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Daily Market Update – December 21, 2015 (Close) Whatever promise last week had was quickly dashed on Thursday and Friday when the market fell about 3.5% after having climbed nearly that amount in the first 3 days of the week. While that pretty much sounds like a breakeven it comes after a week that had a nearly 4% loss, that came after 2 weeks of virtually no movement, that themselves came after a week with a 3.5% gain. That’s been the story of the year. Up, down, nothing, up and down and over again, except in no identifiable order. Today, though, it ended up being up, down, and up. Lots of activity, but without any guiding theme and with little net movement. As we get to enter the final 2 weeks of trading, minus 2 of the 10 days that are ordinarily in a two week period, due to Christmas and New Year’s celebrations, there’s still a chance for the year to end up on the positive side, to end up deeper in the hole or to go nowhere. Any of those would be plausible. This morning the pre-opening futures were trading nicely ahead, even as oil futures were again falling sharply. For over a year those dropping oil futures would have dragged the market down along with it, much in contrast to what history would have predicted. Obviously, a single day isn’t the sort of things that patterns are made of, but if the market can finally come to an embrace of rising interest rates, maybe it can also come to the realization that falling energy rates can be good for the economy, too. Both the interest rate issue and those falling energy prices have been long considered to be reasons to sell stocks, rather than as a sign of an improving economy. In this case, as long as those energy prices have been falling because supply has been increasing, should be enough to make people feel good about things. But that just hasn’t been the case for the 15 months of declining energy prices. The decoupling of the normal relationship between the two has really been striking and fairly irrational. A return to rationality might be a nice way to close out the year and we may get a clue as to just how strongly the market may be prepared to embrace interest rate increases as GDP is released this week along with some other data that reflect economic growth, such as home sales, durable goods orders and jobs. Strong numbers across the board should lead to a buying spree, as long as they’re not wildly strong. But still, you never know, just as the week after the Employment Situation Report came as a complete surprise as the market gave up on all of its initial embrace. This week I expect to be doing little differently from the past 2 weeks, when I opened only a single new position. I don’t expect to be spending too much money this week and would be very satisfied if I could get some assignments and rollovers of the 4 positions expiring this week. With a smattering of positions also expiring in the other weeks of January, leading up to a large number of positions expiring during the final week of the January 2016 cycle, I’d like to be able to avoid adding any to that week, if rolling over. With any strength that the market can show and more importantly, sustain, I’d much rather be able to sell calls on uncovered positions than to put any more cash at risk, especially while there’s not too much cash to go around. Today was just another head scratcher. After giving up a substantial gain and then trading listlessly for much of the day, the market pulled it all together and closed respectably. Tomorrow? Who knows, but look for the GDP before the market opens to set the tone. |
