Month: September 2015

Daily Market Update – September 18,  2015  (7:45 AM)

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

The following trade outcomes are possible today:

Assignments:  CVC

Rollovers:  HPQ

Expirations:  CY, GDX, GPS, KO, KSS, MOS, NEM

The following were ex-dividend this week: GE (9/17 $0.23), LVS (9/18 $0.65)

The following will be ex-dividend next week: CY (9/22 $0.11)

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

Daily Market Update – September 17,  2015  (Close)

The last couple of days were pretty impressive, especially given that today’s FOMC Statement release coming at 2 PM and the ensuing Chairman’s press conference report still held some uncertainty.

What has been surprising is that it suddenly seemed as if investors no longer feared the idea of an interest rate increase and that they made that change of heart so quickly.

But it’s also surprising that they seemed so certain of what the FOMC would do this afternoon.

At best, the messages from the Federal Reserve Governors have been mixed and the data has been less than compelling, but there has really been a very palpable change in acceptance of what can only be validation that the economy is improving,

This morning, less than 90 minutes from the opening of trading, the futures were once again subdued, as they have been all week. This morning, as China again had another large market decline overnight, it looked like another day of not caring what is going on there and we continue to focus on our own fundamentals and prospects for the economy.

As the morning was ready to open for trading, the S&P 500 was still about 7% below its highs from exactly 2 months ago, but that’s far better than what has been happening overseas, where there’s still no indication of what will turn things around. At this point, the only thing that should provide any encouragement about the economy in China can come from the earnings reports of US companies doing significant business there, if they report stability or growth in their revenues coming from China.

At the very least that would indicate something about the economy that may have much more validity than anything that the government’s official numbers can provide. But still, that doesn’t mean that their stock markets will follow suit.

But so long as that remains the case and the Chinese markets lack the ability to provide investors confidence, that can only be good for our own markets, especially if the Chinese economy continues to support business activities of US companies.

To a large degree, it may be that seeing the meltdown in China has been the factor that finally caused US investors to come to the realization that a small interest rate increase by the Federal Reserve may not be such a bad thing, after all, given what may be going on in the rest of the world. At least that interest rate increase is a reflection of the fact that we’re heading in the right direction and have a lot more transparency about everything than can be readily found elsewhere.

For now, that may be next week’s story, as all that will matter this week and certainly for the last 2 trading days of this monthly option cycle was to have been that FOMC Statement.

About that.

So, no change in rates and the statement includes a comment about events in “overseas markets.”

China?

Who else could they be referring to? So now the mandate is being expanded overseas?

That’s news.

What ended up happening was that a 170 point gain after the announcement of no change ended up going into neagitive territory as Janet Yellen’s press conference came to its end.

From there, it actually got worse.

No one expected that, especially since markets have always climbed during a Yellen post-FOMC Statement release press conference, except for the very first one.

So we’ll see what the mood will be tomorrow, including what the reaction will be in those overseas markets greeting us when we awaken.

Even though the past few days have seen a large drop in volatility, I’ve been glad to see some recovery from the 10% decline that we had and would be happy to see things stabilize at this level for a while as we get ready to head into yet another earnings season, which is now barely 3 weeks away.

For the rest of the week it’s otherwise just more of the same.

In the event that the market decides to add more onto its gains for the week after digesting FOMC Statement,  I’ll look for any possible opportunity to roll something over, or better yet, sell some calls on new options, but for now I’d be happy seeing whatever can be assigned, actually getting assigned.

While anything is still possible, at the least it does look as if a couple of positions will be assigned this week, helping to add some cash to reserves as the new monthly cycle gets ready to begin in a few days.

.

Daily Market Update – September 17,  2015  (8:30 AM)

The last couple of days were pretty impressive, especially given that today’s FOMC Statement release coming at 2 PM and the ensuing Chairman’s press conference report still hold some uncertainty.

What has been surprising is that it suddenly seemed as if investors no longer feared the idea of an interest rate increase and that they made that change of heart so quickly.

But it’s also surprising that they seem so certain of what the FOMC will do this afternoon.

At best, the messages have been mixed and the data has been less than compelling, but there has really been a very palpable change in acceptance of what can only be validation that the economy is improving,

This morning, less than 90 minutes from the opening of trading, the futures were once again subdued, as they have been all week. This morning, as China again had another large market decline overnight, it looks like another day of not caring what is going on there and we continue to focus on our own fundamentals and prospects for the economy.

