Month: June 2015

Daily Market Update – June 8, 2015  (9:00 AM)

There isn’t too much economic news scheduled for this week and that should mean that teh markets will be relatively calm.

That would be a comforting thought, if it also wasn’t so unlikely to be the case. 

The past few weeks haven’t had too much news other than for the final day of the trading week, but the propensity to move lower has been pretty clear.

Even though if you squinted really hard you may have been able to see some positive signs coming from some of those trading days of the past two weeks, the reality has become that the market really can’t find much reason to try and go past those recent highs.

What has really been striking is the resurgence of the bond market as it has decided that rates are going higher sooner than anyone had come to recently expect. It is making its third recent assault on the ceiling on interest rates in the past few months and this time it may have it right.

The past week’s strong Employment Situation Report coupled with the idea that what we thought was a weaker than expected economy based on faulty data has suddenly created the idea that interest rate increases could even come as early as in 2 weeks.

This week’s Retail Sales Report could open some eyes if it gives reason to believe that consumers are finally coming alive.

When you look back just a week earlier and remember that people had started suggesting that a data driven Federal Reserve could possibly wait until 2016 to begin their rate increases, the idea of it now happening in two weeks can be pretty unsettling.

And that’s exactly what the markets have become.

They’re unsettled because their notions of where we the economy is standing may not be very valid and that could lead to sudden shifts in monetary policy.

No one likes that sort of thing.

The pre-opening futures to begin this week are pointing to a very quiet open. Whether that’s going to stay the case as the day, much less the week unfolds is going to be anyones guess, but with my cash reserves much lower than I would like, I’m not expecting to be opening many new positions for the week. The general uncertainty also adds to the reluctance to make much in the way of a commitment.

Like last week, this one will have a nice number of existing positions going ex-dividend and that offers some solace. However, with only a small number of positions scheduled to expire this week, there may not be very much trading activity or opportunity to generate new income, unless an unexpectedly strong move higher creates the chance to sell calls on uncovered positions.

Of greater concern, however, are the large number of positions set to expire next week, just 2 days after the FOMC Statement release.

The concern, although still based on a small likelihood, is that if the FOMC does announce an interest rate increase, that will send markets sharply lower in the short term.

With just 2 days of recovery time until expiration that would put those positions set to expire at risk, so there may have to be some additional thought put to rolling those positions over this week, where possible or feasible.

For now, it’s just a question of sitting back and seeing where the momentum may take the market. At the moment, despite the quiet that looks as if it’s heading our way, for the most part that’s how markets have looked every morning in the past few weeks, only to deteriorate as there has been nothing to give reason
to bid prices higher.

Hopefully the bond market will take a little break this week and offer less competition to the stock market as we await any news that could create optimism and count down until the start of the next earnings season next month, which could offer those reasons.

Daily Market Update – June 5, 2015  (8:00 AM)

The Week in Review will be posted by 10 PM and the Weekend Update will be posted by Noon on Sunday.

The following trade outcomes are possible today:

Assignments:  none

Rollovers:  none

Expirations:   MOS, MRO, WY

The following were ex-dividend this week:  HAL (6/1 $0.18), JOY (6/2 $0.20), MOS (6/2 $0.27), BAC (6/3 $0.05), COH (6/3 $0.34), HFC (6/3 $0.33), WY (6/3 $0.29)

The following will be ex-dividend next week. GM (6/8 $0.36), KSS (6/8 $0.45), BBY (6/9 $0.23), NEM (6/9 $0.025), KO (6/11 $0.33)

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

Daily Market Update – June 4, 2015  (Close)

With the Employment Situation Report coming tomorrow, the pre-open futures was continuing its recent pattern of indecisiveness, as the morning was going counter to yesterday’s trading.

The futures were improving as the morning had proceeded, with the early triple digit losses reflecting some bad overseas sessions over Greek concerns getting more manageable

However, given that there has been a 0.5% move higher in the S&P 500 over the course of the first 3 trading days of the week and the uncertainty contained in tomorrow’s Employment Situation Report, it’s completely understandable why the market might be reluctant to add to those gains.

What there wasn’t was any reason to lose nearly 200 points on the day.

While there were reasons to be optimistic following the first 2 days of trading this week, it was less easy to be so yesterday, despite the market gains.

