Category: Daily Market Update

Daily Market Update – September 8, 2014 (Close)

After another week of setting records this week is one that doesn’t really have much in the way of scheduled news events.

In fact, if you didn’t realize it to be otherwise, you would have thought that this was the last week of summer, with no one staying around to do their jobs. In addition to a very, very light week of planned economic reports and releases, there’s only a single Federal Reserve Governor giving prepared remarks for the week, whereas most weeks it’ss about 5 or so.

Lately, however, the market has liked these vacuums and insulation from the world of real economics and data. It has just moved higher and higher, especially when there’s been nothing acting as resistance.

During these periods of quiet there hasn’t been a need to decide whether good news is bad or bad news is good. Instead, no news has been the best news. No thought is necessary when there are no inputs coming and even autopilot looks like a genius.

What it hasn’t liked has been external events, but lately it has turned a deaf ear to what has been going on around the world, not really letting much get in the way of its continued climb higher after a very brief and shallow downturn in July.

After a bit of a buying spree last week and the spending down of cash reserves that saw only 3 positions get assigned, I may be in a more cash preserving mode as this week begins. Unlike last week when the week started with only a single position set to expire that week, this week is much more broadly populated with expiring positions.

The same is true, and even more so, for next week’s monthly expiration.

With volatility continuing at such low levels that means that the likelihood is that for any new positions opened this week the focus will be on weekly expirations, as much as I would like to expand the holdings on the basis of expiration date, but we all know how those plans go, sometimes.

As has been the case for a while I would gladly trade off some new positions for the opportunity to find cover for existing positions and the ability to put those back to work. Not only could that preserve cash it could share in any potential market climb while not adding to the risk that might be associated with any market decline.

Unfortunately, that’s been more of a dream than a reality, but you can’t blame someone for continuing to dream. Today, though, wasn’t the kind of day that was meant to see dreams come true.

With no real direction noted in the pre-open, as has been the case for a while, I was very likely wait to see if there was any prevailing tone being established before committing much in the way of reserves, but some early weakness dictated otherwise and in hindsight, I wish I had not waited at all.

Although I’d especially like to add some technology, healthcare or finance in order to better re-establish some diversification, I wasn’t likely to just wait for one of those specific opportunities to come along, instead using
the “best athlete” model and going for that opportunity, if it appears. So instead, it turned out to be more energy and more consumer sector positions added today.

Hopefully the week will be one of calmness inside and outside of markets, allowing some of the week’s positions to be assigned and replenishing cash, with an eye toward getting ready for the cycle’s end and beyond.

Today was nothing more than a step to get us one day closer to this Friday and the next and with nothing else very memorable or consequential. However, I’m not certain that I will be very inclined to add too much more in the way of new positions unless feeling significant certainty that a fair portion of this week’s expiring positions are likely to be assigned or rolled over.

Unfortunately, today’s market didn’t do much to encourage that feeling of confidence.

Daily Market Update – September 8, 2014 (9:00 AM)

After another week of setting records this week is one that doesn’t really have much in the way of scheduled news events.

In fact, if you didn’t realize it to be otherwise, you would have thought that this was the last week of summer, with no one staying around to do their jobs. In addition to a very, very light week of planned economic reports and releases, there’s only a single Federal Reserve Governor giving prepared remarks for the week, whereas most weeks is about 5 or so.

Lately, however, the market has liked these vacuums and insulation from the world of real economics and data. It has just moved higher and higher, especially when there’s been nothing acting as resistance.

During these periods of quiet there hasn’t been a need to decide whether good news is bad or bad news is good. Instead, no news has been the best news. No thought is necessary when there are no inputs coming and even autopilot looks like a genius.

What it hasn’t liked has been external events, but lately it has turned a deaf ear to what has been going on around the world, not really letting much get in the way of its continued climb higher after a very brief and shallow downturn in July.

After a bit of a buying spree last week and the spending down of cash reserves that saw only 3 positions get assigned, I may be in a more cash preserving mode as this week begins. Unlike last week when the week started with only a single position set to expire that week, this week is much more broadly populated with expiring positions.

