Daily Market Update – December 4, 2014 (7:30 AM)
Ahead of this morning’s scheduled ECB policy statement the market doesn’t look as if it is expecting too much.
At some point markets may give up on expecting anything tangible to come from Mario Draghi, but so far, that hasn’t been the case as his assurances have always sent markets higher. If news from the Bank of England this morning will be any indicator there won’t be any change coming out from the ECB today.
If and when the day comes that some substantive moves toward a European version of Quantitative Easing are actually made there’s going to be a big reaction, but it’s always a question of what direction that reaction will take us. A weak central currency and stalled economic growth would seem like the kind of things that a central bank would want to address with more than just words, but the longer the ECB delays action the better the situation is for the US economy and probably markets, as well.
Today, if nothing comes from the ECB to heat things up, it should be another quiet day as professional traders look to position portfolios ahead of tomorrow’s Employment Situation Report.
Generally that means to place hedges on portfolios in order to protect gains, but as 2014 is winding down there aren’t too many gains to be seen by those traders and reports are coming that predict a record year for closure of traditional hedge funds.
Yesterday was also another quiet day, coming off the previous day’s surprise move higher. Whatever it was that outgoing voting Federal Reserve Governor Richard Fisher said during his speech yesterday evening, it isn’t getting any media attention and isn’t seeming to have any impact on this morning’s future trading. Fisher may simply be falling into irrelevancy, as this month he will cast his final vote or perhaps he just had nothing to add to the conversation that could shake things up a bit the way he customarily did.
Fortunately, even with a relatively flat day yesterday there were some unexpected opportunities to sell calls and rollover positions and it would certainly be nice to be able to do the same today and be left in good position to end the week.
Unless there is some kind of precipitous move today or tomorrow positions expiring this week have reasonable prospects of either assignment or rollover. As I mentioned yesterday, I’m inclined to prefer rollovers at the moment, but still wouldn’t mind adding to cash reserves.
Today may be a day of simply being a passive observer and hoping for some stability and maybe even some continued improvement in the energy sector.
Once the ECB issue is moved out of the way early this morning we’ll have a better idea of where markets may be headed on their own and whether that passivity evolves into anything more interesting.