Those gains were much better in the DJIA than they were in the S&P 500, although as the DJIA gains eroded heading into the close, the gap between the two indexes did get smaller. Still, the gains weren’t as broad as they may have appeared.

Today was disappointing, not only for the size of the loss, but because the market had actually erased the pre-futures losses after tumbling about 100 points at the open and was looking as if it might really sky rocket.

And then it didn’t.

This morning there had to be concern about the upcoming Employment Situation Report, not just for what the data happens to be, but also because there’s no telling how the market will react if the data is outside of the expected range.

On top of that, with talk of more adjustments to previously released GDP data comes lots of uncertainty about the validity of economic data to date.

With so many people now taking a position that interest rate hikes may be held at bay until 2016, there could be a very significant surprise in store if revised data shows that the economy has been much stronger than we’ve been lead to believe.

While most understand that interest rate increases would be a good thing for the economy, even while likely causing some near term and short lived selling pressure, that scenario might be less likely if interest rate increases occurred as a result of the sudden realization that previous data had been invalid.

It’s much easier to deal with what may be perceived as bad news if you can prepare yourself for it or if it’s expected. Despite anecdotes of an economy much better than what economic data has reflected, the market has been taking its lead from the expectation that a stagnant economy would delay hold interest rate increases.

With the next FOMC meeting occurring just 2 days before the end of the June 2015 option cycle, any indication that the economy is stronger than previous data has indicated would be a good reason to want to rollover those positions well in advance of their expiration.

Just in case.

With only 3 positions now set to expire tomorrow, there’s not that much at stake as we get closer to the big reveal tomorrow morning.

However, just as was the case earlier this week, even though I generally like to wait until Friday to try my rollover trades, I would have liked to take any opportunity as it may have arisen. It’s just that today wasn’t going to be that day..

While I’d like to see some assignments in order to replenish the cash reserve that was spent down this week in the pursuit of dividends and premiums, I think I would rather get the chance to rollover positions and pocket the premiums with certainty, than to await the uncertainty of their assignment.

Maybe tomorrow will be that day.

Daily Market Update – June 4, 2015  (8:00)

With the Employment Situation Report coming tomorrow, the pre-open futures is continuing its recent pattern of indecisiveness, as the morning is going counter to yesterday’s trading.

The futures were improving as the morning has preceded, with the early triple digit losses reflecting some bad overseas sessions over Greek concerns getting more manageable

However, given that there has been a 0.5% move higher in the S&P 500 over the course of the first 3 trading days of the week and the uncertainty contained in tomorrow’s Employment Situation Report, it’s completely understandable why the market might be reluctant to add to those gains.

While there were reasons to be optimistic following the first 2 days of trading this week, it was less easy to be so yesterday, despite the market gains.

Those gains were much better in the DJIA than they were in the S&P 500, although as the DJIA gains eroded heading into the close, the gap between the two indexes did get smaller. Still, the gains weren’t as broad as they may have appeared.

This morning there has to be concern about the upcoming Employment Situation Report, not just for what the data happens to be, but also because there’s no telling how the market will react if the data is outside of the expected range.

On top of that, with talk of more adjustments to previously released GDP data comes lots of uncertainty about the validity of economic data to date.

With so many people now taking a position that interest rate hikes may be held at bay until 2016, there could be a very significant surprise in store if revised data shows that the economy has been much stronger than we’ve been lead to believe.

While most understand that interest rate increases would be a good thing for the economy, even while likely causing some near term and short lived selling pressure, that scenario might be less likely if interest rate increases occurred as a result of the sudden realization that previous data had been invalid.

It’s much easier to deal with what may be perceived as bad news if you can prepare yourself for it or if it’s expected. Despite anecdotes of an economy much better than what economic data has reflected, the market has been taking its lead from the expectation that a stagnant economy would delay hold interest rate increases.

With the next FOMC meeting occurring just 2 days before the end of the June 2015 option cycle, any indication that the economy is stronger than previous data has indicated would be a good reason to want to rollover those positions well in advance of their expiration.

Just in case.

With only 3 positions now set to expire tomorrow, there’s not that much at stake as we get closer to the big reveal tomorrow morning.

However, just as was the case earlier this week, even though I generally like to wait until Friday to try my rollover trades, at the moment I would take any opportunity as it may arise.

