Category: Daily Market Update

Daily Market Update – August 14, 2014 (Close)

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.

As it turned out, it didn’t really hurt either, but it definately didn’t help to push things along even further for a good cause.

At the level of Macys, whatever level of the shopping demographic that represents, the activity hasn’t been great and it got punished yesterday, even as its CEO, Terry Lundgren, is still referred to as the best retailer in American.

At the level of Wal-Mart things weren’t much better and the bottom line was only aided by reduced costs and not because of increased revenues. Disturbingly, they don’t envision any improvement in the coming quarter and they have now had a string of disappointing quarters.

So while we wait for other retailers to report, perhaps to see if those discretionary dollars have shifted elsewhere, there isn’t much else to do or much else to move this market, other than overseas events.

As what can only be considered a contra-indicator, as past assurances have been less than reliable predictors of future events, came word this morning that Russia is seeking to pursue its “humanitarian” agenda in Ukraine and was hoping to avoid bloodshed.

That can’t be good. In fact, if Google had a “Putin to English” translation tool, it may have interpreted his comment as saying “the only way to minimize bloodshed is through bloodshed,” which does make sense, although the idea is fairly chilling and if it becomes a reality would also send a chill into the market.

On top of that comes word that Europe is really slowing down. Not only did we learn last week that Italy is in recession, but this morning comes news of Germany’s woes, as its GDP shrunk in the past quarter and that’s before considering the impact of any reduced trading activity with Russia.

So as far as my hopes go for today to be the day that the rabbit appears and pops out of that hat, I wasn’t counting on it. I would have taken it, but I wasn’t counting on it.

After a few weeks of really nicely out-performing the S&P 500 with existing positions, this week, so far, isn’t keeping up, although that may change if some of the rollover income can be added to the mix, but the impetus for the move higher isn’t looking as if its going to be there.

Certainly there’s no news to propel it forward, but at some point I’m going to learn to never be surprised when the unexpected is what happens, since that so often seems to be the case.

At the moment there are some positions that may be assignment candidates or perhaps rollover candidates, as long as the market doesn’t throw a tantrum in the next 6.5 trading hours.

For now, that’s the focus as I let the dog search for that rabbit that we both want him to catch before it doesn’t matter any more

Daily Market Update – August 14, 2014 (9:30 AM)

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.

At the level of Macys, whatever level of the shopping demographic that represents, the activity hasn’t been great and it got punished yesterday, even as its CEO, Terry Lundgren, is still referred to as the best retailer in American.

At the level of Wal-Mart things weren’t much better and the bottom line was only aided by reduced costs and not because of increased revenues. Disturbingly, they don’t envision any improvement in the coming quarter.

So while we wait for other retailers to report, perhaps to see if those discretionary dollars have shifted elsewhere, there isn’t much else to do or much else to move this market, other than overseas events.

As what can only be considered a contra-indicator, as past assurances have been less than reliable predictors of future events, came word this morning that Russia is seeking to pursue its “humanitarian” agenda in Ukraine and was hoping to avoid bloodshed.

That can’t be good.

On top of that comes word that Europe is really slowing down. Not only did we learn last week that Italy is in recession, but this morning comes news of Germany’s woes, as its GDP shrunk in the past quarter and that’s before considering the impact of any reduced trading activity with Russia.

So as far as my hopes go for today to be the day that the rabbit appears and pops out of that hat, I’m not counting on it.

After a few weeks of really nicely out-performing the S&P 500 with existing positions, this week, so far, isn’t keeping up, although that may change if some of the rollover income can be added to the mix, but the impetus for the move higher isn’t looking as if its going to be there.

Certainly there’s no news to propel it forward, but at some point I’m going to learn to never be surprised when the unexpected is what happens, since that so often seems to be the case.

At the moment there are some positions that may be assignment candidates or perhaps rollover candidates, as long as the market doesn’t throw a tantrum in the next 13 trading hours.

For now, that’s the focus as I let the dog search for that rabbit that we both want him to catch.

Daily Market Update – August 13, 2014 (Close)

This morning was just another day in a week that has no business having any surprises, as there is essentially no meaningful economic news to be released.  If the world stays relatively quiet for the next couple of days there’s then really no reason to see much of anything happen in the market.

So far, that has been the theme and this morning doesn’t appear to be much different, but for no reason, certainly not spurred on by robust earnings, the market hovered near a 100 point gain for much of the day.

With some large retailers reporting earnings this week, starting with Macys this morning, it will be interesting to see whether or not the consumer is returning to their old ways of discretionary spending.

