Daily Market Update – September 8, 2015 (Close)
I was awaiting this morning with a little bit of trepidation after seeing how China and Japan were trading last night.
After China having been closed for two trading sessions in commemoration of the end of World War II, anything was possible when their markets were ready to re-open. Added to that has been the Nikkei, which has been in the background, but has slowly been melting away, as China had undergone a loss of about 40% in its Shanghai market.
The last that I looked before heading off to bed the Shanghai market and the Nikkei market were both down sharply, but the US market was pointing nicely higher.
That seemed odd, but I also noticed that the Shanghai futures were looking very good.
Shanghai actually trades in two sessions each day. There is a morning and then an afternoon session. What I was seeing last night was another large loss on the morning session, but a sharp advance looming in the afternoon session.
This morning, we all wake up to a sharp move higher in Shanghai, all coming in the final hour, a sharp move lower in Japan and US futures getting stronger, getting closer to a 300 point gain in the DJIA.
That should be sufficiently confusing for most everyone.
The alteration in moves in China and then the divergences between the Nikkei and US markets from the Chinese markets means that we can have no sense at all of what today, tomorrow or the next day may bring.
WIth markets down sharply last week it is nice to at least see some stability come back into the market. But stability is not created by having these 200 and 300 point moves higher. Those kind of moves only add to the instability as there’s lots of impetus for people to think about selling in order to get a better price than they could have gotten the day before. In an environment where there are such large moves in both directions and the net result of all of those moves to send the market lower, selling may make sense.
This morning, just about everything was higher, including precious metals and Brent Oil.
What’s also higher were interest rates on the 10 Year Treasury.
That may not be too much of a surprise as there’s confirmation that the People’s Bank of China had been burning through their foreign reserves. Specifically, it appears that they had sold nearly $100 Billion in Treasury notes in efforts to defend their currency. Since those kind of efforts don’t usually work, it really is as if the money was just burned away and there may be more upward pressure on rates as they consider even more sales.
That’s not very good for stocks as they have to compete with higher yields, which may get a boost from the FOMC when it meets next week.
But you wouldn’t know that by the way today progressed. There was never even a second of weakness throughout the session and it closed right near the highs of the day, just shy of 400 points higher on the DJIA.
For this week, with little cash and only a single position set to expire, I didn’t expect very much activity. There certainly wasn’t much reason to believe that this morning’s futures were pointing toward a move that would have some ability to sustain itself, so I wasn’t not too likely to extend myself.
Now the burden of proof is in the other direction.
With lots of ex-dividend positions last week and with a fair number again this week, I’m a little more at ease with income generation, but would very seriously look at any opportunity to roll over next week’s expiring positions, of which there are quite a few, if that means being able to take advantage of market strength.
As long as volatility remains relatively high, the best returns can be achieved by keeping individual stocks in play, almost like a beach ball at a concert.
As long as those forward week premiums are stronger than the near week premiums and time reflects increased uncertainty, even rolling over positions that might otherwise expire can make sense.
For now, keeping positions alive, such as with Best Buy, which had its two lots rolled over in an attempt to keep this week’s dividend or at least get a substitute for it from additional premium and early assignment, may be the principal activity.
That suits me just fine, as long as we can make some money. At least today offered some of those opportunities in tangible ways and on paper.