Month: July 2014

Daily Market Update – July 25, 2014 (8:30 AM)

The Week in Review will be posted by 6 PM EDT and the Weekend Update will be posted by Noon on Sunday.

The possible outcomes for today include:

Assignments:  BBY, EBAY, HFC ($44.50), JPM, LVS

Rollovers: DOW, GPS ($40), RIG

Expirations: FDO ($64.50), FDO ($66), GPS ($42), HFC (46.50), LO

Trades, if any, will be attempted to be made prior to 3:30 PM EDT.

Daily Market Update – July 24, 2014 (Close)

Along the lines of yesterday’s thoughts about the absence of market leaders, it’s too bad that advertising revenues aren’t the sort of thing that pick up everyone’s confidence and floats all sectors higher.

If that was the case then Facebook would be this generation’s IBM.

Facebook’s continuing ability to generate ad revenue, especially from mobile devices, is really incredible.

Yesterday was the company’s ninth earnings report since going public and investors have only once not rewarded existing shareholders after the very first time someone expressed negativity about the lack of a mobile strategy way back when.

While good news for Facebook it’s not really clear what their fortunes mean for anyone else.

It’s tempting to believe that increased ad revenues reflect increased optimism by retailers and increased interest by consumers. That could be good news for retailers.

Of course, it could also just mean that more people are on line with Facebook and spending more time when on line on the site, as Facebook ads can generate revenue simply by being served and not always requiring a click to bring in the bucks.

Facebook was one of those companies that I thought about selling puts in advance of earnings, but I rarely want to do so when there is a large advance in share price right before earnings. More often than not that kind of pre-earnings advance is an invitation to tumble after the data is released.

Not so this time around.

While the market has a mild upward bias in the pre-opening futures, it’s not too likely that anyone has to thank Facebook, although other individual stocks, like Twitter, may be getting some benefit by their loose association or resemblance to Facebook.

For things that really matter and are better reflections of the overall economy you have to look to companies like Caterpillar, which reported this morning. Their EPS figures are improving, thanks to large buy backs, which will be increasing. However, revenues were on the light side and projections for next year are on the low side of analyst’s reports.

So what does that mean?

Who know
s? Is the economy not growing? Is Caterpillar mis-firing?

A year ago the most celebrated and successful short seller, Jim Chanos, very publicly called Caterpillar his short of the year. Since that time shares are about 25% higher.

The Chairman was called the worst CEO of the year and widely criticized for executing buy backs at high share prices.

This one company just shows that no one really knows, no matter how good their thesis.

Business is not as good as expected, financial optics improving EPS data and the stock just goes higher.

Too bad there aren’t more of those. I’d gladly trade being right on my thesis for boatloads of profits.

I was hoping that this morning’s muted strength would translate into some of those profits, maybe getting a delayed Facebook initiated rally, but that wasn’t to be, as stocks stopped alternating between gains and losses after seven straight sessions. For the broader market while the gains were as small as you could make them, that was enough for another record on the S&P 500.

With next week’s weekly options trading beginning for those companies that don’t have expanded weekly options there was a chance of adding some positions, such as Texas Instruments, which goes ex-dividend next week, but my focus will continue to be finding opportunities for rollover. ‘t many and they were also fleeting.

At the moment there looks like there is the possibility of a fair number of assignments and some rollovers in the making especially if tomorrow holds true to form. That’s because the past seven or so Friday’s have closed positively, giving me some encouragement for this week, which has otherwise been bereft of activity and more importantly, income revenue.

Daily Market Update – July 24, 2014 (8:30 AM)

Along the lines of yesterday’s thoughts about the absence of market leaders, it’s too bad that advertising revenues aren’t the sort of thing that pick up everyone’s confidence and floats all sectors higher.

If that was the case then Facebook would be this generation’s IBM.

Facebook’s continuing ability to generate ad revenue, especially from mobile devices, is really incredible.

Yesterday was the company’s ninth earnings report since going public and investors have only once not rewarded existing shareholders after the very first time someone expressed negativity about the lack of a mobile strategy way back when.

While good news for Facebook it’s not really clear what their fortunes mean for anyone else.

It’s tempting to believe that increased ad revenues reflect increased optimism by retailers and increased interest by consumers. That could be good news for retailers.

