Category: Daily Market Update

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

After all of the talk last week about how it was going to be the best performing in the previous 6 weeks, all it took was a single murmuring of some armed conflict to derail that locomotive. Never mind that the reports were never verified.

In a world where there’s not video tape of absolutely everything that goes on, there’s nothing to have confirmed that market rattling news. Nor were there any denials from the other side, though, so above all, it was confusion that reigned and the market hates confusion.

When you’re on edge anything can set you off.

Still, the week acquitted itself very nicely, despite the sell-off to end the week.

Without any real confirmation of everything just escalating into Armageddon, this week, if it ended after just 3 days of trading would have left last week in the dust, even if Friday was excluded from the results.

So far, the market is up 1.6% for the week and has only the challenge of some mis-spoken words coming from anyone’s lips that may be attending the Kansas City Federal Reserve’s meeting in Jackson Hole. If all goes as hoped and no one pulls the rug out then this stands to be the best week in 4 months and again within a hair’s breadth of more new records.

After Bernanke skpping last year’s meeting the eyes are once again focused there as Janet Yellen will be in attendance and is scheduled to deliver prepared remarks tomorrow. I don’t know how long they have been holding that meeting, but I found myself in Jackson Hole some 32 and 33 years ago, both times  in August and don’t remember any Federal Reserve types hanging out in the campground or the Cowboy Bar, but we may have just missed each other. There’s also a chance that I wasn‘t paying too much attention,  but it was at least a year later before I had any interest in anything at all.

With attention focusing on the annual event out west the market looks to continue some of the previous three days worth of gains.

What has made this week interesting is that all for but a few minutes after the FOMC statement the market hasn’t really made any attempt to reverse the gains or take any profits.

That’s in fairly sharp contrast to the way the market has very tentatively found its way getting to new high after new high. If you’re a bull you will take comfort in the fact that the climb came bit by bit and had some mild reversals along the way.

“Slow and steady wins the race,” is the basic tenet at play and it should inspire confidence.

Still, despite all of the reasons to remain long in the market, albeit with some cash on the sideline in the event there is an opportunity to
capitalize on any mis-steps, it’s clear that there are lots of nerves as there are lots of tender spots around the globe.

For now, none of that matters until it does.

With only a minimal number of new positions opened this week now comes the critical time to begin planning for the coming week which depends on some assignments to help rejuvenate cash and rollovers to put some discretionary cash into the pile.

While watching the market climb higher and assets growing along with the market, the only really tangible evidence of good times is action and the ability to do the rollovers and sell those options.

Hopefully the next two days will have its share of good and tangible news, but if not, there’s always a Cowboy Bar around the corner to drown those sorrows.

Daily Market Update – August 20, 2014 (Close)

After two strong days that found the market reveling in the absence of any significant geo-political news, it appeared that this morning is going to get off to a flat start, but that didn’t last too long.

A flat start wouldn’t have been unusual on the morning of a scheduled FOMC statement release, especially one that’s expected to continue a year long string of fairly benign and inconsequential restatements of policy.

Where there may be some excitement is in Jackson Hole, where on Friday Federal Reserve Chairman Janet Yellen will be making some remarks at the annual retreat of the Kansas City Federal Reserve.

While she probably won’t say anything intended to excite anyone or catch anyone off guard, it’s usually a case of interpretation or sometimes an off the cuff remark or less than perfectly crafted answer to a question.

Sometimes, however, insights into a thought process can take people off guard or start speculation running wild as to the true beliefs that may underlie the public demonstration of idea s and beliefs.

While Janet Yellen is considered to be “dovish,” the new Vice-Chairman, the influential and highly regarded Stanley Fischer is considered to be a “hawk.” However, after some surprising dovish comments by Fischer in a recent speech in Sweden it should probably come as no surprise that  regardless of how any of these economists may be pigeon-holed they will still act based upon data, despite some potential for philosophical bias. However, our expectations have little flexibility for anything that deviates from those expectations.

Coming on Friday, those remarks may have some impact on a day that we can also reasonably expect something to happen on the Russia – Ukraine front. Either of those could move the markets which by now had started the morning within about 1% of their highs and finished the day brushing up right against those highs.

That’s an amazing turnaround from barely a week ago when suddenly everyone had discovered the concept of volatility and were all agog about the 30% and higher increase in volatility in the course of just a few days.

Looking at volatility now, which generally moves inversely with the market, you wonder where all of the noise has gone and why no one is pointing to the 30+% reduction in volatility in the past few days.

