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Daily Market Update – November 12, 2015 (7:30 AM)
Well, that was really bad news yesterday. Macy’s had absolutely nothing good to say about itself nor its prospects for 2016, as it sunk to its lowest level in about 30 months. It’s not that Macy’s is necessarily the harbinger of things to come or the leader in retail, but in many ways it can be and it is, respectively. Even if it isn’t either of those, you would never know, based upon how most every other major national retailer followed suit, as Macy’s itself fell about 14%. There’s still lots more to come from the retail sector, but you would have to think that most are going to follow Macy’s experience, although maybe some other, somewhat lower end retailers don’t count on foreign tourist’s spending quite as much as Macy’s may. Still, their gloomy outlook for 2016, even when discounting decreased foreign tourist spending, doesn’t seem to be consistent with the idea of a resurging consumer with more money to spend than has been the case for the past few years. Maybe they’re just spending it somewhere else, but we’ll find that out soon enough, unless everyone is losing substantial market share to on-line retailers, as Amazon has surprised everyone with profits the past two quarters. While I ended yesterday thinking that there wasn’t too much likelihood of spending down some of that cash pile with what little remained this week, the sheer size of the decline in Macy’s has to make one at least curious about wondering just how much more short term risk could be involved if entering a position right now. As mentioned the past couple of days, with already a number of positions set to expire next week as the November 2015 cycle comes to an end, and as this week was nearing its own end, right now any new purchases would be more likely to look at a new definition of what constitutes “short term.” Instead of looking at weekly options, there may be reason to look at those expiring the week after the monthly expiration week. That would take things to Thanksgiving week and beyond. Perhaps enough time to show some recovery in retail, such as Macy’s, at a time when even feeble recovery could be sufficient to get a decent return, particularly if also looking just a bit further out in time, as an ex-dividend date is at hand on December 11th, as well. Otherwise, with only a single position set to expire this week, there’s not too much else to be thinking about unless some other great opportunities may seem to pop up and find a way to be convincing enough to part with some cash at a time when the market seems to be pretty tentative and now could easily find a way to give back some more of what it had gained since the beginning of October. |