Of course, it could also just mean that more people are on line with Facebook and spending more time when on line on the site, as Facebook ads can generate revenue simply by being served and not always requiring a click to bring in the bucks.

Facebook was one of those companies that I thought about selling puts in advance of earnings, but I rarely want to do so when there is a large advance in share price right before earnings. More often than not that kind of pre-earnings advance is an invitation to tumble after the data is released.

Not so this time around.

While the market has a mild upward bias in the pre-opening futures, it’s not too likely that anyone has to thank Facebook, although other individual stocks, like Twitter, may be getting some benefit by their loose association or resemblance to Facebook.

For things that really matter and are better reflections of the overall economy you have to look to companies like Caterpillar, which reported this morning. Their EPS figures are improving, thanks to large buy backs, which will be increasing. However, revenues were on the light side and projections for next year are on the low side of analyst’s reports.

So what does that mean?

Who kn
ows? Is the economy not growing? Is Caterpillar mis-firing?

A year ago the most celebrated and successful short seller, Jim Chanos, very publicly called Caterpillar his short of the year. Since that time shares are about 25% higher.

The Chairman was called the worst CEO of the year and widely criticized for executing buy backs at high share prices.

This one company just shows that no one really knows, no matter how good their thesis.

Business is not as good as expected, financial optics improving EPS data and the stock just goes higher.

Too bad there aren’t more of those. I’d gladly trade being right on my thesis for boatloads of profits.

Hopefully this morning’s muted strength will translate into some of those profits.

With next week’s weekly options trading beginning for those companies that don’t have expanded weekly options there is a chance of adding some positions, such as Texas Instruments, which goes ex-dividend next week, but my focus will continue to be finding opportunities for rollover.

At the moment there looks like there is the possibility of a fair number of assignments and some rollovers in the making. Since the past seven or so Friday’s have closed positively, that gives me some encouragement for this week, which has otherwise been bereft of activity and more importantly, income revenue.

Daily Market Update – July 23, 2014 (Close)

As far as Wednesdays go this one looked to be exceptionally quiet as far as stimulants or catalysts for the market.

With the market being unable to string two consecutive days moving in the same direction for the past 7 days and also being unable to string two consecutive weeks moving in the same direction for the past seven weeks, the expectation was that today may be a lower moving day, despite some decent earnings news after the closing bell yesterday.

And while the market did erase some losses and finished the day at a respectable level, with in fact the S&P 500 reaching another new high, for the DJIA it was a down day. The relative performance of the two indexes being reverse their experiences of the previous week.

Even Apple and Microsoft reporting earnings after yesterday’s close seemed to have done nothing. Nether too much for their own stocks and certainly nothing to boost or depress the markets this morning. Ultimately, perhaps based on some comments from Tim Cook regarding the nature of Apple’s performance, its shares did come to a nice gain to end the day, however.

While there’s no shortage of earnings reports today the early ones don’t appear to have any impact either and the market was about as flat as you can get to start the day’s trading.

There were also virtually no economic reports scheduled to be released today.

So I didn’t have much expectation for doing much today in what is now officially the slowest week of the year, with only two trades thus far having entered the day. That ended up getting doubled with a couple of early rollovers.

With lots of positions set to expire on Friday there’s certainly a hope that something will happen between today and Friday, but that something really does need to be a higher move in order to get some rollover trades done. With some opportunity at hand in eBay and Transocean to execute rollovers for shares that seemed unlikely to be assigned, it was a way to fend off the continuing boredom.

While the expectation isn’t there even in the absence of any anticipated event you just never do know what the sentiment will be once things get going for real. While the pre-open trading can give you a pretty good clue if it shows large moves in either direction it really does little to alert you to what the trading session holds when the early moves are small.

That’s especially been the case the past few days, but has always really been the case. Eventually the day’s trading takes on a  life of its own. Today it showed little hints of life, though,
just as the futures predicted.

What has really been missing form the past couple of years of earnings is seeing blow out numbers from a company propel the entire market. There was a time when Boeing, IBM, Intel, Microsoft and others could do that. Of course, the flip side was that those same companies could drive the market lower, as contagion can spread in both directions.

