Daily Market Update – February 3, 2015 (9:00 AM)
Not a single trade yesterday, but at least there was some good news with the market’s turnaround after nearly a 200 point decline early in trading.
While the size of these gains, seeing multiple 200 point advances in the last 6 weeks, and not really seeing the market move any higher, should be good if you like volatility, the problem is the sheer size of those moves.
Granted that 200 points don’t mean as much at these record levels as it would have meant 5 years ago, but unusually large advances are typically seen during bear markets or leading up to them.
That’s part of the reason that I’m not overly anxious to add any new positions and would especially like to add to cash, instead.
Along with that I’d also especially like to simply add the protection that cover gives, as that protection also gets more rewarding as this kind of volatility continues or even increases.
This morning the pre-open futures is indicating some follow-up to yesterday’s large late day gain. That gain was one that just kept picking up steam in the final hour similar to that seen in the mid-afternoon on Friday, except that one ended up waving the white flag when no real reason for the advance in oil prices, which led the market’s advance, could be figured out and seemed to be either rumor driven or hedging driven.
There was no real reason for Monday’s turnaround either, although the good news for the day was that the news continues to not be so bad from the energy sector as they report earnings and the disappointment that’s being provided in forward guidance already seems to be factored in.
This morning the only real economic news of any importance is one that isn‘t generally so important. After the morning’s trades begin Factory Orders are reported and oddly, given that we’re supposed to be in an expanding economy, those factory orders have been down for the past 4 months. Going down for a fifth consecutive month doesn’t really send a signal that the economy is humming along on all cylinders.
After that report is made essentially the rest of the week focuses on jobs, with statistics coming on Wednesday, Thursday and the big Employment Situation Report on Friday.
None of those should really have much of an impact on markets unless they contain some really big surprises.
If the numbers are too big, then the fear of the FOMC increasing interest rates sooner rather than later creeps in, but the bond market, which usually gets things right, is going in the opposite direction.
If the number is too small, or if there are big adjustments downward, there comes the doubts about the story we’ve been all believing and investing in.
So while I would, at least theoretically, like to be participating in whatever rally may come our way this week, if yesterday’s good graces can continue, I’d rather be in a position to take advantage of any moves higher, regardless of for how long they may turn out to last.
AT least while sitting and doing nothing I won’t find reason to complain if some catch up in the bottom line starts occurring, whether there’s a good reason for energy sector positions to be moving higher or not.