Daily Market Update – December 10, 2014 (8:30 AM)

Yesterday was an impressive kind of day.

The market deterioration started fairly suddenly in the pre-opening futures about an hour before the open of trading, but came to a relatively abrupt halt in the early afternoon as the market had fallen more than 200 points.

There wasn’t very much reason for the fall, as the news that had been blamed was already many hours old and pointed toward China. Neither was there much reason for the turnaround. Not even technicians could come up with a reason to explain the move, even if they squinted really, really hard at their charts.

The JOLT Survey, which everyone was now believing had newfound importance, was a non-event and so no fingers could be pointed at it for moving the market as it had done in the previous month.

Oil actually showed some stability yesterday and maybe that played some role in re-introducing some strength into the market, if you’re the kind of person that really needs an explanation for why things happened, even if that explanation isn‘t necessarily correct or accurate.

Today, however, that theory of the role of oil may be put to a test as the Petroleum Status Report is released.

For me, that mid-morning Wednesday report is usually a yawner, but it may take on some new significance as inventory builds or draws may have greater impact on the overall market as long as oil continues being an area of focus.

This morning, before the market’s open, everything other than oil is just treading water. Stocks, precious metals and interest rates all seem to either be taking a breather from yesterday or waiting to see where oil prices may be heading after the Petroleum Status Report release.

With a surprise trade that added shares of Dow Chemical yesterday, now I really don’t believe that I’ll be adding any more this week, instead trying to direct efforts toward rollovers and assignments. However, just as the Dow Chemical purchase was a surprise, I suppose there could be more possible.

For those that follow volatility, yesterday was a day that saw some nice bounces in it, reflecting what the market itself was doing. From an incredibly low level, volatility is up nearly 30% in less than a week, but still far below where it had been just 2 months ago. In fact, it would have to climb another 100% to get to those levels which were also fairly low, but at least at acceptable levels for trading.

What would be a nice impact of maybe even marginally increasing volatility would be some return of volume to the option market. That sparse volume has made it very challenging to get trades done, especially since it has also created a greater schism between motivated buyers and sellers, creating bigger bid and ask spreads than I recall ever seeing.

For today, I expect that like most Wednesdays it will be a quiet week, however, I wouldn’t mind the opportunity to execute some rollovers early, if possible. I did try to do that with Joy Global yesterday, but it was one of those stocks that just had such a wide bid and ask range and non-existent volume. Maybe that will change as Friday draws to its close, but lately that has only been the case in the last 10 minutes or so of Friday’s trading, right before the options are set to expire and suddenly the spreads become a little more realistic, at least for the in the money strikes.

Otherwise, it may simply be a day of watching and wondering in what remains to be a very quiet news week once 10:30 AM has passed.