Daily Market Update – September 2, 2015 (8:30 AM)
Yesterday’s 469 point decline was just another in a series of unusually large moves that have come in both directions, that can’t really be called unusual anymore.
For those who look at charts, the market had done very well at defending the 2045 level on the S&P 500 after repeated attempts to assault it.
During a period of time preceding the initial 10% correction that we had just seen, the market was making a series of lower highs and higher lows. That kind of situation is one that technicians believe predict a large move, but they can’t quite tell you in which direction it’s going to be, so that means you move onto the next tool, which is a coin flip.
In this case that pattern did precede a precipitous drop and that 2045 support level didn’t hold.
The next support level is at about 1865 and we were getting close to re-testing that yesterday, but this morning’s bounce in the futures creates some more distance from that support level.
There could be some concern that if that 1870 level is breached, there’s only minimal support at 1830 and the next stop is 1750, which would be right at bear market territory.
To put it into DJIA terms, that would be a drop of about 1200 points, so we are about halfway there, after yesterday’s loss.
After a quiet trading day in China overnight, our futures are pointing to what would ordinarily be a nice move higher. But after a 469 point loss the previous day, it will take a lot more to make up for that retreat.
Surprisingly, despite the very negative tone of the first 2 trading days, I’ve found reasons to buy and have also been lucky enough to find some opportunities to roll some positions over.
As long as the primary goal is to generate income then the goal is basically to keep that ball alive and doing something more than just sitting there.
WIth the Employment SItuation Report coming on Friday, there’s really not much that’s inherent to this market that should account for any meaningful moves until then, but we will continue trading in response to what happens overseas until that is either no longer an issue or we come to the realization that it really shouldn’t be an issue.
While economic woes in China certainly do have an impact on many US companies, the overwhelming realization has to be that the US economy is not only Number 1, but also the best in the world at the time being.
There will come a point that the market will celebrate that fact and disengage from moving in response to the Number 2 economy in the world that may have received lots of support from smoke and mirrors.
FOr the rest of the week I would be stunned if I actually made any more trades to open new positions. With 3 opened this week and 2 rollovers and an unusually large number of ex-dividend positions, this had the feeling of weeks from a long time ago.
Hopefully, while I do like the higher level of volatility and the better premiums it creates, I would give some of that up for the chance to make some call sales on uncovered positions.
I know that may be asking for too much, but you never know unless you ask.