Daily Market Update – November 23, 2015 (9:15 AM)
After a gain last week of about 3.5%, almost erasing the entirety of the loss in the previous week, this week gets off to a start that has lots of news behind it.
China has doubled its stock margin requirements and a $150 Billion proposed buyout in the pharmaceutical sector are enough to get this trade shortened week started, as earnings are coming to a trickle, at least for systemically important companies.
Ordinarily, we know what the impact is of tightening margin requirements in speculative markets turns out to be and it typically puts lots of additional downward pressure on stocks or commodities, even after the downward slide in price has already been long underway.
But that doesn’t seem to be the story coming out of China as the week begins, as we may have to get used to paradigms not necessarily being paradigms, anymore.
Instead, that market started the week flat, just as our futures market appears to be doing the same thing, after having come off of that 3.5% gain.
Over the last few weeks the pre-opening numbers have had little to no relationship to what has ended up happening once the day got started for real.
What we haven’t seen over the past few weeks in the pre-opening sessions is the kind of large moves, in either direction, that have been so frequent lately.
With that being the case and with this likely to be a volume deprived week, you can not be excused for believing that just about anything could happen this week.
With a little bit of extra cash to spend, but only two expiring positions for the week, if I do let go of some of the money in the cash reserve, I’d like to think in terms of a weekly option expiration.
The problem is that as a trade shortened week, the option premiums are going to be somewhat less than they would be during the course of a regular week.
The ideal day to make a trade, as far as those premiums would go, is always on a Monday, but even more so this week.
While I am willing to make some trades, my preference, as it almost always is, would be to see some decline to start the day, but I could also be enticed if there is a sense of boredom in the markets, as well.
Since there’s no really big economic news planned for the week. there probably won’t be much to test the market’s seeming support of the FOMC’s recent hawkish tone, so if there are any big moves, and those have been the norm lately, there’s not too much reason to suspect that there would be a rational basis for whatever it is that we see this week, unless what we see is exactly what the futures are suggesting.
I wouldn’t mind a quiet week of consolidation, but I would like to have some opportunity to generate some income, so I’m hopeful that some pessimism or profit taking sets in, but does so early in the week.