Daily Market Update – February 25, 2016 7:30 AM)
Yesterday’s turnaround was great, but it was also disturbing.
It was just more of the stock market blindly following oil.
As oil was sharply lower in the morning, so, too, was the stock market. It was threatening to make it 300 points lower at one point in the late morning.
But when oil moved higher, the stock market reversed course and recovered all of that loss and more.
So that wasn’t so good unless you care about your bottom line, so I guess I won’t complain.
But that now leaves us even more confused this morning as a double blow is facing the stock market’s futures traders as Shanghai was about 7% lower and oil is again lower this morning and stocks are basically unchanged, maybe even a bit higher in the early part of futures trading.
With hints that there could finally be a disssociation between stocks and oil then becoming false within a day, it’s hard to have any idea of what any of these things mean.
Tomorrow, with the GDP Report being released, another factor can possibly get thrown into the equation to either soothe, confuse or frighten.
That factor is going to be interest rates.
If the GDP seems to show that the consumer is awakening, when coupled with last week’s CPI, there could be reason for another small interest rate increase when the FOMC meets in a few weeks.
If the initial response to that idea is fear, I don’t think I want to be watching things if, coincidentally oil and Shanghai again decide to go much lower in tandem tomorrow.
With the large loss on Tuesday and the reversal yesterday, I just would be very happy to see some of the confusion take a rest and see some of that consolidation, even if only for a few days or even if only lasting a week.
A little of that consolidation, while volatility induced premiums are still at decent levels, would make it much easier to invest parked cash on a short term basis.
With nothing to expire this week and with no new positions opened, while I do want to see that stability, at the moment I wouldn’t mind some more unbridled and unjustified enthusiasm, though.
I don’t mind seeing the bottom line increase, but would be much happier if that increase also brought some trades along with it to create a cushion, ideally an additive one, to whatever the broader market is doing.
So far this week has a nice cushion already, but I would love to get that cushion even bigger and really back on track to more consistently have relative out-performance, but it generally takes trading to do so and not passivity.