Over the next few days as we digest the FOMC and await the Jackson Hole meeting there isn’t much in the way of expectation for any significant activity. The first few days of this week have already seen the S&P 500 advance 1.3% on top of last week’s 1.2%. Add another 0.3% today and now we’re on track for the best week in 4 months. Up until last Friday’s sell-off that week was headed toward being the best in the previous 6 weeks, but ended up just missing that distinction.

But we’ll see.

Thus far, despite the strong advance higher the existing portfolio positions are still keeping pace, which gets to be very challenging once that advance gets to or exceeds the 1% level. That was certainly the case last week when existing positions badly trailed the index .

Any opportunity to generate additional portfolio income would help to keep pace with the market, but the low volatility is making it hard to justify the sale of calls on some positions, as the premiums are just so low that the offer such little income or protection in exchange for ceding some advance in share value.

As long as the market is moving higher and taking most positions along with it there’s little reason to accept a pittance and receive little in return, but as we’ve seen time and time again, all of the environment that you see around you can change in an instant.

All it takes is a mis-placed word here or there in a prepared text or a casual comment. Or maybe just another rumor of conflict or peace coming out of some corner of the world that most of us have never considered, but has suddenly set the world back into the glory days of  the cold war that we thought we had won.

In the meantime there’s no reason to not enjoy the move higher, although you might enjoy things even more if our collective expectations come under attack.

Daily Market Update – August 20, 2014 (8:00 AM)

After two strong days that found the market reveling in the absence of any significant geo-political news, it appears that this morning is going to get off to a flat start.

That itself isn’t unusual on the morning of a scheduled FOMC statement release, especially one that’s expected to continue a year long string of fairly benign and inconsequential restatements of policy.

Where there may be some excitement is in Jackson Hole, where on Friday Federal Reserve Chairman Janet Yellen will be making some remarks at the annual retreat of the Kansas City Federal Reserve.

While she probably won’t say anything intended to excite anyone or catch anyone off guard, it’s usually a case of interpretation or sometimes an off the cuff remark or less than perfectly crafted answer to a question.

Sometimes, however, insights into a thought process can take people off guard or start speculation running wild as to the true beliefs that may underlie the public demonstration of idea s and beliefs.

While Janet Yellen is considered to be “dovish,” the new Vice-Chairman, the influential and highly regarded Stanley Fischer is considered to be a “hawk.” However, after some surprising dovish comments by Fischer in a recent speech in Sweden it should probably come as no surprise that  regardless of how any of these economists may be pigeon-holed they will still act based upon data, despite some potential for philosophical bias. However, our expectations have little flexibility for anything that deviates from those expectations.

Coming on Friday, those remarks may have some impact on a day that we can also reasonably expect something to happen on the Russia – Ukraine front. Either of those could move the markets which by now are within about 1% of their highs.

That’s an amazing turnaround from barely a week ago when suddenly everyone had discovered the concept of volatility and were all agog about the 30% and higher increase in volatility in the course of just a few days.

Looking at volatility now, which generally moves inversely with the market, you wonder where all of the noise has gone and why no one is pointing to the 30% reduction in volatility in the past few days.

Over the next few days as we await both the FOMC and the Jackson Hole meeting there isn’t much in the way of expectation for any significant activity. The first few days of this week have already seen the S&P 500 advance 1.3% on top of last week’s 1.2%. Up until last Friday’s sell-off that week was headed to wrd being the best in the previous 6 weeks, but ended up just missing that distinction. At the moment, as we get ready to begin the third day of trading this week, we are already poised to proclaim this as being the best performance in the past 7 weeks.

But we’ll see.

Thus far, despite the strong advance higher the existing portfolio positions are still keeping pace, which gets to be very challenging once that advance gets to or exceeds the 1% level. That was certainly the case last week when existing positions badly trailed the index .

Any opportunity to generate additional portfolio income would help to keep pace with the market, but the low volatility is making it hard to justify the sale of calls on some positions, as the premiums are just so low that the offer such little income or protection in exchange for ceding some advance in share value.

As long as the market is moving higher and taking most positions along with it there’s little reason to accept a pittance and receive little in return, but as we’ve seen time and time again, all of the environment that you see around you can change in an instant.

All it takes is a mis-placed word here or there in a prepared text or a casual comment. Or maybe just another rumor of conflict or peace coming out of some corner of the world that most of us have never considered, but has suddenly set the world back into the glory days of  the cold war that we thought we had won.

