Daily Market Update – April 2, 2014 (Close)



Daily Market Update – April 2, 2014 (Close)

This morning the futures gave up some of their early gain, which was very muted, to begin with, as ADP released its jobs report.

After years of the report being held back because it wasn’t ready for prime time, it’s still not entirely clear how much the ADP report portends for the Employment Situation Report that comes later in the week.

Lately that hasn’t mattered because the market has almost always gone higher with the release of the Employment Situation Report and has gone higher for the entire week of the report, as well. So far, this week the market is already up 1.5% after just two days, so there’s lots of cushion to keep the latter pattern continuing by the time the week is ready to close its books.

The statistical case, however, is stronger for the Friday outcome than for the weekly outcome, although it’s not something that I plan to test this week.

Expectations for Friday’s report are pretty high and this morning’s ADP report was nothing terribly exciting, but it did suggest that weather was no longer at play in the economy, although that may not be the case once earnings season re-starts in just a week, as the quarter being reported is certain to show the influence of unusually bad weather everywhere.

As with so many things when expectations are high it’s so easy to set yourself up for disappointment. But as far as those employment numbers have gone in the past 20 months, even disappointment has largely been met with a higher moving market.

To a large degree that’s because of the perverse mindset that had become established where bad news was good. In this case bad news about employment was interpreted as meaning continued Quantitative Easing, which itself was widely believed to be the root cause for the market’s appreciation.

With Janet Yellen’s confirmed dovish tone this week it’s likely that disappointment in this week’s report won’t find a mate in a market decline.

If the report had been issued just two week’s ago after Yellen’s words were interpreted by some to have been hawkish, any disappointment would likely have been met by a significant market decline. But this time around the fears just aren’t there and instead there’s the belief that any disappointment may be met with less tapering and by consequence, more easing.

So what to do?

For now, despite only 3 new positions this week, I’m content to watch shares go higher, if that’s what they need to do. It would be even better if they would take my shares, especially those uncovered, along for the ride. But, I’m still not ready to chase. When the market gets to a point that it climbs 1.5% or more for the week it’s pretty hard to keep up if using a covered call strategy.

The good thing is that the market doesn’t usually do that week in and week out, although 2013 seemed that way.

This year has been different, despite closing at another new high yesterday. The path higher has been very different and a much better one for the sale of covered options.

Of course, after having said that this morning the day ended with yet another new high in the S&P 500 and the DJIA just missed posting its first new high for 2014.

While I expected today to be a slow trading day, I don’t think that will be the case for the final two days of the week and am hopeful of having a good combination of rollovers and assignments. While I would love to see another week such as last week when a fair number of rollovers could be done on Thursday, thereby making Friday less hectic, I don’t think that will be the case this week.

Still, if I had to choose, I’d take hectic over boring and especially over sitting in desperation and unable to make trades because of a sinking market on expiration Friday.

I expected yesterday to be a slow day, as well, and was a little surprised by the activity that ensued, so who knew what today may have had in store? With money still in hand any respite in the move higher, especially in positions that I can get a week and a half premium by using April 11 expirations may be very enticing.

I’m only human, so will see if they can be resisted if they happen to pop up.

As it would turn out most of that money is still right where it belongs and will now likely stay safe until next week as preperations for a busy couple of days ahead will begin.


Note: If you haven’t seen it, I posted an article that looked at the rollover trade executed in Bristol Myers Squibb yesterday, dissecting out the rationale for having done so in an effort to retain the dividend.