Category: Daily Market Update

Daily Market Update – May 14, 2014 (Close)

With Macys and Deere now out of the way, having reported earnings this morning, there’s wasn’t much left until the entire process starts all over again in July. While there will still be some more earnings reports ahead next week and until about the end of June, most of the consequential companies will have reported by this week. Wal-Mart and Cisco are among the important ones still left to come this week and though they represent disparate parts of the economy they are both important indicators.

It’s difficult to put a positive spin on this earnings season, although the previous two quarters somehow were spun that way. This time, however, optimistic guidance isn’t broadly being provided to help shares after disappointing earnings. In the past two quarters there was a general practice of providing positive guidance which offset the actual earnings and helped to propel stocks higher, often reversing initial earnings related drops.

This earnings season is notable for its relatively little forward looking optimism. There’s not been a sense of good things ahead, neither in retail nor in manufacturing despite reports of increasing employment and low interest rates, which would generally be considered as a formula for economic expansion and spending.

Whatever improvements in EPS data may have be seen would have to be adjusted for the number of shares in float, which has widely been decreasing owing to all of those buy backs.

The good news stories and the positive moves higher have been relatively few these past weeks even though common sense would seem to suggest that higher profits should be resulting at least in part from higher revenues and not just from cost cutting.

Still, it’s new record after new record.

It’s hard to fight the tape and no one wants to be left out, but I’ve had a hard time justifying much in the way of new purchases this week as the party has moved on, although you do have to admit that there hasn’t been much conviction in the process, despite Monday’s strong move.

This morning seemed to be ready to open with a less effusive market, but everyone may now be waiting for another Janet Yellen bump, as she is scheduled to speak tomorrow evening and may set the tone to end the May 2014 cycle, hopefully on an up note.

As always, whenever the end of the monthly option cycle is at hand I just want to see as many as possible positions get assigned or rolled over and be in a good position to start the next cycle. The rollovers get you on the ground running and the assignments give you the luxury of being able to act when it feels appropriate.

While the week’s expiring contracts appear to be reasonably well positioned the prospects of even a single misinterpreted word on Thursday evening could be enough to cause a market seizure, especially since it is a monthly expiration day the next morning.

Of course, when today’s trading finally settled we could now use a Yellen bump, a
s it turns out that wanting another new record to be set doesn’t mean that it will happen.

Because of that further possibility of a single mis-spoken word on Thursday night there may be reason to consider some action on Thursday, particularly with regard to rollovers. In general, it’s better to roll something over that may otherwise have been assigned, than it is to wait and lose the opportunity and then which the contract expire after some sort of sell-off.

Today being a Wednesday, which is usually a slow day for me, in general and then compounded by an ambivalence to participate in making new purchases, I didn’t expect to be doing much today, either. Other than a single rollover there wasn’t much to do other than watch the weeds growing in the vegetable garden.

As in the past few days, any opportunity to sell new cover would have been greatly appreciated, but I think the week will start tomorrow and come to its crescendo on Friday.

Since it’s been reasonably profitable just sitting and passively watching the market do its thing, I haven’t got too much to complain about, but I’d much rather be an active participant and be able to take some of the credit.

Today, despite the broad market weakness wasn’t that bad of a day and thus far this has been an acceptable week, but it all comes down to Thursday and Friday, as so often seems to be the case.

Daily Market Update – May 13, 2014 (Close)

While yesterday was one of those rare Mondays that was almost devoid of trading, it was a nice day to sit back and watch the market do some heavy lifting.

It still seems a little incongruous that both the DJIA and S&P 500 set even more new highs yesterday when there’s really very little to support that kind of enthusiasm, especially when it’s also apparent that there’s so much nervousness around.

That’s an odd combination and I can’t really call a similar period over the past 30 years, other than for today, when new records were once again set on both the DJIA and S&P 500.

Every bull market and every climb higher has its naysayers and doubters, but you don’t often see so many doubters and so many actions that seem counter to the moves higher, such as the real pronounced NASDAQ weakness.

Generally, weakness in that sector is an early signal of an upcoming market top and not a signal to keep climbing higher and higher.

Today was looking to get off to a slow start, but at least there was the possibility of some continued follow through to yesterday’s strength, which was long overdue, despite reaching all of those new highs. Once it was all over it was a pretty benign day, but it did build a little on what had preceded it.

I may remain content to add little in the way of new positions this week if that kind of strength can continue as we enter into the final meaningful week of this earnings season. So far, there has been very little to get excited about. Even though some big retailer names report this week, the overall retail numbers are down and that can’t be a good thing, unless all of retail is now being concentrated in the likes of Wal-Mart, Macys and Nordstroms.

It’s also not as if Keuring Green Mountain Coffee Roasters, which continues to rise after its earnings report is reflective of our economy. It’s just reflective of questionable taste in coffee and Coke’s deep pockets and little to show for it.

