Category: Daily Market Update

(see all trades this option cycle)

Daily Market Update – February 4, 2014 (Close)

A couple of years ago the last time we really had a market that was going through some corrections the United States stock markets were in an unusual position.

Rather than leading the world we were being wagged and our markets were following in response to European and Asian markets that were struggling with their own issues, particularly currency and monetary policy related.

We’re not used to following.

In addition to those kinds of woes the United States markets have continually fallen under the pressures of the Chinese markets, especially when it appeared as if the data was truthful.

Over the past 18 months or so the US markets have not been held hostage by events in other markets, although Chinese economic news has still been impactful.

Yesterday, however, there was some widespread belief that our own markets, which were already teetering a little, were sent over the cliff as the Nikkei and Russian stock markets gave the push, as they officially entered correction territory.

With the Nikkei dropping another 4% in its trading overnight it’s comforting to see that our own markets are resisting, thus far, following that path lower.

The word this morning was that the start to February was the worst seen since 1982. For his part, Peyton Manning says he’s seen worse starts, but for those that remember, 1982 was the beginning of the re-awakening of the stock market and the beginning of a 5 year bull market, until shortly after Alan Greenspan became Chairman of the Federal Reserve.

If that’s what it takes to ignite a fire I’m all for it. Besides you really don’t appreciate the heights until you’ve seen the depths.

The market crash in 1987 came just 2 months after Greenspan took office. The market decline in 2007 started almost 2 years after Bernanke took office. On the other hand, Janet Yellen’s first day was greeted with a 325 point loss, but today looks to be more hospitable.

For those that were daring and made some of the new trades yesterday, i don’t think there will be many more this week, although I’m not closed to the idea, but am not drinking any Kool-Ade if the market enjoys some kind of substantive bounce back.

Before making too much of an additional commitment I want to have some level of comfort that I’ll be seeing some assignments this week, but as we’ve seen the past few weeks it doesn’t take much to change everything. One day will do it, especially if it’s a Friday and the clock runs out on you.

After yesterday’s fall there’s a lot of ground that needs to be recovered, but at least we do have a few days to do so, although Friday’s Employment Situation Report brings a new challenge.

In the meantime it’s time for all of those who have been saying that they would be buyers on any dips to come and put their money where their mouths are. Instead many are seemingly busy either re-writing their personal history or patting themselves on the back for having predicted a correction consistently over the course of the past year.

Like me.

At least I did my part and opened some new positions.

As the market came to a close it didn’t come even close to erasing yesterday’s loss. However, on a very positive note despite several attempts to pare back the gains today the market fought back, even though the opposition may have been taking a rest after all of its efforts yesterday. Most impressive was that it did so one last time during the final hour of trading.

During the course of the day there were a number of trades that I had entered, including new positions in Intel, International Paper and Eli Lilly, but then canceled the orders, as I still had some doubts about today’s initial reaction to the stresses in the market and also mindful of the potential stress to come on Friday with the Employment Situation Report.

I’d love to see tomorrow be another day like much of today even if only to have opportunity to pick up cover for some positions, as nothing beats selling calls into price strength. Hopefully, the Nikkei futures which are spiking 3% higher as our own markets come to a close will provide some leadership for us tomorrow.

Sometimes it’s nice to be wagged for a change.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of February 4, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – February 4, 2014 (9:30 AM)

A couple of years ago the last time we really had a market that was going through some corrections the United States stock markets were in an unusual position.

Rather than leading the world we were being wagged and our markets were following in response to European and Asian markets that were struggling with their own issues, particularly currency and monetary policy related.

We’re not used to following.

In addition to those kinds of woes the United States markets have continually fallen under the pressures of the Chinese markets, especially when it appeared as if the data was truthful.

Over the past 18 months or so the US markets have not been held hostage by events in other markets, although Chinese economic news has still been impactful.

Yesterday, however, there was some widespread belief that our own markets, which were already teetering a little, were sent over the cliff as the Nikkei and Russian stock markets gave the push, as they officially entered correction territory.

With the Nikkei dropping another 4% in its trading overnight it’s comforting to see that our own markets are resisting, thus far, following that path lower.

