Daily Market Update – August 5, 2015 (9:00 AM)
It was nice to wake up this morning and to see the futures heading nicely higher. They were nearly 100 points higher on the DJIA and those kinds of moves tend to have some staying power.
Then came the ADP Employment Report and it was a disappointing release as it reflected job decreases in the energy sector.
So what did the futures market do? It simply added about 50% to those earlier gains.
With that somewhat bad news the market reverted back to its “bad news is good news” mentality, as the initial thought must now be that those kinds of employment statistics would likely mean a further delay in an interest rate increase, even when Federal Reserve Governors are increasingly saying that it’s time for that increase.
It’s too bad that is still the way of interpreting news. At some point the market has to get to the more healthy way of accepting news for its real meaning and simply discounting the first order of events 6 months down the road.
Instead, the market is discounting second order events 6 months into the future. That’s a good way to discover disappointment and to realize that crystal balls get cloudy when you expect too much of them.
It is predicting that the bad news will delay an interest rate increase and then it is further predicting that such a delay in interest rates will be good for the stock market that’s just a bit too much of a stretch.
That’s just too much to try and predict.
It also forgets that there’s lots of data that is still going to be released between now and the September FOMC meeting and those scales can easily be tipped, especially if those FOMC members are getting anxious to finally do something after 9 years of not having had a rate increase.
That still leaves Friday’s Employment Situation Report and an expectation that if the numbers are light that the market may again exhibit some inappropriate rejoicing.
We’ll see if the futures buying will continue into the actual trading session today, but it comes within the context of DJIA component Disney down nearly 5%, which alone is taking away about 60 points from the DJIA. It also comes with a continuing weak Apple, which is now officially in correction mode, although it is only down about an additional 1% in the futures trading.
I’d like to see these gains continue and hopefully leave expiring positions this week in better shape for either assignment or rollover. In a perfect world it would also allow for the sale of some call options on uncovered positions. That would be nice, but it might take some sustained gains to see those happen and the staying power of advances hasn’t been very good of late.
We’ll see if bad news can end up being the new good news and take us to the new highs that we’ve started believing is our destiny, even if the masses are left behind.