The expectation would be that as employment numbers move higher and that as people start erasing some debt, you would start seeing a return to the retailer, although I’m still having a really hard time wrapping my mind around Citibank’s belief that the retailer most likely to benefit from an improving back to school sale season would be Williams Sonoma.

Most of the kids I know still have lots of pink sea salt slab left over from last year, so I don’t see them flocking to get more.

On the more mundane retail side the initial news from Macys was discouraging if the thesis was that people were in a better position to spend more of their newly earned salaries and would actually spend that money..

The way the usual stream of events works is that increased employment leads to increased spending which leads to both increased pricing and increased production to take advantage of that increased pricing. In turn that leads to even more need for workers, which leads to wage inflation, which leads to increasing interest rates.

For anyone watching the game, it is the anticipation and fear of increased interest rates which is thought to welcome the end to the market’s climb higher.

So in the  bad news is good news kind of world that we’ve lived in for much of the past two years, any measure of lower revenues or decreased growth rates at retailers would be seen as a positive sign, insofar as it would be seen as delaying any increase in interest rates.

Tell that to Macys this morning.

As the morning does get started I’m hopeful that maybe the pattern of the last few weeks will repeat itself, although despite today’s gains there was little ability to take advantage of the move higher.

During those previous weeks there wasn’t much action until the latter part of the week, as the markets tended to show some positive turnaround and offered rollover opportunities to catch up for all of the income not generated earlier in the week due to the absence of many new position purchases.

I would never tire of the repetitive nature of that kind of surprise, but it is difficult to see the catalysts fo
r it again this week, but I do suppose that’s the essential component of any surprise.

At the mid-week point I thought that I was done with any new purchases for the week, but with nothing else really going on, it was hard to resist another pullback in eBay, marking the 22nd purchase of shares in about 20 months,

That new purchase notwithstanding, I would very much like to see some assignments to help start the new monthly option cycle off to a good start. If not that, then at least some positive movement to allow positions to be rolled over.

The early morning indication did have us moving in the right direction, but as most everyone should have learned by now, there’s usually no good reason to get overly confident until it’s all over for the week.

Daily Market Update – August 13, 2014 (9:00 AM)

This morning is just another day in a week that has no business having any surprises, as there is essentially no meaningful economic news to be released.  If the world stays relatively quiet for the next couple of days there’s then really no reason to see much of anything happen in the market.

So far, that has been the theme and this morning doesn’t appear to be much different.

With some large retailers reporting earnings this week, starting with Macys this morning, it will be interesting to see whether or not the consumer is returning to their old ways of discretionary spending.

The expectation would be that as employment numbers move higher and that as people start erasing some debt, you would start seeing a return to the retailer, although I’m still having a really hard time wrapping my mind around Citibank’s belief that the retailer most likely to benefit from an improving back to school sale season would be Williams Sonoma.

Most of the kids I know still have lots of pink sea salt slab left over from last year, so I don’t see them flocking to get more.

On the more mundane retail side the initial news from Macys was discouraging if the thesis was that people were in a better position to spend more of their newly earned salaries and would actually spend that money..

The way the usual stream of events works is that increased employment leads to increased spending which leads to both increased pricing and increased production to take advantage of that increased pricing. In turn that leads to even more need for workers, which leads to wage inflation, which leads to increasing interest rates.

For anyone watching the game, it is the anticipation and fear of increased interest rates which is thought to welcome the end to the market’s climb higher.

So in the  bad news is good news kind of world that we’ve lived in for much of the past two years, any measure of lower revenues or decreased growth rates at retailers would be seen as a positive sign, insofar as it would be seen as delaying any increase in interest rates.

Tell that to Macys this morning.

As the morning does get started I’m hopeful that maybe the pattern of the last few weeks will repeat itself.

During those weeks there wasn’t much action until the latter part of the week, as the markets tended to show some positive turnaround and offered rollover opportunities to catch up for all of the income not generated earlier in the week due to the absence of many new position purchases.

I would never tire of the repetitive nature of that kind of surprise, but it is difficult to see the catalysts for it again this week, but I do suppose that’s the essential component of any surprise.

At the mid-week point I think that I’m done with any new purchases for the week and would very much like to see some assignments to help start the new monthly option cycle off to a good start. If not that, then at least some positive movement to allow positions to be rolled over.

The early morning indication does have us moving in the right direction, but as most everyone should have learned by now, there’s usually no good reason to get overly confident until it’s all over for the week.

