Category: Daily Market Update

(see all trades this option cycle)

Daily Market Update – January 30, 2014 (9:15 AM)

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.

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.

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 artificially prop up share price.

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 results 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.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 29, 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 – January 29, 2014 (Close)

When the S&P 500 Futures opened for trading about an hour after the Turkish Central Bank announced a huge 4.5% increase in its overnight lending rate, it rallied sending the futures up about 9 points.

This morning they’re down by almost 10 points.

That’s quite a turnaround.

I’m not really certain what the reason for that reversal is, but the overnight futures aren’t necessarily a good indicator of where the markets will find themselves trading the next day. I really don’t know why I even bother looking at them or why I sometimes get hopeful or fearful.

Today, once again, attention gets turned to the 2 PM release of the FOMC minutes and the key question is whether the taper will continue or be deferred, based on recent employment data and perhaps other factors that may reflect a weaker than expected economy.

It’s hard to know what the impact of recent overseas weakness might be on the Federal Reserve. Things used to be very straightforward, but now everything is connected. These days Turkey matters.and you have to wonder whether a 12% overnight rate might pull some money away from the United States and into Turkey or all of the other countries that are bound to raise their rates in response to some rate creep here in the US.

I’m glad I don’t have to think about these sort of things.

While I don’t expect much of a surprise in today’s FOMC release, it’s always fascinating to see the initial responses and so often the reversals of those responses, as well as the delayed responses. So often it seems that an hour later, or sometimes the next day is when euphoria or fear set in.

As with the past two weeks I’m hopeful that the market can hold it together long enough to send some reasonable mixture of rollovers and assignments in order to be able to fully participate in next week’s market.

Until then it may be another bumpy ride as the market has been showing continued weakness this morning and likely to erase yesterday’s gains.

As it would turn out there was no surprise in the FOMC minutes but the market just added to the already triple digit losses, for no real reason, other than prevailing sentiment.

Is this simply a susceptible market or one that is inherently weak? Today I think it’s just a susceptible market.

The likelihood of executing any new purchases to day is pretty small, as I am already at my lower limit for cash reserves at 20% and besides, it’s a Wednesday, which are usually slow anyway.

For now, I’m content to see how the world deals with a changing interest rate environment and currency fluctuations. Those are two things that I really don’t understand and have always kept my distance from those markets.

Whether the current “crisis” is additive, infectious or simply one in passing will be clear in just a few days.

This is a good time to be a passive observer.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 29, 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 – January 29, 2014 (9:15 AM)

When the S&P 500 Futures opened for trading about an hour after the Turkish Central Bank announced a huge 4.5% increase in its overnight lending rate, it rallied sending the futures up about 9 points.

This morning they’re down by almost 10 points.

That’s quite a turnaround.

I’m not really certain what the reason for that reversal is, but the overnight futures aren’t necessarily a good indicator of where the markets will find themselves trading the next day. I really don’t know why I even bother looking at them or why I sometimes get hopeful or fearful.

Today, once again, attention gets turned to the 2 PM release of the FOMC minutes and the key question is whether the taper will continue or be deferred, based on recent employment data and perhaps other factors that may reflect a weaker than expected economy.

It’s hard to know what the impact of recent overseas weakness might be on the Federal Reserve. Things used to be very straightforward, but now everything is connected. These days Turkey matters.and you have to wonder whether a 12% overnight rate might pull some money away from the United STates and into Turkey or all of the other countries that are bound to raise their rates in response to some rate creep here in the US.

I’m glad I don’t have to think about these sort of things.

While I don’t expect much of a surprise in today’s FOMC release, it’s always fascinating to see the initial responses and so often the reversals of those responses, as well as the delayed responses. So often it seems that an hour later, or sometimes the next day is when euphoria or fear set in.

As with the past two weeks I’m hopeful that the market can hold it together long enough to send some reasonable mixture of rollovers and assignments in order to be able to fully participate in next week’s market.

Until then it may be another bumpy ride as the market has been showing continued weakness this morning and likely to erase yesterday’s gains.

The likelihood of executing any new purchases to day is pretty small, as I am already at my lower limit for cash reserves at 20% and besides, it’s a Wednesday, which are usually slow anyway.

For now, I’m content to see how the world deals with a changing interest rate environment and currency fluctuations. Those are two things that I really don’t understand and have always kept my distance from those markets.

Whether the current “crisis” is additive, infectious or simply one in passing will be clear in just a few days.

This is a good time to be a passive observer.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 28, 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 – January 28, 2014 (Close)

It’s probably a good thing that Apple stopped being a market leader about 2 years ago.

There was a time, not too long ago, that we really didn’t need an S&P 500. All we needed was an S&P 1, as long as that one stock was Apple. Back then, as went Apple shares so went the rest of the market.

Apple’s volatility has been falling significantly and is well below 1.00, as it gets closer to moving in a discordant manner with the overall market.

With the earnings disappointment comes lots of questions, mostly around company leadership and not around a changing marketplace that is beginning to get saturated with the highest of margin products and finds itself with alternative choices. If ever there was a time for Apple to introduce a new product genre, it’s now. Supporting Apple’s share price will take lots more than share buy backs or financial engineering, but you can certainly expect a lot more noise on that front if the market doesn’t buoy share price higher as it perceives a bargain.

So a pre-market indication of a nearly 8% loss shouldn’t have too much of an impact, other than on the NASDAQ 100. Instead, this morning saw an early reversal of its nice gains created by a disappointing durable goods number, but at least that has some fundamental, although probably not lasting, value.

