Daily Market Update – November 10, 2014 (Close)




Daily Market Update – November 10, 2014 (Close)

Last week there was plenty of reason to believe that the market would do something to make either bulls or bears happy.

There were potentially 3 big stories for the week, each of which could have moved the market in a big way. As it would turn out the market didn’t care very much and did little of anything, other than acted a little surprised by the election results that were very widely expected.

This week there’s very little on the economic calendar that could potentially move markets and as unpredictable as the world has always been, there doesn’t appear to be any particular flash point this week, as some signals being sent on Friday regarding a Russian incursion into Ukraine haven’t been validated.

So, logic might suggest that this morning’s listless futures trading would characterize the week ahead, but that kind of logic didn’t fare too well last week and there’s not much reason to ever expect that quiet futures trading has any great predictive power.

For now, that doesn’t really matter too much.

Ultimately, what forms action is the availability of cash, the need to raise cash or the need to preserve cash.

The reality is that the market is still at new highs and the momentum has clearly been in a single direction for the past 3 weeks, although it did slow down just a little bit last week. Historically, the last 2 months of the year outperform the preceding 10 months, especially in years that hedge funds are likely to be trailing the broad market, as they are again this year.

Today would end up just adding to those new highs. Not by much, but still, a little higher than ever before.

With little to lose, especially if investing other people’s money and not their own,  I expect that hedge funds may fuel that momentum, just as I think they have been already causing the options market to see less volume, as they take hedges off in an effort to go for the fences.

With some more cash in hand after some assignments last week I’m not  opposed to adding new positions in order to take advantage of any potential continuation of the upward momentum, but I would still like to be able to generate whatever income possible from additional call sales, despite the realization that it may continue being more difficult to rollover positions as sellers are fewer or asking relatively exorbitant premiums as trying to close out positions near the week’s end.

With a few positions scheduled to expire this and the same next, the low volatility makes it unlikely that I would be looking at expanded weekly options unless there is an earnings report or a dividend involved.

That was definitely the case with the purchase of Mattel today and the use of the December and may be reason to rollover the additional Sinclair Broadcasting option sold today on the new shares picked up.

I expect this week to be relatively light in personal trading, but fortunately there are some dividends this week as well. One of those, International Paper, may be at risk for early assignment, but is also a potential choice for addition of a new position this week. I may look at opportunities to roll that existing position over in order to keep the dividend, but like Intel the previous week the traders just weren’t there to make a deal. With International Paper there will still be two more days to try and get a trade done, but the participants are few and far between as are the spreads.

As long as it takes 2 parties to complete a trade that’s an obstacle that I hope won’t last very long.