Should We Expect The Sideways Market Action To Continue?

| April 7, 2014 | 0 Comments

The economy continues to chug along at a moderate pace. There’s not a whole lot to get excited about in the economic data.  However, there’s absolutely no reason to believe a recession is in our future either.

The recent slew of economic reports has been mostly positive, and mostly in line with expectations.  Basically, any risks to US equities aren’t likely to come from domestic economic issues.

For the moment anyways, the vast majority of potential risk seems to be coming from overseas.  While the US has been extremely stable lately, the rest of the world hasn’t been so lucky.

Still, despite the various international hot spots, many US equities take their cues from the domestic economy.  So, there’s still no reason to believe the markets are set to crash anytime soon.

More pertinent information is forthcoming with second quarter earnings season about to kick off.  What the companies are saying will give us a far more detailed picture of what‘s going on in economic terms.

One thing’s for sure, the job market is slowly but steadily improving. 

March’s non-farm payroll report was modestly encouraging.  Private payrolls increased by 192,000 from February – helping to reverse the slowdown in hiring caused by the poor winter weather.  Overall, year-over-year hiring growth remains at a solid yet unspectacular 2%.

Private jobs have finally caught up to pre-recession levels.  (It only took six years!)  Basically, any gap in employment levels is entirely due to fewer government jobs – a causality of austerity programs.

However, with manufacturing and services both showing growth, it’s hopeful that an increasing pool of private jobs can help make up for the lack of government hiring.  Once again, we’re not entirely out of the woods in terms of hiring and the job market – but it’s definitely getting better.

So essentially, we have a slowly growing economy and a fair amount of geopolitical risk.  There’s not a lot of reason to be overly excited or overly worried. 

In other words, the sideways market action we’ve been seeing makes perfect sense given the variables.

Being long short-term options in this environment may be tough given the lack of sustained moves in the market.  It’s not the worse time to sell index straddles right now, although that can be risky given the international risk.

Let’s see what earnings season brings.  Perhaps it will provide the catalyst that gets the markets moving once again.

Yours in Profit,

Gordon Lewis

Tags: , , , , ,

Category: Options Trading, Stocks

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also one of the key analysts behind the highly successful Options Trading Wire and Advanced Options Adviser. As a market maker on the floor of the CBOE, Gordon analyzed and traded stocks and options across a broad range of market caps and industries including retail, internet, oil, insurance, and telecom. He often traded thousands of options contracts per month… and it’s fair to say, Gordon’s analyzed and invested in some of the most complex and successful options strategies in the world.

Leave a Reply

Your email address will not be published. Required fields are marked *