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Daily Market Update – December 9, 2015 (Close) Yesterday was the second consecutive day of unexpected large losses. Today was really the third, if you eliminated DuPont from the DJIA. Both of those days had attempts to rally and both sputtered out, with neither of those days really being foretold by nervousness in futures trading. This morning’s futures were just mildly lower, but they didn’t seem to be getting much in the way of encouragement from some potentially big merger news of two industrial and chemical giants. Those two companies, Dow Chemical and DuPont were each soaring in the pre-opening, but the contagion wasn’t spreading very much, at least not in the early trading. However, within about an hour after the opening bell the market was up nearly 200 points and then fell to its low, which was nearly 320 points off from the high. When it all ended, the DJIA was only about 80 points lower, but take away DuPont and that performance would have been about 135 points lower.. The day may have deteriorated because cynics may have looked at the proposed merger as being one of desperation as commodity prices are continuing to suffer far longer than anyone would have imagined. Other cynics might have pointed to the activists at the doors of both companies. Whatever the reason for the merger, it’s not an idea that hasn’t been entertained before, but for now, no one really seems to see it as anything but a couple of companies and not indicative of a bigger picture. The bigger picture usually gets people speculating about merger mania and other opportunities. In a way, the lack of early speculation as to where this kind of merger could lead markets is a good thing, as most of the speculation that arises turns out to be baseless. Right now, we don’t need any speculation, especially the baseless kind. Following Monday’s decline, I still didn’t have a very good feeling about the next stop. That’s counter to about the last 10 weeks, especially when the week opened on a down or flat note. During that time period I was a fairly active buyer on early week weakness, but this time it just felt a little bit different to me. Yesterday was the same. Today, just more of the same. Another big drop in markets, but still no real conviction that it was a good time to step in and pick up some bargains. The issue, at least in my mind at the moment, is that i can’t identify any kind of catalyst that might lift markets until earnings start all over again in January 2016. I still might be willing to look at some short term opportunities in the event that the market shows some stability, but I’m not overly excited about the prospects of taking on additional risk right now. With next week’s FOMC meeting and most everyone expecting a decision to raise rates, it feels as if the response to that has already been built into markets, so I wouldn’t be too surprised if some more wind was let out of its sails. If that’s the case, I don’t want to add any more weight to the portfolio. This may be the kind of quiet week that hasn’t been seen in a few months, but I’m still hopeful that the positions with expirations this week will still remain in contention either for assignment or rollover. So far, they’ve held up better than the overall market, but each day has been a new challenge lately. |
