Category: Daily Market Update

Daily Market Update – October 14, 2014 (Close)

Yesterday was a very disappointing day from start to finish.

It started with an attempt to bounce back from Friday’s late day sell-off that lasted all of about 20 minutes.

It ended with another sell off in the final hour, most of which actually came during an acceleration phase in the final 30 minutes, that resulted in another 200 point loss.

As opposed to the triple digit moves that started three weeks ago on an alternating basis between qains and losses, the predominant flavor now is losses.

Yesterday would have been a perfect day to have seen a strong bounce, even if there was no sincerity behind it. As it was the way stocks went back and forth yesterday between mild gains and losses, before finally seeing everyone decide to sell, there was really no opportunity to execute any trades that made sense in order to establish covered positions from existing stocks.

It was an extremely rare kind of Monday that ended with me not having made any trades, at all. I’m not certain how much that will change for the rest of the week, as there are relatively few positions set to expire this week and a continuing desire to conserve cash.

Yesterday was also a good lesson, though, on how such appealing looking prices could be illusory, as those prices got even cheaper across the board by the time the final bell rang. Lately that has been a theme in development, but it has over-extended its welcome.

Today almost looked as if it might be a repeat. The initial rally died after after about 30 minutes, but then came back and the market actually ha d a triple digit gain for a while.

Despite the fact that much of that gain was lost in the final hour and eventually closing negative, at least on the DJIA, it was a better day, as judged by the broader market and as judged by some of the price rebounds in individual names.

The S&P 500 is still down about 6.8% from its peak back in September, but so many stocks are in their own correction phase already, many of which haven’t really had any news to warrant the sharp moves lower, particularly in cases where there moves higher were of a gradual nature, rather than gap ups higher, which are much more prone to sharp drops down in the event of either bad news or a deteriorating market.

Many will point to the S&P 500 having fallen below its 200 day moving average as the catalyst for the sell off, but that barrier had actually been breached several times during the trading day before the serious selling started in the final hour of trading. None of those earlier breaches that didn’t result in selling will ever be remembered, only the one that did, making it much more easy to point to the successful ability of that particular indicator as a valid one.

While I would love to see a continued strong move higher, that would only be for purposes of selling new covered positions, because that kind of move is also just an illusory one. Past markets indicate that such moves are usually related to downtrends and not typically parts of sustained reversals or bull trends. Instead, I would much rather see a sustained move higher or, perhaps even better, simply treading in place right now.

That’s really where the best opportunity will come. While treading in place everyone is in a state of uncertainty, regardless of whether they wear bull or bear stripes and that uncertainty shows up where it really counts.

Today’s market was actually a good one for the possibility of building some kind of a base. Despite the pullback the market didn’t succumb to the kind of selling that has been the norm of late. I was a little disappointed not to have sold any calls today, but am hopeful that some of the same strength may be evident tomorrow and we start a pattern of 3 steps forward for every 2 or so steps back.

In the meantime the volatility was already moving higher yesterday before the late afternoon sell off as the market was going back and forth between gains and losses. Even with little to no net movement in value that kind of movement is the essence of volatility. The last hour’s sell-off yesterday added to the volatility, as it continued the reversal from the sustained moves higher that had characterized the markets for the past two years.

Today the volatility fell all through the day, but there are still some potential opportunities to capitalize on that volatility.

Hopefully some of that sustained move higher will emerge again tomorrow morning and offer some opportunity to sell calls, maybe being fueled by Intel’s earnings report after today’s close, much like Citigroup helped today’s market move higher..

Interestingly, despite some less optimistic numbers from JP Morgan and Wells Fargo, which usually, at least in the past two years, have out-performed the market, as a whole in earnings quality, the market didn’t seem to care. The fact that the market has at a positive bias this morning and stayed that way for most of the day gives some reason for optimism, if only for a short while.

But that’s all I ask for this week. Maybe tomorrow will be the day to finally get some trades in the books

Daily Market Update – October 14, 2014 (8:30 AM)

Yesterday was a very disappointing day from start to finish.

