Daily Market Update – September 28, 2015 (Close)
Last week’s mid-week swoon, more like a nose dive after a tepid attempt at a recovery from the previous week’s FOMC induced nose dive, wasn’t giving much indication of being reversed as we got set to start the week.
Last Friday’s gains were actually only very mild, at best, once you factored out the performance of Nike and suddenly that triple digit gain on the DJIA was barely 35 points, while the S&P 500 finished lower, in a much better reflection of what was going on for most stocks and most people.
What this week does have, though, is some catalysts that could move markets higher and possibly move them away from the 10% correction line that’s been straddled for the past month.
In addition to the usual collection of FOMC Governors speaking their minds during scheduled speeches, the two that matter the most, Janet Yellen and Stanley Fischer will be holding court.
But you wouldn’t have known that based on how the day went, especially since there was never any kind of visible effort to bargain hunt as prices went lower and lower.
Last Friday’s early rally, which ultimately gave up ground heading into the close, may have been related to a more hawkish tone taken by Janet Yellen the previous day following the market’s close. Most everyone will be looking for more of the same and some reason to believe that the FOMC believes that the economy is on a good enough forward moving path to finally tighten up a little on the cost of borrowing.
However, the market may be indicating that it is getting weary of just words and wants words to coincide with actions. In this case, that means finally getting the initial interest rate increase done and moving on with things.
Bill Dudley’s comments today that he was expecting an increase by year’s end did nothing to give traders reason to change direction and start picking up bargains.
While today was terrible, the week ends with the Employment Situation report and a strong number could really send the market higher if Yellen and Fischer precede Friday’s report with an indication that they’re really ready to move in a somewhat pre-emptive fashion on any evidence of a pattern of good economic news.
Until then, though, the market seems to be in a “show me” state of mind and just more so after the first day of the weeks has now been entered into the books.
With a couple of assignments last week and a small number of potential expirations this week, coupled with a few ex-dividend positions, there was some room to add some new positions for the week. But with some income already guaranteed and with at least a couple of the week’s expiring positions being within reach of either assignment or rollover, the need to spend money to create income isn’t as strong this week.
Still, one of the characteristics of these kinds of markets is that you can often re-do the same trades, as the newly opened positions in Bank of America and General Electric today may demonstrate.
With the DJIA right at the 10% correction line and the S&P 500 just a it better, at only a 9% decline from its July 2015 highs, the pre-opening futures were doing nothing to help either index create a safety cushion on the right side of that line and the depth to climb out of that hole simply got larger, but it was hard to resist going back to the well a 5th time in the past month for General Electric and a 3rd time for Bank of America.
While I’m not entirely resistant to adding some additional new positions this week, especially if also including some dividends, I doubt that I’ll be as active in doing so as was the case last week.
For now, there’s very little reason to put too much faith into where the FOMC will be going, even though it feels as if they can only go in one direction. The real issue has been a question of “when” they’ll get going and they keep confounding
While I would still like to add to cash reserves, if the market can continue straddling this 10% correction line and punctuate its moves with large moves higher and lower, I’d continue being happy to try and make some trades with a very short term time frame on them and would continue looking for opportunity to lock into some longer term contracts for their enhanced premiums, for as long as they might last.
We got one of those big moves today, hopefully there will be some sort of offset in the other direction.
So, as with most weeks, the week began with an open mind awaiting some indication of direction and sentiment and a hope that any opportunities are real and not illusory.
We’ll see about that tomorrow.