Daily Market Update – January 7, 2015 (9:00 AM)
It’s not too easy to understand why this morning’s futures are pointing so strongly higher.
Usually there has to be some kind of news for that kind of reaction prior to the markets open to account for the strong commitment in either direction. While tepid futures moves don’t have much meaning for the market’s trading once the day begins, the strong kind of early mornings usually do have some staying power, although not necessarily for the entire session.
What makes it unusual this morning is that it comes after a failed recovery attempt in the final hour of trading, which ended up adding another 130 points to the 330 point loss from the day before.
But even more unusual, while it does come in the absence of any economic news, it also comes hours before the FOMC Statement.release.
It can be a risky thing to commit too much in advance of the release as you never know how the slightest nuanced change in wording can set off programmed trading. For the past couple of months the FOMC Statement hasn’t really set off too much in the way of fireworks, even with last month’s wording change, but those days could easily return.
The double dip in markets seen over the last couple of weeks that had us returning toward than typical 2 month mini-correction level just a couple of weeks after the most recent one, is itself something that should be getting some attention, as that hasn’t happened in nearly 3 years and might make me reluctant to plow money into new positions, despite what appeared to be some bargain prices yesterday.
This morning, if the early rally holds, I’d be more than happy to be able to sell calls on uncovered positions, but the preceding drop of nearly 500 points in the two prior days means that there’s lots of catching up to go.
While I’d like to see some of that recovery today put positions set to expire this week into better position top either be assigned or rolled over, I’d especially like to see any advance over the next few days accomplish exactly that, but for the next week, which is the final week of the January 2015 option cycle.
With only 4 positions now set to expire this week, while it would be nice to see them contribute to the weekly income stream or to regenerate cash supplies, the 11 positions expiring next week could be more meaningful contributors.
In the meantime, while awaiting this afternoon’s FOMC Statement, I’d be happy to see the market start to reclaim some of the substantial ground that it has lost over the past couple of days, especially if that results in something more than just paper gains for the day.
While I wasn’t expecting to make any new purchases yesterday, I think that I’d really be stunned if I added more new positions today or for the rest of the week, for that matter.
Other than taking advantage of any short term market climb I expect that the rest of the week will be fairly passive and filled with lots of observation, even though there’s still plenty of economic and market moving news to come in the final 2 1/2 days of trading for the week.