Daily Market Update – January 8, 2015 (Close)
It’s wasn’t too easy to understand why this morning’s futures were pointing so strongly higher.
Wait. That’s what I said yesterday.
This morning the futures were even higher than they were yesterday and there’ wasn’t much reason to account for it.
It would be easy to point to yesterday’s FOMC Statement release and say that was responsible, but the market was virtually unchanged in the aftermath of that release in the afternoon. The new confusion that was contained in the altered wording of the statement would have ordinarily caused gyrations in the market as it tried to figure out what the FOMC meant, was instead simply discussed and not the basis of any emotionally charged swings in trading.
That’s either adult-like or rational, neither of which are usually adjectives used when describing stock trading behavior among the masses.
What was really interesting was how last night’s futures, at a time when not much is happening, suddenly went nearly 100 points higher at about 8:30 PM. At that time of the night no major markets are open to lead the US futures in sentiment, so it was odd seeing that happen, but more odd seeing that high level sustained through the night.
Later during this morning’s trading there was some consensus that the rise was fueled by words from new voting FOMC Governor Charles Evans, but the timing wasn’t quite right if trying to connect his comments and the spike in futures.
With so much focus on yesterday’s tragic events in France you might have thought that the sudden surge reflected some kind of substantive development in the story. While initial rumors proved to be false, had those been the impetus for the sudden pop higher, they would also have been the reason for any bursting of that bubble, except that this morning the rally is even stronger.
As the morning’s strength continued and wass able to add to yesterday’s strength, that reduced the nearly 5%sudden decline in about half, in about as much time as it took to reach the bottom in that drop earlier this week.
That meant trying to do more of the same and keeping an eye on all of next week’s positions and taking advantage of any price strength by either rolling over into that strength or, even better, being fortunate enough to find the opportunities to sell new call positions on uncovered positions.
What I can tell you, based on the option premiums, is that next week’s premiums don’t reflect the same kind of optimism that is still being reflected for tomorrow’s market. That’s because I tried rolling over a good number of positions, including GDX (again), GME, AZN and EMC. In addition, I made lots of adjustments in order to get the LXK rollover executed, but those same adjustments did nothing for those others.
Regardless of how today ended up, and the addition of another 30 points was a nice way to end the day, there is still tomorrow’s Employment Situation Report.
There’s not too much reason to think that there will be anything in the report to spook or elate markets, although at some point there may be evidence of decreasing employment statistics related to the suddenly reduced energy prices and subsequent reduced drilling activities.
While the actual statistic may not have too much impact directly on how markets react, an overly strong number will get people playing the game of “what will the FOMC think?”
Too much good news could herald the kind of economic heating up that the FOMC will want to squash by increasing interest rates, although they too will have an eye on how those falling energy prices can increase GDP, while also adversely impacting employment statistics.
Hopefully, as earnings season starts next week some of the impact of lower oil prices will be seen in earnings, and maybe more importantly on future guidance.
Those could be the fuel for the next level higher and could bring “The January Effect” really back to life.