Daily Market Update – March 6, 2014 (Close)
The Jobless Claims number was already in and said nothing of real interest. Taken together with the seeming quiet coming from Crimea all pointed toward a quiet trading day today, or at least none with any known catalysts.
When it was all over the market was actually much more alive than anyone would have expected, but did so in a very sedate way.
Despite what looks like an inevitable further dissolution of the Ukraine, which will likely see the creation of an autonomous Crimea or one given to Russia as an EU prize of sorts, today may be nothing more than a conduit to tomorrow’s Employment Situation Report. Ultimately, no one really cares about the nature of an area that is rarely thought about due to its insignificance regarding world-wide stock markets. Who owns Crimea will be irrelevant to most people and traders as long as it’s not the nidus for armed confrontation.
The last time we were awaiting a report it seemed pretty clear that Richard Fisher, who is a fairly vocal Reserve Reserve Governor, and one of those described as being a “hawk,” seemed to strongly hint that the numbers would be on the low side, as he repeatedly emphasized the impact of weather, in an appearance prior to the numbers being released.
He was right, at least on the numbers being on the low side, although there is still debate over the exact role of the weather, which at some point can no longer be blamed for malaise and decreased economic activity.
Today, there are no fewer than three current Federal Reserve Governors speaking to various groups, although only one occurred after regular market hours. It seemed as if it might have been interesting to see whether the markets would take any cues from their cues.
But based on the blase kind of day either no one listened or nothing of real interest was said.
Given past history of the market’s reaction to the Employment numbers there’s little reason to fear their release, regardless of where they may come in or regardless of whether they are perceived in a positive or negative light.
If the European situation is taken off the table, as it seems only the threat of actual military confrontation is what will move the market in the short term, there’s also no reason to believe that as earnings season is coming to an end, that the market won’t find some reason to move higher.
It has been doing that for a long time, as we, coincidentally come up to the 5th anniversary of the market bottom, occurring 5 years ago. Within that remarkable 5 year period the past 20 months have been fairly memorable in their own right.
With even flat days today and tomorrow we should be left in good position to face the coming week, with a nice combination of available cash and covered positions. Of course, it’s never a really good idea to assume that will end up being the case, as the market does have that ability to surprise and take the wind out of you, but it really hasn’t done so very often of late.
So far this has been a quiet trading week after a couple of busy ones. While that may change over the coming two days and while I don’t usually add new positions near the end of the week, I still would consider doing so, particularly to get a head start of populating the list of positions that expire next week, which is a little on the light side at the moment.
But that too could change if the next two days stay on course and results in some assignments and rollovers, in which case there’s nothing wrong with looking forward to the end of the monthly option cycle for expiration dates, as long as the premiums aren’t dragged down by the low volatility.
While volatility has been down after a brief moment that it looked as if it would be heading to better premium enhancing levels, the current market, one that is gradually moving higher, is my second favorite kind of market and usually results in narrowing the variation in positions held, as the same positions are frequently re-purchased just about as soon as they are assigned.
There’s not too much shame in that and I can live with myself if that’s the case.
PS: I usually try to avoid trades in the final thirty minutes because I know that the alerts may catch people flat-footed and unable to make the suggested trade. I did send the AIG trade with just 10 minutes to go in an effort to ensure capturing the dividend, only as the price started coming down and making it a conceivably logical thing to do, when it wasn’t the case earlier in the afternoon. If you didn’t get the alert in time you will very likely be assigned early. However, the ROI would still amount to about 3.6% for the position, versus 1.8% for the S&P 500 during that period.