The same is true, and even more so, for next week’s monthly expiration.

With volatility continuing at such low levels that means that the likelihood is that if any new positions are opened this week the focus will be on weekly expirations, as much as I would like to expand the holdings on the basis of expiration date.

As has been the case for a while I would gladly trade off some new positions for the opportunity to find cover for existing positions and the ability to put those back to work. Not only could that preserve cash it could share in any potential market climb while not adding to the risk that might be associated with any market decline.

Unfortunately, that’s been more of a dream than a reality, but you can’t blame someone for continuing to dream.

With no real direction noted in the pre-open, as has been the case for a while, I will very likely wait to see if there is any prevailing tone being established before committing much in the way of reserves. Although I’d especially like to add some technology, healthcare or finance in order to better re-establish some diversification, I probably won’t just wait for one of those specific opportunities to come along, instead using the “best athlete” model and going for that opportunity, if it appears.

Hopefully the week will be one of calmness inside and outside of markets, allowing some of the week’s positions to be assigned and replenishing cash, with an eye toward getting ready for the cycle’s end and beyond.

Daily Market Update – September 5, 2014 (8:00 AM)

The Week in Review will be posted by 6:00 PM and the Weekend Update will be posted by 12:00 noon on Sunday.

Today’s possible outcomes include:

Assignments: INTC

Rollovers:  BP, LVS, WFM

Expirations: none

The following positions were ex-dividend this week: COH (9/5 $0.34), MOS (9/2 $0.25)

The following positions are ex-dividend next week: GM (9/8 $0.30), NEM (9/9 $0.025)

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

Daily Market Update – September 4, 2014 (Close)

Comparatively speaking, today was a big news day with both the ADP Jobs reports and an announcement from the ECB regarding its forward policies, in addition to comments from its head, Mario Draghi.

As it would turn out, neither would really be very important nor really change anyone’s minds about anything.

Early this morning came the unusual leak of information confirming the initiation of ECB’s version of quantitative easing and placed it at 500 billion Euros, which would be about 7 months worth of Federal Reserve easing, so while sounding like a lot, may be only a down-payment on what may be required to jump start the European economies that are lagging.

The pre-opening market seemed to like the unconfirmed information contained in that leak, but as I mentioned yesterday, that kind of  embracing the ECB decision by US markets may be short lived if it ends up firming up European markets, whose offerings can be in direction competition to our own.

If that’s going to be a problem it will likely be one that gets set into place in relatively slow motion, at least in its early phases. Other than the day when someone finally opines that is going to be the case and the market takes a quick hit, there should be plenty of time to position a portfolio to not get blind-sided.

With Thursday now here, my attention shifted to positioning for next week. That’s far enough into the future to be planning, for now.

With only five positions set to expire this week there’s wasn’t too much to work with, although as Thursday’s trading got ready to begin they were all in striking range of either being rollover candidates or getting assigned. Either of those is acceptable, although, as with most weeks it’s always nice to have a combination.

Surprisingly, there was some opportunity to add another new position as British Petroleum had a horrible day after receiving news of the court’s decision regarding the fine for its role in the Gulf of Mexico spill some 4 years ago. Shockingly, the claim was that British Petroleum put cost savings ahead of safety and for that they have another $17 billion in fines and penalties facing them.

Does anyone remember Anadarko?

In addition to that purchase came some reason to rollover some positions early. One of those, Coach, goes ex-dividend tomorrow and it saw its price run up sharply at about 2 PM, as there were two separate large trades that sent shares sharply higher very quickly. More intriguing were the two very large options trades made a few minutes later after the jump from $37.10 to $37.37.

There was a very aggressive trade for the $37.50 contracts expiring tomorrow, about 800 contracts worth and then an equally sized, but more cautious trade for the $37 September 20th contracts.

I hope that whoev
er made those trades is right, but I did want to keep my dividend, hence the rollover, which as it turned out in the final 10 minutes of trading, may not have been necessary, as shares closed inside of the $37.34 threshold.