It started with an attempt to bounce back from Friday’s late day sell-off that lasted all of about 20 minutes.

It ended with another sell off in the final hour, most of which actually came during an acceleration phase in the final 30 minutes, that resulted in another 200 point loss.

As opposed to the triple digit moves that started three weeks ago on an alternating basis between qains and losses, the predominant flavor now is losses.

Yesterday would have been a perfect day to have seen a strong bounce, even if there was no sincerity behind it. As it was the way stocks went back and forth yesterday between mild gains and losses, before finally seeing everyone decide to sell, there was really no opportunity to execute any trades that made sense in order to establish covered positions from existing stocks.

It was an extremely rare kind of Monday that ended with me not having made any trades, at all. I’m not certain how much that will change for the rest of the week, as there are relatively few positions set to expire this week and a continuing desire to conserve cash.

Yesterday was also a good lesson, though, on how such appealing looking prices could be illusory, as those prices got even cheaper across the board by the time the final bell rang. Lately that has been a theme in development, but it has over-extended its welcome.

The S&P 500 is now down about 6.8% from its peak back in September, but so many stocks are in their own correction phase already, many of which haven’t really had any news to warrant the sharp moves lower, particularly in cases where there moves higher were of a gradual nature, rather than gap ups higher, which are much more prone to sharp drops down in the event of either bad news or a deteriorating market.

Many will point to the S&P 500 having fallen below its 200 day moving average as the catalyst for the sell off, but that barrier had actually been breached several times during the trading day before the serious selling started in the final hour of trading. None of those earlier breaches that didn’t result in selling will ever be remembered, only the one that did, making it much more easy to point to the successful ability of that particular indicator as a valid one.

While I would love to see a strong move higher, that would only be for purposes of selling new covered positions, because that kind of move is also just an illusory one. Past markets indicate that such moves are usually related to downtrends and not typically parts of sustained reversals or bull trends. Instead, I would much rather see a sustained move higher or, perhaps even better, simply treading in place right now.

That’s really where the best opportunity will come. While treading in place everyone is in a state of uncertainty, regardless of whether they wear bull or bear stripes and that uncertainty shows up where it really counts.

In the meantime the volatility was already moving higher yesterday before the late afternoon sell off as the market was going back and forth between gains and losses. Even with little to no net movement in value that kind of movement is the essence of volatility. The last hour’s sell-off added to the volatility, as it continued the reversal from the sustained moves higher that had characterized the markets for the past two years.

Hopefully some of that sustained move higher will emerge this morning and offer some opportunity to sell calls, but the pre-open futures aren’t particularly strong, but at least they are positive, with some mildly good news from the big three banks; JP Morgan, Citigroup and Wells Fargo.

Those usually, at least in the past two years, have out-performed the market, as a whole in earnings quality, but were a little under-whelming this morning. Still, the fact that the market has at least a positive bias this morning gives some reason for optimism, if only for a short while.

But that’s all I ask for the week.

Daily Market Update – October 13, 2014 (Close)

Sigh.

What a lousy finish to a totally nondescript kind of day that for a few brief moments after the opening bell looked as if it would have at least held some prospect for a bounce higher.

After 3 weeks of triple digit moves that seem to be getting bigger, the volatility has really climbed and is now at a two year high level, although still not terribly high by historical standards.

There isn’t very much happening this week as far as economic reports go, but lately it has been the injudicious use of words that have made markets move as nerves may be more frayed than is healthy.

This week there aren’t too many scheduled speeches, talks or conferences, so it’s possible that the market may actually focus on fundamentals, like earnings, which start going in full force this week.

But it looks as if that will have to wait until tomorrow, as the market badly deteriorated in the final hour, probably on technical factors or sell programs.

For more than a year each quarterly earnings season has been lead off by strong earnings from the financial sector, especially the big money center banks, but the rest of the market hasn’t necessarily kept up, especially on the retail side.

This year, the laggard is likely to be the energy sector and their forward guidance may be especially critical, while retail may be expected to do better than in the past.

