Daily Market Update – October 29, 2015 (7:30 AM)
Yesterday’s stock market movements were pretty surprising.
The strength ahead of the 2 PM FOMC Statement release itself was surprising, as the pattern for nearly a year had been strength on the days leading up to the release date, particularly the day before.
This week it seemed as if all of the buying had happened in the last two days of the previous week and tentativeness had taken hold on Monday and Tuesday.
But for some reason the optimism came back and the turned on a dime at 2 PM.
At that point the market fell over 100 points as the FOMC came out with a more hawkish tone, even though it left interest rates unchanged.
It laid out the kind of thresholds that it would take as justification for a rate hike and each of the bullet points seemed as if they could be easily met by the time of the next FOMC meeting in December.
Maybe it was that relative degree of certainty and removing any reference to the uncertainty in international markets,such as China, which then gave investors some confidence.
Because just as quickly a the market turned lower at 2 PM it jumped higher about 15 minutes later, as the market made up about double what it had lost.
This morning’s pre-opening trading has some of those gains being given back, but most people would be happy with the idea of taking 3 steps back for 4 steps forward, especially if that kind of back-filling could be dome on a regular basis.
Yesterday’s gain now leaves the S&P 500 at only a 2% or so deficit from its all time high achieved in the summer, having made up about 10% of that deficit in less than a month.
That kind of rapid climb higher really does need some kind of back-filling to leave it in a reasonably stable condition and any givebacks over the next few weeks might not be the worst thing in the world.
With the FOMC now out of the way, today’s GDP may give some insight into what retail earnings are going to look like, but I would put more faith in the latter, despite the ease with which the bottom lines are manipulated.
The key to look for as the national big box retailers are getting ready to report their earnings is to look at their top line revenue numbers. Any increase in those numbers is going to be a reflection of increased consumer spending, which itself represents about 70% of the GDP.
It’s that kind of consumer activity that would probably be the best indicator of a growing economy and the best reason for the FOMC to consider lightly tapping on the brakes.
FOr the rest of the week my focus will most likely be restricted to this week’s expiring positions and trying to be in a position to be able to spend some money next week to open some other new positions.
With only a single expiring position next week, it would certainly be nice to have an opportunity to either open new positions or at least get to rollover this week’s expiring positions, in order to create the week’s income stream.