Daily Market Update – March 5, 2014 (9:15 AM)

With no news to wake up to from Crimea this morning and no blaring headlines, it’s back to a normal post-earnings season kind of stock market.

This morning’s news was a completely uninteresting ADP Employment report that normally serves as a prelude to Friday’s Employment Situation Report, regardless of whether it actually is able to accurately reflect non-farm payroll statistics.

After two successive disappointing months that were nonetheless greeted with enthusiasm by the markets, this month everyone has toned down their employment estimates as weather is still the easy culprit.

Yet despite mediocre earnings and an extraordinarily slow recovery the market reached another new high yesterday, completely erasing the Crimea induced loss from Monday and then some.

While it wasn’t too unusual to see a snapback rally on the interpretation of good news, the most surprising thing so far this week is how muted the decline was on Monday and how tentative the fear was on the preceding Friday.

That Friday offered a great excuse for a sell off of a market that had been strongly higher, as rumors of a confrontation were making the rounds. While the early part of the final trading hour saw the entire gain being lost lost, a meaningful portion was recovered before the close, allowing the market to end the day with a gain. Doing so going into the weekend and especially a weekend of international uncertainty is not the sort of thing that frightened markets do.

Monday’s losses on the news of the reality on the ground were also muted, especially considering the stock market’s level and its quick ascent from its recent 7% correction. That sort of rise higher is the sort of thing that could easily have been deflated and in a big way.

But it wasn’t. The market saw a decline, but by any post-2007 standard, that decline was really very small and then subsequently erased on the flimsiest of news.

The difference between a market that’s giddy and a market that is simply optimistic may not be easy to define. Yesterday seemed giddy insofar as performance, but not insofar as volume. Importantly, there wasn’t a “blow off top,” which would have seen everyone piling aboard a market perceived to be rocketing higher.

This morning’s flat market is far more healthy than any alternative following two entirely different days.

As things appear to be, at least temporarily quieting down and perhaps making way for diplomatic efforts, any kind of negotiated outcome in that regard can only be positive for the markets, even if negative for either of the directly involved nations.

At the moment, with cash still in hand, and the prospects of potentially having a number of assignments at the end of this week if all goes quietly, I continue to have an optimistic near tern outlook.

While I have no hesitancy in spending down cash reserves going forward, there still remains that pesky matter of finding positions that either haven’t benefited as much from the recent market strength or are in their own peculiar price cycles, awaiting a chance to move higher.

Additionally, while that optimism is still there, I’m not particularly interested i
n tempting fate and looking to higher beta names to offset the low option premiums. Where possible, dividends still hold greater appeal, which is why I decided to rollover the Coach position yesterday, so as to retain the dividend.

As next week’s weekly options will be opened up for many stocks that don’t have expanded weekly options I may also look to initiate new positions, despite it being the end of the week, which is usually a time for considering rollovers.

Part of that possibility is the very fact that this Friday is an Employment Situation Report. If you were geeky enough to have been interested in the statistics behind an analysis of the market’s response to the monthly Employment Situation Report you know that there’s an increased likelihood of a higher moving market on Friday, regardless of what the report says.

So if the opportunities are there, why think change is coming?

 

 

 

 

 

 

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