Daily Market Update – April 6, 2015 (Close)
This morning looked as if it would do what it has to do to make up for lost time when it wasn’t able to react to Friday’s Employment Situation Report.
With the very disappointing numbers, that can still be subject to revision, as they always are, the bond markets and futures markets were open and did what you would probably have expected them to do in light of a very weak report.
Maybe a year ago or even just 6 months ago, the very same kind of weak job growth report would have been met enthusiastically because it would have meant a continuation of Quantitative Easing.
Now, a decline from what’s expected only means that growth is decelerating and that’s not a good thing when you realize how flat the trajectory has been over the past 6 years. It’s not as if there’s been explosive growth that could just as easily fall off of a cliff. The gains in employment and the economic growth have all been hard won, but have only been incremental victories. Even a small step backward may seem overly large or significant.
In the best of the worlds the market will come to the realization that the numbers released on Friday may either be an aberration, perhaps weather related, or be in line for their own revisions. Doing so would require some rational thought regarding the logic or reacting so strongly to data that is subject to revision. In fact Friday’s data included a downward revision to the previous month which had exceptionally strong numbers that started the recent decline seen all through the month of March.
But that’s not likely to happen based on the past. We will still go from number to number. Reacting first and rarely thinking over the logic of the action other than to have an equally illogical reaction.
Yet, it did happen today, as suggested this morning that it might once the need to do something about that gap was requited.
After what turned out to be a really nice day today, tomorrow we start all over again with eyes firmly set on Wednesday.
This week brings another FOMC Statement release and there’s not too much reason to suspect that it will contain anything to move markets. There’s no expectation for a rate increase, nor for change in the language unless there is an acknowledgement that the economy is not growing as much as would have been expected.
The language used, especially if expressing any disappointment at the slower than expected pace of economic expansion, especially in the face of declining energy prices could be one of those things that sends the market higher, as there will be an expectation of some more time with free and easy money courtesy of the Federal Reserve.
With only a single assignment last week it was at least good to get all expiring positions rolled over. That added to the positions now set to expire this week and next, which marks the end of the monthly cycle.
With volatility so low, despite what seems like a very volatile environment, there’s not much inducement to think about looking very far into the future when it comes to selecting expiration dates. The caveat to that is that earnings season starts this week and for select positions there may be some enhancement of premium due to an upcoming earnings report.
With minimal in cash reserves I still don’t expect very much action this week and find myself again preferring to generate whatever weekly income possible either through rollovers or the sale of calls on existing uncovered positions. There was some limited opportunity today, just not enough.
With the large decline expected this morning it wasn’t too likely that the latter of those preferences would be borne out today, but this kind of day, with the market needing to do some filling in for what was missed on Friday was also the kind of day that has seen a turnaround once that filling in has come to its end.
Luckily, that’s exactly the way the script played itself out and did so quickly. Hopefully the rest of the week will also allow some nice constructive tardes to be made in preparation for the end of the cycle next week.