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

 

Just as you think you are seeing a pattern it disappears.

That was the case yesterday as the recent pattern would have had the day give back the gains that the market accrued 2 days prior.

Instead, and there’s no reason to complain about it, the market added on to those gains after having taken a day to catch its breath.

If that pattern were to be back in force today it would be another day to catch breath and get ready for what has been typically a very active day to close the week.

These past few weeks the market has opened and closed with a bang and has also done so on Wednesdays.

Yesterday’s gain was unexpectedly nice and another in a growing list of triple digit moves, although the net result of those moves has been to take the market to its first real correction in quite a while.

The market’s turnaround last week Friday to yesterday’s close has now shaved the loss down to 7% from its summertime highs. That’s still large by recent standards, but that gain has been sizable and very quick to unfold.

This morning the market looks as if it will be giving back yesterday’s gains and is trading for the first time in a week with the Shanghai markets back open. Prior to those markets closing for a holiday there was some stability, but there was certainly less of an overhang for us with a very significant market being closed.

Today starts earnings season, which now basically never ends. The real torrent of important earnings begins next week as the financials start to report. Between now and then there isn’t too much to potentially pull the market strongly in either direction as we await the outcome of open contracts that expire on Friday.

I’ve learned to not get overly wedded to the likely outcome after a Friday closely bell until after that bell has sounded, but there does appear to be a good chance of achieving some rollovers and assignments in order to be better positioned for next week, which marks the end of the October 2015 option cycle.

Somewhat uncharacteristically, with that final week, I have fewer expiring options than is usually the case, as more and more positions have extended option contracts open with aspirational strike prices, hoping to see the market erase some losses and collect some dividends along the way.

I don’t expect to be doing too much today, but would happily jump on any opportunity to sell some calls on uncovered positions or even roll over something from next week or the following weeks while there is still some additional premium from elevated volatility, which is now in the process of shrinking back.

That volatility was good while it lasted and I wouldn’t mind the market giving back some of these recent gains in order to extend some of the time that the volatility enhanced premiums would be around. That’s especially true if energy and commodities can continue to show some stability or even some strength.

That would be the best of all worlds right now, until finally getting a chance to ease up on some of those sector holdings.

Hope may not be a strategy, but without it you have nothing.