Daily Market Update – August 19, 2014 (Close)
Well, yesterday was a surprise, but it does seem to go along with the recent pattern that the market basically hates getting news and loves existing in either ignorance or denial.
The reaction last Friday to news or at least what was passed off as news contrasted sharply to the reaction yesterday to nothing.
It’s hard to understand how the market could be so fragile as to flee on any bad geo-political news, but then to flock back when there is no news. It doesn’t even take good news, it just takes no news.
That’s especially confusing when you realize that the story is far from being done and any day, especially any Friday the way the pattern seems to be going, can bring a new series of investor rattling bits of news.
While every one still believes that the market looks out into the future by a 6 month period, that’s increasingly hard to accept, given the way daily events or non-events rock the markets and can change the entire tone in an instant.
After seeing yesterday’s gain it’s hard to not want to be part of the revelry and today looks like it may add to those gains.
The one bit of good news coming from the market before the opening was Home Depot.
It reported earnings the way any company would like to see itself report. It beat on every single metric and it guided even stronger for the next quarter.
If looking for good economic news, or at least any news that doesn’t have the word “geo-political” attached to it, the news from Home Depot seems to be just the right kind. Of course, it will be put into better context tomorrow when Lowes reports. There was some contagion, though, as Lowes went up sharply in advance of their release.
But at least then we will know whether Home Depot’s good fortunes have come at the expense of its competition or whether the pie just got larger.
Ultimately, good news from both of those companies has to be good news for the economy as a whole. While there may be various theories about what strength at Home Depot and Lowes means for the home builders, which are often thought of as the real measures of the economy,those theories are just that and not necessarily having much in the way of validity.
Too often mutual exclusivity is believed to be a rule in so many aspects in life. Home Depot can thrive even as home builders do, as well. So I think that if the pie is expanding that is more likely to be good news for all.
While the market’s early morning gain wasn’t a guarantee to extend yesterday’s rally I planned to still practice the “prove it to me” approach. As it would turn out today was not only an extension but was able to stand tall on its own. I was still content to mostly watch and wasn’t expecting to make any new purchases, but was taken in by Carnival going ex-dividend tomorrow.
Where there was no content was in seeing just how ridiculously low premiums are now as volatility has plunged. While a number of positions climbed higher today, just as they did yesterday, the premiums are sop low that they offer very little reward in exchange for the risk taken of not sharing in any further upside. That’s especially true of forward week premiums that are reflecting little anticipation of increasing volatility at the moment..
I hate that.
On a very positive note, after last week’s inability to keep up with the market, even with yesterday’s 1% gain existing positions kept pace. However, the more those market gains continue the harder it will be to keep up, as a number of positions are currently now in the money and not sharing in the good times.
Sometimes the tide is good, but I’d much rather swim free and see the market tread water for a bit.