still not fully participating in terms of volume and willingness to make trades. While yesterday may have added a little more to the overall sense of confusion about which way things will move next, this morning’s strong open to the futures trading may bring some of those reluctant option buyers out from the woodwork. Although two consecutive days don’t really make a trend, the bar is set pretty low and people are looking for any sign of stability in the market. The overnight action by China to purchase stocks in the open market turned things around in Shanghai and may have helped today get off to a positive start as we await GDP numbers and any other comments that might come from the Federal Reserve party at Jackson Hole, that is not being attended by Janet Yellen. Instead, everyone is waiting to hear what her Vice-Chair, and nearly everyone’s mentor, Stanley Fischer will say. in her absence. With no positions set to expire this week, but with some rollovers, new positions opened and an isolated call sale on an uncovered position, in addition to some ex-dividend positions, it has been a decent income week, but there’s still much more to be done. I don’t know how much of that will get done during the rest of the week, but I definitely would welcome the climb higher. It would be much nicer, though to see that climb come in little bits and drabs. You may or may not believe in technical analysis, and by and large, I don’t, but there is something to be said for the unsustainability of real surges higher. When there’s not a very good foundation underneath a stock’s price, it really is very easy to see those shares tumble. As much as everyone talks about a V-shaped recovery, they’re not necessarily the kind that you like to see for longer term stability. On the other hand, if you established some positions before the climb higher, you can definitely take advantage of the higher premiums available even on out of the money strikes. That’s what has really been missing for the longest time. In that kind of environment you find yourself not opening very many new positions, but rather trying to keep playing and re-playing the same ones, as even in the money positions may make more sense to keep that to let be assigned. We’re not quite at that stage yet, but if this back and forth does continue it could end up being a trader’s best friend.
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