Daily Market Update – October 12, 2015 (8:45 AM)
This is a week that has the Shanghai market in China back in action and starting the week off with a large gain and the People’s Republic of China putting out comments saying that the correction is over.
History shows that it’s difficult to know with much certainty when an economy or when a stock market is really at an inflection point and braggarts have a way of getting humbled very easily if they own up to their own comments.
This morning begins the first substantive week of earnings with the financial sector getting things started. As long as using history as a barometer, it’s pretty clear that the financials don’t necessarily tell us too much about the rest of the economy.
Over the past few years as the market has been in recovery, we’ve had lots of quarters with earnings jumping out of the gate as the financials had roared back, but the retail and industrial portion of the S&P 500 didn’t necessarily follow along in reporting great revenues.
Increasingly lots of attention is being placed on both the top line and the bottom line, with the top line having recently become more important. That’s because every one now admits that the bottom lines have been artificially altered by all of the stock buy backs and it has been nearly impossible to compare one quarter to a next when the number of outstanding shares has really been a moving target.
When that point comes that the top lines of companies do start to grow, we are likely headed for another leg higher and are likely to finally give the FOMC some reason to act.
This wee does have a Retail Sales Report and that may give some glimpse into what is being experienced within the economy, but the more telling information will come in a few weeks as the major retailers begin spinning their numbers.
With some money in hand from a fair number of assignments last week and with only a small number of potential assignments or rollovers this week, I am very open to adding new positions, but will likely be looking at weekly expirations.
This morning the pre-opening futures are very flat, having ended last week in the same way, after accruing some nice gains for the week. The market has essentially been on an upward climb since the mid-morning turnaround on the Friday of the last Employment SItuation Report.
With the S&P 500 having hit a low point of being nearly 12% lower, it starts this week only about 6% lower.
That climb has been great, but you do have to wonder about those straight shots higher. The market rarely goes on to gains in that manner. It usually puts together lots of incremental pieces that just create a cumulative effect.
As with large declines, the market usually tries to fill in the gaps and there is certainly a big gap right now.
Part of the reason for that gap may be that markets have again gone to believing that the delay in an interest rate increase means that their party ways can now continue. In other words, bad economic news has created an environment that’s perceived to be good for the markets.
What that means is that we will likely once again be faced with a market that will then look at good economic news as being bad for markets, just as we had finally started interpreting news on its face value.
So there may be reason to buckle up again and maybe not spend all of that money that recently showed up after last week’s assignments.