Category: Daily Market Update

Daily Market Update – June 16, 2014 (Close)

After a few weeks of little happening, this week has lots to come. If there was a vacuum last week, it is in the process of cracking this week as external and internal events are in focus.

The first event was actually brewing over the weekend and despite the continued loss of stability in Iraq and the likelihood of greater conflict, disruption of oil supplies and whatever other things might be tangentially related, the market appears to have ignored those events as it got ready to start a new week.

After the first full day of trading there was absolutely no evidence that anyone really cared about what was going on in Iraq, even as oil prices reacted and escalation seemed likely.

In addition to that continued uncertainty we have the monthly FOMC statement due on Wednesday, Janet Yellen’s ensuing press conference and a quadruple witching on Friday.

With some big merger news to begin the week the market was still looking to begin with a mildly weak opening and other than for a brief moment when it was down about 50 points it never really wavered from the flat line for most of the day.

Not having replenished cash reserves this past week and having lots scheduled for expiration this Friday, the likelihood is that I won’t be looking to open too many new positions, but where possible would want to look at an expiration using an expanded weekly option.

With so many positions set to expire as the monthly cycle ends I’m especially wary of Wednesday’s FOMC event. That’s really the case as this week starts off with many of the expiring contracts appearing to have good likelihood of assignment.

A flat or mildly positive week this week would be ideal for being able to get a nice combination of assignments and rollovers, but that’s just not the way things work. While I never give up on hoping or trying to mentally will the market to move in a specific direction, I’m not certain it really helps.

As for about the past 6 months there’s not much reason to suspect that there would be anything substantively different in the wording of the FOMC statement, but you never know how the market will react for the remainder of that day and for the next day, as well.

Compound that with the press conference to follow and you have increased possibility of a significant reaction, especially if there are any misplaced comments or fuzzily communicated thoughts. So far, that has happened only once during Yellen’s tenure and she does tend to speak in a very deliberative manner, but it is a two way street. It’s not just what she says but it’s also in how the words are parsed and interpreted. Reality may be a bystander when it comes to the interpretations.

Because of that potential risk there may be some reason to look at rolling over some positions, if the opportunities pres
ent themselves, prior to the FOMC statement release.

That’s something that I consider doing before each such FOMC but rarely actually do, especially as the forward week’s premiums are usually insufficient to offset whatever still remains on the current week’s premiums and make the trade itself worthwhile.

That, too, is something that would change with an increase in volatility.

For yet another week I would be very happy to generate the week’s revenue from selling calls on currently uncovered positions, but last week was a disappointment in that regard, even while the rest of the week went nicely, despite the market’s weakness.

Hopefully the opportunity to do so will present itself but that would require a turnaround from the early morning futures and pre-open trading. AS it turned out at least two opportunities did appear, but they were small premiums as the market isn’t pricing in any kind of movement.

Otherwise the plan is to stick to relatively low risk new positions or those not too likely to be influenced by international conflict and keep some fingers crossed.

The purchase of additional shares in Las Vegas Sands was entirely for a chance to get its dividend and in the belie that iraq won’t have too much of an undue impact. The Lowes purchase was more in the line of perceived low risk, especually after a recent 5% decline from where shares were last assigned just a week ago.

We’ll see what tomorrow may bring.

Daily Market Update – June 16, 2014 (9:00 AM)

After a few weeks of little happening, this week has lots to come. If there was a vacuum last week, it is in the process of cracking this week as external and internal events are in focus.

The first event was actually brewing over the weekend and despite the continued loss of stability in Iraq and the likelihood of greater conflict, disruption of oil supplies and whatever other things might be tangentially related, the market appears to have ignored those events as it gets ready to start a new week.

In addition to that continued uncertainty we have the monthly FOMC statement, Janet Yellen’s press conference and a quadruple witching on Friday.

With some big merger news to begin the week the market was still looking to begin with a mildly weak opening.

Not having replenished cash reserves this past week and having lots scheduled for expiration this Friday, the likelihood is that I won’t be looking to open too many new positions, but where possible would want to look at an expiration using an expanded weekly option.

With so many positions set to expire as the monthly cycle ends I’m especially wary of Wednesday’s FOMC event. That’s really the case as this week starts off with many of the expiring contracts appearing to have good likelihood of assignment.

