Daily Market Update – December 29, 2014 (Close)

With only a few trading days left for 2014 the Santa Claus Rally doesn’t have much time left, but then again, it never does.

After today’s uneventful trading it now has even less time.

While December is typically the best month of the year, or at least right up there with the very best, by comparison to past years, so far the 1% advance for the month is disappointing. It’s also a little deceiving, as essentially the entire net gain for the month came last week, after two very large moves in opposite directions the first two weeks of December.

Two back to back days accounted for the entire month’s worth of gains

So if you’re looking for trends or patterns to explain this December, you can keep looking for clues. What has been largely missing, as there have been some big international macro-economic stories, has been an almost complete absence of discussion about retail sales.

Maybe not today and maybe not tomorrow, but very soon lots of attention will be paid to those reports as they start to come out.

Usually at this time of the year, the last few days of December we find out that sales haven’t been as bad as we thought and that last minute price cutting by retailers helped to rescue the season.

So far, that’s not the way it has been playing out, as there hasn’t been the kind of widely held cries about how preliminary sales were lagging projections and last year’s statistics.

Given what’s going on in the economy, with increasing employment, better jobs and much lower energy costs, you would have to think that unless people are paying down debt or saving, they would have to be spending.

If that’s the case, it didn’t look as if the pre-opening futures knew about it. Based on the early trading it looked as if it was going to be a quiet start to a quiet week and it wasn’t looking as if anything was being done to push that rally forward.

There’s not too much scheduled news this week and the world is usually quiet during the final week of the year, as well.

It’s funny how that works out. Somehow the world is often able to put everything on the back burner and just watch the old year go out like a lamb.

As usual, whenever there’s going to be a week of relatively low volume, like this shortened 4 day trading week, there’s always the talk of artificially large moves created by the light volume.You certainly couldn’t prove that theory based on today’s light volume, though, as the market barely mopved around a 20 point range from being unchanged all through the d
ay.

That low volume axiom doesn’t seem to be quite as true or frequent anymore, as those that really control market volume aren’t likely to just sit back and watch a large move in either direction occur without them, But still, there’s nothing lost by keeping fingers crossed and hoping for a nice rally to close the year and to get us off to a good start.

No matter what the last few days of the year will bring, the theories to explain any large moves are the same, year in and year out.

There will be those claiming traders taking tax losses. There will then be those claiming that those that already took tax losses are now jumping back in before a traditional January rally.

Of course, that traditional January Rally isn’t so traditional anymore, either.

With some cash replenished and only a single position set to expire this week, I’d be much more happy being able to use existing positions to create the week’s income stream. However, early indications aren’t showing the kind of broad advance that would make that likely.

The alternative is to add some new positions to begin the week and in all probability looking at the weekly option, although the shortened trading week again offers lower premiums, just as with last week.

The exception, just as with last week, is again found in the energy sector, which has lots of uncertainty built into option premiums, a oil is able to hold above $54 for now, which may be a good level at which to anchor energy related strategies, whether bullish or bearish on near term price.

However, because of the inherent near term risk, some thought, was given to using longer option contracts, especially when considering trades directly based on the price of oil, such as BNO.

Otherwise, it’s more of the same for now. Sitting back and watching to see how the market wants to begin the week once the bell rings for real.

I don’t think that tomorrow will be very different, although it couldn’t possibly be any slower.