Daily Market Update – March 23, 2015 (Close)
This should be a relatively quiet week on the news front
I don’t usually look at “Existing Home Sales” very much, but that was one of the factors cited by the FOMC last week as being a reason to delay interest rate hikes, as those sales continue to be disappointing, having been on a downtrend for the past 9 months.
While the weather may still be at play as those figures are reported this morning any uptick leading into Friday’s GDP report and then Stanley Fischer’s scheduled speech could easily get markets fearful again of coming interest rate increases.
As it would turn out those Existing Home Sales were improved and Stanley Fischer spoke today, as well as still being scheduled on Friday and the world didn’t explode.
In fact, the market actually finally was almost able to string two higher days on the DJIA, missing out only in the final 2 minutes of trading. But the market did break that string of alternating triple digit moves.
It still is confusing why everyone is so afraid of the initiation of such increases, as the market has generally done very well during the early stages of such increases.
Unless there are real signs of an economy heating up too fast there shouldn’t be the fears that rates are going to start increasing too often and too quickly. That would definitely stifle stocks as investors would look for alternatives.
The technical indicators after the past 7 or 8 trading sessions point higher even as the market has been unable to even have 2 consecutive days higher.
This morning the market was perfectly flat as we awaited the beginning of trading. Lately, however, with only a single day’s exception, that pre-open trading hasn’t been an indicator of the direction nor the size of the move by the closing bell.
Today it was pretty good as the market traded in a fairly tight range, only showing a little bit of relative weakness in the closing 15 minutes.
What has been especially interesting is that in the time of those previous trading sessions there had also only been a single day in which the trading theme saw a reversal, so it was interesting to see whether the market would continue trading in a state of fugue as the week began.
With a couple of assignments last week and some cash added to the pile I was less reluctant to spend some money to establish new positions. Since there are only 2 positions set to expire this week the greatest likelihood is that I would look for opportunities with contracts also expiring this week, in order to increase the likelihood of being able to recycle money to re-deploy in the following week.
A couple of those opportunities did come along, but I’m still open to some more.
But as the volatility has moved again near its low point for the past year, despite all of those triple digit moves, there’s little attraction for looking at longer time frame contracts, as those premiums are just getting so low. With a smattering of contracts already set to expire for all of the weeks in the April 2015 cycle there’s not too much reason to look for opportunities to populate those at the moment.
Again, as has been the case for quite some time, I would most invite any opportunity to simply conserve cash and generate income through the sale of options on existing uncovered positions. After making those new purchases today I would now especially welcome a repeat of some of last week’s unfounded moves higher.
Last week was a good week for that and that always offers some enhancement to return as it generates cash flow. However, what has been especially frustrating is that the market’s inability to string together meaningful moves forward has resulted in lost opportunities to sell those call options. That’s because any hopes of seeing shares move even higher in anticipation of some sort of rally have generally been dashed, although there have also been some exceptions.
Despite those exceptions, such as with Astra Zeneca and Sinclair Broadcasting, I think that I would still jump at any opportunity at this point to lock in any premiums on moves higher, as more and more stocks are moving higher in isolated ways and unable to hold those levels.
This morning I waited until the Existing Home Sales data was released to see if there was any reason for the markets to forget about their celebration of a continued dovish stance on interest rates. The last time the market responded with relief it only lasted 2 days, so it seemed right to see how long the party would keep going this time.
And if the party does keep going?
I still wouldn’t mind a repeat of last week, with or without new positions to enjoy the ride.