As the morning is ready to open for trading, the S&P 500 is still about 7% below its highs from exactly 2 months ago, but that’s far better than what has been happening overseas, where there’s still no indication of what will turn things around. At this point, the only thing that should provide any encouragement about the economy in China can come from the earnings reports of US companies doing significant business there, if they report stability or growth in their revenues coming from China.

At the very least that would indicate something about the economy that may have much more validity than anything that the government’s official nuvbers can provide. But still, that doesn’t mean that their stock markets will follow suit.

But so long as that remains the case and the Chinese markets lack the ability to provide investors confidence, that can only be good for our own markets, especially if the Chinese economy continues to support business activities of US companies.

To a large degree, it may be that seeing the meltdown in China has been the factor that finally caused US investors to come to the realization that a small interest rate increase by the Federal Reserve may not be such a bad thing, after all, given what may be going on in the rest of the world. At least that interest rate increase is a reflection of the fact that we’re heading in the right direction and have a lot more transparency about everything than can be readily found elsewhere.

For now, that may be next week’s story, as all that will matter this week and certainly for the last 2 trading days of this monthly option cycle will be that FOMC Statement.

Even though the past few days have seen a large drop in volatility, I’m glad to see some recovery from the 10% decline that we had and would be happy to see things stabilize at this level for a while as we get ready to head into yet another earnings season, which is now barely 3 weeks away.

For the rest of the week it’s otherwise just more of the same.

In the event that the market decides to add more onto its gains for the week after the FOMC Statement is released, as has been the case for many of the months over the past couple of years, I’ll look for any possible opportunity to roll something over, or better yet, sell some calls on new options.

While anything is still possible, at the least it does look as if a couple of positions will be assigned this week, helping to add some cash to reserves as the new monthly cycle gets ready to begin in a few days.

.

Daily Market Update – September 16,  2015  (Close)

Yesterday was really a surprise.

Today too.

It was funny to hear so many people refer to the fact that the day before an FOMC Statement release the market has a tendency to move significantly higher.

That was their explanation for a 228 point gain in the DJIA on Tuesday, with really not an instant in which that gain would come under attack throughout the day.

That observation about the day before an FOMC Statement release, actually has been true for about the past 18 months, with an occasional outlier or two. Still, the odds have been very good that if you were investing during the Janet Yellen era the market went higher on the Tuesday ahead of the Wednesday release.

What no one really seemed to make note of was that today was really like the Monday before a Wednesday release and there has been no identifiable Monday pattern.

Yesterday, however, was the equivalent of a Monday because this week’s FOMC Statement release is on Thursday and not it’s usual Wednesday.

So if you believe in patterns, and I do, there’s still no reason to believe that a pattern was involved in yesterday’s really strong showing that just got better and better as the day went along. At least there were appearances of there being a reason to explain what was really not so rational.

Our gains yesterday came despite the fact that China was again abysmal and our pre-open futures were comatose.

Our gains today came as China rebounded, but we were slow getting out of the gate in the pre-open, but did do some catching up by the end of the day.

Since there was nothing to point a finger at as being responsible for neither yesterday’s nor today’s gain, it can only be that investors are finally at peace with whatever the FOMC will decide to do this week, as long as what they decide to do is within the narrow range of anticipated actions.

It’s like your parents being at peace with whatever you decided to do with your life, as long as it was becoming either a doctor or a lawyer.

When Thursday afternoon does roll around It’s very unlikely that there will be anything of a surprise, but if there happened to be a surprise, such as a 0.5% or greater increase or any suggestions by Chairman Yellen during her press conference that economic data couldn’t support an increase in interest rates, I would be prepared for a major sell-off.

I don’t expect that, but if the interest rate isn’t increased on Thursday, someone is bound to ask the obvious question during the press conference.

No matter how Yellen might nuance that answer, the bottom line would be that things aren’t as good as had been hoped.

Considering that there appears to be growing sentiment within the FOMC that a rate increase is due, if it doesn’t come through this week, all of those mindsets that had come around to not feeling threatened by the increase might instead feel threatened by the lack of an increase.

Does that make sense?

It shouldn’t, because up until yesterday, there probably hasn’t been a single day when investors seemed to understand that there was nothing in our past to suggest that the early stages of such rate increases is anything but a good thing.

Anyway, now just past mid-week and with very little trading activity, it becomes a question of just waiting for events and seeing whether any opportunities will be created as the monthly cycle will come to its end.

I hope so, but very little has p
layed according to script the past few months, so there’s not too much reason to suspect that things will become more predictable any time soon.