A flat or mildly positive week this week would be ideal for being able to get a nice combination of assignments and rollovers, but that’s just not the way things work. While I never give up on hoping or trying to mentally will the market to move in a specific direction, I’m not certain it really helps.

As for about the past 6 months there’s not much reason to suspect that there would be anything substantively different in the wording of the FOMC statement, but you never know how the market will react for the remainder of that day and for the next day, as well.

Compound that with the press conference to follow and you have increased possibility of a significant reaction, especially if there are any misplaced comments or fuzzily communicated thoughts. So far, that has happened only once during Yellen’s tenure and she does tend to speak in a very deliberative manner, but it is a two way street. It’s not just what she says but it’s also in how the words are parsed and interpreted. Reality may be a bystander when it comes to the interpretations.

Because of that potential risk there may be some reason to look at rolling over some positions, if the opportunities present themselves, prior to the FOMC statement release.

That’s something that I consider doing before each such FOMC but rarely actually do, especially as the forward week’s pr
emiums are usually insufficient to offset whatever still remains on the current week’s premiums and make the trade itself worthwhile.

That, too, is something that would change with an increase in volatility.

For yet another week I would be very happy to generate the week’s revenue from selling calls on currently uncovered positions, but last week was a disappointment in that regard, even while the rest of the week went nicely, despite the market’s weakness.

Hopefully the opportunity to do so will present itself but that would require a turnaround from the early morning futures and pre-open trading.

Otherwise the plan is to stick to relatively low risk new positions or those not too likely to be influenced by international conflict and keep some fingers crossed.

.

Daily Market Update – June 13, 2014 (9:00 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:  none

Rollovers:  GME

Expirations:   EBAY, EBAY, HFC, PFE

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

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Daily Market Update – June 12, 2014 (Close)

After a rare triple digit loss and no new record being set, the morning’s market doesn’t appear to be quite ready to follow through with more of the same. It doesn’t really appear to be ready to do much of anything, actually.

There still remains no identifiable catalyst to move the market in either direction and if yesterday’s thesis was correct, that Eric Cantor’s primary election loss was the culprit for the market decline, there’s no real reason for continuing pessimism. Those kind of stories don’t usually have much in the way of lasting power, even if they were accurate in the first place.

On the other hand, it’s the unforeseen that really shake things up and today, the most likely culprit for the market ringing up another triple digit loss is the rapidity of the deterioration in Iraq.

When oil and precious metals start to look appealing that’s not the best of environments of stocks.

While the market has been by and large unexciting and moving in smallish kind of steps, the same can’t be said for individual stocks, especially when earnings are in focus.

Today it’s LuLuLemon.

It started yesterday when its founder, who arguably started a slide in shares months ago when he made comments that were very disparaging of potential and actual customers, decided to pull his support of the current Chairman of the Board, saying that his interests weren’t aligned with the “core values” of the company.

Every time Chip Wilson, the founder, seems to open his mouth, if you’re a shareholder you feel as if your core values were violated.

Yesterday was no different, and came one day before earnings were to be released.

The Board expressed their disagreement with the founder and stemmed yesterday’s loss, but this morning’s diminished guidance is punishing shares and adding to their already depressed levels.

This, without the added drama of an errant founder, has been the story of many stocks the past few earnings seasons.

Despite a market that has been climbing higher many stocks are left behind or sent into tailspins and are taking longer to recover than ever before. as the market moves higher it does so on the backs of stocks rotating in and out of favor rather than pulling most along higher to varying degrees.

While there may be something unhealthy at LuLuLemon a market not trickling down to its component members is also something that may not be as robust as it seem
s.

While the volatility continues to be interpreted as reflecting investor “complacency,” I think that it’s hard to accept that interpretation. Very few are taking anything for granted which is unlike other periods when markets were making new highs. There is much more nervousness than is being acknowledged and that has to include the professional investor community which is reportedly under-performing the broad market.

In the case of hedge fund managers they are lifting some of their traditional hedging techniques in efforts to catch up to the market, while at the same time increasing their exposure to adverse events by having done so.

That should give them plenty of reason to be nervous.

