Daily Market Update – November 18, 2014 (Close)
It has been a really long time since the S&P 500 has gone 4 days without a daily move of more than 0.1%.
That was back in 1979 and now it’s actually up to 5 consecutive days having remained virtually unchanged since that one day pop that came with the release of a previously obscure JOLT Summary.
The early indications weren’t for anything different today, although over the past few months the day before an FOMC Statement release has been a strongly higher moving kind of day. Today turned out to be a moderately higher day, but without any bells and whistles accompanying the move higher to leave the streak at 5 days, the first of such length since 1969.
Yesterday there was a comment about how much professional traders hate those kind of days when nothing actually happens, much less when you string a few of them together. Traders make their living by the continuing moves up and down. They don’t particularly care about the direction, it’s change that they crave.
So if you were looking for change the stock market has been the wrong place to be for the past week, although it is still stunning to see how harshly some names are treated, with or without bad news and how punishing the market has become.
Yesterday was another of those one time unthinkable Mondays when I could find absolutely no trades that could be made, The nice thing about change is that in the event of a price drop you can consider a purchase of shares or the sale of puts or in the event of a price surge higher you can consider the sale of call options.
When there’s nothing happening there’s not much to be done. It’s otherwise not very different from flipping a coin. While you always hope for the best, it’s nice to feel that you have some kind of advantage when going in. Sometimes that feeling of advantage stems from following the trend and sometimes that advantage comes from going counter-trend.
But the past week has been absolutely trendless.
That could change as the FOMC Statement release draws closer, but despite the generally positive reaction to it over the past year, that too, still has a “flipping a coin” kind of characteristic to it. Since there are a number of components to the statement that are pored over and over-analyzed, any one of those could cause a significant movement. Trying to predict what will be contained in the statement, particularly if there are any substantive changes from the previous month and then trying to predict the market’s reaction is really a fool’s game.
That’s what makes the past few months so confusing. Why traders would have bid prices much higher the day before the release really made no sense at all and seemed to be very risky. Of course, it turned out not to be risky and so it has to make you wonder what the signal was that made traders go from their traditional pre-FOMC caution to one of bullishness.
If you’re cynical, there can only be one answer.
Today there didn’t appear to be any reason to be cynical, as it appeared that some caution is back at play. While the market did move higher and set even more new closing records, it was still a pretty quiet day, all in all.
Ultimately, this may end up being a week that doesn’t really begin until 2 PM on Wednesday as some of the uncertainty may then be lifted and traders can get back to trading and attempting to make some money.