The word this morning was that the start to February was the worst seen since 1982. For his part, Peyton Manning says he’s seen worse starts, but for those that remember, 1982 was the beginning of the re-awakening of the stock market and the beginning of a 5 year bull market, until shortly after Alan Greenspan became Chairman of the Federal Reserve.

If that’s what it takes to ignite a fire I’m all for it. Besides you really don’t appreciate the heights until you’ve seen the depths.

The market crash in 1987 came just 2 months after Greenspan took office. The market decline in 2007 started almost 2 years after Bernanke took office. On the other hand, Janet Yellen’s first day was greeted with a 325 point loss, but today looks to be more hospitable.

For those that were daring and made some of the new trades yesterday, i don’t think there will be many more this week, although I’m not closed to the idea, but am not drinking any Kool-Ade if the market enjoys some kind of substantive bounce back.

Before making too much of an additional commitment I want to have some level of comfort that I’ll be seeing some assignments this week, but as we’ve seen the past few weeks it doesn’t take much to change everything. One day will do it, especially if it’s a Friday and the clock runs out on you.

After yesterday’s fall there’s a lot of ground that needs to be recovered, but at least we do have a few days to do so, although Friday’s Employment Situation Report brings a new challenge.

In the meantime it’s time for all of those who have been saying that they would be buyers on any dips to come and put their money where their mouths are. Instead many are seemingly busy either re-writing their personal history or patting themselves on the back for having predicted a correction consistently over the course of the past year.

Like me.

At least I did my part and opened some new positions

.

  Access prior Daily Market Updates by clicking here

 
OTP Sector Distribution* as of February 3, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

(see all trades this option cycle)

Daily Market Update – February 3, 2014 (9:00 AM)

The week comes to its start that the Nikkei is now officially in correction territory.

Our own markets aren’t looking very committal this morning, as the single biggest piece of news is likely to come at the end of the week as the new Federal Reserve Chairman, Janet Yellen, will be closely watching the Employment Situation Report, especially after last month’s surprisingly abysmal numbers.

Here, we’re still far away from official correction territory and the DJIA and the S&P 500 have diverged a bit with the narrower DJIA showing nearly a 50% greater loss, with it having gone down 5.4% as compared to just 3.6% for the S&P.

The safety perceived in the boring blue chips isn’t supposed see that sort of divergence happening on more than an occasional day or two when it is usually due to a single or two outliers that have just had an unusual day. But this is now a relatively prolonged divergence that to some degree is a consequence of having added high priced Visa and Goldman Sachs to the index, while Alcoa was shown the door.

In the meantime volatility, which I always harp about in the hopes that it will increase, has done so, having gone slightly more than 50% higher in the past month and still having a long way to go until it returns even to 2011’s levels, which in turn were quite a bit lower than a couple of years prior.

With the possibility of increasing volatility will come greater reliance on monthly options rather than weekly.

The reasons for that are because the monthly options will finally be returning a decent premium in exchange for the additional time and also the longer term options give some opportunity to perhaps ride out any short term market decline that could occur when you blink your eyes.

With low volatility there is greater use of weekly options because it provides a better premium, but also because it doesn’t tie you down during a higher moving market. The downside is that if the share price moves against you you won’t have coverage for very long.

That’s the trade-off.

With increasing volatility usually comes a decrease in the number of new positions opened as it reflects a market that isn’t consistently continuing higher and higher and resulting in an unending stream of assignments.

But that increasing volatility also makes it easier to get a decent premium even using out of the money strikes. Coupled with longer term options even the orphaned positions suddenly have some hope of at least becoming contributing members to a portfolio.

In so many ways, even though at first blush it may seem as increasing volatility is a decided negative, there are many more opportunities that present themselves, especially if the increase in volatility isn’t accompanied by a rapidly plunging market. A slow decline in the broad index punctuated with some large moves up and down is all it takes to start seeing the volatility increase and the premiums follow right along.

We’ve certainly seen more of those large moves in the first month of 2014 than we saw in all of 2013.

This week starts off with cash reserves replenished a bit, but again, not as much as I would have liked.

This will likely mark another week when I’m not going to dip too deeply into those reserves, but I am probably willing to go from 30% to about 20%, which might leave room for 5 or so new positions, although if Apple, which goes ex-dividend this week is one of them, I may end up with fewer.