The one trade not made, and we’ll see whether it would have been warranted, was rolling over the $24.50 September 25 and $25 October 2 General Electric contracts, as shares are ex-dividend tomorrow.  As volatility has fallen strongly the past two days the premiums have also dried up to some degree and there wasn’t very much to be gained from doing those rollovers in an attempt to retain the dividend.

As with everything else, we’ll see.

Daily Market Update – September 16,  2015  (7:30 AM)

Yesterday was really a surprise.

It was funny to hear so many people refer to the fact that the day before an FOMC Statement release the market has a tendency to move significantly higher.

That was their explanation for a 228 point gain in the DJIA, with really not an instant in which that gain would come under attack throughoiut the day.

That observation about the day before an FOMC Statement release, actually has been true for about the past 18 months, with an occasional outlier or two. Still, the odds have been very good that if you were investing during the Janet Yellen era the market went higher on the Tuesday ahead of the Wednesday release.

What no one really seemed to make note of was that today was really like the Monday before a Wednesday release and there has been no identifiable Monday pattern.

Today was the equivalent of a Monday because this week’s FOMC Statement release is on Thursday and not it’s usual Wednesday.

So if you believe in patterns, and I do, there’s still no reason to believe that a pattern was involved in yesterday’s really strong showing that just got better and better as the day went along. AT least there were appearances of there being a reason to explain what was really not so rational.

Our gains today came despite the fact that China was again abysmal and our pre-open futures were comatose.

Since there was nothing to point a finger at as being responsible for the day’s gain, it can only be that investors are finally at peace with whatever the FOMC will decide to do this week, as long as what they decide to do is within the narrow range of anticipated actions.

It’s like your parents being at peace with whatever you decided to do with your life, as long as it was becoming either a doctor or a lawyer.

When Thursday afternoon does roll around It’s very unlikely that there will be anything of a surprise, but if there happened to be a surprise, such as a 0.5% or greater increase or any suggestions by Chairman Yellen during her press conference that economic data couldn’t support an increase in interest rates, I would be prepared for a major sell-off.

I don’t expect that, but if the interest rate isn’t increased on Thursday, someone is bound to ask the obvious question during the press conference.

No matter how Yellen might nuance that answer, the bottom line would be that things aren’t as good as had been hoped.

Considering that there appears to be growing sentiment within the FOMC that a rate increase is due, if it doesn’t come through this week, all of those mindsets that had come around to not feeling threatened by the increase might instead feel threatened by the lack of an increase.

Does that make sense?

It shouldn’t, because up until yesterday, there probably hasn’t been a single day when invetsors seemed to understand that there was nothing in our past to suggest that the early stages of such rate increases is anything but a good thing.

Anyway, now at mid-week and with very little trading activity, it becomes a question of just waiting for events and seeing whether any opportunities will be created as the monthly cycle will come to its end.

I hope so, but very little has played according to script the past few months, so there’s not too much reason to suspect that things will become more predictable any time soon.

Daily Market Update – September 15,  2015  (Close)

Yesterday was a rare kind of day if you only look at the last month or two as your guide to what is normal.

Instead of the wild swings that we’ve gotten used to and that have helped volatility start returning toward what we used to consider normal levels, there was virtually no range in trading yesterday. The market traded in as tight of a range as we’ve seen for a while as there was absolutely no reason to get excited about anything.

Despite more weakness in Asia, which continues as we wee ready to get started this morning, the market was again looking as if it may be another flat day as it was moving away from trading in sympathy with Shanghai.

When you think about the fact that Shanghai has now fallen 40% in the past 3 months, we are pretty fortunate to find ourselves down only about 9% to start the morning, in what is nothing more than what should be thought of as a normally occurring correction, from which recovery is routine.

You can’t necessarily refer to anything about a 40% decline as routine, but it is good seeing that the co-dependence in trading seems to be waning as the realization comes that there’s no better place to be parking your money than in the United States.

By the time today’s trading was done, that 9% decline was more like 7.5% in what could only be described as a surprising day, but without any surprises to make it so.

With all attention being focused on this week’s FOMC Statement release and Chairman Yellen’s press conference to follow, there’s plenty of anticipation for something big to spring out from the market at that time, so for now, there’s not too much reason to expend much energy when it all may be called for on Thursday.

But that didn’t matter today, as the enthusiasm for something began to bubble over.

It’s was a little disappointing seeing the morning look as if it would be another flat or down kind of day, as I’d have liked to see more opportunity to do something with non-performing positions or find some opportunities to roll over those positions expiring this week.