If the focus does turn to earnings this week should be one with much less volatility, but predicting what may happen coming after the past three weeks is probably not a good idea.

This week, with less cash than I would like to have, but still uncertain about whether there i still more declines ahead, I’m not eager to spend much money.

As mentioned in the Weekend in Review, I may be more inclined to look at put sales as a means of entering positions and creating the week’s revenue streams.

However, based on where premiums were headed as the market came to its close on Friday, the volatility may be at that level where it may become possible to start thinking increasingly about DOH trades.

Doing so, though, requires some more nimbleness, in the event that an unwanted assignment looks as if iy may occur.

While I generally look at DOH trades as being short term, depending on where those premiums are and whether they extend to forward week contracts, there m
ay be reason to consider their use in some out of the money expanded contracts.

Further, as earnings season is now also a factor, selective positions may also have their premiums enhanced by earnings, so there may be opportunity for the DOH trades to encompass the earnings enhancement and also take advantage of volatility enhanced time premium.

So this week the trading may be of a very different nature, although as always, once the opening bell rings, all of those well laid out plans may get scuttled.

The real challenge ahead is trying to discern between what seems to be a sea of value from the value traps that just want to suck up your investment dollars.

The way today’s market ended up working out, this time with a really unexpected triple digit loss coming almost entirely in the final 30 minutes, it’s probably a good thing to not have fallen for any “values” today.

So there’s certainly no reason to rush in to commit cash reserves at this point, especially resisting the temptation to get lured in by any single day’s strong move higher, as those tend to occur with great frequency during downtrends and just serve to have you buy at artificially higher prices.

Instead, I would be very happy to create the week’s income from simply selling as many calls as possible on existing positions and would certainly welcome a one day pop higher as the stimulus to do so.

Although this morning’s pre-opening futures showed recovery from last nights early trading and the volatility headed lower, as so often has been the case that strength didn’t last. Today, it lasted about 20 minutes and then just bounced back and forth, alternating between mild losses and mild gains, until the bottom fell out. That should help premiums tomorrow, but I’m reluctant to sell those calls while stocks are moving lower. 

So, tomorrow morning may be like today and be another good one to sit back and see how the trading evolves after the opening bell, while assuming a defensive posture for the rest of the week.

Hopefully tomorrow will at least offer some opportunity to do something other than just watch the back and forth of prices that continue their downward trend.

Daily Market Update – October 13, 2014 (9:00 AM)

After 3 weeks of triple digit moves that seem to be getting bigger, the volatility has really climbed and is now at a two year high level, although still not terribly high by historical standards.

There isn’t very much happening this week as far as economic reports go, but lately it has been the injudicious use of words that have made markets move as nerves may be more frayed than is healthy.

This week there aren’t too many scheduled speeches, talks or conferences, so it’s possible that the market may actually focus on fundamentals, like earnings, which start going in full force this week.

For more than a year each quarterly earnings season has been lead off by strong earnings from the financial sector, especially the big money center banks, but the rest of teh market hasn’t necessarily kept up, especially on the retail side.

This year, the laggard is likely to be the energy sector and their forward guidance may be especially critical, while retail may be expected to do better than in the past.

If the focus does turn to earnings this week should be one with much less volatility, but predicting what may happen coming after the past three weeks is probably not a good idea.

This week, with less cash than I would like to have, but still uncertain about whether there i still more declines ahead, I’m not eager to spend much money.

As mentioned in the Weekend in Review, I may be more inclined to look at put sales as a means of entering positions and creating the week’s revenue streams.

However, based on where premiums were headed as the market came to its close on Friday, the volatility may be at that level where it may become possible to start thinking increasingly about DOH trades.

Doing so, though, requires some more nimbleness, in the event that an unwanted assignment looks as if iy may occur.

While I generally look at DOH trades as being short term, depending on where those premiums are and whether they extend to forward week contracts, there may be reason to consider their use in some out of the money expanded contracts.

