Daily Market Update – October 20, 2015 (8:45 AM)
The earnings are flowing in as the morning is ready to begin, but the biggest news and the biggest moves are coming from companies with news unrelated to earnings. When stock prices are low corporate opportunists and activists take center stage and companies take actions that they probably should have taken before the barrel was placed against their head.
As far as the earnings go, so far they haven’t been terribly exciting and they haven’t had too much impact on the market. Companies are still attempting to mitigate bad news with announcements of share buybacks, but that’s having less and less impact, even as buybacks make much more sense at lower share prices and should be more applauded by investors now than when being undertaken at record highs.
This morning is shaping up no differently and the excitement level is hard to find, as there is no pattern developing in the health, quality and forward looking nature of earnings being reported.
What does appear to be a continuing pattern is that the market is punishing unexpected bad news much more than it is rewarding unexpected good news.
With the FOMC getting ready to meet next week the days are dwindling to just a handful remaining for any meaningful economic data to be released that could reasonably be expected to lead to an FOMC decision to raise interest rates.
Given the way in which the market turned around its thinking and again decided that a delay in that rate hike was a good thing, I would imagine that as we draw closer to the FOMC meeting we could expect another in a series of higher moving days.
As long as there’s no overwhelmingly negative picture being painted by corporate earnings that next move higher may be coming. Ironically, even a sad earnings picture may end up being a good thing as far as minimizing the likelihood of a rate increase, so traders may actually be indifferent to earnings this time around.
That may explain the relatively listless trading of the past week.
I was happy to find some potential investment opportunities yesterday and now wouldn’t mind if that listlessness continued in order to have a better chance at seeing those positions either get assigned or be in position for rollovers.
With what has become the new normal for new positions opened in a week, maybe even a little bit higher than the new normal, I don’t expect to part with much more cash for the week. However, every time that I think that’s going to be the case it seems that something pops up to change my mind. Despite the market having impressively recovered most of the large correction since the end of August, there still appear to be opportunities. I don’t have too much free cash to explore those opportunities, but as I’ve done for the past few months, I don’t mind borrowing from myself with the intention of a quick repayment of those loans.
So far, that short term horizon has been working out since the market took its plunge some two months ago.
With only one position expiring next week, I’d like to see more assignments than rollovers, but either would be just fine. In fact, the one position expiring next week is one that I’ve been trying to rollover for the past week and am hopeful that I can still keep that trade alive, as it has been a classic revenue machine despite having had very little net movement in share price.
Otherwise, this week, just as has been the case for the past month or so, has been dictated by energy and materials. Thus far, the past few days have been negative in those sectors, but as also has been the case over the past few months, that’s bound to change and then change again and again.