Daily Market Update – March 24, 2015 (9:00 AM)
Well, at least yesterday came close to being able to put together two consecutive days of gains for the first time in a month.
Up until the last 10 minutes or so it looked as if it would happen.
There was actually some reason to feel optimistic yesterday as the Existing Home Sales were higher and Federal Reserve Vice-Chair Stanley Fischer gave the first of his two talks this week and didn’t shy away from plainly stating that rates were going up.
Perhaps had those events happened a week earlier the market may have taken it as a set of signs that it would be appropriate to take a plunge.
Instead, there was both something refreshing about Fischer actually joking about impending rate increases and the market reacting rationally to news that would have sent it into a panic just days ago.
That may be reason enough to have some optimism as the market continues to be able to find higher ground even as so many stocks are being challenged on a 50 day basis, which many consider to be a bearish signal.
While there’s nothing much else scheduled between today and the end of the week, there’s always Friday and Stanley Fischer has another chance to get people nervous now that he’s softened them up with economic humor.
It will be interesting to hear his comments in light of the GDP statistics that will be released that morning, as most everyone will be focusing on whether the GDP finally begins to show the consumer led expansion that we’ve now been expecting for about 4 months of lower energy prices.
This morning the Consumer Price Index was up 0.2%, which did nothing to excite the pre-opening futures, which like yesterday were trading fairly flat. That was, however, the first increase seen since October 2014, but it actually reflected higher gas prices seen over the past month. The increase was, though, perhaps an indication that the annual inflation rate may reach the Federal Reserve target of 2% or even beyond, which could give some justification for the first interest rate increase.
In its very early response, though, the bond market was taking rates down ever so slightly.
So far there hasn’t been any validation of the thesis that consumer spending was going to increase in a meaningful way as energy prices decreased in a meaningful way. Even retailers that had initially started painting a rosy picture stepped back a little when providing earnings guidance over the past month.
Yesterday, though, most of the day was simply one of trading without any reason to go up nor down, although over the previous week the market hasn’t really needed a reason to make a large move, although each of those moves was in some way erased or mostly erased the following day.
With a couple of new positions opened yesterday there still may be some more for the rest of the week, but there’s no real compelling reason to put more at risk when the market continues to be so directionless.
If that direction does turn higher, it would still be nice to see some very strong moves in that direction, even if they don’t have much in the way of staying power. Those are the kind of moves that can make sale of calls on uncovered positions begin to look appealing. Additionally, those large moves, especially if occurring with lots of intra-day price fluctuation sends premiums higher. Lately we’ve had the large moves, but without the intra-day fluctuation, so the volatility has actually been falling and taking premiums along with it.
As with yesterday there’s not too much reason to rush into any trades and plenty of reason to simply watch and see where the market may head for the day.