Despite some unexpected activity today, what’s still missing this week is the ability to reduce the number of uncovered positions as the market has been fairly milquetoastish during the first couple of days of trading. Ideally, what helps to get a position to leave its uncovered status is a price spurt and there haven’t been too many of those of late.

What I think has been telling of late of the health of the market is that individual stocks seem to be taking longer to recover from any moves lower. Those moves seem to be sharper and more sustained. In a period of low volatility it is then difficult to find an option premium that can justify the trade off of potential future gains.

One can argue that is the case simply because there may be alternative investments and so money flees from a weakened position to others. That’s precisely the same kind of dynamic that could be the undoing of our current market run higher.

While so much has been said of the US equity markets offering the best opportunities, not only in terms of geography, but also in terms of products, such as in comparison to bonds, any perception in that advantage waning will shift investor allegiances.

The micro-economic issues are important, witness this mornings further erosion in YUM Brands, but the various macro-economic issues are all of concern, as well.

For now, it’s just time to take it all in, as the only consistency is inconsistency. Following the ECB statement and comments from Draghi, we may be entering an altered landscape, but one that could be a much more easy one in which to trade if it slows down the rush of US stock markets higher.

Daily Market Update – September 4, 2014 (8:00 AM)

Comparatively speaking, today is a big news day with both the ADP Jobs reports and an announcement from the ECB regarding its forward policies, in addition to comments from its head, Mario Draghi.

Early this morning came the unusual leak of information confirming the initiation of ECB’s version of quantitative easing and placed it at 500 billion Euros, which would be about 7 months worth of Federal Reserve easing, so while sounding like a lot, may be only a down-payment on what may be required to jump start the European economies that are lagging.

The pre-opening market seems to like the unconfirmed information contained in that leak, but as I mentioned yesterday, that kind of  embracing the ECB decision by US markets may be short lived if it ends up firming up European markets, whose offerings can be in direction competition to our own.

If that’s going to be a problem it will likely be one that gets set into place in relatively slow motion, at least in its early phases. Other than the day when someone finally opines that is going to be the case and the market takes a quick hit, there should be plenty of time to position a portfolio to not get blind-sided.

With Thursday now here, attention shifts to positioning for next week. That’s far enough into the future to be planning, for now.

With only five positions set to expire this week there’s not too much to work with, although as Thursday’s trading gets ready to begin they are all in striking range of either being rollover candidates or getting assigned. Either of those is acceptable, although, as with most weeks it’s always nice to have a combination.

What’s still missing this week is the ability to reduce the number of uncovered positions as the market has been fairly milquetoastish during the first couple of days of trading. Ideally, what helps to get a position to leave its uncovered status is a price spurt and there haven’t been too many of those of late.

What I think has been telling of late of the health of the market is that individual stocks seem to be taking longer to recover from any moves lower. Those moves seem to be sharper and more sustained. In a period of low volatility it is then difficult to find an option premium that can justify the trade off of potential future gains.

One can argue that is the case simply because there may be alternative investments and so money flees from a weakened position to others. That’s precisely the same kind of dynamic that could be the undoing of our current market run higher.

While so much has been said of the US equity markets offering the best opportunities, not only in terms of geography, but also in terms of products, such as in comparison to bonds, any perception in that advantage waning will shift investor allegiances.

The micro-
economic issues are important, witness this mornings further erosion in YUM Brands, but the various macro-economic issues are all of concern, as well.

For now, it’s just time to take it all in, as the only consistency is inconsistency. Following the ECB statement and comments from Draghi, we may be entering an altered landscape, but one that could be a much more easy one in which to trade if it slows down the rush of US stock markets higher.

Daily Market Update – September 23 2014 (Close)

If the stakes weren’t so serious this morning’s news from Ukraine would be pretty laughable.

The retraction of a claim that Ukraine had reached a ceasefire agreement with Russia because Russia claims it was never a party to the conflict and because rebel leaders said they were never consulted could never happen in real life, but could be the sort of fork in the road that could take the next step in any direction.

So while awaiting some clarification on what that conflict will mean for us, there is the matter of tomorrow morning’s delayed ADP Report, which comes before Friday’s Employment Situation Report.

