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Daily Market Update -January 12, 2016 (Close) Yesterday morning’s futures offered some promise even as China plunged another 5% and as oil was taking its biggest one day hit in quite a while. As long as the market continues its odd relationship with the price of oil, that should have been a potent one – two punch, but the futures yesterday morning held dome promise. Those futures weren’t pointing toward any meaningful kind of rebound, but at least they were showing some strength. That strength did deteriorate during the latter phases of the futures session and at mid-day there was a substantial loss, but the market did recover and closed near its highs. The gains yesterday were a little narrow and the S&P 500 was flat, as the DJIA showed that gain, but still, based on the first week of 2016, even flat was good. This morning again showed some optimism as the early futures were trading, but as with yesterday, the strength was lessening as we got closer to the opening bell. The difference was that they started a comeback before the opening bell and then continued that comeback to the point that the DJIA was up nearly 200 points before losing it all and another 70 points, until turning it all around again at about 2 PM. We haven’t had a day like today in a while. With so many positions set to expire this week, I would have loved to have seen some sustained strength today and even more as we approach Friday, if only to be able to have a chance to get some rollovers done. I wasn’t not looking for any bargains this morning and as is usually the case, as each passing day hits the books, I’m less inclined to open a new position expiring that week, although the higher volatility can offer what we used to take as a week’s worth of premium, now in only 4 days. That was the case today, as I finally opened a new position after it looked to be too good at its price and offered a good premium for just 4 days and another $0.27 in share upside, as well. But as has been the case lately, we’ll just have to see whether it works out according to plan, because predictability hasn’t been the way things have behaved lately. With no real news yesterday and not much this week, other than perhaps the JOLTS and then the beginning of earnings season tonight, hopefully all of the surprises in store for 2016 already happened last week. I know that’s not going to be the case, but 2016 got off to a rocky start as far as international news goes and that didn’t help things in our market that was already spooked by two 7% day declines in Shanghai. Just to show how that’s not going to be the case, there came the news that Iran seized to US naval vessels and was holding 10 sailors. So we’ll see. We’ll see. This morning’s early gains and the later gains didn’t have too much behind them other than perhaps selling weariness, so it’s going to be hard to take the strength as really being reflective of anything. With the consensus being that earnings this quarter are going to be the second consecutive one of decreasing revenues and earnings, any good news could be the catalyst for a strong jump higher as the momentum has definitely turned negative. As that turn has gone negative, there are also sectors that are in bear territory and not just energy and materials. At some point, value investors do come in and they do so in a meaningful way when they think an inflection is upcoming or just been passed. Nothing would do the trick to get them back in at this point than what has been missing from the market for about 7 years and that’s fundamental growth in revenues and earnings. For the longest time earnings have been artificially inflated by stock buybacks and we may not be re-entering a phase when those earnings are going to be less and less helped out by shrinking the share base. Having real earnings would be a great thing and could be just what’s needed to restore some health to energy, materials and commodities. A little inflationary movement would be a very good thing and during those early phases the stock market’s moves are usually leveraged by economic growth. We’re still waiting for that kind of growth to become obvious. I know I am. |