While I suppose that’s good it would be nice to see something good spreading throughout, but no one company seems to be in a position to be perceived as a leader.

While Chipotle Mexican Grill’s earnings advance was great, I don’t think that’s poised to take on a leadership role. Nor Intuitive Surgical. Outside of people that hold those shares, or those that wish they held shares, no one cares. As once said, it’s “much ado about nothing.”

That no company is presenting itself as a leader is consistent with a market that has been one that has seemed to move sector by sector, with nearly each taking its turn in the sun and grabbing some glory, while not falling too far behind when the sunlight has dimmed.

Collectively, that keeps taking the market higher and higher, a sector at a time and under everyone’s radar, while eluding everyone’s attempts to predict the next winning sector.

Unless something big breaks soon, I can at least predict more of the same down the line.

Daily Market Update – July 23, 2014 (9:30 AM)

As far as Wednesdays go this one looks to be exceptionally quiet as far as stimulants or catalysts for the market.

With the market being unable to string two consecutive days moving in the same direction for the past 7 days and also being unable to string two consecutive weeks moving in the same direction for the past seven weeks, the expectation is that today may be a lower moving day, despite some decent earnings news after the closing bell yesterday.

Even Apple and Microsoft reporting earnings after yesterday’s close seem to have done nothing. Nether too much for their own stocks and certainly nothing to boost or depress the markets this morning.

While there’s no shortage of earnings reports today the early ones don’t appear to have any impact either and the market is about as flat as you can get to start the day’s trading.

There are also virtually no economic reports scheduled to be released today.

So I don’t have much expectation for doing much today in what is now officially the slowest week of the year, with only two trades thus far.

With lots of positions set to expire on Friday there’s certainly a hope that something will happen between today and Friday, but that something really does need to be a higher move in order to get some rollover trades done.

While the expectation isn’t there even in the absence of any anticipated event you just never do know what the sentiment will be once things get going for real. While the pre-open trading can give you a pretty good clue if it shows large moves in either direction it really does little to alert you to what the trading session holds when the early moves are small.

That’s especially been the case the past few days, but has always really been the case. Eventually the day’s trading takes on a  life of its own.

What has really been missing form the past couple of years of earnings is seeing blow out numbers from a company propel the entire market. There was a time when Boeing, IBM, Intel, Microsoft and others could do that. Of course, the flip side was that those same companies could drive the market lower, as contagion can spread in both directions.

While I suppose that’s good it would be nice to see something good spreading throughout, but no one company seems to be in a position to be perceived as a leader.

While Chipotle Mexican Grill’s earnings advance was great, I don’t think that’s poised to take on a leadership role. Nor Intuitive Surgical. Outside of people that hold those shares, or those that wish they held shares, no one cares. As once said, it’s “much ado about nothing.”

That no company is presenting itself as a leader is consistent with a market that has been one that has seemed to move sector by sector, with nearly each taking its turn in the sun and grabbing some glory, while not falling too far behind when the sunlight has dimmed.

Collectively, that keeps taking the market higher and higher, a sector at a time and under everyone’s radar, while eluding everyone’s attempts to predict the next winning sector.

Unless something big breaks soon, I can at least predict more of the same down the line.

Daily Market Update – July 22, 2014 (Close)

Talk about a boring day.

Sure, it was nice seeing the market climb 75 points, and seeing some breadth return to the market after last week seeing the DJIA outperform the S&P 500 every single day, but there really wasn’t much that was actionable today.

While I don’t mind being taken along for the ride it’s much better to actively participate in it, as well.

Today wasn’t destined to be that day, nor was it going to match yesterday’s excitement.

Yesterday’s comeback was pretty impressive as it seemed that the chance for any real explosive shift in either Ukraine or Gaza was unlikely, despite the situations still being tenuous.

This morning, in the absence of any overnight drama, the market looks as if it would continue that trend, although most eyes were on Bill Ackman’s presentation regarding Herbalife, that’s was scheduled to begin before the morning’s open. Instead, the Herbalife CFO got some airtime on CNBC and Ackman’s presentation started later than scheduled, but was live streamed by more than 10,000 people.

Given what Ackman has at stake and his apparent detente with Carl Icahn, you do have to wonder when he characterizes his presentation as “the most important he’s ever given in his life” it’s because of the amounts of dollars involved or because he thought he would blow the doors off on this years old story.