With the May 2014 option cycle ending this week I would love to see a fair number of assignments as I’d like to add to my cash reserves. Making new highs may be the starting point for going even higher, but it may also be an inflection point and be the start of a reversal.

If the latter of those two possibilities is so, let it start next week.

Either way, it’s good to be prepared and cash is the best way to be able to play either of those scenarios.

In the meantime, yesterday was a little disappointing, despite the nice addition to the bottom line, because of the inability to put through some new cover on existing positions. I was hoping that it would be a little different today as I’d ha
ve liked to get some more positions set up for weekly expiration as part of the June 2014 cycle.

In the event of any weakness today I was prepared to get enticed and pick up some items that were on the weekly list, as well as looking at other opportunities, but I expected that it would be a fairly quiet day and that I’d still be holding onto cash reserves for the most part.

Otherwise, sit back along with me and hopefully enjoy as some more heavy lifting would be a nice thing to watch while sipping on some good coffee for the rest of the week.

Daily Market Update – May 13, 2014 (9:30 AM)

While yesterday was one of those rare Mondays that was almost devoid of trading, it was a nice day to sit back and watch the market do some heavy lifting.

It still seems a little incongruous that both the DJIA and S&P 500 set even more new highs yesterday when there’s really very little to support that kind of enthusiasm, especially when it’s also apparent that there’s so much nervousness around.

That’s an odd combination and I can’t really call a similar period over the past 30 years.

Every bull market and every climb higher has its naysayers and doubters, but you don’t often see so many doubters and so many actions that seem counter to the moves higher, such as the real pronounced NASDAQ weakness.

Generally, weakness in that sector is an early signal of an upcoming market top and not a signal to keep climbing higher and higher.

Today is looking to get off to a slow start, but at least there’s the possibility of some continued follow through to yesterday’s strength, which was long overdue, despite reaching all of those new highs.

I may remain content to add little in the way of new positions this week if that kind of strength can continue as we enter into the final meaningful week of this earnings season. So far, there has been very little to get excited about. Even though some big retailer names report this week, the overall retail numbers are down and that can’t be a good thing, unless all of retail is now being concentrated in the likes of Wal-Mart, Macys and Nordstroms.

It’s also not as if Keuring Green Mountain Coffee Roasters, which continues to rise after its earnings report is reflective of our economy. It’s just reflective of questionable taste in coffee.

With the May 2014 ending this week I would love to see a fair number of assignments as I’d like to add to my cash reserves. Making new highs may be the starting point for going even higher, but it may also be an inflection point and be the start of a reversal.

Either way, it’s good to be prepared and cash is the best way to be able to play either of those scenarios.

In the meantime, yesterday was a little disappointing, despite the nice addition to the bottom line, because of the inability to put through some new cover on existing positions. Hopefully that will be a little different today as I’d like to get some more positions set up for weekly expiration as part of the June 2014 cycle.

In the event of any weakness today I may get enticed and pick up some items that are on the weekly list, as well as looking at other opportunities, but still expect that it will be a fairly quiet day and that I’ll be holding onto cash reserves for the most part.

< span style="font-family: arial,helvetica,sans-serif;">Otherwise, sit back and hopefully enjoy as some more heavy lifting would be a nice thing to watch while sipping on some good coffee.

Daily Market Update – May 12, 2014 (Close)

There’s not too much on the schedule this week and while there are still some big names left to report, particularly major retailers,  it’s going to be hard to imagine how anyone will be able to put a positive spin on the recent pattern of earnings releases.

While Janet Yellen does speak on Thursday and lately her words have been reassuring, it’s just too late in the week, unless she has some real blockbuster in store for us.

I’m not counting on that happening.

What has really become clear is that despite all of the stock buy backs and the enhancements offered to the standard metric of earnings, earnings per share, comparable numbers haven’t set the world on fire. If anything, the market which for the previous quarters had overlooked the apples to oranges comparisons was now taking a more critical look at earnings and forward guidance.

What continually seems confusing is how there can be a belief that the economy is expanding yet earnings are mediocre and more importantly, forward guidance isn’t generally indicating optimism. It’s difficult to reconcile those seemingly contradictory points.

Yet employment statistics seem to indicate the creation of new jobs and a falling unemployment rate. While  perhaps buoyed by decreasing participation you would still anticipate that the rise in employment would begin to have some impact on the fortunes of retailers, especially on the lower and mid-tier end.

At least this week there will be lots of opportunity to see if that’s going to be the case as many do report, all the way from Wal-Mart to Nordstrom and the nation’s retailer, Macys.

With the DJIA hitting yet another high last week, in a week that the overall market saw a decline and a continued devastation of the NASDAQ, it’s hard to get overly enthusiastic, but somehow the market just decided to start the week with another triple point gain and hit new highs in both the DJIA and S&P 500 and the NASDAQ’s gain was nearly double that of those, after weeks of badly trailing them.