Further, as earnings season is now also a factor, selective positions may also have their premiums enhanced by earnings, so there may be opportunity for the DOH trades to encompass the earnings enhancement and also take advantage of volatility enhanced time premium.

So this week the trading may be of a very different nature, although as always, once the opening bell rings, all of those well laid out plans may get sc
uttled.

The real challenge ahead is trying to discern between what seems to be a sea of value from the value traps that just want to suck up your investment dollars.

There’s certainly no reason to rush in to commit cash reserves at this point, especially resisting the temptation to get lured in by any single day’s strong move higher, as those tend to occur with great frequency during downtrends and just serve to have you buy at artificially higher prices.

Instead, I would be very happy to create the week’s income from simply selling as many calls as possible on existing positions and would certainly welcome a one day pop higher as the stimulus to do so.

This morning’s pre-opening futures are showing recovery from last nights early trading and the volatility is heading lower, but it’s not too likely that will impact option premiums that at Friday’s close were exceptionally high for a number of out of favor stocks in equally out of favor sectors.

So this morning may be a good one to sit back and see how the trading evolves after the opening bell, while assuming a defensive posture for the rest of the week.

MONDAY:  A generally quiet week, but lately words have been mopre meaningful than actual data. Strong earnings reports starting this week with banks could be the thing the markets need.

TUESDAY:     A very disappointing market day yesterday and, as a result, not a single trade to show for the effort. The effort to move higher lasted about 20 minutes and quickly gave way to uncertainty, before completely falling apart in the final hour. This morning seems tentative, at best.

WEDNESDAY: Despite yesterday’s decent finish to trading and Intel’s decent earning’s report, the market looks to be back to the path it had established nearly 4 weeks ago and is headed toward another triple digit down day, based on the opening futures.

THURSDAY:   Yesterday’s attempt to rally going into the close was a positive sign, but this morning’s futures point to another triple digit move lower. Even Goldman Sachs’ better than expected earnings are met with an initial sharp move lower this morning and does nothing to buoy markets.

FRIDAY:   Hang on, as the fourth week of triple digit moves comes to its end. FInally. But who knows what next week brings. For one, I’d like to see some sanity, which is marked by normal sized moves in either direction, rather than the “new normal” sized moves and give traders a chance to more rationally look at their positions.







Daily Market Update – October 10, 2014 (8:30 AM)

The Week in Review will be posted by 6 PM tonight and the Weekend Update will be posted by Noon on Sunday.

The following are possible outcomes for today:

Assignments:  none

Rollovers:  EMC

Expirations: WFM, DOW, GPS, HAL

The following were ex-dividend this week: GPS (10/6 $0.22), CPB (10/8 $0.31), DRI (10/8 $0.55), CHK (10/10 $0.09), FCX (10/10 $0.31)

There are currently no ex-dividend positions for next week

Trades, if any, will be attempted to be made by 3:30 PM EDT

Daily Market Update – October 9, 2014 (Close)

It’s almost a little eerie when one day can go down 272 points and the next day can go up 274 points.

Of course when the third day see prospects of a 300 point decline it gets a little tiresome. Even if you do like the idea of volatility rising the process can really be painful.

While yesterday’s rebound was definitely welcome there’s still no escaping the historical significance of such large upward moves. They tend to occur during market downtrends and aren’t generally parts of the building blocks that take markets higher in a sustained fashion.

The October 2007 to March 2009 period was filled with those kind of days and if you can remember back to those days how many times did you think “finally, we’re done with all of the selling”?

There was a lot of talk about how yesterday represented a “key reversal” day.

That’s one where the market opens lower than the previous day, then moves to a new low, before reversing course to close higher than the previous day’s high.

There was a lot of talk about it because many see it as a very bullish sign, although like so many such signs it’s not as valid as many would like to believe. In fact, Thomas Bulkowski, who extensively studies chart patterns has reported that about 51% of the time that a key reversal occurs during a market downtrend, such as we’re currently experiencing, the trend continues downward after the  key reversal.