As a reminder, if Apple is a possibility, the mini-options are available for those that don’t want a full 100 share position. The mini-options allow contracts to be written on every 10 share lot and trades with good liquidity.

As with last week I’m going to sit back and see whether any early gains can persist after the first 60-90 minutes of trading. That has been a key for the past two weeks. Opening strength has been hard to maintain and there has been a price to be paid for jumping in trying to get ahead of the curve or thinking that value was about to disappear.

With only a handful of positions set to expire this Friday, despite starting to think more long term, if volatility continues higher, I w
ill also be looking to have more positions in play to expire this week, if the market looks as if it can sustain prices for those few days.

Lately, that hasn’t been a sure thing as week end fades have become the norm.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 31, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

MONDAY: Nikkei now officially in correction territory, but we start the week looking like an indifferent opening is in the works. Lots of earnings this week, but most big names already in the record books

TUESDAY:     Huge sell-off in Japan, but not seeming to translate here as the market prepares to open and Nikkei futures now also pointing broadly higher. We’ll see.

WEDNESDAY:  Nikkei has small rebound on same order as our own yesterday, signifying nothing. All eyes will be on ADP Report and then Friday’s Employment Situation Report

THURSDAY:    As long as Twitter and Green Mountain Coffee Roasters is able to keep everyone’s interest today could be another quiet day awaiting tomorrow’s Employment Report

FRIDAY:  Was yesterday’s advance justified? Not based on the first reaction to the disappointing Employment Report. Much weaker than expected.

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

(see all trades this option cycle)

Daily Market Update – January 30, 2014 (Close)

One nice thing about the market is that it doesn’t always hold a grudge.

It can lose 200 points one day and give indications of having totally forgotten about that blow out the very next morning.

For investors that often leads to confusion because human nature prefers to see continuity and slow transition. The market, on the other hand, although it is very much a product of human behavior, doesn’t always respond in the way that we are able to grasp.

Sometimes life would be much easier if we were all able to just move forward and not be weighed down by the past and our own prejudices. On the other hand, while we may occasionally take steps backward, for the most part we are forward moving beings. The market is anything but, although the past year it has behaved in a human fashion, by only taking small steps backwards and otherwise forging ahead.

Lately, however, the market has been acting like a human in the midst of a tail spin with predominant steps backwards and only an occasional gasp of life.

Was today’s 50% recovery of yesterday’s 200 point decline a gasp or a return to life?

That split in behavior, going from a forward charging entity to one that is tentative at best and manifests great nervousness with news doesn’t generate very much short term confidence.

Wouldn’t you rather know whether something is in the throes of a death spiral or simply taking a needed rest before continuing with a vibrant life?

The underlying components of the stock market, that is the companies that comprise the market are expressing some pessimism regarding their own future prospects for growth. Record level share buy backs are reflective of record levels of cash, but also of an inability to recognize opportunities to use that cash in a constructive fashion. A number of companies, such as Caterpillar and Cisco have been accused of having buyback programs that have been purchasing shares at values much too high,just so the cash wouldn’t be on the books and to use that cash to artificially prop up share price by simple supply and demand laws.

Since cash basically has a P/E of just 1, while it may be non-intuitive, may actually serve to keep a lid on share price. The more cash you have relative to your market capitalization the lower your P/E will be.

The reason that Cisco and Caterpillar’s actions are important is that in the past share buybacks were viewed as a reflection of the company’s opinion that its shares were bargain priced and was a sign to the rest of the world that investment in those was a good idea.

Now you can’t be quite as certain, although the optics of the situation result in better earnings per share and in the short term may move shares higher on that basis, as well as a shrinking supply of shares floating in the face of stable or increasing demand can still send shares higher.

As this week is coming to an end and earnings have been somewhat better than the previous week, hopefully we will end on an up note for a change and see some acceptable combination of rollovers and assignments.

However, placing lots of trickle down hope on the basis of earnings from Facebook and Netflix and other such companies that really don’t add great economic value across the spectrum is probably not a good idea.

While cutting edge is great for growth and creation of new markets, it’s still retail, construction, infrastructure that really moves us forward with confidence.

I can’t wait to be able to Tweet out that kind of good news when it actually happens and maybe increase GDP at the same time.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 30, 2014

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle