Daily Market Update – November 9, 2015 (7:30 AM)
Last week was another in a series of weeks with the market moving higher as it now seems as if it is fully ready to accept an increase in interest rates, maybe as early as this December.
This week may provide more of the data that the FOMC is seeking in order to justify their decision, but after last week’s Employment Situation Report that came in about 80% higher than what the FOMC indicated would be a level sufficient to warrant such an increase, it seems fairly certain that decision will be made very soon.
The data that’s coming this week will be from a number of national retailers and it will continue through to next week. Very much on an anecdotal level, I went into two big box retailers yesterday and they were packed
Also coming this week, at the very end of the week, will be the official Retail Sales figures. The government’s data never seems to be as compelling as what the CEOs and CFOs of those national big box retailers have to present.
What may really be key this week is not so much the top and bottom lines for retailers, although it would be nice to see some improvement on the top lines and a bottom line that is less manipulated by stock buy backs, but forward guidance. Most retailers tend to move on their forward guidance, which typically compounds the impact of the earnings that were just reported.
Insofar as the data being reported is already at least 3 months old, what may be far more important is what trends those retailers may be seeing in their stores.
They tend not to be overly optimistic when providing guidance, so any positive tone should be a signal that personal spending is finally on the move higher and the FOMC is sure to take note.
What we’re looking for is that inflection point that takes CEOs from cautious to optimistic as they finally see a consumer that feels confident that their new job has some security and now they are willing to make up for lost time not having done much in the way of discretionary spending.
As long as the market is going to continue interpreting good economic news as being good for the market, that should be a signal to move higher.
This morning, the pre-open futures are on the weak side, but only mildly so. Following last week, there’s not too much reason to pay attention to the early direction of trading.
On the other hand, after a quiet week of adding new positions last week and with no positions expiring this week, I would like to take cash reserves and do something with them.
After 2 assignments last week I’m at my highest cash level in quite a while, although I’d like to see it get even higher. However, that has to be balanced with a desire to generate some weekly income.
With any weakness to open the week, as opposed to last week, I would be happy to part with some of those cash reserves.
With volatility remaining at such low levels after another week of the market having moved higher, I’d again like to focus on positions also paying dividends this week or next in an effort to supplement the cash stream in the coming weeks.
With a number of positions set to expire next week, the likelihood is that any new purchases this week will use either weekly options or seek to bypass the coming week and go straight to the first week of the December 2015 option cycle.