While the market was very nicely higher today, the disappointment continued, as there really was nothing that popped up as a new opportunity.

As has been the case for quite a while, although less so now as volatility has been increasing, the relative costs of those rollovers is still higher than I would like. Although I really do dislike not being able to rollover a position, these days I’d rather not do a rollover than do one with virtually no benefit and obliging yourself to assignment.

While it’s perhaps unrealistic to expect that you can have it all, you really can have it all when volatility gets sustained at a higher level, so there may be reason to not rollover positions as a matter of reflex. There’s definitely more and more reason to look at some longer term contracts as long as there’s the chance to lock into higher premiums and get paid to wait out some bounce back in the market.

That is actually the case for a number of contracts expiring this Friday as those were sold as “Hail Mary” kind of sales to generate some income while awaiting some good news. As it is taking longer than we’ve become accustomed to for getting good news to return to the scene after a market dip, that may be the strategy for a while and just trying to grab any premium advantage while it’s available and while in waiting mode.

Today looked as if it might have been a quiet day for portfolio trading before things got out of hand in a sort of subdued buying frenzy, but despite yesterday not offering any surprises, it probably doesn’t make too much sense to completely discount the possibility of something popping up to create opportunity even as we may still be in a state of suspended animation until Thursday afternoon.

.

Daily Market Update – September 15,  2015  (8:15 AM)

Yesterday was a rare kind of day if you only look at the last month or two as your guide to what is normal.

Instead of the wild swings that we’ve gotten used to and that have helped volatility start returning toward what we used to consider normal levels, there was virtually no range in trading yesterday. The market traded in as tight of a range as we’ve seen for a while as there was absolutely no reason to get excited about anything.

Despite more weakness in Asia, which continues as we are ready to get started this morning, the market is again looking as if it may be another flat day and continues its moving away from trading in sympathy with Shanghai.

When you think about the fact that Shanghai has now fallen 40% in the past 3 months, we are pretty fortunate to find ourselves down only about 9%, in what is nothing more than what should be thought of as a normally occurring correction, from which recovery is routine.

You can’t necessarily refer to anything about a 40% decline as routine, but it is good seeing that the co-dependence in trading seems to be waning as the realization comes that there’s no better place to be parking your money than in the United States.

With all attention being focused on this week’s FOMC Statement release and Chairman Yellen’s press conference to follow, there’s plenty of anticipation for something big to spring out from the market at that time, so for now, there’s not too much reason to expend much energy when it all may be called for on Thursday.

It’s a little disappointing seeing the morning look as if it will be another flat or down kind of day, as I’d like to see more opportunity to do something with non-performing positions or find some opportunities to roll over those positions expiring this week.

As has been the case for quite a while, although less so now as volatility has been increasing, the relative costs of those rollovers is still higher than I would like. Although I really do dislike not being able to rollover a position, these days I’d rather not do a rollover than do one with virtually no benefit and obliging yourself to assignment.

While it’s perhaps unrealistic to expect that you can have it all, you really can have it all when volatility gets sustained at a higher level, so there may be reason to not rollover positions as a matter of reflex. There’s definitely more and more reason to look at some longer term contracts as long as there’s the chance to lock into higher premiums and get paid to wait out some bounce back in the market.

That is actually the case for a number of contracts expiring this Friday as those were sold as “Hail Mary” kind of sales to generate some income while awaiting some good news. As it is taking longer than we’ve become accustomed to for getting good news to return to the scene after a market dip, that may be the strategy for a while and just trying to grab any premium advantage while it’s available and while in waiting mode.

Today looks as if it may be a quiet day for portfolio trading, but despite yesterday not offering any surprises, it probably doesn’t make too much sense to completely discount the possibility of something popping up to create opportunity even as we may be in a state of suspended animation until Thursday afternoon.

.

Daily Market Update – September 14,  2015  (Close)

Last week at least had the good news of our markets disassociating themselves from China.

Even if the Shanghai market goes higher, it’s probably a good thing if we go our own and independent ways.

This morning, as both Shanghai and Japan were sharply lower, our own market is doing nothing as it prepared to begin the week.

That’s not too surprising considering that this is the week that many expect the FOMC Statement release to finally announce an interest rate increase for the first time in nearly a decade.

In all likelihood, at this point there are only two things that would make the market take any news badly.

The first is if no interest rate increase is announced.

