Daily Market Update – June 29, 2015 (Close)
It may be a good thing that this is going to be a holiday shortened week.
It may be a week of bookends, as the week was getting off to a very negative start on news yesterday of Greece closing its banks to avoid a run on deposits. The week will end on Thursday, as the Employment SItuation Report will be released and could revive fears of an interest rate increase again.
This morning’s pre-open futures were pointing to a nearly 200 point decline on the DJIA, but that represented a much better state than was the case yesterday evening as the DJIA was down 300 points.
Too bad that didn’t matter, as even a 300 point loss would have been better than the eventiual 350 point loss.
It’s hard to believe that the situation this morning would have been unexpected, as it’s difficult to point to a single situation over the years that has had a hard deadline but where a resolution occured well in advance of that deadline.
In this case the hard deadline in July 1, but the difference may be that even with two days remaining until that deadline, it doesn’t look as if a solution will be achieved in time. It’s not easy for the Greek government to come to an agreement with its creditors by July 1st, if it’s calling for a referendum by its citizens on July 5th.
So that’s what we will be dealoing with as the week was ready to begin.
While most everyone believes that we are long overdue for a correction, somehow I don’t believe that this will end up being the precipitating factor. Despite a terrible day in overseas markets, including the Chinese markets that are having their own issues, this sort of worldwide weakness usually drives investors to safety and that means money flowing into the US.
Of course, first you have to get over the initial shock of what shouldn’t have been a shock to anyone.
Following that initial shock, we are now about 4% lower on the S&P 500. That’s almost mini-correction territory.
With a little more cash on hand after a single assignment last week, but with only two positions set to expire this week, it looked like another very quiet week of trading ahead as the morning started.
It’s not easy to imagine that this week could be even quieter than last week, but it was certainly within the realm of possibility, particularly with one less day of trading opportunity.
Even with weakness this morning, which can be tempting to want to take advantage of, it may not be the opening to do so. If doing so, the question may become one of deciding between the trading week shortened premiums available this week or using an extended weekly option.
However, since I want to retain cash, or at least have a decent chance of recycling it so that it can also be used next week, it may be better to take the paltry premiums available this week, which may get a little bump higher from the added volatility this morning.
Still, my prevailing mood is one of penury. I don’t really want to be spending down the cash reserve.
With that mindset, the trade in Cisco, to capture its dividend, looked good, until the market decided to begin a second phase downward.
Now, after having made that trade and watching the DJIA move down about another 200 points from the time of that trade, I really don’t want to be spending down what remains of the cash reserve. That’s especially true as Thursday’s Employment Situation Report could be the second of this week’s one – two punch and it’s not easy justifying why you would take on additional risk in advance of what is known to be a sensitive area and one that has provoked some fear when it has given good news.
The expectation has to be for more of the good news to continue and that would be likely met in a pessimistic way by those who have been sensitive to the prospects of rising interest rates.
For now, that means the entire market. But just as they will be able to get past the European banking crisis and the possible loss of an EU member nation, they’ll learn to get over a small, non-recurring increase in interest rates, especially if next week’s earnings get off on the right foot.