In the meantime there’s no reason to not enjoy the move higher, although you might enjoy things even more if our collective expectations come under attack.

Daily Market Update – August 19, 2014 (Close)

Well, yesterday was a surprise, but it does seem to go along with the recent pattern that the market basically hates getting news and loves existing in either ignorance or denial.

The reaction last Friday to news or at least what was passed off as news contrasted sharply to the reaction yesterday to nothing.

It’s hard to understand how the market could be so fragile as to flee on any bad geo-political news, but then to flock back when there is no news. It doesn’t even take good news, it just takes no news.

That’s especially confusing when you realize that the story is far from being done and any day, especially any Friday the way the pattern seems to be going, can bring a new series of investor rattling bits of news.

While every one still believes that the market looks out into the future by a 6 month period, that’s increasingly hard to accept, given the way daily events or non-events rock the markets and can change the entire tone in an instant.

After seeing yesterday’s gain it’s hard to not want to be part of the revelry and today looks like it may add to those gains.

The one bit of good news coming from the market before the opening was Home Depot.

It reported earnings the way any company would like to see itself report. It beat on every single metric and it guided even stronger for the next quarter.

If looking for good economic news, or at least any news that doesn’t have the word “geo-political” attached to it, the news from Home Depot  seems to be just the right kind. Of course, it will be put into better context tomorrow when Lowes reports. There was some contagion, though, as Lowes went up sharply in advance of their release.

But at least then we will know whether Home Depot’s good fortunes have come at the expense of its competition or whether the pie just got larger.

Ultimately, good news from both of those companies has to be good news for the economy as a whole. While there may be various theories about what strength at Home Depot and Lowes means for the home builders, which are often thought of as the real measures of the economy,those theories are just that and not necessarily having much in the way of validity.

Too often mutual exclusivity is believed to be a rule in so many aspects in life. Home Depot can thrive even as home builders do, as well. So I think that if the pie is expanding that is more likely to be good news for all.

While the market’s early morning gain wasn’t a guarantee to extend yesterday’s rally I planned to still practice the “prove it to me” approach. As it would turn out today was not only an extension but was able to stand tall on its own. I was still content to mostly watch and wasn’t expecting to make any new purchases, but was taken in by Carnival going ex-dividend tomorrow.

Where there was no content was in seeing just how ridiculously low premiums are now as volatility has plunged. While a number of positions climbed higher today, just as they did yesterday, the premiums are sop low that they offer very little reward in exchange for the risk taken of not sharing in any further upside. That’s especially true of forward week premiums that are reflecting little anticipation of increasing volatility at the moment..

I hate that.

On a very positive note, after last week’s inability to keep up with the market, even with yesterday’s 1% gain existing positions kept pace. However, the more those market gains continue the harder it will be to keep up, as a number of positions are currently now in the money and not sharing in the good times.

Sometimes the tide is good, but I’d much rather swim free and see the market tread water for  a bit.

Daily Market Update – August 19, 2014 (9:15 AM)

Well, yesterday was a surprise, but it does seem to go along with the recent pattern that the market basically hates getting news and loves existing in either ignorance or denial.

The reaction last Friday to news or at least what was passed off as news contrasted sharply to the reaction yesterday to nothing.

It’s hard to understand how the market could be so fragile as to flee on any bad geo-political news, but then to flock back when there is no news. It doesn’t even take good news, it just takes no news.

That’s especially confusing when you realize that the story is far from being done and any day, especially any Friday the way the pattern seems to be going, can bring a new series of investor rattling bits of news.

While every one still believes that the market looks out into the future by a 6 month period, that’s increasingly hard to accept, given the way daily events or non-events rock the markets and can change the entire tone in an instant.

After seeing yesterday’s gain it’s hard to not want to be part of the revelry and today looks like it may add to those gains.

The one bit of good news coming from the market before the opening was Home Depot.

It reported earnings the way any company would like to see itself report. It beat on every single metric and it guided even stronger for the next quarter.

If looking for good economic news, or at least any news that doesn’t have the word “geo-political” attached to it, the news from Home Depot  seems to be just the right kind. Of course, it will be put into better context tomorrow when Lowes reports. Then, at least will know whether Home Depot’s good fortunes have come at the expense of its competition or whether the pie just got larger.

