Daily Market Update – November 4, 2015 (7:30 A.M.)
After 2 days of really nice gains, despite some give back in yesterday’s trading, the S&P 500 is now sitting only about 1.5% below its all time high.
There was certainly nothing to suggest that the market would have taken the opportunity to spend the past 2 days in a celebratory mode, especially since the final day of this week could be an antidote to the happiness.
It’s really hard to understand how the market will react to Friday’s Employment Situation Report, but it seems that everyone is again willing to accept the fact that the FOMC will either be really ready to raise rates very soon, or at the very least will increase their hawkish tone, as there’s little reason to believe that the upcoming Employment Situation Report won’t reach the fairly feeble threshold that was just set.
The difficulty in predicting what may happen at the end of the week is that there could be a “buy on the rumor, sell on the news” kind of situation being set up if the number is well above 150,000, as it had been for much of the past 3 years, other than last month.
Alternatively, if the number continues on the very low side and maybe teeters near 150,000 again, there may be some concern.
If the number is really strong and especially if there are revisions to last month’s low number, there could be reason for even more buying on the basis of “good news is again good news,” with traders believing that rates could possibly be raised even as early as December.
Friday will be a big day, but next week, as national retailers report, could be even bigger, if the top line numbers are strong.
While the bottom line is important, right now the real focus is on whether people are spending money and not as much on how businesses are managing their businesses.
With only a single purchase for the week and with all of those prospective dividend plays being ex-dividend today, I don’t think there will be too much more activity for the week, other than to keep an eye on those positions due to expire in a few days.
With the unknown of Friday’s Employment Situation report coming up and with volatility back down to its usual low levels, there’s very little reason now to think about taking the risk of 3 day options, as the reward is so very low. Any new purchase now would really have to look at an extended or a monthly option to be remotely appealing. But with big news looming on Friday, I don’t have much reason to get in front of that news.
At this point, I would much rather see the market continue the week’s trend and move higher. I don’t mind going along for the ride, especially if energy is part of it, as it was yesterday and being able to roll over existing positions or see them assigned.
If that’s the case, then the pattern starts over again and the wish is for some pullback to start next week, perhaps with more cash in hand to pick up relative bargains, as the evidence will continue coming in to suggest that the economy is heating up and may perhaps serve as the most appropriate catalyst for the market to begin testing and exceeding its highs.