Daily Market Update – March 11, 2015 (9:00 AM)
After yesterday’s 300 point loss, following a nearly similar loss last Friday which was only half recovered to open the week, this morning’s small gains in the pre-open futures trading is no where close to recovering what’s been lost.
It still astonishes me that people can keep a straight face and talk about how it’s the realization that currency exchange rates are now serious challenges to corporate earnings, that was responsible for yesterday’s decline.’
The S&P 500 is now about 3.5% below its high from less than 2 weeks ago, but the rise to that high occurred over a 4 week period. For the 6 weeks preceding that rise the market had been toying with 3-5% drops every 2 weeks. For the 2 1’2 years before that it was more like every 2 months that some sort of sell-off got our attention.
I’m not of the belief that there’s reason to believe that this time we’ll finally see the 10% kind of decline that everyone agrees is long overdue. While you can’t deny that it’s long overdue, it’s hard to point at any surprises that would be responsible for taking us there. However, based on yesterday’s market, apparently surprises aren’t a necessary component in the mix.
While all of this is going on with stocks the volatility in other markets is also striking. Precious metals, interest rates, currencies and oil continue to move in big ways and all of those have direct and indirect influences on US equity markets, as well.
Is all of what’s going on, including the initiation of European Quantitative Easing now constituting a “Perfect Storm” that conspires against stocks?
I don’t think so, but it is making things unnecessarily challenging right now.
With a couple of new purchases for the week and little indication of anything positive to come for the rest of the week, my guess is that I won’t be adding any new positions and instead will be focusing on trying to get rollovers or maybe get lucky and get an assignment, or two to end out the week.
It’s always tempting, however, to want to buy something after the kind of price drops that we’ve seen in the past few days. The problem is that as we begin to approach the next earnings season, which begins in just 4 weeks, we may start getting earnings warnings from companies before their official reports, that reflect the currency exchange rates of late.
It’s hard to want to get in front of that kind of news. At the very least you would want to see some kind of evidence that there’s some stability ahead sooner rather than later.
With only a paltry advance in the pre-open futures, that’s not the kind of advance that I’d be looking for to signal some kind of stability. At this point, you have to believe that there may be another 1.5-2% left in the current decline, so I might rather be content to be wrong about that while I’m on the sidelines watching existing positions recover.