I don’t know if he’s right, but somebody is wrong when it comes to the significance of the exalted key reversal.

Still, yesterday was welcome as we head into the final days of the week and always hopeful for some combination of assignments and rollovers.

One of those hopes, The Gap, got dashed yesterday after the close, as its CEO unexpectedly announced hos retirement, saying he was unable to commit anew to the time being asked of him.

That’s a very bizarre reason, but more bizarre has been the immediate reaction to the announcement, particularly considering that there was nothing terribly spectacular about the CEO or his performance. If anything, during his reign, The Gap has been incredibly inconsistent in its performance and certainly not a stellar retail performer.

The market may be reacting to uncertainty over the real reasons for his sudden departure. The after hours response came before The Gap released its monthly same store sales, which were flat, but did indicate an increase in expenses, which ordinarily would probably have caused some drop in shares in the aftermarket. However, in the past, The Gap has typically made initial 5% moves in either direction upon same store sales, although often quickly reversing the initial reactions. This time, it’s a 10% move in the absence of significant same store sales news.

So that will be one to watch and weather as we await the real story.

For the morning there didn’t appear to be a follow through forthcoming to yesterday’s gains, although precious metals were showing a large bounce after prolonged selling. As often is the case, there’s no readily apparent reason for doing so other than the possibility that those inclined to trade precious metals suddenly believe that the selling was overdone, perhaps buoyed a bit by yesterday’s FOMC.

While I would have liked to see the same thing in today’s equity market, it’s a good thing that I didn’t hold my breath. I would have been happy with some stability in  prices and simply a little respite from a large move opposite to yesterday’s in an effort to see those positions set to expire tomorrow either be assigned or rolled over.

That wasn’t asking for too much, but today’s sell off was really over the top and again had no real reason for being, no matter how much people point once again at Martio Draghi for calling for economic reform from European leaders.

So while I was hoping to get some rollovers either done today or be in better position to do so, it was a repeat of last Thursday when the possibility was also made less likely.

Last week Friday’s strong gain salvaged the week, but I’m not so positive about the same happening tomorrow, as today was beginning to feel a little more like a blow off kind of sale, but still didn’t reach that level.

As far as rollovers go,  you may have noticed that with, what may be a temporary increase in volatility, I’ve taken the opportunity to take advantage of some improving premiums in forward weeks by rolling over to periods other then the next coming week. That offers a little extra bit of diversification and reduces dependency on a single week, which can easily be subject to a sudden adverse price movement.

With a few positions already set to expire next week, I may look for tomorrow’s rollover opportunities beyond that monthly cycle end date to further add to that spreading of risk, if possible.

December anyone?

Daily Market Update – October 9, 2014 (8:30 AM)

It’s almost a little eerie when one day can go down 272 points and the next day can go up 274 points.

While yesterday’s rebound was definitely welcome there’s still no escaping the historical significance of such large upward moves. They tend to occur during market downtrends and aren’t generally parts of the building blocks that take markets higher in a sustained fashion.

The October 2007 to March 2009 period was filled with those kind of days and if you can remember back to those days how many times did you think “finally, we’re done with all of the selling”?

There was a lot of talk about how yesterday represented a “key reversal” day.

That’s one where the market opens lower than the previous day, then moves to a new low, before reversing course to close higher than the previous day’s high.

There was a lot of talk about it because many see it as a very bullish sign, although like so many such signs it’s not as valid as many would like to believe. In fact, Thomas Bulkowski, who extensively studies chart patterns has reported that about 51% of the time that a key reversal occurs during a market downtrend, such as we’re currently experiencing, the trend continues downward after the  key reversal.

I don’t know if he’s right, but somebody is wrong when it comes to the significance of the exalted key reversal.

Still, yesterday was welcome as we head into the final days of the week and always hopeful for some combination of assignments and rollovers.

One of those hopes, The Gap, got dashed yesterday after the close, as its CEO unexpectedly announced hos retirement, saying he was unable to commit anew to the time being asked of him.