The market believed it might be the latter,as Herbalife went down about 11% yesterday on news of today’s presentation.

But when the reality became known it more than made up for everything that was lost, as you had to wonder what Ackman was talking about yesterday, as he must have known that today would bring nothing new to the equation. There was no Herbalife smoking gun and the presentation was befitting of the rest of the day in its boring track.

At the very least it should h
ave made for some good theater or diversion if today would turn out to be an otherwise boring or quiet day. It was, but Ackman wasn’t

For those concerned about more meaningful things it was a big day for earnings reports with Verizon, Coca Cola, McDonalds and DuPont all scheduled before the opening and Apple and Microsoft, among others, after the close.

That should have been enough to keep most people busy and it would be especially nice to see some good numbers continue to come in and help support current pricing levels. In all likelihood the reports kept the market trading at a narrow, but decently higher range all day and may set the stage for tomorrow, as well.

The market continues to focus on EPS data, even though for so many companies comparing EPS data to previous quarters can be like apples and oranges because of the extent of share buy backs. In summarizing past earnings periods analysts have assessed their totality on the basis of increased EPS statistics without consideration of a decreasing number of shares that serve to inflate that metric.

The real measure for those interested in whether the economy is expanding has to be related to top line revenue and not the EPS data, which is further muddied by all of the accounting manipulations, charges and other adjustments.

One has to wonder what happens not only when Quantitative Easing ends in October, but when these massive buy backs start to slow down. Those have certainly been important factors, whether directly or indirectly, in helping investors favor equities over bonds and helping to stabilize stock prices.

You also have to wonder about the wisdom of initiating or increasing buy backs at current share prices.

CEOs and Boards of notorious for being willing to spend share holders’s money without regard to value and rarely buy back stock when prices are depressed. The fact that insider buying isn’t a terribly good predictor of a stock’s share price being ready to appreciate should be all anyone needs to know, If an insider can’t spend their own money in a timely and wise manner what chance do have have for doing so with other people’s money?

So this morning was another of just seeing where the early morning earnings reports would take the market and then hoping that the direction would continue higher as the pre-open futures indicated.

The hoping seemed to work, but still nothing really materialized.

Both before and after today’s session I continue to be indifferent to the prospect of adding new positions and would still rather see the market climb, drag my paper values with it and give me the opportunity to be positioned to sell new options or rollover existing positions.

My preference yesterday would have been to have used forward week option expirations rather than adding onto this week’s long list of expiring positions, but that turned out to not be the case. If there are any new purchases this week I would really like to see  a little more ability to use some longer options, but things rarely follow the script, although today no script was necessary.

Daily Market Update – July 22, 2014 (7:30 AM)

Yesterday’s comeback was pretty impressive as it seemed that the chance for any real explosive shift in either Ukraine or Gaza was unlikely, despite the situations still being tenuous.

This morning, in the absence of any overnight drama, the market looks as if it will continue that trend, although most eyes will be on Bill Ackman’s presentation regarding Herbalife, that’s scheduled to begin before this morning’s open. Given what he has at stake and his apparent detente with Carl Icahn, you do have to wonder when he characterizes his presentation as “the most important he’s ever given in his life” it’s because of the amounts of dollars involved or because he will blow the doors off on this years old story.

The market believed it might be the latter,as Herbalife went down about 11% yesterday on news of today’s presentation.

At the very least it should make for some good theater or diversion if today ends up being an otherwise boring or quiet day.

For those concerned about more meaningful things it will be a big day for earnings reports with Verizon, Coca Cola, McDonalds and DuPont all scheduled before the opening and Apple, among others after the close.

That should be enough to keep most people busy and it would be especially nice to see some good numbers to help support current pricing levels.

The market continues to focus on EPS data, even though for so many companies comparing EPS data to previous quarters can be like apples and oranges because of the extent of share buy backs. In summarizing past earnings periods analysts have assessed their totality on the basis of increased EPS statistics without consideration of a decreasing number of shares that serve to inflate that metric.

The real measure for those interested in whether the economy is expanding has to be related to top line revenue and not the EPS data, which is further muddied by all of the accounting manipulations, charges and other adjustments.