With my personal cash sitting at 29% I was willing to get down to about 20% for the week, but didn’t do too much to make that happen today. Certainly with a market jumping out of the gate I wasn’t prepared to chase positions, but even in a flailing market I hadn‘t expected to add much more than 4 new positions for the week. Rather than add new positions I would have been much more interested in seeing the market confront all of the reasons that it shouldn’t go any higher and then just go higher. I’d have been very happy to have the opportunity to then sell new covers on existing positions rather than add to the exposure.

Sometimes passivity works and today was definitely a day for passivity, as I watched and watched, with barely any trades, but also with no complaints, other than not having sold any additional call contracts.

But selling new calls has been a hard goal as the market has been unduly punishing not just the real high fliers but most anyone coming in short on the numbers. With guidance being less sanguine it has been rare to see companies reporting mediocre earnings to see their share performance rescued by positive guidance. Instead, it has been more like a 0ne – two punch. Additionally, for those that have fallen it’s been notable that the typical bounce backs have been much more muted, delayed or even absent.

Instead, something unusual has been happening. Instead of some bounce back and attenuation of losses, we’ve been seeing sellers just piling on and compounding the pain. While you might make a case that investors are simply taking their money and rotating elsewhere, especially into more traditionally safe sectors, that pattern hasn’t really held up for more than a portion of a single trading session.

None of that makes me very optimistic, but I am happy to see this particular earnings season wind down and also see the use of “weather” as an excuse for earnings to enter into the history books.

Based on the latest pattern of alternating higher and lower weeks, we’re due to go higher this week. However, as far as patterns go, last week’s string of higher Tuesday’s was demolished with a large loss, so I’m not putting too much faith into those purely coincidental events that seem to get lots of attention.

Today was simply a nice day and with broadly based advances. Why did it act the way it did? Who knows? In fact, I don’t think I really heard anyone offer a guess today, because there’s really no good reason for it to have happened.

However, if traders choose to believe the validity of those patterns, then this week, as long as we’re due to go higher, I fully embrace them putting their money where those beliefs are and I’d be happy to collect the residual benefit of their actions.

Daily Market Update – May 12, 2014 (9:15 AM)

There’s not too much on the schedule this week and while there are still some big names left to report, particularly major retailers,  it’s going to be hard to imagine how anyone will be able to put a positive spin on the recent pattern of earnings releases.

While Janet Yellen does speak on Thursday and lately her words have been reassuring, it’s just too late in the week, unless she has some real blockbuster in store for us.

I’m not counting on that happening.

What has really become clear is that despite all of the stock buy backs and the enhancements offered to the standard metric of earnings, earnings per share, comparable numbers haven’t set the world on fire. If anything, the market which for the previous quarters had overlooked the apples to oranges comparisons was now taking a more critical look at earnings and forward guidance.

What continually seems confusing is how there can be a belief that the economy is expanding yet earnings are mediocre and more importantly, forward guidance isn’t generally indicating optimism. It’s difficult to reconcile those seemingly contradictory points.

Yet employment statistics seem to indicate the creation of new jobs and a falling unemployment rate. While  perhaps buoyed by decreasing participation you would still anticipate that the rise in employment would begin to have some impact on the fortunes of retailers, especially on the lower and mid-tier end.

At least this week there will be lots of opportunity to see if that’s going to be the case as many do report, all the way from Wal-Mart to Nordstrom and the nation’s retailer, Macys.

With the DJIA hitting yet another high last week, in a week that the overall market saw a decline and a continued devastation of the NASDAQ, it’s hard to get overly enthusiastic.

With my personal cash sitting at 29% I am willing to get down to about 20% for the week. That means that I’m not expecting to add much more than 4 new positions for the week. Rather than add new positions I would be much more interested in seeing the market confront all of the reasons that it shouldn’t go any higher and then just go higher. I’d be very happy to have the opportunity to then sell new covers on existing positions rather than add to the exposure.

Sometimes passivity works.

But selling new calls has been a hard goal as the market has been unduly punishing not just the real high fliers but most anyone coming in short on the numbers. With guidance being less sanguine it has been rare to see companies reporting mediocre earnings to see their share performance rescued by positive guidance. Instead, it has been more like a 0ne – two punch. Additionally, for those that have fallen it’s been notable that the typical bounce backs have been much more muted, delayed or even absent.

Instead, something unusual has been happening. Instead of some bounce back and attenuation of losses, we’ve been seeing sellers just piling on and compounding the pain. While you might make a case that investors are simply taking their money and rotating elsewhere, especially into more traditionally safe sectors, that pattern hasn’t really held up for more than a portion of a single trading session.

