Daily Market Update – October 6, 2015 (Close)
Last week it was down big, take a break, up big, take a break and up big following a big intra-day reversal.
This week got started with an up big kind of move and the following day looked as if it might be another of the “take a break” kind of days, but lately there hasn’t been too much of a reason for much of anything that we’ve been seeing.
As long as you ignore the impact of a single stock on the DJIA, which helped the index move higher, the S&P 500 went lower, but only mildly so, making it a breather kind of day.
Yesterday’s 300 point gain in the DJIA has left the S&P 500 less than 7.5% below its all time highs. That means that it had moved about 4.5% from its intra-day low on Friday to its close on Monday.
That gain came after the initial reaction to the poorer than expected Employment Situation Report data was released and there’s not much of an explanation to account for that large magnitude change in direction other than a change in the market’s thinking about prevailing economic data.
We may begin slowly getting some idea of what corporate America is experiencing as earnings begin again this week and in a normal world that earnings news would get appropriately translated by stock investors, but it seems as if it’s been a long time since there has been a normal world for those stock investors.
Some consistently good numbers on both top and bottom lines would do wonders for investors who surely would come to appreciate the fruits of an expanding economy more than the prospects of a fourth phase of Quantitative Easing.
It’s even hard to understand how people could have been talking about such prospects literally just days after having talked about how an interest rate increase was inevitable and could have come as early as in just a few weeks.
As Doug Kass so frequently has been saying of late “the market has no memory.”
Ultimately, it’s much better when the market does have a memory and is rational, but that may be asking too much.
Yesterday, despite the sharp climb higher, I found some reason to add some new positions. I usually like to do so when markets or individual stocks are heading lower, but the opportunities still seemed opportune.
I don’t usually suffer from the “fear of missing out” and certainly had no expectation of the market continuing its torrid 2 day rise, but the 2 new positions opened did seem to be reasonable safe trades for a short term horizon.
For the longer term, there was also some opportunity to sell longer dated calls on some uncovered positions, but the premiums are already beginning to show some relative decline as volatility has fallen quite a bit as the market has taken that rapid climb.
History hasn’t been one to warrant the belief that large and rapid climbs higher are sustainable, so whatever opportunities may arise to sell calls on non-performing assets may be worth taking while waiting for the market to actually create a more sound foundation upon which it can begin seriously heading and staying higher.
With plenty of time left in this week I still wouldn’t count out the possibility of adding some more new positions, but would much rather be in a position to watch existing assets appreciate and maybe get some more opportunity to put the lazy ones back to work or even simply rollover some that might be in line for assignment.
Ultimately, it’s all just money and it may not matter what the source of the money was, as long as there’s no white powder residue.