Daily Market Update – July 25, 2016 (Close)
Ordinarily, any week with both an FOMC Statement release and the release of the latest GDP data could be expected to be a game changer.
No one is expecting that this week and neither am I, but that could be a mistake.
The FOMC, when it last raised interest rates in December 2016 didn’t exactly have the most overt data on its side. At the moment, the data isn’t great, but it may be heading in a more positive direction than last time.
The FOMC has made it clear that a rate hike need not be tied to a scheduled monthly meeting and August is an off month.
That raises the possibility that there could be a rate hike this month or any time between Wednesday and the regularly scheduled meeting in September.
A hike now would take lots by surprise and would likely not be viewed in a positive way, at least in the short term.
With lots of itchy trigger fingers as the market is sitting at all time highs, there could be lots of reason to sell and take profits.
That’s especially true if you think about the facts.
One fact that may be germane is that in all of its history, the market had only gone on to add 2% or more to an all time closing high on 3 occasions.
You might want to do some quick math to see where we currently sit.
I sit with only 3 expiring positions this week and two of those are in the same position, but on opposite sides of the coin.
One short call and one short put and with earnings in that position being reported next week.
While I wouldn’t mind spending some money this week to supplement the 3 ex-dividend positions, I think that I’d like to see an assignment of the short call and an expiration of the short put.
If not, then the next tactic is to roll those over, likely beyond the next week, but being mindful of an upcoming ex-dividend date, as well.
The futures weren’t doing very much this morning and as much as I might want to supplement the week’s income, I was reluctant to stick my neck out too far, still sitting at such lofty levels.
I expected to be a passive watcher as the morning got underway and to weigh the options, but I also expected to become a buyer on any downside movement.
Instead, even as the market was hitting triple digit losses, I couldn’t see anything worth the risk, but was very happily pleased by the opportunity to sell some calls on an uncovered position, even though having to use November calls.
We’ll see what tomorrow brings.
Maybe there will be a reason to part with some cash, but for now, I’ fine with just watching and treading water.