Daily Market Update

(see all trades this option cycle)
Daily Market Update – January 2, 2014 (Close)
2014 is going to be held to a high standard.
For lots of investors 2013 was one of the best years that they’ll ever see, although there have certainly been better ones.
What there really hasn’t been is such a strong and concerted move that has sent markets up about 150% in less than 5 years.
Can 2014 live up to that standard?
The period from 1995 to 1999, in terms of market performance, may be similar to the current time. Really good years were followed by really good years.
And then the bubble burst.
The comparison may end, though, without including the bursting part, because there really is not dot com craziness pervading the current market. Everything is moving higher and while the market doesn’t seem completely rationale, its mostly because it hasn’t taken a break and not because of frenzied bidding.
For people that trade Momentum stocks, such as Tesla, the idea is to trade and trade until the trade is no longer there. They don’t question the rationality of the price move, they just accept that it’s happening and want to be part of it. They also recognize that at some point the trade will disappear and will usually do so with little warning and in a big way.
At least most recognize that to be the case. The others shouldn’t be investing.
The market may have simply been acting like a Momentum stock for the past 14 months. How much longer it keeps going is anyone’s guess, but it’s hard to not be part of the action, especially if the uniqueness of the product is not what is sending prices higher.
I spent so much of 2013 waiting for a correction I don’t know what it feels like anymore to be an unrepentant bull., bull I am more bullish about 2014 than 2013, simply because of history, despite the fact that this run is getting really long in the tooth.
Interestingly, not that much has been made this year about the historical strength the market sees in January. In the past the years in which everyone seemed to be talking about the guarantee of profits in January the theory just fell apart.
The lack of talk is always a good sign, although the market is getting 2014 off to a lackluster start.
For the covered option buyer the least preferable of all markets is the one that we just finished. While I am more bullish for 2014 than 2013 part of that bullishness is wrapped up in the hope that the market will show more indecision this year and spend more time bobbing up and down.
Those movements create volatility and create many more opportunities to generate income from holdings, while requiring less reliance on discovering new buying opportunities.
With initial weakness to start the morning I plan on watching a bit before considering any more purchases for the week, despite now being more open to adding new positions on Thursdays and Fridays.
As the morning seemed to do nothing but confirm weakness there did appear to be some new opportunities, but caution isn’t a bad idea whenever there is a large move. It’s bad to ever get into a mindset that you’re either going to miss a rally or miss a bargain.
I don’t believe that the selling this morning is reflective of anything other than a little exhaustion and taking profits while deferring tax liability until 2015, so I do expect things to get back on track fairly soon. Anyone of that mindset, looking at a declining market is going to want to lock their profits in before any risk of a slide lower.
While the market never did recover, neither did the selling really grow and the volume was very light, so no real insights were in the making today.
Hopefully tomorrow, with expiration at hand, we’ll have a little bit of a snapback to either get some assignments or at least some rollovers.With plenty of positions already set to expire the next two weeks I may be looking for rollovers using expanded options or even the February monthly contract.
With money in hand and perhaps some relative bargains beginning to appear I’m anxious to get back to work, hoping to make fewer trades, collect more dividends and rollover more positions in 2014.
Oh yeah, and peace on earth, too.
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OTP Sector Distribution* as of January 2, 2014
 * Assumes equal number of shares in positions


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