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Daily Market Update – May 26, 2016 (7:30 AM) After two big days of gains, the June 2016 option cycle is off to a good start. There’s till a long way to go until the cycle ends and I would certainly like to see the few positions that I have that do expire at that time actually get assigned, there’s one potential obstacle. That obstacle is the FOMC Meeting announcement that occurs 2 days before the monthly expiration. SInce many have given credit to investors coming to grips with a rate increase being announced at that time, there could be some price to be paid if whatever does happen gets construed negatively. Between now and then we will get plenty of economic news, although the very latest numbers suddenly seem to be the kind that would justify an increase. That will especially be the case if this week’s GDP is stronger and we have some upward revisions, and next week’s Employment Situation Report is the same. The latter report could really be the key if there are also some upward revisions to the recent month’s disappointing numbers. About 6 months ago we went through this same thing and investors finally started to embrace the likelihood of a small rate increase. That embrace was pretty fickle once the increase was announced and it took a few months for the market to get back on stride after having a 19% decline. Whether the FOMC helped to slow down a heating up economy by a pre-emptive increase last time, or simply jumped the gun and misread the data, will be subject to interpretation. The same may be the case in just a few weeks. This morning’s futures are flat, but that’s not too surprising after the past 2 days and the big news that could come our way tomorrow. With earnings not being horrible over the past week and oil holding steady, things haven’t conspired against investors even as interest rates may be going higher. With earnings just about done and the embrace in place, we may simply be back to tracking oil prices for a while. I just hope that the move higher continues, regardless of whether it makes sense or not. |