One has to wonder what happens not only when Quantitative Easing ends in October, but when these massive buy backs start to slow down. Those have certainly been important factors, whether directly or indirectly, in helping investors favor equities over bonds and helping to stabilize stock prices.

You also have to wonder about the wisdom of initiating or increasing
buy backs at current share prices.

CEOs and Boards of notorious for being willing to spend share holders’s money without regard to value and rarely buy back stock when prices are depressed. The fact that insider buying isn’t a terribly good predictor of a stock’s share price being ready to appreciate should be all anyone needs to know, If an insider can’t spend their own money in a timely and wise manner what chance do have have for doing so with other people’s money?

So this morning will probably be another of just seeing where the early morning earnings reports take the market and hoping that the direction will continue higher as the pre-open futures are indicating.

I continue to be indifferent to the prospect of adding new positions and would still rather see the market climb, drag my paper values with it and give me the opportunity to be positioned to sell new options or rollover existing positions.

My preference yesterday would have been to have used forward week option expirations rather than adding onto this week’s long list of expiring positions, but that turned out to not be the case. If there are any new purchases this week I would really like to see  a little more ability to use some longer options, but things rarely follow the script.

Daily Market Update – July 21, 2014 (Close)

The weekend had plenty of people glued to the news and as bad or gruesome as it events may have been it looked as if the week’s trading may have warranted the confidence of those ignoring calls to lighten up holdings going into a weekend of uncertainty.

With a mildly negative beginning to futures trading to start the week, it’s really no different from most any other week in that regard, but the market decided to start its worries after first making certain that they didn’t get in the way of enjoying a nice summer’s weekend.

To its credit the market did really reverse a nice 125 point decline and almost got to the even mark, before finally ending the day right where the futures said it would begin the day.

With so many S&P 500 companies reporting earnings this week I though maybe extraneous events would lose some relevancy as the market focused more on fundamental issues of profits, losses and outlook, but it probably wouldn’t be a very good idea to actually believe that has high probability.

The market though started its recovery after a statement by President Obama that pointed fingers but didn’t add additional sanctions and now it appears that the EU won’t be adding any sanctions against Russia, at the moment.

But at least some of the week may simply be about the stocks and nothing else as there will be a deluge of results being released over the next few days that’s bound to generate some speculation about where we are going.

Following the previous week’s strong showing by the financials it will remain to be seen if other sectors of the economy begin to show the same kind of strength. That hasn’t been the case for the past few quarters, especially at the retail level, which is ultimately the best indicator of everything. Sooner or later, perhaps sooner, there’s bound to be some corroborating data indicating that the economy is improving and more than just earnings per share data buoyed by stock buy backs.

With a surprisingly good week last week, owing entirely to the rebound seen on Friday, I’m still not filled with over-confidence to begin this week. While I don’t necessarily see an immediate reason for negativity, by the same token it’s hard to see an immediate reason for optimism that is in turn backed up by investment dollars.

As with previous weeks I would be more happy to generate the week’s income through rollovers or even better, the sale of calls on uncovered positions, than through the opening of new positions.

In some part that due to having only a single position assigned last week and not driving cash reserves significantly higher.< /p>

While I’m willing to spend cash down to about 15%, representing about 5 new positions, as in previous weeks I haven’t found too much in the way of appealing opportunities.

I’m still a little surprised that two new purchases were made today, but they were in keeping with the idea of looking for those positions that might be somewhat more resistant to European centric bad news. Best Buy and Las Vegas Sands fit that billing.

General Electric, which was on this week’s list, but with that caveat about its international liability, showed why it was to be avoided today, but just how much should certain stocks be punished on the rumor?

Friday’s rebound helped to erase some of what appeared to be developing opportunities, or at least put them a little further out of reach, but there’s almost always something that may be a relative bargain that pops up unexpectedly, perhaps because of some unexpected news, such as YUM Brands dropping further this morning on another food safety issue in China, or Lorillard on the heels of a $26 billion jury award to a smoker who passed away nearly 20 years ago, who started smoking at age 13, sometime around 1973. Something tells me that even if the then 13 year old child did know that cigarette smoking was hazardous to health it wouldn’t have made too much of a difference in his course of action.