Most everyone is expecting another month of 200,000+ job gains and there’s little reason to expect a surprise from either measure of the US economy. The bad news is that because we’re so accustomed to good news on employment bad news would now likely be received very negatively, as no one can reasonably expect the Federal Reserve to back off from its planned end to quantitative easing. Further, really good news would likely also be interpreted as being bad as it could mean an accelerated time table for interest rate increases.

So there’s not much benefit to be gained from the reports and there really hasn’t been much in the way of market reaction through all of 2014, although the Employment Situation Report continues to be strongly associated with both a market advance for the week as well as for the day before the release.

Instead, the real interest will be on tomorrow’s ECB statement and the speculation as to whether they will finally follow the path set by our Federal Reserve and take actions that could add some reason for investment in their own stock markets. However, even in this new inter-connected world, where our greatest companies are now multi-nationals, the shift to a European version of quantitative easing could divert money from our own markets to the new hot markets in Europe.

While any suggestion of quantitative easing in Europe may be made with some initial euphoria, it wouldn’t be too surprising to see a realization that moving in that direction might not be the best thing for our own markets, which have certainly benefited from the flow of money from others around the world.

But that’s an issue for some other day. The delay is also in homage to the deftness with which Mario Draghi, head of the ECB, has done very well speaking a good game, consistently saying that the ECB would do everything in its power, yet has really not done anything other than the obligatory need to lower rates as the world has set the pace in that regard.

Today the market is prepared for a positive open in advance of a quiet day on the news front and after yesterday’s comeback. With a busier day than I initially expected yesterday, I wasn’t expecting to do very much in the pursuit of more new positions and was just hoping that the market is able to maintain at these levels, if not higher, to end out the week.

As usua
l, just as with the Federal Reserve, I have a dual mandate.

I want assignments and I want rollovers. At least yesterday’s surprisingly busy activity opens up the possibility for both this week and with only 4 days in which to act there’s already the need to start thinking about setting up the stage for next week, which is also in need of having it populated with positions set to expire next Friday.

For today, while I didn’t anticipate spending too much  more and definitely don’t want to chase anything down, there was still some hope of finding an isolated opportunity, ideally one that was also dividend related. Those are fairly sparse this week, but among the opportunities appeared to be some going ex-dividend on Monday, which can be an easy way to pick up an additional week’s worth of premium for a very short holding period if all goes as hoped.

Well see.

Daily Market Update – September 23 2014 (8:15 AM)

If the stakes weren’t so serious this morning’s news from Ukraine would be pretty laughable.

The retraction of a claim that Ukraine had reached a ceasefire agreement with Russia because Russia claims it was never a party to the conflict and because rebel leaders said they were never consulted could never happen in real life, but could be the sort of fork in the road that could take the next step in any direction.

So while awaiting some clarification on what that conflict will mean for us, there is the matter of tomorrow morning’s delayed ADP Report, which comes before Friday’s Employment Situation Report.

Most everyone is expecting another month of 200,000+ job gains and there’s little reason to expect a surprise from either measure of the US economy. The bad news is that because we’re so accustomed to good news on employment bad news would now likely be received very negatively, as no one can reasonably expect the Federal Reserve to back off from its planned end to quantitative easing. Further, really good news would likely also be interpreted as being bad as it could mean an accelerated time table for interest rate increases.

So there’s not much benefit to be gained from the reports and there really hasn’t been much in the way of market reaction through all of 2014, although the Employment Situation Report continues to be strongly associated with both a market advance for the week as well as for the day before the release.

Instead, the real interest will be on tomorrow’s ECB statement and the speculation as to whether they will finally follow the path set by our Federal Reserve and take actions that could add some reason for investment in their own stock markets. However, even in this new inter-connected world, where our greatest companies are now multi-nationals, the shift to a European version of quantitative easing could divert money from our own markets to the new hot markets in Europe.

While any suggestion of quantitative easing in Europe may be made with some initial euphoria, it wouldn’t be too surprising to see a realization that moving in that direction might not be the best thing for our own markets, which have certainly benefited from the flow of money from others around the world.