That’s a very bizarre reason, but more bizarre has been the immediate reaction to the announcement, particularly considering that there was nothing terribly spectacular about the CEO or his performance. If anything, during his reign, The Gap has been incredibly inconsistent in its performance and certainly not a stellar retail performer.

The market may be reacting to uncertainty over the real reasons for his sudden departure. The after hours response came before The Gap released its monthly same store sales, which were flat, but did indicate an increase in expenses, which ordinarily would probably have caused some drop in shares in the aftermarket. However, in the past, The Gap has typically made initial 5% moves in either direction upon same store sales, although often quickly reversing the initial reactions. This time, it’s a 10% move in the absence of significant same store sales news.

So that will be one to watch and weather as we await the real story.

For the morning there doesn’t appear to be a follow through forth
coming to yesterday’s gains, although precious metals are showing a large bounce after prolonged selling. As often is the case, there’s no readily apparent reason for doing so other than the possibility that those inclined to trade precious metals suddenly believe that the selling was overdone, perhaps buoyed a bit by yesterday’s FOMC.

While I’d like to see the same thing in today’s equity market, I’m not going to hold my breath. Instead, I’d be happy with some stability in  prices and a little respite from a large move opposite to yesterday’s in an effort to see those positions set to expire tomorrow either be assigned or rolled over.

As far as rollovers go,  you may have noticed that with, what may be a temporary increase in volatility, I’ve taken the opportunity to take advantage of some improving premiums in forward weeks by rolling over to periods other then the next coming week. That offers a little extra bit of diversification and reduces dependency on a single week, which can easily be subject to a sudden adverse price movement.

With a few positions already set to expire next week, I may look for today and tomorrow’s rollover opportunities beyond that monthly cycle end date to further add to that spreading of risk, if possible.

Daily Market Update – October 8, 2014 (Close)

There are lots of people who are dismayed to see the market pointing mildly higher this morning. Imagine how they must feel as it came to its unlikely close this afternoon.

That’s because they believe that after a 272 point sell off the real healthy market action would be to have a blow out kind of selling environment. That is thought to be akin to “getting it all out of your system” and then being in a position to start all anew.

Instead, thanks mostly to a dovish FOMC Statement that took notice of European weakness, the market erased yesterday’s loss and even had one of those “key reversals” that get mentioned every now and then.

Thoose are supposed to be very, very positive signals.

The “blow out” theorists do seem to have history on their side, but it tends to be the sort of thing that you see during a protracted market decline and has more false positives than you might want to know about if you believed in that theory. Just look at the period of time between October 2007 and March 2009 and you’ll see lots of declines that could have qualified as “blow outs,” but were predictive of nothing.

Before getting too smug about what means what, those key reversals aren’t perfect, either.

On the other hand, there’s probably nothing terribly wrong with creating another one of these 5% declines that seem to occur every two months. We’re less than 1.5% away from having done that and if the past two years is any guide, after having done so it’s off to more new records.

That pattern will remain to be a valid one until it’s broken and it’s anyone’s guess whether we are on a path to break the pattern now, but we should know soon, as the peak to trough back to peak over the past two years has generally been on the order of less than 3 weeks.

Did today break reconfirm that pattern?

Well, maybe, but you would have been prematurely optimistic if saying the same thing last Friday on a similar kind of day.

But with today being an FOMC Statement release day there may be a little more riding on it than usual. Always something that the market finds a reason to react to, today any change that could be construed as indicating interest rate hikes coming sooner than expected could really tip the already nervous market into something of a blow off kind of selling pattern.

That’s true even though we all know that with each passing month that interest rate hike becomes a case of “sooner rather than later.”

Yesterday’s sell-off in advance of today’s FOMC wa
s surprising and again, there really wasn’t very much of substance to support that kind of selling, although fingers were pointed at Europe. However, the market which had already opened gapped down from the previous day’s close took a real drop sometime after 2 PM without any new news to account for that sell off.

