Daily Market Update – September 17, 2015 (Close)
The last couple of days were pretty impressive, especially given that today’s FOMC Statement release coming at 2 PM and the ensuing Chairman’s press conference report still held some uncertainty.
What has been surprising is that it suddenly seemed as if investors no longer feared the idea of an interest rate increase and that they made that change of heart so quickly.
But it’s also surprising that they seemed so certain of what the FOMC would do this afternoon.
At best, the messages from the Federal Reserve Governors have been mixed and the data has been less than compelling, but there has really been a very palpable change in acceptance of what can only be validation that the economy is improving,
This morning, less than 90 minutes from the opening of trading, the futures were once again subdued, as they have been all week. This morning, as China again had another large market decline overnight, it looked like another day of not caring what is going on there and we continue to focus on our own fundamentals and prospects for the economy.
As the morning was ready to open for trading, the S&P 500 was still about 7% below its highs from exactly 2 months ago, but that’s far better than what has been happening overseas, where there’s still no indication of what will turn things around. At this point, the only thing that should provide any encouragement about the economy in China can come from the earnings reports of US companies doing significant business there, if they report stability or growth in their revenues coming from China.
At the very least that would indicate something about the economy that may have much more validity than anything that the government’s official numbers can provide. But still, that doesn’t mean that their stock markets will follow suit.
But so long as that remains the case and the Chinese markets lack the ability to provide investors confidence, that can only be good for our own markets, especially if the Chinese economy continues to support business activities of US companies.
To a large degree, it may be that seeing the meltdown in China has been the factor that finally caused US investors to come to the realization that a small interest rate increase by the Federal Reserve may not be such a bad thing, after all, given what may be going on in the rest of the world. At least that interest rate increase is a reflection of the fact that we’re heading in the right direction and have a lot more transparency about everything than can be readily found elsewhere.
For now, that may be next week’s story, as all that will matter this week and certainly for the last 2 trading days of this monthly option cycle was to have been that FOMC Statement.
So, no change in rates and the statement includes a comment about events in “overseas markets.”
Who else could they be referring to? So now the mandate is being expanded overseas?
What ended up happening was that a 170 point gain after the announcement of no change ended up going into neagitive territory as Janet Yellen’s press conference came to its end.
From there, it actually got worse.
No one expected that, especially since markets have always climbed during a Yellen post-FOMC Statement release press conference, except for the very first one.
So we’ll see what the mood will be tomorrow, including what the reaction will be in those overseas markets greeting us when we awaken.
Even though the past few days have seen a large drop in volatility, I’ve been glad to see some recovery from the 10% decline that we had and would be happy to see things stabilize at this level for a while as we get ready to head into yet another earnings season, which is now barely 3 weeks away.
For the rest of the week it’s otherwise just more of the same.
In the event that the market decides to add more onto its gains for the week after digesting FOMC Statement, I’ll look for any possible opportunity to roll something over, or better yet, sell some calls on new options, but for now I’d be happy seeing whatever can be assigned, actually getting assigned.
While anything is still possible, at the least it does look as if a couple of positions will be assigned this week, helping to add some cash to reserves as the new monthly cycle gets ready to begin in a few days.