Daily Market Update – Jul 7, 2014 (Close)
After a nice 3 1/2 days off from trading it looks as if there’s little memory of what got the markets to their new highs last week.
If you can recall back just a few weeks when the market got a nice boost from the FOMC and then Janet Yellen’s press conference remarks, that boost was very short lived, as well, never having any impact on the following week.
This past week’s boost, as opposed to the tiny steps that marked the large number of previous new highs en route to Dow 17000, was somewhat larger and more decisive. That alone should have created some momentum and optimism but in a world where short term memories are scant, maybe 3 1/2 days is just too long to sustain anything.
So it maybe it shouldn’t be a little surprising that the pre-open futures weren’t reflecting any of that optimism that ended last week’s trading, although with volume very likely to be light again this week, there’s no telling what kind of exaggerated moves may happen.
When the day finally settles the market had done as it did for the first half of last week and traded ina narrow range, going lower, with the broad market weaker than the DJIA. There was really no news for today’s mild weakness and really no news for any kind of move.
Although there is an FOMC statement release this week, it’s an otherwise very quiet week on the news front.
On the events front it is the start of earnings season again, although it does get difficult to know where one season begins and the previous one ends.
With a large number of positions set to expire this week I do get a little concerned about potential fallout from the FOMC release even though there’s very little reason to suspect that it will contain anything surprising in nature.
Over the past two weeks the market has been spurred ahead by comments from Janet Yellen that should be reflected in the language used and the selection of words in the FOMC statement. With the belief that interest rates will be kept low until 2015 and news that the employment rate is dropping, equity markets shouldn’t find themselves spooked by anything that may be contained in Wednesday’s release.
However, given that next week is the end of the July cycle that means that every position with a contract expiring this week could potentially be rolled over on Wednesday, without having had to wait for the appearance of the weekly option on Thursday, as is normally the case.
At least that gives some greater flexibility in dealing with existing positions and any concerns for a surprise coming on Wednesday afternoon.
For the coming week with adequate cash there is certainly opportunity to add new positions, but the possibility of rolling over some of those existing positions may create ample cash streams to reduce the reliance on new positions to do so.
That would actually suit me just fine, as I wouldn’t mind a relatively quiet week for new positions. I would like to maintain cash near its current level so I don’t expect to be terribly aggressive with adding new positions.
However, the greatest likelihood is that with all of those positions set for this Friday’s expiration there’s reason to want to look at the July 19 contracts or beyond for any new positions in some attempt to diversify just a little.
As has been the case lately, there’s probably good reason to sit back and see how the market actually opens once the trading starts for the rest of us. This week, I would love to see some additional strength, if only to have the opportunity to rollover or see assignments on a wide scale. At the moment I find that more appealing than being able to pick up a broad selection of newly created bargains.
As the day took shape there wasn’t much reason to consider adding anything to the portfolio as there wasn’t really any movement in prices from the early established declines and there was absolutely no indication of any trend or direction other than the disappointment of not following through on last week’s good news.
For some, that’s reason enough to refrain, but at least there was some opportunity to do some of those early rollovers and even get coverage for one existing position to start the week.
Those may have been baby steps, too, but they may still get us to the hoped for destination if enough of them can be put together by Friday.