Daily Market Update – February 11, 2014 (10:00 AM)

Yesterday was a very subdued day as the conventional wisdom held that most everyone was awaiting to hear Janet Yellen’s congressional testimony.

It’s not too likely that there will be any surprises coming from the prepared text which was distributed prior to the planned testimony. It also seems unlikely that anyone would be surprised by the lack of surprise, but you can never really predict human behavior, which includes the buying or selling response to news or even the lack of news.

It’s equally unlikely that the ensuing questions from elected officials will elicit much in the way of deviation from the planned course, of which she was an active architect. Whether she says anything that may be over-interpreted is a different manner, but like her predecessor, she seems to value the meaning of every word ands speaks slowly enough that she’s not trying to slip anything through.

What is somewhat interesting and different is that a response panel has been invited to also present and be questioned by the congressional panels after Yellen’s testimony, similar to how the opposition gets to respond to the State of the Union Message. While that may have happened in the past, I just can’t remember that to be the case. But as most would agree, what’s really missing is more politicization of the Federal Reserve.

I think that the upcoming testimony may have played a role in Monday’s quiet trading, but not to be overlooked is the roller coaster of the week before and the lack of indication of which end of the week was the one that foretells where we are headed next.

While Charles Dickens just had his 202nd birthday celebrated, it might be appropriate to think that last week was “the best of times and the worst of times.” Dickens didn’t really focus on an analysis of the net result of the times, but last week the net result was a positive one, especially when you consider the growing negative sentiment that had come from the background and into the foreground.

So far this morning the futures also seem to be muted, just as they were to open the week. They did, however, improve as the opening bell rang and the initial comments had their embargo lifted.

Again, probably not a surprise, but given the previous couple of weeks and the nervousness that pervaded the trading floors, it’s also not surprising that there’s still caution abounding.

With only a single new position it was the quietest Monday in over 2 years and I think that low level of activity is likely to continue today, although my focus will be on a couple of positions that go ex-dividend tomorrow, looking for an opportunity to justify their purchase. Other than those I don’t see many prospects unless something breaks in either direction.

In the meantime I don’t mind watching prices move higher and get closer to the point that they can get cover. Granted, while they do so it’s just a paper exercise, but getting cover is tangible and justifies sitting around all day.

The market is currently less than 3% below its current peak having recovered about half of the loss that sent even brave traders quivering into retreat. It’s precisely that kind of ambivalence, straddling that mid-point that makes it difficult to establish positions that commit assets.

With the equally sudden retreat of volatility the reward for taking the risk has also fallen and without reward the mattress begins to look appealing, but we all know, that’s never the right way to go.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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