This kind of back and forth alternation between losses and gains, especially in the magnitude of the changes is different from the 5% corrections that we’ve gotten accustomed to seeing. Those have been more based on smaller, but sustained movements lower, just as the bounces higher had also not been characterized by explosive movements.

What that means is also anyone’s guess. In the past 5 years it has both meant a highly tumultuous market with a large net decline, as well as a market that essentially was treading water.

Volatility, as the day was getting ready to begin trading, was at the same level it was at its peak during the last market mini-correction, when the S&P 500 stood at 1925, which was 10 points below yesterday’s close.

In the past year volatility hit its peak in February, approximately 25% higher than it currently sits and the S&P 500 was then at 1741, which would represent a very sizeable drop from the current level.

However, even that February volatility peak is fairly low by historical standards, so there’s some reason to be concerned, but only if there is a breech of the usual 10% correction threshold.

For those that have cash reserves, despite what appears to be some bargain prices, I would still be reluctant to do much shopping, although an occasional purchase can still be a timely one.Today’s surge after the FOMC report was interesting to watch, but other than looking for some opportunities to sell calls, it wasn’t very enticing as far as making me part with any more money.

If you’ve been sitting back, today was a good day to continue inactivity and tomorrow may be the same. If the market is destined to go higher after today’s key reversal, let it do so and let it do the hard lifting. If it results in some assignments, that would be just fine by me.

Daily Market Update – October 8, 2014 (9:00 AM)

There are lots of people who are dismayed to see the market pointing mildly higher this morning.

That’s because they believe that after a 272 point sell off the real healthy market action would be to have a blow out kind of selling environment. That is thought to be akin to “getting it all out of your system” and then being in a position to start all anew.

The “blow out” theorists do seem to have history on their side, but it tends to be the sort of thing that you see during a protracted market decline and has more false positives than you might want to know about if you believed in that theory. Just look at the period of time between October 2007 and March 2009 and you’ll see lots of declines that could have qualified as “blow outs,” but were predictive of nothing.

On the other hand, there’s probably nothing terribly wrong with creating another one of these 5% declines that seem to occur every two months. We’re less than 1.5% away from having done that and if the past two years is any guide, after having done so it’s off to more new records.

That pattern will remain to be a valid one until it’s broken and it’s anyone’s guess whether we are on a path to break the pattern now, but we should know soon, as the peak to trough back to peak over the past two years has generally been on the order of less than 3 weeks.

But with today being an FOMC Statement release day there may be a little more riding on it than usual. Always something that the market finds a reason to react to, today any change that could be construed as indicating interest rate hikes coming sooner than expected could really tip the already nervous market into something of a blow off kind of selling pattern.

That’s true even though we all know that with each passing month that interest rate hike becomes a case of “sooner rather than later.”

Yesterday’s sell-off in advance of today’s FOMC was surprising and again, there really wasn’t very much of substance to support that kind of selling, although fingers were pointed at Europe. However, the market which had already opened gapped down from the previous day’s close took a real drop sometime after 2 PM without any new news to account for that sell off.

This kind of back and forth alternation between losses and gains, especially in the magnitude of the changes is different from the 5% corrections that we’ve gotten accustomed to seeing. Those have been more based on smaller, but sustained movements lower, just as the bounces higher had also not been characterized by explosive movements.

What that means is also anyone’s guess. In the past 5 years it has both meant a highly tumultuous market with a large net decline, as well as a market that essentially was treading water.

Volatility is now at the same level it was at its peak during the last market mini-correction, when the S&P 500 stood at 1925, which is 10 points below yesterday’s close.

In the past year volatility hit its peak in February, approximately 25% higher than it currently sits and the S&P 500 was then at 1741, which would represent a very sizeable drop from the current level.

However, even that February volatility peak is fairly low by historical standards, so there’s some reason to be concerned, but only if there is a breech of the usual 10% correction threshold.

For those that have cash reserves, despite what appears to be some bargain prices, I would be reluctant to do much shopping, although an occasional purchase can still be a timely one.

If you’ve been sitting back, today seems to be a good day to continue inactivity.