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Daily Market Update – September 25, 2014 (Close) After yesterday’s gain which recouped about 70% of what was lost during the first two trading days of this week, it’s hard to know which of the two very different markets to believe. This morning’s pre-opening futures was equally confused as yesterday’s strong gain wasn’t very dissimilar from the sharp losses of the two prior days. None of those days really had any kind of meaningful news that seemed to be responsible for the moves. At least today we could blame it all on outgoing Dallas Federal Reserve Governor, Richard Fisher. Not having any news is always frustrating because it makes you believe that sometimes there’s not much more involved than the luck of the coin toss. Even totally rational and maybe even correct theses could have looked very much otherwise depending on the day of initiation. However, reacting as the market did to Richard Fisher’s comments is equally frustrating as he has been a loose cannon since his appointment in 2005 when he was chastised by then Chairman Greenspan for public comments. Additionally, he has consistently been on the wrong side of history in the dogged pursuit of his own dogma. Monday and Tuesday there was a predominant wave in one direction and yesterday that wave may have simply gone in the opposite direction, creating geniuses and idiots, all because of the accident of their timing. After all of the pointing at “Death Crosses” and where previous record IPOs came during their respective market cycles, yesterday all of that was just ignored. Just as with the selling on Monday and Tuesday, yesterday’s buying didn’t come in tremendous waves. It was fairly insidious and orderly. But after the buying was done the market was only a scant 0.3% below its record high from last week. Today, however, although not a blow out by any means, it was a decidedly negative day, as you could have seen if looking at any heat map at any time of the day. For those waiting for another of those periodic mini-corrections that seem to come about every two months and temporarily shave 4-5% off the market highs before setting new ones, we started the morning needing that means we have to re-create Monday and Tuesday and then still lose another 3-4%. Well, we did recreate Monday and Tuesday, almost to the last decimal point. As that happened and if this gyrations continue in a short time frame we might really see volatility begin to really move. It usually goes higher as markets move lower, it is also a measure of the variation and the pronounced moves in opposite directions is the sort of thing that drives up volatility, beta and investor uncertainty. For those that remember 2011, that was a year with so many triple digit moves, but they routinely went in either direction, as the year ended unchanged from where it started. The volatility, however, was more than triple where it stands this morning. This morning began the countdown on rollover considerations and yesterday’s gains were helpful in trying to get there, but more would have been welcome, especially in the hope of seeing what is always sought. That is a balance between rollovers and assignments to feed the income stream and replenish the cash pile. At the moment my cash reserves are lower than I would like so I’d prefer seeing more assignments than rollovers, but that outcome looked tentative, at best without another strong and broad move higher. Today’s trading made even “tentative” seem to be out of reach. Tomorrow’s GDP report may offer some of that needed positive catalyst, but in the shadows of some of summer’s disappointing employment statistics, there may be concern, especially as GDP has been a very inconsistent this year. For today I wouldn’t have minded a flat market, as that would at least have eroded some of the premium necessary to re-purchase contracts for potential rollovers, as those premiums are still heavily weighted in the current week due to the continuing low volatility. So today started as another day of watching and waiting and waiting for that tossed coin to land. Unfortunately, it landed hard.
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