Daily Market Update – December 22, 2014 (Close)
Today looked as if it would open with a mildly higher bias, but the real impetus may come tomorrow, as the GDP is released, including any revisions to prior months.
Given how the day ended 150 points higher today that could really be a beautiful thing if the GDP could really give that push to the next level. Maybe it would offset the weakness shown by the energy sector today that put a lid on the S&P 500’s gains, as compared to the DJIA.
Oil prices have now been low enough and long enough to possibly already begin showing up in the GDP and that statistic has created some powerful moves in markets this year in both directions. If not this month, then the next month’s GDP report, which comes a day after the next FOMC Statement could be the one to start showing some real impact of lower energy prices on consumer spending and economic growth.
Although oil prices and the market seemed to de-couple last week there will still be plenty of attention placed on the energy sector, which also seemed to de-couple somewhat from oil prices.
Today was another day of de-coupling, as it is sinking in that there’s much more to a market of stocks than just energy companies.
The morning already indicated a decline in oil prices, but the market was clearly heading again in the opposite direction. However, during this trade shortened week, with its expected low volume, anything can easily magnify and distort any trends.
While the traditional Santa Claus Rally is usually set to begin right after Christmas and even with some nice recovery last week, I’m not really anticipating establishing much in the way of new positions in anticipation of that rally.
I would just be happy to see prices, especially in the energy sector move higher and would like to see attention return to the retail sector, which is usually where we’re focused at this time of the year.
Although energy didn’t play along, it was good seeing the market rise without any real provocation and if we can get over the oil issue we may be able to start paying attention to the usual story this time of year.
The typical December story is that retail sales are disappointing heading into the final days of the Christmas holiday and then surprisingly, turn out to be better than expected when the dust settles.
This year we have almost none of the information that usually accompanies this time of the year, but the expectation has to be for good numbers as all of the signs are now pointing to an improving economy with more jobs, better paying jobs, a relatively warm winter, so far, and dropping oil and gas prices.
That would be a nice scenario to end out the year and usher in the next earnings season that starts in just a little more than 2 weeks.
Last week was an exceptionally slow trading week. Hopefully this week will provide an opportunity to make some trades, especially the sale of new call positions. I would like to see some more assignments this week, although at the moment there are only a handful of positions set to expire this Friday. Any opportunity to add to that list from among current positions would be a good thing, as in addition to the income received, I’d still like to reduce the total number of positions held.
With such a short trading week option premiums are going to be lower than usual, especially for the weekly variety. With some give back in volatility last week after that two day 700 point gain, there’s probably going to be less enticement to look at expanded weekly options, but that still may offer a little bit better premium.
Although last Friday was a fairly quiet trading day after a preceding 4 days of triple digit moves, including lots of intra-day volatility, there’s no reason to believe that it will be overly quiet this week, despite the calm that seems to be characterizing this morning’s open.
While I’d like to see an early week’s market climb in order to have some opportunity to sell calls, any sign of a give back of gains would be the time that I would consider adding some new positions, in the anticipation that this week could be as much of a roller coaster as last week.
Today’s strong triple digit gain is an indication of the kind of surprises, good and bad, that may await.