While those make me wary, it doesn’t make me overly nervous.

The lack of enthusiasm for this market has to be taken as some sort of positive sign, but it is still very difficult to justify committing all to the prospect of the crowd being wrong. The way today worked out it may be even more difficult making that commitment, but as is usually the case suddenly some positions start to look more appealing.

Does the situation in Iraq really make Lowes and MasterCard less desirable?

For now, there’s little reason to make a directional bet and little basis for the belief that there will be any kind of clear directional path.

At the moment I’m not willing to bet much new money and may even want to recycle less than the already low levels as assignments occur.

The next two days will be ones looking for the opportunities to rollover stocks, although there aren’t too many for this week and perhaps realize some assignments in preparation for next week’s monthly option cycle end.

Hopefully next Wednesday FOMC statement and ensuing press conference by Janet Yellen won’t disrupt prices too much and leave us in a good position to make some decisions for July 2014.

.

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

After a rare triple digit loss and no new record being set, the morning’s market doesn’t appear to be quite ready to follow through with more of the same. It doesn’t really appear to be ready to do much of anything, actually.

There still remains no identifible catalyst to move the market in either direction and if yesterday’s thesis was correct, that Eric Cantor’s primary election loss was the culprit for the market decline, there’s no real reason for continuing pessimism. Those kind of stories don’t usually have much in the way of lasting power, even if they were accurate in the first place.

While the market has been by and large unexciting and moving in smallish kind of steps, the same can’t be said for individual stocks, especially when earnings are in focus.

Today it’s LuLuLemon.

It started yesterday when its founder, who arguably started a slide in shares months ago when he made comments that were very disparaging of potential and actual customers, decided to pull his support of the current Chairman of the Board, saying that his interests weren’t aligned with the “core values” of the company.

Every time Chip WIlson, the founder, seems to open his mouth, if you’re a shareholder you feel as if your core values were violated.

Yesterday was no different, and came one day before earnings were to be released.

The Board expressed their disagreement with the founder and stemmed yesterday’s loss, but this morning’s diminished guidance is punishing shares and adding to their already depressed levels.

This, without the added drama of an errant founder, has been the story of many stocks the past few earnings seasons.

Despite a market that has been climbing higher many stocks are left behind or sent into tailspins and are taking longer to recover than ever before. as the market moves higher it does so on the backs of stocks rotating in and out of favor rather than pulling most along higher to varying degrees.

While there may be something unhealthy at LuLuLemon a market not trickling down to its component members is also something that may not be as robust as it seems.

While the volatility continues to be interpreted as reflecting investor “complacency,” I think that it’s hard to accept that interpretation. Very few are taking anything for granted which is unlike other periods when markets were making new highs. There is much more nervousness than is being acknowledged and that has to include the professional investor community which is reportedly under-performing the broad market.

In the case of hedge fund managers they are lifting some of their traditional hedging techniques in efforts to catch up to the market, while at the same time increasing their exposure to adverse events by having done so.

That should give them plenty of reason to be nervous.

While those make me wary, it doesn’t make me overly nervous.

The lack of enthusiasm for this market has to be taken as some sort of positive sign, but it is still very difficult to justify committing all to the prospect of the crowd being wrong.

For now, there’s little reason to make a directional bet and little basis for the belief that there will be any kind of clear directional path.

At the moment I’m not willing to bet much new money and may even want to recycle less than the already low levels as assignments occur.

The next two days will be ones looking for the opportunities to rollover stocks, although there aren’t too many for this week and perhaps realize some assignments in preparation for next week’s monthly option cycle end.

Hopefully next Wednesday FOMC statement and ensuing press conference by Janet Yellen won’t disrupt prices too much and leave us in a good position to make some decisions for July 2014.

.

Daily Market Update – June 11, 2014 (Close)

This morning’s pre-open trading brings something rarely seen lately.

The morning appeared to be ready to open with some moderate losses and as a result the volatility is actually creeping up just a bit from its all time low levels. It actually lasted that way, essentially unchanged from its initial near triple digit drop all throughout the day.

Always needing a reason to explain even that which has no need for explanation, this is so far being blamed on the anticipated legislative gridlock that would ensue as a result of the unexpected loss of Eric Cantor in yesterday’s Virginia 7th District Congressional primary.