While I’d like
to see some assignments in order to replenish the cash reserve that was spent down this week in the pursuit of dividends and premiums, I think I would rather get the chance to rollover positions and pocket the premiums with certainty, than to await the uncertainty of their assignment.

Daily Market Update – June 3, 2015  (Close)

With the ADP Employment Report coming this morning and setting the tone for what’s to be expected with Friday’s Employment Situation Report, the pre-open futures were again optimistic, as they were on Monday.

If that tone continued it would be the third day in an alternating pattern of direction, but there was some good news in both of the previous days this week, especially yesterday, as a meaningful early loss was reversed.

This morning, prior to the ADP release, the futures are already more than 100 points higher, probably in anticipation of a number that falls squarely and comfortably into the range of what most are expecting or hoping for.

Most neither want a number too good nor too weak.

Most would be very happy with economic data that is ambivalent. No one wants any suggestion of an economy heating up, nor as last week’s GDP data suggested, an economy that was shrinking faster than expected.

Whatever side you’re on, it all still comes down to what may be an irrational fear of the initiation of an interest rate increase.

History has shown that the market very quickly recovers from what never should have been a shock in the first place, as the early rounds of interest rate hikes are implemented. So it’s hard to understand why the markets have been so fixated on an action  that should be considered to reflect good economic news. Additionally, the early stages of interest rate hikes typically are followed by more economic growth and not a slowing down.

But old pre-conceived notions are hard to give up.

That ADP number turned out to be slightly less growth in the private sector job market than had been expected. The futures gave up just a little ground on that information, but essentially did nothing, as it came in as expected.

That tone continued today and will hopefully continue to do so for the next few days as we try to get out of this week with some combination of assignments and rollovers.

One of those rollover opportunities  came today and maybe some more are in store if the news remains good or even just ambivalent.

While there may not be too much trading in the personal account this week, it is at least much more busy than it was last week. Another positive is that this week has an unusual number of ex-dividend positions and that income is very much welcome after a week last the past one.

As I look at next week it too offers lots of ex-dividend positions and I don’t mind seeing those distributions add up.

For now, and probably for the rest of the week, there’s little likelihood that I’ll be adding more new positions. I would much rather see the number of existing positions get reduced and add more to my cash pile. As we continue to teeter at these levels and without any clear indication of what is coming next, my preference would be to have more cash than to have more risk.

But to get there, it will take some more moves higher and some more record closes, so I’m hopeful that Friday’s big event will be the kind of non-event that the market interprets in a bullish way.

While there’s not too much in the near term that should be able to act as a catalyst to move markets higher, with each passing day we get closer to the next earnings season that begins in just 5 weeks.

That is one that has had low expectations set for it as most were forecasting USD and Euro parity and that hasn’t been the case, so top line revenues and profits should be better than the guidance that so many companies had offered.

One possibility, however, that may not require having to wait 5 weeks for that catalyst, is if companies begin to change their guidance before earnings are released. That’s more commonly done when the news is bad, but sometimes it goes the other way, as well.

If that’s the case, hopefully we will be smart enough to realize that good news should be treated as good news.

Daily Market Update – June 3, 2015  (8:30 AM)

With the ADP Employment Report coming this morning and setting the tone for what’s to be expected with Friday’s Employment Situation Report, the pre-open futures are again optimistic, as they were on Monday.

If that tone continues it would be the third day in an alternating pattern of direction, but there was some good news in both of the previous days this week, especially yesterday, as a meaningful early loss was reversed.

This morning, prior to the ADP release, the futures are already more than 100 points higher, probably in anticipation of a number that falls squarely and comfortably into the range of what most are expecting or hoping for.

Most neither want a number too good nor too weak.

Most would be very happy with economic data that is ambivalent. No one wants any suggestion of an economy heating up, nor as last week’s GDP data suggested, an economy that was shrinking faster than expected.

Whatever side you’re on, it all still comes down to what may be an irrational fear of the initiation of an interest rate increase.

History has shown that the market very quickly recovers from what never should have been a shock in the first place, as the early rounds of interest rate hikes are implemented. So it’s hard to understand why the markets have been so fixated on an action  that should be considered to reflect good economic news. Additionally, the early stages of interest rate hikes typically are followed by more economic growth and not a slowing down.

But old pre-conceived notions are hard to give up.

