Daily Market Update – April 19, 2016 (Close)
Yesterday stocks showed that they could go their own way apart from oil, oil oil’s rebound later in the day didn’t hurt things.
This morning’s futures had stocks and oil once again moving hand in hand, as what should have been the expected disappointment coming from Doha is going to be forgotten quickly.
Back in the days, OPEC was a real cartel and the countries comprising it were relatively united in their aim to squeeze the most out of the world.
That changed when Saudi Arabia decided it might be a bad idea to seriously injure the economies of the nations that actually buy your product. It also changed when Saudi Arabia saw other nations with increasing production, who found it necessary to keep production going to keep themselves in power.
It’s hard to have a cartel with any real influence when there is no real agenda anymore,
It’s also hard to artificially try to influence price when there are producers around the world who aren’t part of the club or won’t follow the edicts.
But this morning oil was again higher and WTI was again above $40 and likely to move higher, although with continued volatility.
It did move higher today, but stocks were ambivalent about following and gave up much of their earlier gain on the day.
Ultimately, it’s just a question of when stocks will come to the realization that more expensive oil shouldn’t really be a catalyst for higher stock prices, unless the oil price increase reflects real growth in demand.
But, that’s a question for another day.
For now, earnings are coming in and the market seems to be reasonably happy if lowered expectations are met and seems not to care about the less than optimistic guidance that is being delivered to date.
Today’s market wasn’t helped too much by IBM, but the broader S&P 500, which shouldn’t have been impacted as much as the DJIA by IBM’s weakness, had other issues to contend with, such as Google and Netflix.
I made one purchase yesterday and was ready to make an additional one yesterday and again today, but that one, too, was in the retail sector.
That gave me some reason for pause, because a few years ago I was overweight in retail and it took some time to dig out, so I’m not necessarily eager to be in the same position, as I’m now still overweight in oil and commodities and have been waiting the longest time to see some sunlight.
With a couple of positions set to expire this week and one ex-dividend position, I’d still like to generate some more income on the week, so I won’t yet put the wallet away.
On the other hand, I don’t mind the passivity, as long as it sees the market moving higher and pulling me along with it.
I’d be especially happy if some of the market’s move higher continues to be disproportionately based in oil and commodities, as that’s made 2016 a good year to date, just as it had made 2015 not such a good year. Today it was definitely weighted on that side of the equation, as oil and commodities continued their climb.
With volatility falling, there’s less reason to look at longer term option contracts at the moment, although I’d still love the opportunity to get some call sales on uncovered positions and may prefer to get something rather than just let those positions sit there and do nothing.