But that’s an issue for some other day.

Today the market is preparing for a positive open in advance of a quiet day on the news front and after yesterday’s comeback. With a busier day than I initially expected yesterday, I’m not expecting to do very much in the pursuit of more new positions and will just be hoping that the market is able to maintain at these levels, if not higher, to end out the week.

As usual, just as with the Federal Reserve, I have a dual mandate.

I want assignments and I want rollovers. At least yesterday’s surprisingly busy activity opens up the possibility for both this week and with only 4 days in which to act there’s already the need to start thinking about setting up the stage for next week, which is also in need of having it populated with position
s set to expire next Friday.

For today, while I don’t anticipate spending too much  more and definitely don’t want to chase anything down, there’s still some chance of finding an isolated opportunity, ideally one that is also dividend related. Those are fairly sparse this week, but may have some  opportunities next week, including some going ex-dividend on Monday, which can be an easy way to pick up an additional week’s worth of premium for a very short holding period if all goes as hoped.

Well see.

Daily Market Update – September 2, 2014 (Close)

The big story this morning was that the traders are back now that Labor Day has come and gone.

It’s really not as if anyone went away for the summer, it’s just that they had other things to do besides trading all day long. Market volume was abysmally low during the climb higher and the only really elevation in trading activity came during the very brief decline earlier in the summer.

But this week people start coming back and volume should also be increasing, as if they had absolutely no ability to conduct business from the Hamptons.

For a little while today it seemed as if they were coming back with a chip on their shoulders, as the market took a brief turn downward in the absence of any real catalyst.

Fortunately there was nothing on a geo-political front occurring during this past long holiday weekend to really shake things up, because that could have been a messy way to get a shortened week off to a start. As a result the market looked as if it would get off to a really benign start and with very little scheduled news during the week to create expectations for market reactions in either direction. Why the market took a brief turn downward is anyone’s guess, but despite the comeback it was a fairly dour kind of day.

Although there is the monthly Employment Situation Report on Friday and a number of Federal Reserve Governors will be speaking during the week, including the one most recent dissenting voter, there’s not likely to be much in the way of surprise coming from these scheduled events, although there may be some news coming later in the week from the ECB, particularly regarding their version of qualitative easing and how firmly they may be ready to adopt such policies.

Until that point that, again, puts the spotlight on geo-political events and that could also take markets in either direction, although with the NATO meeting this week it’s hard to see how anything could move the markets higher as a result of those events, unless an acquiescent Putin is the end result. However, if the market has any ability to draw upon its recent past, it will realize that the appearance of any kind of acquiescence or agreeability is just a precursor to another bit of disagreeable action.

But what are you going to do? Wait until something happens? That’s actually not a bad idea, except to predicate everything on waiting is probably not a good way to go, but keeping something back for any kind of surprise isn’t necessarily a bad strategy.

Recycling money from assignments is an intermediate approach to dealing with uncertainty. It’s not really committing new money and it doesn’t have to include all of the recently freed up cash, although it easily could and even more.

As usual, when I have funds from assignments looking to be recycled I like to see the market get off to a weak start for the week, but lately that hasn’t been the case, as August had a four week winning streak, with each week getting off to a good start, so I’m not likely to recycle all of it this week.

However, with only a single position set to expire this week that meant that there is littl
e to be rolled over into next week, which itself has a mere three positions set to expire. That further meant I needed to populate this week’s list of income producing stocks and either create the possibility of freeing up cash for next week or at least creating additional income streams from the rollover of any new positions. As a result I found myself looking for new positions with expirations coming this week rather than thinking about the use of expanded options or the monthly. While I would have liked to focus on dividend paying positions, there aren’t too many worthy ones this week that could be of any use.

With the market appearing to get off to a very flat start there wasn’t much reason to aggressively get into the hunt. Instead, as has been the recent pattern, I expected to wait to see if there was any kind of direction to be established. The downside to that waiting, however, was that premiums were already extremely low thanks to the non-existent volatility and are further driven to their depths by having lost one day of time value with the holiday passed.

As far as a constellation of factors goes, those forming this week aren’t very propitious.

