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Daily Market Update – April 14, 2016 (7:30 AM) The gains from yesterday added to the previous day were already pretty nice to look at. They would have been even nicer if Monday hadn’t given back all of the same magnitude of gains and actually lost a little. This week, much of the strength in stocks has come without the push from oil, although there was a boost when some rumors started regarding Saudi Arabia’s and Russia’s changing position on production cuts. That rumor could become reality as we get ready to start next week, or they could fall by the wayside as they did in February. For now, though, focus is on earnings. Even as JP Morgan Chase may have lifted markets yesterday, the news wasn’t really that good. It was just a case of announcing top and bottom lines that were better than expected, but no one expected much. Although the numbers were better than expected, guidance wasn’t very positive. So at least that means that JP Morgan could be setting itself up for another strong showing 3 months from now. That could really be the case if interest rates start to show some life and bad loan provisions in the oil sector don’t face continuing pressure from falling oil prices. While we may await the news on an agreement to cut back oil production, there are lots and lots of earnings reports ahead for the next few weeks. Although it won’t be for a while, the real key may be when retail begins to report in a few weeks. Given yesterday’s disappointing economic news that may be more in line with the Atlanta Federal Reserve’s lowering of its GDP forecast last week, there may be reason to think that the FOMC may not be raising rates anytime soon and that the market will react in kind. With yesterday’s gain, 2016 is no longer in the red. The question may be whether there is another 10% move in store in one direction or another. The past few days have been gap moves higher. Depending on how you look at things, that’s either the start of a sustained move higher or the basis for a swift drop. You can find evidence to support both camps, but I’m hoping that some reasonable earnings news will be an impetus to move higher and maybe sustain the move, especially if retail reflects some consumer participation. With some new calls sold yesterday, I’d love to do the same today. Faced with a rare assignment tomorrow, I still may be interested in rolling that position over, because the premium may end up being as good as any alternative, but with far more downside protection, so be prepared for a potentially unusual trade. Those kinds of trades were very common when volatility was high across the market. When volatility is high for an individual stock, the same concept can apply, so why not? |
