Daily Market Update – July 12, 2016 (Close)
This morning’s futures trading was telling us to expect that the all time closing and intra-day highs on the S&P 500 were safe.
That’s pretty unusual behavior not to want to test those old highs, but the predominant wave of opinion was so strongly that of finding no justification for the market to go higher that there was probably no option to do anything than to go higher.
This morning’s futures were looking to do just that, but with some degree of moderation.
That moderation gave way as the day did, as well and the S&P 500 closed at almost their highs for the day.
Ultimately, if new highs are going to be sustained it’s far more likely to happen if the path comes through moderate moves higher, rather than a breakout.
Today may not have been a breakout, but if you add the last 3 days together, we are certainly getting there.
With earnings now about to get into gear in a couple of days, despite some early earnings having started at yesterday’s close, the question will become just how much of a dampening effect might come from Brexit related guidance, especially from the financial sector.
The financial sector really kicks things off on Thursday and we get some idea.
Rarely does a weak financial sector at the time of earnings put the market into a happy place.
So there may be a battle ahead for the hearts and minds of investors.
For my part, I just want to leave the July 2016 option cycle in a few days with some assignments and some rollovers.
I’m not thinking very much in terms of what awaits, but rather what is in the here and now.
With the chance of some of those assignments and rollovers and sufficient uncovered positions, I wouldn’t mind a breakout and would certainly take any opportunity to sell calls on those uncovered positions in the belief that any breakout would be only a blip.
For that reason, I might consider longer term call options on those uncovered positions and adding some dollars to the “at cost” strike levels.
In theory, that sounds good, but first we need that breakout.
With earnings ahead and the FOMC to follow in a couple of weeks, there may be lots to give the market something to think about and maybe lots to make it move in either direction.
I just want to be ready and not flatfooted as 2017 is not too far around the corner at this point.