It reminds me of the opportunity that arose when the award against Anadarko was first announced a few months ago. The amount of the award would eventually turn out to be very far removed from anyone’s sense of reality, yet the market’s initial reaction was to believe that the award amount was sacrosanct.

While awaiting or assessing those potential opportunities the week already has a fair number of positions set to expire this Friday. What makes this Friday a little unusual is that of the 17 positions expiring, that represents only 10 different stocks, as a number are multiply represented.

That number is also an unusually high number to begin a monthly option cycle, but with the volatility being so low there has been very little ability to justify going longer in time on many positions as the incremental premiums have been so low. Even the new purchases so far have been for this week’s expiration as it was difficult to justify the extra time for such small amounts of extra income.

Otherwise, where possible or logical, I may look to any opportunity for early rollover of some of those positions to better diversify the holdings by expiration date, as well as to generate some of the week’s income flow.

As has been the case lately, tomorrow will probably be the same as today and many previous days. I will probably sit back a bit and see how the market unfolds, as it’s not giving too much indication of strength, weakness or commitment as it ended trading today.

Daily Market Update – July 21, 2014 (9:00 AM)

The weekend had plenty of people glued to the news and as bad or gruesome as it events may have been it looks as if the week’s trading may warrant the confidence of those ignoring calls to lighten up holdings going into a weekend of uncertainty.

With a mildly negative beginning to futures trading to start the week, it’s really no different from most any other week in that regard.

With so many S&P 500 companies reporting earnings this week maybe extraneous events will lose some relevancy as the market focuses more on fundamental issues of profits, losses and outlook, but it probably wouldn’t be a very good idea to actually believe that has high probability.

But at least some of the week may simply be about the stocks and nothing else as there will be a deluge of results being released over the next few days that’s bound to generate some speculation about where we are going.

Following the previous week’s strong showing by the financials it will remain to be seen if other sectors of the economy begin to show the same kind of strength. That hasn’t been the case for the past few quarters, especially at the retail level, which is ultimately the best indicator of everything. Sooner or later, perhaps sooner, there’s bound to be some corroborating data indicating that the economy is improving and more than just earnings per share data buoyed by stock buy backs.

With a surprisingly good week last week, owing entirely to the rebound seen on Friday, I’m still not filled with over-confidence to begin this week. While I don’t necessarily see an immediate reason for negativity, by the same token it’s hard to see an immediate reason for optimism that is in turn backed up by investment dollars.

As with previous weeks I would be more happy to generate the week’s income through rollovers or even better, the sale of calls on uncovered positions, than through the opening of new positions.

In some part that due to having only a single position assigned last week and not driving cash reserves significantly higher.

While I’m willing to spend cash down to about 15%, representing about 5 new positions, as in previous weeks I haven’t found too much in the way of appealing opportunities.

Friday’s rebound helped to erase some of what appeared to be developing opportunities, or at least put them a little further out of reach, but there’s almost always something that may be a relative bargain that pops up unexpectedly, perhaps because of some unexpected news, such as YUM Brands dropping further this morning on another food safety issue in China, or Lorillard on the heels of a $26 billion jury award
to a smoker who passed away nearly 20 years ago, who started smoking at age 13, sometime around 1973. Something tells me that even if the then 13 year old child did know that cigarette smoking was hazardous to health it wouldn’t have made too much of a difference in his course of action.

It reminds me of the opportunity that arose when the award against Anadarko was first announced a few months ago. The amount of the award would eventually turn out to be very far removed from anyone’s sense of reality, yet the market’s initial reaction was to believe that the award amount was sacrosanct.

While awaiting or assessing those potential opportunities the week already has a fair number of positions set to expire this Friday. What makes this Friday a little unusual is that of the 17 positions expiring, that represents only 10 different stocks, as a number are multiply represented.

That number is also an unusually high number to begin a monthly option cycle, but with the volatility being so low there has been very little ability to justify going longer in time on many positions as the incremental premiums have been so low.

Where possible or logical, I may look to any opportunity for early rollover of some of those positions to better diversify the holdings by expiration date, as well as to generate some of the week’s income flow.

As has been the case lately, I will probably sit back a bit and see how the market unfolds, as it’s not giving too much indication of the strength or commitment of its initial direction.