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Daily Market Update – November 24, 2015 (7:30 AM)
Yesterday was another flat day. Lately, those have been coming in-between big days up or big days down, as past weeks have been anything but flat. What past weeks have done is to demonstrate just how confused everyone has been as the FOMC has been sending all kinds of messages and not really following through with anything. If you cast the FOMC in the role of a wise parent, you know that consistency would be the least you might expect from those who know just how important that is to those prone to infantile behavior. You can understand why the market would then be very hesitant, especially since it had gotten very used to and comfortable with the FOMC having long given every indication that interest rates would stay low, all while the Federal reserve was helping to depress the competition by buying bonds. This morning the futures are trading moderately lower as we await the GDP release for the 3rd Quarter and any revisions to previous months. If there are upward revisions, you might think that markets would be consistent and then react positively, as their latest position has been to finally accept an impending interest rate increase. But consistency hasn’t been much of a characteristic displayed by anyone. If the FOMC can’t be consistent, why would you expect emotion charged investors to be so, even as their trading algorithms are supposed to dispense with those kind of human frailties? Even though software driven, those human written algorithms have to have some component of either fear or greed, or most likely both, contained within them. They may be tempered and relatively reasoned, but they’re still there, somewhere in that code. With 2 new positions opened yesterday and expiring this week, I would really prefer that the market move higher and not take today’s step backward. I would have much preferred a step backward to have happened yesterday, but there still appeared to have been some short term bargains, despite the market not giving back any of last week’s large gains. With little cash remaining, although I’m willing to dip into my excess reserves and essentially borrow from myself, as had been the case in the past few months on several occasions, now with just 3 days left to the trading week, the returns on weekly options are really going to be smaller and likely too small to be attractive. So the likelihood is that I’ll be a watcher and be hopeful that there may be some opportunity to either sell calls on uncovered positions or even rollover positions not scheduled for expiration this week, such as was the case yesterday with Holly Frontier, which has become a nice cash cow as it bobs up and down amidst all of the energy sector craziness. With that kind of a backdrop, there may not be much to do until we get to Friday. At that point, I hope that some of the expiring positions are in contention for assignment, but as is usually the case, I would also be happy with rollovers, especially if they can be done again and again, as has been the case with Holly Frontier for the past year. So instead of being an active participant today, my expectation is that I’ll be sitting back and watching just what kind of lessons investors have learned as the GDP is released and we all may get a better idea of just what the health of the consumer may be, even as some retailers have painted a pessimistic picture for us. I suppose that the inconsistency of the data can take some of the blame, too.
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