Daily Market Update – August 12, 2014 (Close)

While yesterday’s start to the week  wasn’t exactly “Merger Monday” the news from Kinder Morgan did seem to offer some kind of lift to the market early in its trading.

That lift faded out as the day’s trading came to its close, but still the day represented a further gain, albeit small, from Friday’s really unexpected surge. The complete lack of any other kind of news, economic or international, coupled with a listless volume day, made it a listless day in itself.

There didn’t appear to be the same kind of mild stimulus this morning and there was little on the expected or unexpected news front to have much of an impact on today’s trading.

So I was surprised to have bought as much as I did, especially given the competing and tugging considerations that were around to start the day.

With the monthly cycle coming to its end this week and having 12 positions set to expire, I would have liked to give some greater consideration to using expanded weekly contracts for any new positions that may yet be opened this week, although I was expecting that it would be a slow week for new positions.

As I looked at some of the positions with contracts expiring this week I’m likely to continue some hesitancy in rollovers for some of them, as the cost of the rollover can sometimes just be too high relative to the reward. That’s particularly true for some of the positions that trade only monthly contracts or that have their premiums expressed in $0.05 increments, rather than in pennies, such as Fastenal and Holly Frontier, respectively.

A notable exception was the very late in the afternoon rollover of today’s purchase of DuPont, which goes ex-dividend tomorrow. Several times in the final hour I thought that the rollover wouldn’t be necessary to get that dividend, but the share price kept bouncing back and finally I couldn’t wait any longer, as I really don’t like sending out trading alerts in the final 30 minutes of trading.

But getting back to the hesitancy in making those rollover trades, philosophically, that goes against my desire to not take anything for granted and try to capitalize on the opportunity when it appears, because you never know if that opportunity will be there again when trading resumes on Monday morning.

Again, that’s a casualty of low volatility, where the forward week premium is relatively low as compared to the expiring premium, which is just another way of saying that the rollover trade may just be too expensive.

While I may have still been hopeful of being able to sell some new covers today, generating some income for the week increasingly looked as if it would require the need to be more proactive and to look for the new position opportunities rather than waiting for some price spikes and the chance to create cover.

As always, there are those kind of competing needs, signals and concerns. On the one hand there is the expectation of not making too many of those trades contrasted with the realization that it is precisely those trades that may be necessary to reach weekly financial objectives.

As with most long term approaches to any problem, there’s usually good reason to accept compromises and have flexibility in the approaches taken to reach goals.

Daily Market Update – August 12, 2014 (9:00 AM)

While yesterday’s start to the week  wasn’t exactly “Merger Monday” the news from Kinder Morgan did seem to offer some kind of lift to the market early in its trading.

That lift faded out as the day’s trading came to its close, but still the day represented a further gain, albeit small, from Friday’s really unexpected surge. The complete lack of any other kind of news, economic or international, coupled with a listless volume day, made it a listless day in itself.

There doesn’t appear to be the same kind of mild stimulus this morning and there is little on the expected or unexpected news front to have much of an impact on today’s trading.

With the monthly cycle coming to its end this week and having 12 positions set to expire, I’d like to give some greater consideration to using expanded weekly contracts for any new positions that may yet be opened this week, although I’m expecting that it will be a slow week for new positions.

As I look at some of the positions with contracts expiring this week I’m also likely to continue some hesitancy in rollovers for some of them, as the cost of the rollover can sometimes just be too high relative to the reward. That’s particularly true for some of the positions that trade only monthly contracts or that have their premiums expressed in $0.05 increments, rather than in pennies, such as Fastenal and Holly Frontier, respectively.

Philosophically, that goes against my desire to not take anything for granted and try to capitalize on the opportunity when it appears, because you never know if that opportunity will be there again when trading resumes on Monday morning.

Again, that’s a casualty of low volatility, where the forward week premium is relatively low as compared to the expiring premium, which is just another way of saying that the rollover trade may just be too expensive.

While I may still be hopeful of being able to sell some new covers today, generating some income for the week may require the need to be more proactive and to look for the new position opportunities rather than waiting for some price spikes and the chance to create cover.

As always, there are those kind of competing needs, signals and concerns. On the one hand there is the expectation of not making too many of those trades contrasted with the realization that it is precisely those trades that may be necessary to reach weekly financial objectives.

As with most long term approaches to any problem, there;s usually good reason to accept compromises and have flexibility in the approaches taken to reach goals.

So while the concerns are there about spending down cash reserves if the market appears to be going nowhere soon, the only method for creating an income stream is to use the reserve. If the market subsequently moves in a positive way the income stream can then be supplemented with rollovers and possibly even new call sales, while the reserve itself may be rejuvenated with assignments.