Ultimately, good news from both of those companies has to be good news for the economy as a whole. While there may be various theories about what strength at Home Depot and Lowes means for the home builders, which are often thought of as the real measures of the economy,those theories are just that and not necessarily having much in the way of validity.

Too often mutual exclusivity is believed to be a rule in so many aspects in life. Home Depot can thrive even as home builders do, as well. SO I think that if the pie is expanding that is more likely to be good news for all.

While the market’s early morning gain may extend yesterday’s rally I plan to still practice the “prove it to me” approach and may again be content with little new purchase activity, but not very content if unable to find opportunity to sell new calls on existing positions.

On a very positive note, after last week’s inability to keep up with the market, even with yesterday 1% gain existing positions kept pace.

Sometimes the tide is good, but I’d much rather swim free and see the market tread water for  a bit.

Daily Market Update – August 18, 2014 (Close)

The world was reasonably quiet over the weekend despite some suggestion that events might begin to ratchet higher in the Ukraine – Russia conflict.

While there’s plenty of reason to believe that the quiet could easily dissolve, that’s tomorrow’s problem and not one for today, at least as far as the S&P futures seem to be concerned.

There is an FOMC statement on the calendar this week, but as many parts of the country return to school next week, this week is an understandably extraordinarily quiet one, otherwise.

In fact, there is absolutely nothing on the calendar for Friday, which is extremely unusual other than on a holiday. But even federal bureaucrats and traders have families. Or their spending the weekend in Jackson Hole.

With it becoming increasingly clear that the market is very nervous and very willing to give up some gains I’m not terribly anxious to add too many new positions this week. What complicates the decision, though, is that it’s also equally clear that the market really does want to go higher. Every attempt at a pullback is shallow and brief.

Today’s eventual climb higher, a nearly 1% climb in the DJIA, brings the market within easy striking range of its all time high.

And remember all of that talk about how volatility had climbed 30% in a week? Well, it’s back to its lows.

The fact that each pullback has been met with the market setting a series of new high shows just how emboldened investors and traders have become, gaining confidence with each battle.

Although by now you would think that we would all be getting use to this Teflon kind of market, it still remains odd and uncharted kind of territory, despite all of the experience over the past two years. Somewhere, maybe deep in the recesses of our awareness is the thought that there might be unforeseen land mines out there.

That may be the case, but I’m less concerned about the unseen than I am about the disregarded.

Last week did see a few assignments, but fewer than I would have expected, thanks to the sudden decline when word was released of an attack on some kind of Russian convoy. nearly 60 hours later, in this age of 24/7 news and video documentation at everyone’s fingertips, it seems odd that there hasn’t been much in the way of confirmation of that attack.

So no one really knows what may be the next logical step, neither in response, nor as part of a natural follow-up to the original action, since the very existence of that original action is becoming more and more suspect.

None of this really inspires too much confidence, but as opposed to wanting to see the week get off to a slow or weak start, as I usually do, I would be happy to see some strength and the pos
sibility of being pulled along for the ride, especially since I missed it last week.

Despite having had a few weeks of really strong out-performance in prior weeks, I tend to focus on things the way most people do. I tend to ask “what have you done for me, lately.”

With last week being one of relative under-performance that’s where my focus begins this week, so I was hoping for some strength to begin the week and some opportunity to simply sell calls on positions now laying fallow.

That didn’t really happen, as premiums are generally very low at the moment and there may be reason to wait for some capital gains from the shares as the amount of income or price protection is relatively low and makes it hard to justify selling away the rights for some of those capital gains.

What would have been especially nice was some indication that the early strength in the market had some staying power. The best indication of all is that it did.

In the past few months these kind of early indications had a way of quickly running their course, so there wasn’t too much reason to chase anything until there’s a sense that it was for real, this time around.

And it was.

But even then, there wasn’t much reason to chase. Despite making a couple of purchases today, ultimately, I expect this week to be relatively slow as it comes to any more of those new positions being opened.

The cash generation has to come from somewhere, though.

Part of it will come from losers such as Target and Transocean, which both go ex-dividend this week and have reasonably generous dividends, but dividends are really illusory, as far as net assets go. It is cash, but it comes at a tangible price.

With a number of positions already set for expiration this week there will hopefully be some combination of rollover and assignment opportunities to create real income and re-supply cash reserves, respectively, while waiting for the right opportunities to spend cash reserves down.

At the moment that aspect of things looks very good, but as last week demonstrated it’s probably not a good idea to take too much for granted.