None of that makes me very optimistic, but I am happy to see this particular earnings season wind down and also see the use of “weather” as an excuse for earnings to enter into the history books.

Based on the latest pattern of alternating higher and lower weeks, we’re due to go higher this week. However, as far as patterns go, last week’s string of higher Tuesday’s was demolished with a large loss, so I’m not putting too much faith into those purely coincidental events that seem to get lots of attention.

However, if traders choose to believe the validity of those patterns, then this week, as long as we’re due to go higher, I fully embrace them putting their money where those beliefs are and I’d be happy to collect the residual benefit of their actions.

MONDAY:   Not much in store this week, but those do have a way od becoming eventful, nonetheless. A mildly positive open may be at hand and would be welcome, especially if setting the stage to return to a positive Tuesday and a positive week.

TUESDAY:     No immediate follow through to yesterday’s nice gains, but at least there’s some hope as earnings season, for the most part, comes to its eand this week.

WEDNESDAY:  Early morning earnings from big names don’t seem to offer impetus to move higher, but new records are the norm this week, thus far

THURSDAY:    Wal-Mart and Cisco look as if they’re balancing one another this morning and as we’ve recently been seeing big moves don’t appear to have follow-through the next morning. In today’s case that would be good.

FRIDAY:  Unfortunately, not likely to be too busy with rollovers today as the best two days of strong declines have taken a toll on assignments and rollovers







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

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

Today’s possible outcomes include:

Assignment:  BBY, GPS, TXN, UNH, VZ

Rollover:   GM, SBUX, TXN

Expiration:  EBAY, FDO, LOW

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

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Daily Market Update – May 8, 2014 (8:45 AM)

Markets go up and markets go down all of the time, so it wasn’t or at least shouldn’t have been terribly surprising that yesterday would have a bounce back following Tuesday’s terrible market that saw a broad retreat.

But despite yesterday’s nice performance it was relatively superficial as the NASDAQ continued its high profile decline, taking with it not only the ones you would call the “usual suspects,” but also the more staid.

Last night was more of the same as further earnings were released and companies like Tesla are showing the strain and will just get added to the growing heap of casualties that are, thus far, taking longer than the usual time to at least start their recovery.

That’s discouraging and may not be something that will stay in isolation. As with most systems under attack, it’s the weakest that are usually the first to fall. Tremendously high beta and outrageous price/earnings are those characteristics that on the one hand send some stocks on a parabolic move higher and on an identical path lower.

But after they’ve fallen, what’s next?

To some degree that depends on the rate of the descent and the rate of the spread. It’s like contagion, except the  opposite.

In a real contagion the more quickly spreading and the more lethal, eventually the more self limiting, as the killer kills off its hosts and loses its ability to spread. But with stocks the quicker the descent the more it is likely to drag others along and feed upon itself. Even the healthy low beta, moderate price/earnings kind of names are then susceptible.

That’s why seeing bounce backs are so important, as is seeing evidence of companies that thrive under the same environment. But if the companies thriving under those kind of environments are restricted to utilities and the P&G’s of the world, that itself is a reflection of walls weakening. While the foundation is critical, most people don’t predicate their decisions on the foundations. It’s what else there is beyond the foundation that attracts or frightens people

What has been generally missing so far during this earnings season is much evidence of thriving companies. The signs of strength that would actually promote either investor enthusiasm or at least reflect real economic growth just aren’t there or aren’t widely noticed.

The last few quarters, at least the past two, have seen earnings that were generally referred to as average or better than average and have been some basis for the market moving even further ahead, although for much of the past two years prior to 2014 there wasn’t much reason required.

On a retail level and on a manufacturing level, not to mention iron and coal, the basic fuels of growth, the basis for believing economic growth was proceeding has been lacking. That didn’t matter in 2012 and 2013 and so far, isn’t terribly important now, either.

What had been conveniently overlooked in those previous quarters has been the increasing and ever wider im
pact of stock buy backs as the earnings, even if falling, were rising on a per shares basis.

While reporting earnings per share is supposed to make it an apples to apples kind of comparison, that’s just not always the case. Reduce the number of shares in your denominator and by comparison it’s as if you moved on to a new group of uglier friends that now makes yu look better than before.

It’s often said that the shortcoming of technical analysis is that it focuses solely on charts and doesn’t really consider fundamental factors. Likewise, fundamental analysis is faulted for not considering share movement, history and patterns, but they can be further faulted for willingly accepting numbers on their surface and sometimes comparing apples to oranges. To some degree that can’t be helped because the reporting of buy backs isn’t always made on a timely basis and may not coincide very neatly with the reporting periods.  Apple, for example, just released information regarding its buy backs as of February 2014, while its earnings were for the period ending in March.

Maybe the markets are coming to this kind of realization. You can’t blame tax selling, end of the year profit taking, seasonality,  or the weather anymore.

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