Daily Market Update – November 3, 2015 (7:00 AM)
Yesterday was a really unexpected move higher to start the week.
When you think about how the market reacted to the last release of the Employment Situation Report, there was a quick shift in sentiment as the October numbers were disappointingly low.
Right up to that report the market had finally started looking at economic news in a rational way and its initial response to the bad news was exactly what a rational person would have predicted and the market added to its already 10% loss having started in the latter half of August.
It got down to about a 12% loss and then just turned around on a dime early in the morning of that release, getting to where it ended up yesterday, now less than 2% below its all time highs.
So yesterday’s move higher in advance of this Friday’s release of the next round of employment numbers means only one of two things now that the FOMC seems to be saying that the number that we thought was so disappointing last month, is actually just fine and dandy in justifying an interest rate increase.
So, either the market went higher yesterday in expectation of continued bad news, meaning bad news is good news, or it went higher in expectation that Friday will bring good news.
It’s hard to believe that the former is the case and maybe the market is setting itself up to respond in a rational way, although you would have expected some negative response, given how so much of the rise from the 12% drop seemed to be fueled by the “bad news is good news” kind of mentality.
But that’s the problem with applying rational thought processes to what is really an irrational entity, despite all of its metrics, charting and analyses.
This morning’s pre-opening futures aren’t yet indicating that it would add to yesterday’s gains, but you certainly wouldn’t have predicted yesterday’s gain from yesterday’s p[re-opening futures.
With the fairly rapid and sustained climb yesterday there wasn’t very much opportunity to jump in and buy anything. Most of what I have my eye on this week are dividend related and today would be the last day to make those purchases. If today comes and goes without those buying opportunities, it may end up being a very quiet week.
With a few positions set to expire this week there are still some opportunities to either rollover those positions or potentially see assignments, but as the week progresses, if those dividend related opportunities disappear, the likelihood is that any new trades will then look at an expiration the following week.
After having rolled over next week’s sole expiring position yesterday, I wouldn’t mind being able to populate next week’s list of expiring positions, particularly if there may be a chance of getting some assignments this week.
Otherwise, it will be another morning of watching and waiting to see how sentiment unfolds. I wouldn’t mind a little weakness, especially in those ex-dividend positions in an effort to set up some trades for the week.