Daily Market Update – August 18, 2014 (8:00 AM)

The world was reasonably quiet over the weekend despite some suggestion that events might begin to ratchet higher in the Ukraine – Russia conflict.

While there’s plenty of reason to believe that the quiet could easily dissolve, that’s tomorrow’s problem and not one for today, at least as far as the S&P futures seem to be concerned.

There is an FOMC statement on the calendar this week, but as many parts of the country return to school next week, this week is an understandably extraordinarily quiet one, otherwise.

In fact, there is absolutely nothing on the calendar for Friday, which is extremely unusual other than on a holiday. But even federal bureaucrats and traders have families.

With it becoming increasingly clear that the market is very nervous and very willing to give up some gains I’m not terribly anxious to add too many new positions this week. What complicates the decision, though, is that it’s also equally clear that the market really does want to go higher. Every attempt at a pullback is shallow and brief.

The fact that each pullback has been met with the market setting a series of new high shows just how emboldened investors and traders have become, gaining confidence with each battle.

Although by now you would think that we would all be getting use to this teflon kind of market, it still remains odd and uncharted kind of territory, despite all of the experience over the past two years. Somewhere, maybe deep in the recesses of our awareness is the thought that there might be unforeseen land mines out there.

That may be the case, but I’m less concerned about the unseen than I am about the disregarded.

Last week did see a few assignments, but fewer than I would have expected, thanks to the sudden decline when word was released of an attack on some kind of Russian convoy. nearly 60 hours later, in this age of 24/7 news and video documentation at everyone’s fingertips, it seems odd that there hasn’t been much in the way of confirmation of that attack.

So no one really knows what may be the next logical step, neither in response, nor as part of a natural follow-up to the original action, since the very existence of that original action is becoming more and more suspect.

None of this really inspires too much confidence, but as opposed to wanting to see the week get off to a slow or weak start, as I usually do, I would be happy to see some strength and the possibility of being pulled along for the ride, especially since I missed it last week.

Despite having had a few weeks of really strong out-performance in prior weeks, I tend to focus on things the way most people do. I tend to ask “what have you done for me, lately.”

With last
week being one of relative under-performance that’s where my focus begins this week, so I would like to see some strength to begin the week and some opportunity to simply sell calls on positions now laying fallow.

What would be especially nice is some indication that the early strength in the market has some staying power.

In the past few months these kind of early indications had a way of quickly running their course, so there’s not too much reason to chase anything until there’s a sense that it is for real, this time.

Ultimately, I expect this week to be relatively slow as it comes to new positions being opened.

The cash generation has to come from somewhere, though.

Part of it will come from losers such as Target and Transocean, which both go ex-dividend this week and have reasonably generous dividends, but dividends are really illusory, as far as net assets go. It is cash, but it comes at a tangible price.

With a number of positions already set for expiration this week there will hopefully be some combination of rollover and assignment opportunities to create real income and re-supply cash reserves, respectively, while waiting for the right opportunities to spend cash reserves down.

MONDAY:  A quiet weekend may get the market off to a good start for the week, with not much more than an FOMC statement to contend with for the rest of the week.

TUESDAY:     Maybe Home Depot should show everyone else how earnings are supposed to be done, beating on every metric. That will help the DJIA more than the S&P 500 but a healthy Home Depot is generally good news all around, unless it comes at the expense of its competition. We’ll know that tomorrow

WEDNESDAY:  Market looks to start of trading quietly today ahead of what should be a non-consequential FOMC statement release this afternoon.

THURSDAY:    With the market already up 1.6% for the week it couldn’t be blamed for taking a break today before tomorrow’s festivities from Jackson Hole. Still with money fleeing precious metals this morning and interest rates so low, where else are you going to go? At least for today.

FRIDAY:  All eyes on Jackson Hole and it’s Friday, so no surprises if any surprise comes out of the Ukraine – Russia conflict







Daily Market Update – August 15, 2014 (9:00 AM)

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

Today’s possible outcomes include:

Assignments:  CY

Rollovers: BBY, JPM, MET, TMUS, WFM

Expirations: BMY, CHK, EBAY, FAST, HFC

As in some previous weeks some rollovers may be deferred due to cost and instead waiting for any opportunity in the coming week

Trades, if any, will be attempted to be made before 3:30 PM EDT.With time running out to make this week more busy and pull a rabbit out of a hat as was done in each of the past three weeks, Wal-Mart didn’t help things, at all.