Daily Market Update – June 8, 2015  (9:00 AM)

 

There isn’t too much economic news scheduled for this week and that should mean that teh markets will be relatively calm.

That would be a comforting thought, if it also wasn’t so unlikely to be the case. 

The past few weeks haven’t had too much news other than for the final day of the trading week, but the propensity to move lower has been pretty clear.

Even though if you squinted really hard you may have been able to see some positive signs coming from some of those trading days of the past two weeks, the reality has become that the market really can’t find much reason to try and go past those recent highs.

What has really been striking is the resurgence of the bond market as it has decided that rates are going higher sooner than anyone had come to recently expect. It is making its third recent assault on the ceiling on interest rates in the past few months and this time it may have it right.

The past week’s strong Employment Situation Report coupled with the idea that what we thought was a weaker than expected economy based on faulty data has suddenly created the idea that interest rate increases could even come as early as in 2 weeks.

This week’s Retail Sales Report could open some eyes if it gives reason to believe that consumers are finally coming alive.

When you look back just a week earlier and remember that people had started suggesting that a data driven Federal Reserve could possibly wait until 2016 to begin their rate increases, the idea of it now happening in two weeks can be pretty unsettling.

And that’s exactly what the markets have become.

They’re unsettled because their notions of where we the economy is standing may not be very valid and that could lead to sudden shifts in monetary policy.

No one likes that sort of thing.

The pre-opening futures to begin this week are pointing to a very quiet open. Whether that’s going to stay the case as the day, much less the week unfolds is going to be anyones guess, but with my cash reserves much lower than I would like, I’m not expecting to be opening many new positions for the week. The general uncertainty also adds to the reluctance to make much in the way of a commitment.

Like last week, this one will have a nice number of existing positions going ex-dividend and that offers some solace. However, with only a small number of positions scheduled to expire this week, there may not be very much trading activity or opportunity to generate new income, unless an unexpectedly strong move higher creates the chance to sell calls on uncovered positions.

Of greater concern, however, are the large number of positions set to expire next week, just 2 days after the FOMC Statement release.

The concern, although still based on a small likelihood, is that if the FOMC does announce an interest rate increase, that will send markets sharply lower in the short term.

With just 2 days of recovery time until expiration that would put those positions set to expire at risk, so there may have to be some additional thought put to rolling those positions over this week, where possible or feasible.

For now, it’s just a question of sitting back and seeing where the momentum may take the market. At the moment, despite the quiet that looks as if it’s heading our way, for the most part that’s how markets have looked every morning in the past few weeks, only to deteriorate as there has been nothing to give reason
to bid prices higher.

Hopefully the bond market will take a little break this week and offer less competition to the stock market as we await any news that could create optimism and count down until the start of the next earnings season next month, which could offer those reasons.