That’s a stretch.

Besides, it’s not as if things would get noticeably more grid locked, as legislation didn’t exactly flow smoothly with Eric Cantor in a position of leadership. But as far as predicting the future impact of this event, it may be useful to realize that those who predicted an easy and runaway Cantor victory are now predicting the aftermath of the loss.

That sounds reasonable. I’d follow their forecasting to the end of the world.

If indeed that primary upset is to blame for some mild nervousness this morning, it shouldn’t last very long, particularly since no really large unresolved items remain on the legislative agenda that would be expected to adversely impact the markets or even individual stocks.

For all of the talk and controversy around immigration legislation there’s little reason to believe its passage, defeat or delay would in any way move the markets.

As far as those issues that would possibly impact markets, such as budgets, debt ceilings and government shutdowns the loss of Cantor and his replacement by a Tea Party member may simply be the stimulus to bring the traditional arms of both parties to the realization that they have to work together and actually show accomplishments rather than throw tantrums.

While this morning has seen a tiny increase in volatility, you now increasingly hear discussion of volatility and how its low level is making it difficult to find and execute trades, which is an especially big deal for those whose livelihood is based upon trading volume.

Ordinarily you would think that the market reaching new highs day in and day out would attract all sorts of money and drive volume higher and higher, but that just hasn’t been the case and unless there’s some sort of break-out higher, it doesn’t appear as if that’s going to change.

Being a Wednesday, my expectation is usually for a slow personal trading day. However, market weakness, if it continues into the session may have potentially offered some reason to  add new positions, but today it didn’t offer that many reasons.

I wasn‘t really counting on it, so I’m not too disappointed that nothing much happened today.

I don’t know if  Eric Cantor can say the same.

Daily Market Update – June 11, 2014 (9:00 AM)

This morning’s pre-open trading brings something rarely seen lately.

The morning appears to be ready to open with some moderate losses and as a result the volatility is actually creeping up just a bit from its all time low levels.

Always needing a reason to explain even that which has no need for explanation, this is so far being blamed on the anticipated legislative gridlock that would ensue as a result of the unexpected loss of Eric Cantor in yesterday’s Virginia 7th District Congressional primary.

That’s a stretch.

Besides, it’s not as if things would get noticeably more grid locked, as legislation didn’t exactly flow smoothly with Eric Cantor in a position of leadership. But as far as predicting the future impact of this event, it may be useful to realize that those who predicted an easy and runaway Cantor victory are now predicting the aftermath of the loss.

That sounds reasonable. I’d follow their forecasting to the end of the world.

If indeed that primary upset is to blame for some mild nervousness this morning, it shouldn’t last very long, particularly since no really large unresolved items remain on the legislative agenda that would be expected to adversely impact the markets or even individual stocks.

For all of the talk and controversy around immigration legislation there’s little reason to believe its passage, defeat or delay would in any way move the markets.

As far as those issues that would possibly impact markets, such as budgets, debt ceilings and government shutdowns the loss of Cantor and his replacement by a Tea Party member may simply be the stimulus to bring the traditional arms of both parties to the realization that they have to work together and actually show accomplishments rather than throw tantrums.

While this morning has seen a tiny increase in volatility, you now increasingly hear discussion of volatility and how its low level is making it difficult to find and execute trades, which is an especially big deal for those whose livelihood is based upon trading volume.

Ordinarily you would think that the market reaching new highs day in and day out would attract all sorts of money and drive volume higher and higher, but that just hasn’t been the case and unless there’s some sort of break-out higher, it doesn’t appear as if that’s going to change.

Being a Wednesday, my expectation is usually for a slow personal trading day. However, market weakness, if it continues into the session may offer some reason to  add new positions.

I’m not counting on it, but of Eric Cantor can lose, then anything may be possible.

Daily Market Update – June 10, 2014 (Close)

It’s a Tuesday, so the market is supposed to be going higher, except for the fact that as soon as anyone realizes that such a pattern seems to exist, it begins to break down.

So for the past couple of Tuesdays you wouldn’t have been well served by following that pattern, that like so many doesn’t really have much of a basis in anything logical or rational.