Markets seem to have finally matured enough to understand that a rate hike is only a reflection of all of the good and future good things  that are developing in our economy and are ready to move on instead of being paralyzed with fear that a rate hike would choke off anemic growth.

The second thing, though, is the very unlikely event of a rate hike larger than has been widely expected. That means a 0.5% hike, or even worse, a full 1% hike.

That would likely be met with crazed selling.

This week’s FOMC Statement release comes at a fairly inopportune time, regardless of what it may hold.

It will be on Thursday, instead of its usual Wednesday afternoon.

That gives one less day for markets to recover in the event of a quick reaction to the downside.

Additionally, this is the end of the September 2015 option cycle and as is usually the case, that means more than the typical number of expiring positions that could be subject to becoming even less likely to be assigned.

This time, however, that’s not too much of a concern as many of those expiring contracts were written  on positions that were already well out of the money at the time and not really expected to be in contention for assignment.

My expectation this week, regardless of the FOMC Statement was that most of those positions would expire and that we would look for any new opportunity to simply sell calls on them at the first sign of any price strength, trying to take advantage of some higher volatility and getting whatever premium possible while in waiting mode for a price rebound.

This week, with really very little cash and lots of uncertainty about what will be happening, I didn’t expect to be adding new positions, but you never know what mood will strike, especially if a dividend is involved, as turned out to be the case with adding General Electric, once again.

I hope, just as with last week that there is some opportunity to sell new call contracts or get some rollovers achieved, as the number of ex-dividend positions this week is much reduced from the past 2 weeks and it would be nice to get some more income flowing.

With markets set to open the week flat I didn’t know if any of those opportunities would come today. But just as we’ve seen over the past few weeks, if we’ve seen anything at all, its that they’ve been very unpredictable. Even on those mornings that the futures were pointing toward sharp moves, sadly especially when they were higher, those moves often didn’t survive the day.

Today it pointed at minimal activity, but it ended up being a day that flirted with a triple digit loss for much of the day, finally closing 62 points lower on the DJIA.

For now, all that matters is for portfolios to survive the
day and hopefully add some additional income to do a bit better than simply surviving.

Daily Market Update – September 14,  2015  (8:30 AM)

Last week at least had the good news of our markets disassociating themselves from China.

Even if the Shanghai market goes higher, it’s probably a good thing if we go our own and independent ways.

This morning, as both Shanghai and Japan are sharply lower, our own market is doing nothing as it prepares to begin the week.

That’s not too surprising considering that this is the week that many expect the FOMC Statement release to finally announce an interest rate increase for the first time in nearly a decade.

In all likelihood, at this point there are only two things that would make the market take any news badly.

The first is if no interest rate increase is announced.

Markets seem to have finally matured enough to understand that a rate hike is only a reflection of all of the good and future good things  that are developing in our economy and are ready to move on instead of being paralyzed with fear that a rate hike would choke off anemic growth.

The second thing, though, is the very unlikely event of a rate hile larger than has been widely expected. That means a 0.5% hike, or even worse, a full 1% hike.

That would likley be met with crazed selling.

This week’s FOMC Statement release comes at a fairly inopportune time, regardless of what it may hold.

It will be on Thursday, instead of its usual Wednesday afternoon.

That gives one less day for markets to recover in the event of a quick reaction to the downside.

Additionally, this is the end of the September 2015 option cycle and as is usually the case, that means more than the typical number of expiring positions that could be subject to becoming even less likely to be assigned.

This time, however, that’s not too much of a concern as many of those expiring contracts were written  on positions that were already well out of the monet at the time and not really expected to be in contention for assignment.

My expectation this week, regardless of the FOMC Statement was that most of those positions would expire and that we would look for any new opportunity to simply sell calls on them at the first sign of any price strength, trying to take advantage of some higher volatility and getting whatever premium possible while in waiting mode for a price rebound.

This week, with really very little cash and lots of uncertainty about what will be happening, I don’t epect to be adding new positions, but you never know what mood will strike.

I hope, just as with last week that there is some opportunity to sell new call contracts or get some rollovers achieved, as the number of ex-dividend positions this week is much reduced from the past 2 weeks and it would be nice to get some more income flowing.

With markets set to open the week flat I don’t know if any of those opportunities will come today, but if the past few weeks have been anything, they’ve been very unpredictable. Even on those mornings that the futures were pointing toward sharp moves, sadly especially when they were higher, those moves often didn’t survive the day.

For now, all that matters is for portfolios to survive the day and hopefully add some additional income to do a bit better than simply surviving.