Daily Market Update – June 9, 2015 (Close)
We are about a month away from the next earnings season and between now and then, other than the usual major economic reports or events, such as the Employment Situation Report or an FOMC Statement release, there isn’t too much to get anyone overly excited.
There’s still some drama in Europe, but mostly we’re in a holding pattern, although the market may simply become susceptible to technical factors. The latter is only likely to do one thing if it takes hold and that’s to pull markets lower.
With the weakness theme having taken hold over the last few weeks we are still only less than 3% below market highs as attrition has been gnawing at the market. It’s that slow attrition that could bring the technical traders back to life, as the S&P 500 approaches the 2041 level, which would require about another 2.5% decline and from there has only 2000 as a support level.
But even with all of those events taking place, that would only account for less than a 7% decline.
With this morning’s pre-opening futures trading looking as if it will be just another of the same days as we’ve been seeing over the past 3 weeks, there wasn’t too much telling how the day would proceed. Yesterday was one of slow erosion and attrition as buyers are just finding little reason to get excited about anything.
Today turned out to be a day of biding time as both sides of the unchanged level were tested and no one wanted to be on either side for very long.
Meanwhile, as interest rates are climbing, as they are now for the third time over the past few months, there’s renewed competition for investor’s dollars. What remains to be seen is whether these interest rate increases being seen in the market will persist. Previous attempts to predict the Federal Reserve’s actions proved to be too early and those interest rates fell back down giving some momentum back to stocks.
This time around the bond market may finally be getting it right. This week’s Retail Sales Report may give some further ammunition to the idea that the economy isn’t as weak as the GDP has been indicating.
That leads to next week and the FOMC Statement Release.
It’s probably not too likely that any policy change will occur by then, but all it takes is a change in the wording of the statement that might indicate a change in policy is coming soon. The initial impact of that will probably be to drive even more activity over to bonds and put further pressure on stocks.
Hopefully, though, that kind of pressure will be short lived, as it usually is and will be followed by an earnings season that ends up with better revenues and increased bottom lines, as the expected continuing dollar strength hasn’t materialized.
Right now, that’s still in the distant future.
In the immediate future, such as this week and next it’s all going to be about the FOMC and getting prepared to deal with that as the monthly option cycle will end just 2 days after the FOMC release.
While awaiting the news I have neither the available cash and am generally unwilling to use margin, nor the inclination to put much more at risk at a time when the bias is definitely on the side of sellers.
As with most cycles, whether up or down, it’s just a question of how long it will go on and whether the next leg of the cycle will atone for what preceded it.
For the remainder of this week I expect that I’ll be a spectator more than anything else while letting others figure out what the next step will be and let the stock and bond guys fight it out over who gets the marginal dollars that may be on the fence.
Right now, they won’t be my dollars.