The problem, however, is that while we’ve been talking about that pattern as having been in place for the past couple of months, it actually has many, many years of data behind it lending support to the notion that Tuesdays are far better market days than logic would dictate.

Yesterday was the kind of day that you would have thought would be the logical outcome in a week that really has very little planned news releases or scheduled events. It started quietly in the pre-opening trading and continued that way throughout the session.

Other than the three Federal Reserve Governors that gave talks yesterday and who aren’t generally among the most influential of the various voices, there aren’t even any more such scheduled events the rest of the week to move markets.

To its credit the market did almost set another new high and almost stayed true to its Tuesday self, but probably was more influenced by the nothingness that is supposed to characterize this week.

While I’m always wary of weeks that have lots of scheduled events I think that I get more concerned with these kind of quiet weeks that almost seem to be a sort of vacuum. While scheduled events can and certainly do move markets, they’re usually not the catalysts for anything that’s really sustained.

The reason for that is that the market reacts to data, although sometimes the reaction itself is irrational, but the flow of new data immediately changes the mindset. So often you see conflicting data one day after a market mover and the market responds in a completely different direction, as if the previous data had never existed.

However, in a vacuum there is no data, You’re left with your own insecurities and fears and if anything sets off a reaction it can simply feed on itself with nothing of factual basis coming along the way to counteract the fear.

Not that I expect that to be the case this week, because if I did I would have really been stockpiling cash.

Instead, it’s just another reason to be wary of a market that continues to set new highs but does so in a very tentative manner and with very low volume.

I’m still willing to bring cash reserves down a bit but there aren’t too many positions beckoning. With nearly 100 that I follow it is difficult to make a compelling case as frequently as I would like, but it is getting easier and easier to resist the lure of having money in the bank that wants to go out and have a good time.

Someone has to pay the price when that happens on an indiscriminate basis. It’s often hard enough to have to pay the price when everything seems to be well thought out, but add to that giving in to primal needs and you have some major headaches in the making.

Today, my headache was dealing with a crashing server that started acting up yesterday.

Finally by about 3 PM, after intermittent outages that usually lasted for a minute or so it looks as if the replacement was installed, so hopefully I won’t find myself ranting to myself or incessantly clicking the refresh button tomorrow, although a Wednesday, given its own pattern of slow trading would have been the perfect day to have gotten bogged down.

Daily Market Update – June 10, 2014 (9:30 AM)

It’s a Tuesday, so the market is supposed to be going higher, except for the fact that as soon as anyone realizes that such a pattern seems to exist, it begins to break down.

So for the past couple of Tuesdays you wouldn’t have been well served by following that pattern, that like so many doesn’t really have much of a basis in anything logical or rational.

The problem, however, is that while we’ve been talking about that pattern as having been in place for the past couple of months, it actually has many, many years of data behind it lending support to the notion that Tuesdays are far better market days than logic would dictate.

Yesterday was the kind of day that you would have thought would be the logical outcome in a week that really has very little planned news releases or scheduled events. It started quietly in the pre-opening trading and continued that way throughout the session.

Other than the three Federal Reserve Governors that gave talks yesterday and who aren’t generally among the most influential of the various voices, there aren’t even any more such scheduled events the rest of the week to move markets.

While I’m always wary of weeks that have lots of scheduled events I think that I get more concerned with these kind of quiet weeks that almost seem to be a sort of vacuum. While scheduled events can and certainly do move markets, they’re usually nit the catalysts for anything that’s really sustained.

The reason for that is that the market reacts to data, although sometimes the reaction itself is irrational, but the flow of new data immediately changes the mindset. So often you see conflicting data one day after a market mover and the market responds in a completely different direction, as if the previous data had never existed.

However, in a vacuum there is no data, You’re left with your own insecurities and fears and if anything sets off a reaction it can simply feed on itself with nothing of factual basis coming along the way to counteract the fear.

Not that I expect that to be the case this week, because if I did I would have really been stockpiling cash.

Instead, it’s just another reason to be wary of a market that continues to set new highs but does so in a very tentative manner and with very low volume.