And if not?

There’s always next week, or maybe even tomorrow.

Daily Market Update – August 11, 2014 (Close)

As summer is beginning to wind down there are fewer scheduled economic or potentially market moving events to get our attention. This is another of those very quiet weeks and, so far, at least, it doesn’t appear as if there’s going to be anything substantively new on the geo-political front to begin the week.

Following Friday’s surprisingly strong close there appeared to be some additional strength left to get us started as nothing really occurred over the weekend to dampen whatever it was that stoked that sudden enthusiasm.

With some assignments last week and  some additional cash to put to work than I might have expected going into last Friday’s trading, I thought that there may be some bargains still to be had, despite Friday’s climb. However, the bargains weren’t to be as a number of stocks saw a gap higher to start the session and never really gave up those gains even as the broader market couldn’t hold on to the earlier jump higher.

This is another week where I wouldn’t be adverse to opening new positions but as good as Friday’s trading session was, I am still not overly enthusiastic. However, as is often the case with these bouncing kind of markets, I am definitely more enthusiastic about the bottom line, as those weeks tend to be good in a relative sense and, when also good in an absolute sense, make you hope for more of the same.

Today was another example of that sort of thing, as watching turned out to be profitable, on paper at least.

Last week didn’t really have any unusually strong performers, yet somehow there was generally some broad strength among existing positions that allowed their aggregate to out-perform the market for the week.

However, to demonstrate just how topsy turvy the world of covered options can be the margin of that out-performance decreased from Thursday to Friday, as the caps imposed by strike levels make it difficult to keep up with 180 point gains.

Nonetheless, both relative and absolute constituencies could point to something good, but not readily explainable.

Still, with far too many positions sitting without cover, it continues to be my preference to change that situation, but that has been a difficult task, especially as the volatility continues to remain low, despite some of the recent climb that had everyone marveling.

Today, for all of its positives, didn’t really do anything to remedy that situation, as volatility typically heads lower as markets head higher.

That climb last week, however big in relative terms, was still tiny in absolute terms and didn’t do very much to noticeably drive up option premiums. Friday’s surge higher only helped to then knock those premiums down another peg after dashing some hopes for their climbs.

Seeing the morning’s indication of a moderately higher opening was encouraging, insofar as perhaps getting closer to
finding some new cover for existing positions, but it didn’t necessarily add to the desire to spend or recycle money in the cash reserve. Of particular interest this week, though, may be some of those positions that were hit very hard last week, such as Walgreen and Time Warner, that have begun to show some stability and did so even prior to the Friday gain that took most everything along for the ride. Unfortunately, they didn’t take a breather today and were among some of the positions gapping higher.

My anticipation is to not be very active with new positions this week, although there are more that have initial appeal to begin the week than in a number of weeks past.

The issue at hand though is to decide which market of last week is where the prevailing wind will blow.

The markets of last Monday and Friday or the market of the days in-between?

Very different markets and I may have gotten sucked in by last Monday’s trading, particularly coming off of a week with enough assignments to fuel spending.

This week, especially for positions not really beaten down, or not offering a dividend, I may be a little more circumspect and a little less generous with the outflow of cash.

But for what that concern about outflow is worth, the situation is fluid.

Daily Market Update – August 11, 2014 (8:00 AM)

As summer is beginning to wind down there are fewer scheduled economic or potentially market moving events to get our attention. This is another of those very quiet weeks and, so far, at least, it doesn’t appear as if there’s going to be anything substantively new on the geo-political front to begin the week.

Following Friday’s surprisingly strong close there appears to be some additional strength left to get us started as nothing really occurred over the weekend to dampen whatever it was that stoked that sudden enthusiasm.

With some assignments last week and  some additional cash to put to work than I might have expected going into last Friday’s trading, there may be some bargains still to be had, despite Friday’s climb.

This is another week where I won’t be adverse to opening new positions but as good as Friday’s trading session was, am still not overly enthusiastic. However, as is often the case with these bouncing kind of markets, I am definitely more enthusiastic about the bottom line, as those weeks tend to be good in a relative sense and, when also good in an absolute sense, make you hope for more of the same.

Last week didn’t really have any unusually strong performers, yet somehow there was generally some broad strength among existing positions that allowed their aggregate to out-perform the market for the week.

However, to demonstrate just how topsy turvy the world of covered options can be the margin of that out-performance decreased from Thursday to Friday, as the caps imposed by strike levels make it difficult to keep up with 180 point gains.

