Daily Market Update – February 23, 2015 (9:00 AM)
Although it doesn’t look as if the week is going to get off to the kind of start that takes us to more record high closes, there will be plenty of opportunities this week.
With most of the major retailers reporting earnings this week, and more importantly providing some future guidance, we may finally get to know whether lower energy costs can translate into an expanding economy.
The week then ends with another GDP report which a number of months ago was predicted to greatly expand due to decreasing energy costs, as about 70% of the GDP is dependent on consumer spending.
Also during the week will be 2 days of congressional testimony by Janet Yellen and there is always the possibility of disclosing something, especially regarding the timing of any interest rate increases, that hasn’t been made public previously.
With Bernanke and Yellen the market rarely moved as much when they provided testimony as it did during the Greenspan years.
The real difference, though, was that when Bernanke or Yellen responded to questions posed to them the answers were generally understood. If there was something truly newsworthy, the market generally knew how to react. Instead, when Greenspan spoke, the market was never sure of what he meant and they would alternate between large drops and surges, often within minutes of one another.
That, at least isn’t likely to happen.
As another monthly option cycle gets ready to begin, it’s nice closing the previous month with a fair number of assignments and the cash to play along, if warranted.
Last Friday’s very unexpected response to a temporary solution to the Greek crisis isn’t likely to have much impact on things going forward until approaching that 4 month date down the road when the crisis could start all over again.
Because Friday’s events were really a “one-off” kind of thing there’s not too much reason to believe that those new closing highs will be the starting point for even more due to some technical set of factors or newly discovered optimism.
Instead, this week will likely stand on its own merits based on the major events planned for the week.
With a few positions et to expire this week and with volatility once again falling, the emphasis will be on finding short term option expiration opportunities and trying to populate this week and perhaps next week, as well, with expiring contract positions. Actually, that’s probably a secondary emphasis. I would still rather generate the week’s income stream from finding some chance to sell calls on existing uncovered positions.
While retail sales and Yellen’s two days on Capital Hill will be center stage there is still plenty of reason to still reserve some focus for oil prices and interest rates.
It’s not always about stocks.
As long as those continue to bounce wildly it’s hard to envision any particular direction for the stock market. You can also add precious metals to that short list, too.
Among asset classes there is often a flow of money from major players as one opportunity looks better than the next. With the constant back and forth seen in some of those markets there’s reason not to be fully committed to any of the markets, even the ones that seem to be reasonably stable, as a collapse in the other markets could result in a quick outflow even from the relatively healthy market, such as to meet margin obligations in other markets.
It’s too bad that we’re not seeing some of the same back and forth in the broader stock market, as that would really drive premiums much higher, as is the case for many energy positions, right now. In the best case scenario even with all of that volatility prices would remain basically unchanged as they have recently been in the energy and precious metals markets.
For now, it’s an issue of waiting to see what character the market assumes this week and not being too reckless with newfound cash.