The market is at all time highs,  premiums are at all time lows and we are being held hostage by events external to the market in far off lands.

Not my favorite way to get a week off to a start, but somehow it usually works out anyway.

Admittedly, I was surprised by having opened as many new positions as I did. They may represent the totality of this week’s new position activity, but at least it gives some framework for the rest of the week and perhaps next week as well.

After getting off to a reasonable start for the week I would be very happy to see it gain some strength moving toward the week’s end and the Employment Situation Report. Any opportunity to put some cover on existing positions would be a nice way to mix things up a bit while awaiting some clarity regarding what kind of liabilities await us on the various risk fronts, both inside and outside of the market.

Daily Market Update – September 2, 2014 (8:30 AM)

The big story this morning is that the traders are back now that Labor Day has come and gone.

It’s really not as if anyone went away for the summer, it’s just that they had other things to do besides trading all day long. Market volume was abysmally low during the climb higher and the only really elevation in trading activity came during the very brief decline earlier in the summer.

But this week people start coming back and volume should also be increasing, as if they had absolutely no ability to conduct business from the Hamptons.

Fortunately there was nothing on a geo-political front occurring during this past long holiday weekend to shake things up, because that could have been a messy way to get a shortened week off to a start. As a result the market looks as if it will get off to a really benign start and there’s very little scheduled news during the week to create expectations for market reactions in either direction..

Although there is the monthly Employment Situation Report on Friday and a number of Federal Reserve Governors will be speaking during the week, including the one most recent dissenting voter, there’s not likely to be much in the way of surprise coming from these scheduled events.

That, again, puts the spotlight on geo-political events and that could also take markets in either direction, although with the NATO meeting this week it’s hard to see how anything could move the markets higher as a result of those events, unless an acquiescent Putin is the end result. However, if the market has any ability to draw upon its recent past, it will realize that the appearance of any kind of acquiescence or agreeability is just a precursor to another bit of disagreeable action.

But what are you going to do? Wait until something happens? That’s actually not a bad idea, except to predicate everything on waiting is probably not a good way to go, but keeping something back for any kind of surprise isn’t necessarily a bad strategy.

Recycling money from assignments is an intermediate approach to dealing with uncertainty. It’s not really committing new money and it doesn’t have to include all of the recently freed up cash, although it easily could and even more.

As usual, when I have funds from assignments looking to be recycled I like to see the market get off to a weak start for the week, but lately that hasn’t been the case, as August had a four week winning streak, with each week getting off to a good start, so I’m not likely to recycle all of it this week.

However, with only a single position set to expire this week that means that there is little to be rolled over into next week, which itself has a mere three positions set to expire. That means I do need to populate this week’s list of income producing stocks and either create the possibility of freeing up cash for next week or at least creating additional income streams from the rollover of any new positions. As a result I’ll probably be looking for new positions with expirations coming this week rather than thinking about the use of expanded options or the monthly. While I would have liked to focus on dividend paying positions, there aren’t too many worthy ones this week that could be of any use.

With the market appearing to get off to a very flat start there’s not much reason to aggressively get into the hunt. Instead, as has been the recent pattern, I’ll wait to see if there is any kind of direction to be established. The downside to waiting, however, is that premiums are already extremely low thanks to the non-existent volatility and are further driven to their depths by having lost one day of time value with the holiday passed.

As far as a constellation of factors goes, those forming this week aren’t very propitious.

The market is at all time highs,  premiums are at all time lows and we are being held hostage by events external to the market in far off lands.

Not my favorite way to get a week off to a start, but somehow it usually works out anyway.

Daily Market Update – August 29, 2014 (8:30 AM)

The Week in Review will be posted by 6:00 PM and the Weekend Update will be posted by Monday 12 Noon.

Today’s possible outcomes or trades, include:

Assignments: C

Rollovers:  HAL, TMUS, WFM

Expirations: ANF (put), BBY (put), CHK,

The following positions were ex-dividend this week: HAL, HFC (special), HFC, K, LO, and SBGI

The following positions are ex-dividend next week COH (9/5), MOS (9/2)

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