Nonetheless, bioh relative and absolute constituencies could point to something good, but not readily explainable.

Still, with far too many positions sitting without cover, it continues to be my preference to change that situation, but that has been a difficult task, especially as the volatility continues to remain low, despite some of the recent climb that had everyone marveling.

That climb, however big in relative terms, was still tiny in absolute terms and didn’t do very much to noticeably drive up option premiums. Friday’s surge higher only helped to then knock those premiums down another peg after dashing some hopes for their climbs.

Seeing the morning’s indication of a moderately higher opening is encouraging, insofar as perhaps getting closer to finding some new cover for existing positions, but it doesn’t necessarily add to the desire to spend or recycle money in the cash reserve. Of particular interest this week, though, may be some of those positions that were hit very hard last week, such as Walgreen and Time Warner, that have begun to show some stability and did so even prior to the Friday gain that took most everything along for the ride.

My anticipation is to not be very active with new positions this week, although there are more th
at have initial appeal to begin the week than in a number of weeks past.

The issue at hand though is to decide which market of last week is where the prevailing wind will blow.

The markets of last Monday and Friday or the market of the days in-between?

Very different markets and I may have gotten sucked in by last Monday’s trading, particularly coming off of a week with enough assignments to fuel spending.

This week, especially for positions not really beaten down, or not offering a dividend, I may be a little more circumspect and a little less generous with the outflow of cash.

But for what that concern about outflow is worth, the situation is fluid.

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

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

Today’s possible outcomes include:

Assignments: EBAY (52.50), GPS ($40)

Rollovers: EBAY ($53.50), GPS ($42)

Expirations:  C, CHK, LVS, PFE, WFM

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

Daily Market Update – August 7, 2014 (Close)

Following yesterday’s flat trading and flat finish, the morning was awaiting word regarding the ECB’s refinance rate.

With that remaining unchanged, which came as no surprise, the pre-market just continued along the same flat line as it then awaited some word from the ECB president.

In the past he has had a way of moving markets, exactly the same way that the Chairman of the Federal Reserve can move markets, so while the futures were continuing to go no where special after the rate announcement, they could easily have quickly changed direction about 30 minutes later as Draghi began to speak.

The difference has been that when Draghi has spoken his words have largely been the kind that have reassured and rallied markets.

Today he didn’t, nor did he say anything that created any sense of confidence or any sense of anything.

That alone was enough to disappoint those looking for anything to get out of the current state of stupor and passivity.

Even though we’re not even down 4% from the S&P 500’s high levels, as the morning was set to begin, we could use some of that kind of rally, especially heading into the close of the week when it would especially nice to see some likely assignments.

Unfortunately, today wasn’t going to be the day for that. Even though the market started on a positive note once the bell rang, it fairly quickly deteriorated and really had nothing of a positive tone as the day worked toward the close.

Unlike the past few weeks in which trading started fairly slowly and then picked up steam in the final two days resulting in a nice combination of rollovers, new covers and assignments, I just didn’t see a repeat of that pattern in the making for this week and have little reason to expect that Friday will be the day to rescue all.

While flat and down markets are still my favorite environment, it’s a lot better when the rollovers and new covered positions can be established. Even if the stocks are going no where themselves, at least their derivative cousins can do something of value.

So far, this week?

Not so much.

Although there aren’t too many positions set to expire this week, as compared to some recent weeks past, there is still at least some opportunity to see some assigned and some rolled over, as long as the last two days don’t really do anything terribly stupid.

Today didn’t really help in that regard,
although early in the session there was at least some opportunity for one rollover and one newly covered position.

While the past few weeks were able to withstand some weak trading days to end the week and still see those revenue producing trades accomplished, this week doesn’t have very much of a cushion, so it would have be en nice to see just a quiet end to a week of headless wandering and then have the chance to start anew next week.

Instead, today dug the hole a little bit deeper.

However, despite that apparently sounding negativity, and certainly without wanting to jinx anything, as the market does trade in a flat manner or even trading downward, the portfolio path is again trending toward out-performance as compared to the S&P 500 as today’s session was getting ready to start.

Without having crunched the numbers at the close, I’m hoping that’s still the case.

But that kind of out-performance isn’t unusual as the premiums are typically the factor that provides the additional performance,

However, while out-performance is always the goal, it’s nice to also couple that with actual increasing portfolio value, as well.

Hopefully those will both continue for the final day of the week although some opportunity to make the trades would really help and make hope unnecessary.