Daily Market Update – November 16, 2015 (7:30 AM)
After last week’s terrible showing, the market needs some kind of positive news.
The weekend didn’t bring any happiness on the worldwide front that could spill over to begin the week and only injected more uncertainty into international affairs.
There is lots that could happen this week that hasn’t been discounted by investors and could be market disruptive.
With continuing earnings reports from national retailers this week, there isn’t very much reason to believe that what comes this week will be very different from the disappointments of last week that added onto the disappointment that came from the hawkish tones coming from FOMC members.
Both of last week’s major events were somewhat surprising.
While you could argue that retailer earnings , being backward looking, wouldn’t yet reflect recent improvements in the economy, it’s what came after earnings were reported that brought surprise. The real surprise was that forward guidance continued to be sour, with no suggestion that discretionary spending would pick up.
That didn’t seem to be a likely thing to be heard.
The FOMC, on the other hand, while it obviously will raise interest rates sometime in the future, surprisingly continued its hawkish comments, even will events on the ground didn’t seem to justify those comments.
Whatever wonders the market perceived in October came under assault as soon as November began and the market opens this week almost 6% below its all time high, after having mounted a recovery that brought it back to within about 1.5% of that level.
With such a sharp decline last week you could understand why there might be some kind of recovery this week, but based on the pre-opening futures it appears to be a fairly feeble attempt.
The only positive you might get from this morning’s open is that the futures did a terrible job last week in predicting market direction and magnitude.
With little expectation that the remaining earnings reports are going to buoy the market, the only reasonable possibilities for a rally into the end of the year would likely come from some FOMC decision, rather than continuing indecision.
The market could just as easily climb higher if and when the FOMC raises interest rates or climb higher if the FOMC announces it is delaying that increase until an improvement in the economy sufficient to warrant such an increase would finally occur.
Simply announcing that rates will remain unchanged without indicating a more dovish stance would not mollify investors and would keep them unnecessarily nervous.
The latter of those two FOMC actions might bring some happiness for traders, but it won’t last very long.
Meanwhile, with a number of positions set to expire this week, but with lots of uncertainty from last week, I may not be rushing in to make any new purchases.
I’d be very happy to have some chance to rollover existing positions expiring this week or see them assigned.
I plan to be watchful this morning, but as has been the recent case, may look more at ex-dividend trades and might consider expirations of more than a week’s duration, particularly if it looks as if there could be some assignments this week.