Daily Market Update – January 12, 2015 (Close)

Last week was quite a week.

Even though there was lots of important economic news and there was certainly enough going on in the world, the market followed none of it. It didn’t listen to the FOMC, it didn’t listen to the EMployment Situation Report.

It also didn’t melt when events unfolded in France.

Anyone who follows charts or believes in technical indicators would also be at a loss to explain either the sharp decline or the strong rally back.

This week there isn’t quite as much news and the markets looked as if they were going to get off to a better start than they had last week.

Most of all, another earnings season begins this week and it may hold the key to finding something that may propel markets higher.

But not today.

The market quickly gave up its early futures gains without any real reason for doing so, although oil could again have been the culprit, as there was significant price deterioration in the oil futures markets.

But if the theory that reduced energy prices will be good for the consumer is true, there’s some chance that we’ll catch a glimpse of it soon enough, as the quarter being reported should reflect some of that data. That can start as early as when Alcoa reports its results, as it’s a big user of energy.

If it does, you can expect companies to give guidance that will be more cheery than we’ve heard in a long, long time and if investors have shown that they really like anything, it’s positive guidance. Just look at today’s happy announcement from LuLuLemon, nearly 2 months ahead of its earnings.

By the same token they don’t like  negative guidance, but that’s an issue for another time, unless you’re holding shares of either SanDisk or Tiffanys, both of which gave some early warnings today and took about 15% hits.

This week I wouldn’t have minded seeing a repeat of the last week to get us started.. Even though the broad market was lower there was lots of opportunity to rollover existing positions and sell calls on some uncovered positions. While there was one assignment for the week, the only real disappointment was that there weren’t more, as I’d like to be sitting on more cash than is currently in reserve.

What we got was a literal repeat of the start of last week, with the market ending sharply lower and having traded lower all day without any real evi
dence of an attempt to stem the losses.

This week with 8 positions set to expire as the monthly January 2015 option cycle comes to its end, another week that has some positive days, especially some strong days higher, may offer the opportunities to have a repeat of last week. Last week there were just three days to get it all accomplished after a terrible first two days of the trading week. This week we still have 4 days left.

While there may still be some potential new positions that look appealing this week, I don’t think I’ll be very aggressive in adding to the existing roster, although I thought that last week, as well, and was actually a little surprised to have added any. Today I tried to get a dividend related trade in AbbVie made, but just couldn’t get the right combination of prices.

This morning’s rise in the futures had an optimistic tone, but it was slowly being degraded by even further price drops in oil prices, so it would be especially nice to see some stability coming to that market. The stock market and the economy don’t necessarily need those prices to go any lower, as the decline in energy prices has already been a significant gift, well beyond what has been expected. It’s unlikely that companies, as they do guide forward, will be projecting even lower prices for their good fortunes, so this would be a good place to stop and build a base.

The removal of uncertainty in the direction, magnitude and suddenness of energy price moves would likely be good for most everyone, even if oil prices move higher. In the absence of a significant decrease in production, possibly due to some geo-political event, it’s not too likely that we’ll see the kind of price increase similar to the decline, so anything that removes the downward uncertainty may end up being a gift that keeps giving for quite a while.

I’m ready to accept whatever gifts may come my way and would like to start this week.