Daily Market Update – June 23, 2014 (9:00 AM)
Based on the economic calendar it looks as if this may be a quiet week as the new monthly option cycle begins. Not only is there little of importance, but maybe because this is the first week of summer, there’s just very little in general. A big part of that is that not a single Federal Reserve Governor is giving a speech this week, so there is less likelihood of having someone in a position to actually impact policy saying something that’s either a slip of the tongue or gets to be mis-interpreted by anyone with a nervous finger or algorithm.
In addition, earnings season is pretty much at its end as the next season will get set to begin in about two weeks. While any given company can do as Intel did a couple of weeks ago and unexpectedly announce improved guidance that can propel markets or severely diminished guidance to shock markets, it’s not too likely that will happen.
Unless there are some real unforeseen surprises the only thing that may upset the market will be continued unraveling in Iraq and a significant rise in oil prices.
While growing US energy production makes us less hostage to oil, the reality is that our prices are still part of a worldwide market and if supply dries up in a world that’s increasingly thirsty for crude oil it will drive up our prices, as well, and slow things down on our end. While it would take a while for that to really show up on our economy the fears would begin immediately and could easily dampen the enthusiasm that Janet Yellen rekindled last week when she made it pretty clear that stocks were the way to go for now.
Not in so many words, but if you live in a world where the choice is between stocks and bonds, she gave little reason to believe that interest rates would be heading higher in 2014. Considering that much of the stock market weakness in 2014 has been related to the 10 year rate approaching 3%, you can draw a conclusion that if rates stay low then the market has reason to keep moving up even as Federal Reserve tapering continues.
This week I’m holding more cash than in about 3 months.
The combating forces this week are much like they seem to be most every week.
With the market at more new highs and with so many stocks near their personal highs just how much do you believe that the pattern keeps continuing?
Any effort in second guessing the forward movement of the market has proven wrong and I’ve definitely been on that side of things. Despite being pessimistic about the ability of the market to continue that pattern that hasn’t meant hibernating and completely abdicating the need to participate.
With money, but not to burn, in hand, I don’t envision this week being any different in terms of my willingness to let some of it go and try to generate some revenue.
The past few weeks have been relatively slow ones in opening new positions, but I expect this one will be somewhat more active, as I’m willing to take cash down to about 25%. As a defensive move I wouldn’t be completely adverse to seeking July contracts instead of weekly ones, but with volatility still so low and the short term prospects seeming positive, it’s hard to justify tying up assets.
In hindsight I may believe differently, but for the moment it makes more sense to live for today.
With that said, but already having a number of positions set to expire this week, there may at least be some reason to look for a little diversification, perhaps toward next week’s shortened trading contracts.
In addition to that bit of defensiveness I wouldn’t mind continuing to look for dividend opportunities although those two will frequently find their stocks at or near their yearly highs.
But given all of these considerations none of them, nether individually nor in combination, have been unique. They have been the ones faced nearly early week for about the past two years.
That makes it a little easier to approach this coming week.