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Daily Market Update – May 23, 2016 (Close) This week began with far fewer earnings reports to give us much to think about, but it does have lots of Federal Reserve Governors with little to do, other than to give speeches and make appearances. In all likelihood they will continue to add to the belief that an interest rate hike could happen in June, but they could just simply be setting the table for a July increase. Yesterday and today, though, they really seemed to be taunting investors, saying that the rate hike could come before it was obvious that it was warranted. That sounds just like the case back in the final months of 2015 and we’re still waiting for the obvious to make itself known. Meanwhile, even as earnings reports are slowing down, there will be a GDP release on Friday and it comes just as the market gets ready for a 3 day holiday weekend, So what could possibly go wrong as the June 2016 option cycle gets ready to begin? Let’s see. Federal Reserve Governors talking like hawks coupled with a stronger than expected GDP after a couple of months of disappointing figures could easily put the market in a bad mood. That is, as long as they still think that early signs of economic expansion is really bad news. With the retailers having given their own disappointing news, it is a little difficult to see just where the expansion is coming from if the consumer isn’t participating. With continued reassurance that the FOMC will be led by data you might think that a June rate hike would be unlikely, but now, for those who deal in odds, the talk is that there is now a 30% chance of a June rate hike. That changed from less than 5% barely a week ago and that was this morning before more hawkish words hit the news feed. So as more uncertainty is here to start the week, I have some money to spend after a couple of assignments on Friday. With 2 ex-dividend positions this week, each with 2 lots of shares, I would still like to see a chance of generating some more income, but there isn’t very much to give some confidence, unless the market does decide to interpret the likelihood of that interest rate hike as being good news. At the same time, if oil continues to move higher, but because of contracting supply, you would also have to believe that the market would take that as a negative, but that hasn’t been the case in 2016, so it still remains anyone’s guess how the market will balance competing and conflicting factors. There are a number of positions that I do find attractive heading into this week, but I’m not entirely convinced that i do want to spend the money unless seeing some sign of a rational market. That may be a tall order. Today there was no reason to buy into either side of any argument as the market traded in a very narrow range and finished the day virtually unfinished. Considering a little bit of weakness in oil, maybe the final close was a bullish sign or maybe not. |
