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Daily Market Update – October 7, 2015 (Close)
After Monday’s 300 point surge it was Tuesday’s turn to take a day off, following the previous week’s pattern. If that pattern were to hold true, the expectation would have been for today to be a day when the market gave back its earlier gains of the week. Instead, though, the morning’s futures trading had been pointing toward what could have been a triple digit move, but instead of being lower, it’s 100 points higher. The day actually finished exactly that way, even after having given up those gains mid-session, but the bottom line was that there was resilience. That’s not been the recent trend as the market has now begun to move further away from the 10% correction level. Following yesterday’s close, the S&P 500 is now less than 8% lower as we head into the 8th week after the sharp declines that took us to a correction. Following today’s close that was now down to about 7% below the summer’s highs. With earnings season starting tomorrow and really getting underway next week, there’s very little enthusiasm for the results that are expected to be reported. The last two rounds of earnings haven’t been great as currency issues have kept revenues down and the impact of share buybacks on per share earnings is stabilizing so that artificial boost isn’t continuing to improve that metric. So expectations are low and prices, by and large, are already low, at least in relative terms. While it’s often a mistake to believe that prices couldn’t go any lower and it’s very easy to get sucked into what’s known as a value trap, selective buying at and around the 10% market decline level has, thus far, been a reasonable approach. While i expect that we may see some price moves higher as earnings are released, it would be easier to have a level of confidence if markets could give back some of those recent gains and move closer to that 10% correction line as earnings are getting ready to be released. Before thinking too much about next week, though, we still have to get through this week. Barring some drastic moves lower there is a good chance of seeing some combination of assignments and rollovers, but I don’t think that there’s too much reason to add to the week’s new positions as we await the end to this week. For those over-exposed to energy and commodities this week has offered some catch-up performance just as previous weeks have under-performed, but points out how patience can be a virtue, even if a very frustrating one. I wouldn’t mind seeing that unusual relationship of increasing energy and commodity prices and the market moving higher continue, even if it meant paying more at the pump and elsewhere. I certainly wouldn’t mind ultimately extricating myself from some of those energy and commodity positions, though. The rest of the week has little economic news to move markets, although Jobless Claims are released tomorrow morning and FOMC Minutes see the light of day in the afternoon. Those minutes are sometimes market movers as traders and algorithms pore over each and every word looking for insights into what the FOMC’s level of conviction may be on certain actions. Despite the fact that there isn’t a necessarily good correlation between what’s found in those minutes and what actually transpires in the near future, traders haven’t given up on them as opening the door into the collective mind of the FOMC. So there may be some gyrations tomorrow, as a result, but they shouldn’t be too long lasting. at least hopefully not long enough to alter the hoped for results as the week’s option contracts come to their end. |
