Daily Market Update – May 2, 2016 (8:30 AM)


Last week wasn’t a very good week unless you were long oil and commodities.

I can’t complain personally, but that’s because I wasn’t complaining when oil and commodities were leading the market and more importantly, me,  lower.

For now, the trend is higher, but what has me somewhat concerned is that the stock market may finally be deciding that it’s time to break the irrational association it has had with input prices for quite a while.

It may be thinking that over as the S&P 500 is only about 3% away from its all time high.

That puts it within easy reach of anything. Easy reach of a new all time high as well as easy reach of another 10% correction.

But as we watch oil and the markets, you just knew that sooner or later the market would realize that rising energy and commodity prices weren’t a good thing.

But while knowing that had to be the case, there was a time when you just knew that the stock market would finally realize that falling input prices were a good thing, but it didn’t really work out that way for the longest time

This morning, the market, is slightly higher, as oil is going nowhere.

We’ll see what that means as the week progresses.

With 3 ex-dividend positions this week, but no expiring positions, I’d like to add to the list of income producing stocks for the week, but would much rather be able to sell calls on any uncovered positions, even if tying them down for a while with the use of longer term expiration dates.

I’m definitely not adverse to spending money and dipping into a depleted cash reserve, but some of the uncertainty about how the market will react if oil does go higher and Friday’s employment Situation Report, do have me concerned about risk and reward.

Last week stocks decided not to follow oil higher, as it began to approach $50/barrel.

This week, there are lots of earnings reports, but not many of real consequence, as retailers begin to report next week.

Instead, what we do have is another Employment Situation Report where we may get to find out if there are even more people who can decide not to spend the money that they now have.

And of course, we still have oil.

With talk now of a possible interest rate increase coming at the June 2016 FOMC Statement release, it will be very interesting to see the market’s reaction if there is a strong employment number on Friday, particularly as a rational person would try to square that away with the lackluster GDP number.

Of course, that won’t happen, because all anyone cares about anymore is the latest number and not how the pieces all fir or don’t fit together.

I’m expecting a strong report on Friday and would think that the market might take it well, in the realization that they would still have nearly 2 months at current rates.

That, of course, presupposes that the FOMC would wait until June, as it had given some hint that they wouldn’t rule out an interim increase.

That, I think, would spook markets.

For now, I don’t see much to act as a catalyst in either direction, unless oil continues its march higher and higher.