That ADP number turned out to be slightly less growth in the private sector job market than had been expected. The futures gave up just a little ground on that information, but essentially did nothing, as it came in as expected.

Hopefully that tone will continue for the next few days as we try to get out of this week with some combination of assignments and rollovers.

While there may not be too much trading in the personal account this week, it is at least much more busy than it was last week. Another positive is that this week has an unusual number of ex-dividend positions and that income is very much welcome after a week last the past one.

For now, and probably for the rest of the week, there’s little likelihood that I’ll be adding more new positions. I would much rather see the number of existing positions get reduced and add more to my cash pile. As we continue to teeter at these levels and without any clear indication of what is coming next, my preference would be to have more cash than to have more risk.

But to get there, it will take some more moves higher and some more record closes, so I’m hopeful that Friday’s big event will be the kind of non-event that the market interprets in a bullish way.

While there’s not too much in the near term that should be able to act as a catalyst to move markets higher, with each passing day we get closer to the next earnings season that begins in just 5 weeks.

That is one that has had low expectations set for it as most were forecasting USD and Euro parity and that hasn’t been the case, so top line revenues and profits should be better than the guidance that so many companies had offered.

One possibility, however, that may not require having to wait 5 weeks for that catalyst, is if companies begin to change their guidance before earnings are released. That’s more commonly done when the news is bad, but sometimes it goes the other way, as well.

If that’s the case, hopefully we will be smart enough to realize that good news should b
e treated as good news.

Daily Market Update – June 2, 2015  (Close)

Last week was one that had absolutely no direction, although there wasn’t too much reason for it to have taken any direction from what few events were occurring.

If anything, the bias was to the downside, but that could be understood simply on the basis of the increasing weight of the market and with nothing obviously being recruited to help support that increasing weight.

This week has the same dearth of information and if this morning’s pre-open futures was going to be any indication of what may be ahead, there’s a reversal to yesterday’s very modest increase awaiting.

And that is exactly how the day played out, although the trading range for the day was a little wider than we’ve  recently seen.

Just like last week the singular big economic news item won’t occur until Friday morning. That leaves time for lots of speculation and ambivalence.

Friday’s Employment Situation Report is in a position to confound markets if it is too good or worse than expected, especially after last week’s disappointing GDP data.

Just like last month, what would probably suit the market the best and lead to a positive feeling, would be an employment picture that’s just right in line with expectations.

If that’s the case that delays even having to think about when the FOMC will begin to increase interest rates. That essentially puts June off the table and maybe gets people to bypass September, getting us closer and closer to 2016.

For more than a year, ever since Janet Yellen became Chairman of the Federal Reserve we’ve been delaying the realization that an increase in interest rates is likely to be a positive thing for everyone. What people still think about are those days of red hot inflation and interest rate changes that couldn’t keep up with inflation.

While that’s certainly bound to happen sometime in the future, where is the reason to believe that it’s in our future?

Like so many things in life, sometimes it’s just much better to get it over with and move on with life. If the past is any indication, when that day comes and the market panics over that first in a series of interest rate increases, it will just as quickly recover in the realization that the economy is finally doing what an economy is supposed to do. People with jobs and the ability to spend money is a good thing.

With 3 new positions opened yesterday, all counting on their dividends, I don’t think that there will be too much more to do this week as far as spending money goes.

After being in suspended animation last week, having even 3 trades seems like being on fire, but hopefully there’s more to be done during this week with existing positions.

The pre-opening futures weren’t giving too much confidence in that regard, but at least they are only very mildly lower, so anything was still possible as the day was set to unfold. I was actually surprised and happy to take advantage of some strength in Abercrombie and Fitch to do an early rollover, even though continued strength could have led to an assignment.

At this point I would rather lock in any of those premiums than let them get away, especially as it’s relatively cheap to buy back a deep in the money option these days if the price does really quickly accelerate.

Yesterday’s slow erosion of gains heading into the closing bell was disappointing, but it did put an end to 3 consecutive days of losses. The last of those days was based on the GDP report and could easily have had a lingering impact, but didn’t.

I look at that as a small positive in a sea of no positive news and all it ever takes is a spark.

Today’s recovery from an early triple digit loss and actually venturing suddenly into positive territory at noon time may have been another small positive.

As long as no one throws some cold water on things, the market is still within 1% of its recent all time high and could easily look to re-visit after a few days of resting while waiting for that spark.