Daily Market Update – January 26, 2015 (8:30 AM)
The morning, although appearing to be ready to get off to a lower start is far better than the overnight futures were indicating, after the larger than expected victory of the opposition party in Greece’s election.
After last week’s trading though, the pre-open futures may mean nothing for the way the rest of the day goes, as 3 of the 4 trading days last week had very significant turnarounds from the early numbers in less than an hour after the opening bell.
While the Greek election results may be a big story, even despite the ECB actions of last week that temporarily lifted the markets, the European economy may largely become irrelevant for us, other than the fact that it helps to prop up the strength of the US dollar.
For now, as opposed to a couple of years ago when the very existence of the EU was being threatened by a possible chain reaction of defaults among some members along its southern frontier, it doesn’t seem as if anyone is really worried about the spread of market contagion to our shores.
As with most things our crystal ball is always very cloudy and even the obvious is often far from assured, so we just wait and watch things unfold as the stronger states in the European Union figure out how to deal with the weaker ones and see their joint currency get devalued in the process, which may be the best solution to get the cycle moving back in their favor again.
This week, after the Greek news, there is actually very little scheduled economic news, but what there is could be of real importance.
The 2 big events are the FOMC Statement release and another set of GDP figures.
The latter may give us an idea of whether the logical increase in consumer spending that we all believed would come from the severely declining energy prices has actually started to happen yet. After the surprise of the Retail Sales report f a couple of weeks ago that showed no such increase, but was widely questioned by many, the GDP report could let us know whether the economy is heating up.
It’s that heating up that could be the cause of the FOMC beginning the process of raising interest rates, as we all have come to expect will happen sooner rather than later.
Those interest rates, especially in the past 2 weeks have been really volatile.
That combination of increasing interest rates, devaluation of the Euro and the ECB pumping lots of liquidity into their bond markets shouldn’t be good for US equity markets, but that’s also an example of trying to apply logic.
This week, with a little replenishment of cash, I’m looking forward to spending some of it on new positions. However, because there are only 3 positions set to expire this week, despite all 3 being in a position to be assigned, thereby creating new funds for the following week, the likelihood is that I’ll be looking first at new positions with options to expire this week.
As has frustratingly been the case for far too long, this week, again my preference is to be able to sell calls on existing positions in order to generate the cash stream for the week and hopefully there will be some good news coming on Wednesday from the FOMC and then again on Friday.
More importantly, if there is good news coming, we won’t revert back to that annoying “good news is bad news” kind of thinking that has been happily absent for a while.