Daily Market Update – September 4, 2014 (8:00 AM)

Comparatively speaking, today is a big news day with both the ADP Jobs reports and an announcement from the ECB regarding its forward policies, in addition to comments from its head, Mario Draghi.

Early this morning came the unusual leak of information confirming the initiation of ECB’s version of quantitative easing and placed it at 500 billion Euros, which would be about 7 months worth of Federal Reserve easing, so while sounding like a lot, may be only a down-payment on what may be required to jump start the European economies that are lagging.

The pre-opening market seems to like the unconfirmed information contained in that leak, but as I mentioned yesterday, that kind of  embracing the ECB decision by US markets may be short lived if it ends up firming up European markets, whose offerings can be in direction competition to our own.

If that’s going to be a problem it will likely be one that gets set into place in relatively slow motion, at least in its early phases. Other than the day when someone finally opines that is going to be the case and the market takes a quick hit, there should be plenty of time to position a portfolio to not get blind-sided.

With Thursday now here, attention shifts to positioning for next week. That’s far enough into the future to be planning, for now.

With only five positions set to expire this week there’s not too much to work with, although as Thursday’s trading gets ready to begin they are all in striking range of either being rollover candidates or getting assigned. Either of those is acceptable, although, as with most weeks it’s always nice to have a combination.

What’s still missing this week is the ability to reduce the number of uncovered positions as the market has been fairly milquetoastish during the first couple of days of trading. Ideally, what helps to get a position to leave its uncovered status is a price spurt and there haven’t been too many of those of late.

What I think has been telling of late of the health of the market is that individual stocks seem to be taking longer to recover from any moves lower. Those moves seem to be sharper and more sustained. In a period of low volatility it is then difficult to find an option premium that can justify the trade off of potential future gains.

One can argue that is the case simply because there may be alternative investments and so money flees from a weakened position to others. That’s precisely the same kind of dynamic that could be the undoing of our current market run higher.

While so much has been said of the US equity markets offering the best opportunities, not only in terms of geography, but also in terms of products, such as in comparison to bonds, any perception in that advantage waning will shift investor allegiances.

The micro-
economic issues are important, witness this mornings further erosion in YUM Brands, but the various macro-economic issues are all of concern, as well.

For now, it’s just time to take it all in, as the only consistency is inconsistency. Following the ECB statement and comments from Draghi, we may be entering an altered landscape, but one that could be a much more easy one in which to trade if it slows down the rush of US stock markets higher.