I’m still willing to bring cash reserves down a bit but there aren’t too many positions beckoning. With nearly 100 that I follow it is difficult to make a compelling case as frequently as I would like, but it is getting easier and easier to resist the lure of having money in the bank that wants to go out and have a good time.

Someone has to pay the price when that happens on an indiscriminate basis. It’s often hard enough to have to pay the price when everything seems to be well thought out, but add to that giving in to primal needs and you have some major headaches in the making.

Daily Market Update – June 9, 2014 (Close)

Well this was a strange day.

Vexed by server problems on and off for much of the morning, Trading Alerts sent to Comcast accounts (only those beginning with the letter “R”) getting sent back as spam and a leaking hot tub.

Good thing there was very little planned for this week in the market. I already had my hands full..

As far as planned news, data releases or earnings there won’t be too much going on. Lots of eyes will simply be trained on shares of Apple which begin trading on a post-split basis today.

Following its run much higher after the announcement of the split and increased dividend, it’s hard to argue that substantive product releases or product news were responsible for that climb, so it will be interesting to see how those post-split shares respond to their new affordability, particularly since so many have expected that the actual split will lead to further price appreciation.

Great theories always meet their match in reality.

The week began at yet another new high, although the pre-open is almost at the flat line with absolutely nothing to react to other than some merger and buyout news. But that didn’t matter, because there was enough in the pipeline to make another new high by the time it was all over.

However, as opposed to the gains of last Thursday and Friday, this was back to the earlier pattern of a timid gain.

After a week that saw more assignments than new positions opened for the first time in a little while my cash reserves have risen above where they opened the previous week and despite the increasing highs, I am willing to spend some of that down but I think it’s time to be also increasingly selective.

Over the past month it has been clear that the advancing market isn’t taking everything along as the number of new highs isn’t keeping up with the overall market, as is usually the case when there is broad market strength.

In what is becoming a broken record, my preference again this week would be to find opportunities to sell calls on existing, yet uncovered positions and roll over as much as possible if assignments aren’t likely.. Again, with a fair number of positions set to expire this week I would like to diversify by date of contract expiration, but with volatility so low it’s hard to justify the additional time for the low additional premiums that result.

Ideally, with also a number of positions set to expire next week as the monthly contract ends, it would be nice to begin finding contracts for June 27, 2014 and beyond, but those opportunities are sparse, all falling victim to the low volatility environment.

With stock prices still so high and premiums so low there is a skew of the risk-reward proposition such that the risk attenuation offered by selling calls is decreased relative
to the risk associated with buying shares at or near their highs.

The response to that challenge is to either look for positions that haven’t participated as much in the market rally and by extension don’t have as much to fall or give back or look for those that have participated and may have higher premiums in reflection of the increased risk below.

Tough call, but like most everything going an all or none route is probably not a good idea, so there may be reason to look at the extremes when thinking about how to redeploy some cash until the market makes a real statement and does something more than just tentative moves higher.

Stocks to watch this week include Family Dollar Stores, following news after Friday’s close that Carl Icahn had taken a large stake.

Fortunately, the DOH traded shares were rolled over on Friday, but with the low volatility it was difficult getting a trade with a net credit without going out quite a bit in time. Even then the net credit was not because of the additional time, but because earnings were to be released that week. With the announcement on Friday there was likely to be greater volatility built into the premium so it wasn’t unusual to discover there were some be greater rollover opportunities than there were this past Friday.

What I had hoped to do and what became possible was to rollover the $60 lot that expires next week, specifically to try and either capture the dividend or to get some additional premium in the event of early assignment and then move on with some new found and unexpected cash. Then came the opportunity to do the same with the $65 call that was created last Friday as part of a rollover.

In the first case by rolling up from $60 to $65 there was the need to take on a $4.10 debit, but iof shares are assigned early after tomorrow’s clse, which is likely if FDO stays welss above the strike, there will be an additional $0.90 squeezed out of the trade, although the $0.39 dividend won’t be captured.

For the re-rollover of the $65 contract that additional premium squeezed out was $0.50 in return for likely giving up the dividend, although with a $66.50 strike it may be a little less likely to be assigned early at the current levels.

All in all, it was an unusual trading day to go along with the rest of the day’s events, but at least now I can soak away, because the hot tub repair guy has got it all under control.