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Daily Market Update – February 24, 2016 (Close) Everyone knows that at some point things are going to change. Ar some point oil is going to start moving consistently higher. Also, at some point, the market will stop following oil. At least it will stop following in the same direction. The questions are when all of this happens and particularly when does the stock disassociate itself from its direct relationship to oil? Hopefully, the answer to that last question is that the stock market makes that disassociation fairly late after oil has started its reversal. For all anyone knows, today may have marked the reversal in oil as oil reversed its sharp decline and itself closed higher on the day and the market did precisely the same in very impressive fashion. But if the stock market comes to the realization that an increase in the price of oil is bad for growing consumer participation then we end up with the worst of all worlds. That would mean that the market followed oil lower and at some point started going lower as oil went higher. This morning, though, it looked as if the world that we’ve come to know was still intact. Just as yesterday oil futures carried the market sharply lower, this morning oil futures were again carrying the market sharply lower. If the early futures trading in oil had held, it would have marked a 2 day decline of nearly 10%. Fortunately, while oil and stocks have been traveling in the same direction for far too long, the magnitudes haven’t been in a one to one relationship. That mid-day reversal helped both oil and stocks a lot. After today it looks even more as if this week is going to end up being a very, very quiet one. Hopes that I had on Monday of being able to sell some calls this week on uncovered positions are getting less and less likely of becoming reality, although the action this afternoon still gives some hope. But with a little bit of cash in hand, I still don’t feel compelled to put it to work in what appear to be bargains. At least not until there’s real reason to believe that those bargains are going to be transitory. The previous week’s worth of gains has by far been the best for the past 3 months, but even weekly options couldn’t have withstood the pressures of the market’s need to return those mid-week gains. So, for now, it’s more sitting and waiting for some evidence that there is a reason to feel some sense of optimism. There don’t appear to be any catalysts awaiting, but we also need to get rid of some over hangs, like the fear of another interest rate increase. Maybe Friday’s GDP release will help us move on. But I doubt that will be the case so quickly. . . |
