Daily Market Update – May 20, 2014 (Close)
With an occasional exception over the past 3 months Tuesdays have been a day for markets to move higher.
Eddy Elfenbein, of Crossing Wall Street, keeps track of statistical oddities and in the past has shown that there actually is a predilection by day of the week, for positive market performance, that transcends a mere three month period of observation.
Tuesdays have a reasonably long history of good performance, although you would be hard pressed to call it anything other than an anomaly. There isn’t much reason to suspect that a single day of the week would repeatedly be better than any other day of the week.
I haven’t figured out f there’s any way to take advantage of that, as the statistics don’t look at what kind of machinations may take place during each of those days and only looks at the end result, but today is one of those days that I’d like to see the pattern continue.
While yesterday saw a handful of new covered positions get sold there are far too many more sitting and not generating income. A few nice days higher could help remedy that, but the pre-open futures trading is giving no indication of a market set to move higher.
But today wasn’t one of those nice Tuesdays.
Instead, while the flow of earnings reports is now slowed, there are still more reports to come for another month and the ones coming through this morning are doing nothing to move the market higher.
While Dicks Sporting Goods, Staples and Home Depot are all retailers, they represent very different segments of retail and none of them have much good news to share this morning. While Home Depot isn’t getting sold off too heavily in the pre-open and eventually was one of the few gaining positions during the regular trading session. the others are looking at large losses and if the recent pattern holds their share price recovery will be slower than is usually the case.
With a broad range of retailers consistently presenting disappointing earnings or seeing profits rise, but in the face of falling revenues, you do have to wonder where the economic growth is hiding. It can’t all be concentrating itself in Nordstroms. Yet this disconnect between the reality and the perception is rarely mentioned, much less discussed.
Today, however, that changed and it was a prominent topic of discussion all through the day. Somehow, it had gone unnoticed up until this point, as so many have been left deluded by the impact of share buybacks and simply accepted the unequal comparisons of one quarter to the next, with EPS being reported on fewer and fewer shares in the public float.
After yesterday’s late day push higher the market was within about 0.3% of another new S&P 500 record before the morning’s trading began, as it pays no attention to the economy. While it’s often said that the market discounts the future if you look back 6 months, when the S&P 500 stood at 1800 I suppose you can make a case for today’s 1885 level, but if you go out a year in time it gets much harder to justify a 15% advance.
However, most would agree that the economy isn’t exactly humming along at the moment and that there’s still plenty of room for further economic growth ahead. Maybe that’s the fuel that has been advancing the market and will continue doing so.
The anticipation of further growth to get us back to historical standards may be the driving factor, because we’re certainly not at a stage when the economy is red hot and the markets can be expected to start slowing down as less acceleration of growth becomes more likely.
But what does any of that mean for today or this week?
Not too much.
The plan remains the same. Not too many new positions, maybe a purchase here or there and just the hope that some of these good for nothing positions can begin to support themselves, even if it’s only something symbolic, as from an occasional DOH trade or two.
At least there’s always hope.