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Daily Market Update – December 22, 2015 (Close) Yesterday looked as if it might be just the remedy for what ailed us during the latter half of the previous week. The market did its best, however, to squander the early gains, but somehow was able to turn things around and ended the day with the same kind of gains that were being telegraphed early in the sessions trading. Today the futures were more tentative as we awaited the GDP release before trading begins. A strong number would have been an interesting test of how the market really felt about the interest rate increase announced last week. The issue at hand is that Janet Yellen indicated that the FOMC was not in a “one and done” mode and that subsequent interest rate increases were likely in 2016. You can only assume that if that’s going to be the case that there would be some good economic news regarding expansion of the economy to account for those increases. However, given how badly traders reacted through the vast majority of 2015 to the idea of a rate increase, you really have to wonder how quick they would be to embrace any really strong economic news related to underlying growth. We didn’t really get to find that out today, as the GDP was slightly less than expected, but the market rallied in a big way, really taking off after the first 2 hours of trading, with no other news or events to offer guidance. This may have been like “Goldilocks and the Three Bears.” The economic news was just right. Not too expansive and not pointing at a slowdown. Just right, but that could mean we are back in the “bad news is good news” kind of mentality, with the thinking going that if the economy isn’t expanding all too quickly then the FOMC won’t be so quick to raise rates yet again. Everyone still thinks that we’re in the Gerald Ford – Jimmy Carter era when the predominant effort to battle inflation was to wear buttons with the acronym “W.I.N.” Whip Inflation, Now. That didn’t seem to work, but since then the Federal reserve has been pretty on top of things and you can be reasonably assured that Janet Yellen is going to do everything to keep inflation under control, short of strangling the economy. With no new positions opened yesterday and with only 2 days of premium now remaining this week, I don’t think that I’ll be spending too much money, unless looking at the next week’s options, which also will reflect four days worth of premium. Instead, I was hoping that the market would add on to yesterday’s late day gains and do what it could to erase last week’s losses. As we opened today the futures were flat ahead of the GDP release and the S&P 500 was still down nearly 2% for the year with just a handful of trading days left to go. By today’s close we were down only 1%. Today’s reaction to the GDP release could spell the trading remaining in 2015, unless retail sales come up with some big surprises as the Christmas shopping season is coming to its own end. Unlike the past 2 years when retailers blamed unusually cold and snowy weather around the country for their woes, this year it may end up being complaints regarding the unusually warm weather to put a damper on retail sales figures. Hopefully, a resurging consumer may be able to offset the weather, particularly if all of those new jobs and higher wages are going to come into play and energy prices continue to remain so low. So today was, as expected, another quiet day of sitting back and hoping for some opportunity to sell calls into strength or at least be in some better position to see assignments or rollovers heading into the final week of the year. The difference was that instead of just hoping, there was actually some opportunity. With that good news, there’s reason to hope again tomorrow. |
