Daily Market Update – September 16, 2014 (9:00 AM)
There is so much news packed into the latter half of this week that the market should have considered taking a few days off in preparation.
What really makes this week interesting is that the news is coming from all directions and none of it is additive, although if all pointing in the same direction can end up being very significant.
FIrst, there’s monetary policy news coming from the FOMC. Then there’s political news come from Great Britain and Scotland and finally there’s stock market news coming from the all-time largest IPO offering on Friday and its reception in the secondary market, as well as the manner in which the IPO is executed.
So it’s hard to imagine much of significance happening today as most people wouldn’t want to make any kind of significant commitment in advance of what may be an avalanche of news, any specific bit of such news that could take the market in any direction.
Yesterday so much of what was being discussed was how Friday’s upcoming Alibaba IPO could dry up liquidity, although I’m not certain why that was such a late consideration, as it seemed reasonably obvious from the time that the “roadshow” began last week.
As you would expect the money to get shares of Alibaba at or after the IPO has to come from somewhere and it’s extraordinarily unlikely that those who have been sitting on the sidelines with cash are going to be the ones pumping money into those shares. Rather, people tend to take profits first and then just re-circulate the money.
So it shouldn’t have come as too much of a surprise that some of the biggest momentum names, specifically the ones that may have generated some nice capital gains for some people, would be the ones to feel the pressure, especially insofar as you may need settled funds or margin to make the purchase if offered an allocation.
The timing also shouldn’t have been too much of a surprise as it takes three days for settlement and the IPO is on Friday.
Funny how that all worked out.
Having executed two opening positions yesterday I’m not certain that I’m going to be actively looking to add anything to that, other than hoping to capitalize on any upward movement on existing, but uncovered positions.
This morning once again looks as if it will be opening with a downward bias, but I would imagine that most of the IPO driven selling is now done.
Unfortunately, all of that means that it may be a very boring day today and maybe even for part of the day tomorrow. Part of the quandary that awaits in advance of the first of the weekly challenges is whether to attempt rollovers of positions that may have a chance of being assigned on Friday, in an attempt to avoid any nasty surprises.
Part of that quandary is answered by the still relatively high premiums for those contracts expiring on Friday, due to all of the uncertainty and the relatively low premiums for next week, once the uncertainty is history.
For now, that means more of the same. Just sitting back and seeing what direction and sentiment the market takes and going from there while hoping for the best.