While earnings are going to be the key story for the week, and for the most part, they have been surprisingly good this week, there is that matter of one last Bernanke led FOMC meeting, which begins today and culminates with the minutes being released tomorrow.

After about 8 years of Bernanke’s leadership it was surprising that some would still find themselves speculating as to whether Friday’s 300 point drop would play a role in any decision by the committee. The difference between economists and traders is pretty apparent if you have to ask that question.

There’s probably not going to be much in the way of impact from this last meeting, but you never know how interpretations of the nuances perceived in the wording of the minutes will impact the market.

With three new positions opened already this week there still may be room for a couple more, but that would bring me to the lowest cash position that I’m willing to hold. At 20% there would still be sufficient reserve to take advantage of any sudden drop.

But then there’s next week and the week after.

The more insidious drops, such as what we may be undergoing right now, are the ones that are more difficult to manage and slowly suck reserves down, leaving you incapable of fully taking advantage of the opportunity when it actually finally arrives.

The need to continually replenish reserves through assignments becomes  increasingly important as reserves are getting near threshold levels. Hopefully this week, perhaps buoyed by some decent earnings reports lifting the overall market, will reverse a recent trend of disappointments.

Alternatively, rollovers accomplish the same net result, which is to generate income, but do so without the need to re-invent the wheel by finding  new investing opportunities.

Once again, today was a day of watching to see whether the early slightly positive tone could continue past mid-morning. For the first time in 6 trading sessions the market actually finished with a gain. In some cases, that gain, especially in the final hour, as with Texas Instruments, wasn’t wanted as it started to encroach on that $42.80 level that could trigger some early assignments to capture the dividend.

Lately the mid-morning has been a challenge and picking up shares too early in the day has been an example of bad timing swayed by a false promise of a stabilizing market.

With the market now down nearly 4% the question is whether this is just a repeat of previous market drops over the past 21 months that couldn’t go beyond 5% or just an intermediate point in what we all define as a true correction.

Flip a coin and you’re as likely to be right as the next person. Today was a much welcomed respite, despite the fact that we haven’t really seen much in the way of suffering.

I suppose we may all be the investing equivalent of flabby and out of shape, but in that world, I’d rather be in that shape.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 28, 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 – January 28, 2014 (9:30 AM)

It’s probably a good thing that Apple stopped being a market leader about 2 years ago.

There was a time, not too long ago, that we really didn’t need an S&P 500. All we needed was an S&P 1, as long as that one stock was Apple. Back then, as went Apple shares so went the rest of the market.

Apple’s volatility has been falling significantly and is well below 1.00, as it gets closer to moving in a discordant manner with the overall market.

With the earnings disappointment comes lots of questions, mostly around company leadership and not around a changing marketplace that is beginning to get saturated with the highest of margin products and finds itself with alternative choices. If ever there was a time for Apple to introduce a new product genre, it’s now. Supporting Apple’s share price will take lots more than share buy backs or financial engineering, but you can certainly expect a lot more noise on that front if the market doesn’t buoy share price higher as it perceives a bargain.

So a pre-market indication of a nearly 8% loss shouldn’t have too much of an impact, other than on the NASDAQ 100. Instead, this morning saw an early reversal of its nice gains created by a disappointing durable goods number, but at least that has some fundamental, although probably not lasting, value.

While earnings are going to be the key story for the week, and for the most part, they have been surprisingly good this week, there is that matter of one last Bernanke led FOMC meeting, which begins today and culminates with the minutes being released tomorrow.

After about 8 years of Bernanke’s leadership it was surprising that some would still find themselves speculating as to whether Friday’s 300 point drop would play a role in any decision by the committee. The difference between economists and traders is pretty apparent if you have to ask that question.

There’s probably not going to be much in the way of impact from this last meeting, but you never know how interpretations of the nuances perceived in the wording of the minutes will impact the market.

With three new positions opened already this week there still may be room for a couple more, but that would bring me to the lowest cash position that I’m willing to hold. At 20% there would still be sufficient reserve to take advantage of any sudden drop.

But then there’s next week and the week after.

The more insidious drops, such as what we may be undergoing right now, are the ones that are more difficult to manage and slowly suck reserves down, leaving you incapable of fully taking advantage of the opportunity when it actually finally arrives.

The need to continually replenish reserves through assignments becomes  increasingly important as reserves are getting near threshold levels. Hopefully this week, perhaps buoyed by some decent earnings reports lifting the overall market, will reverse a recent trend of disappointments.

Alternatively, rollovers accomplish the same net result, which is to generate income, but do so without the need to re-invent the wheel by finding  new investing opportunities.

Once again, today will probably be a day of watching to see whether the early slightly positive tone can continue past mid-morning.

Lately that has been a challenge and picking up shares too early in the day has been an example of bad timing swayed by a false promise of a stabilizing market.

With the market now down nearly 4% the question is whether this is just a repeat of previous market drops over the past 21 months that couldn’t go beyond 5% or just an intermediate point in what we all define as a true correction.

Flip a coin and you’re as likely to be right as the next person.

.

.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 27, 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 – January 27, 2014 (Close)

While everyone has been spending their time loving to hate Caterpillar, they may owe an apology to the company for perhaps being what stood between a 300 point down day on Friday and its continuation today, as overseas markets opened the week much lower.

At a time when earnings may actually matter nothing speaks more loudly than a company that gets dirt under their fingernails and is actually making profits, particularly if those profits have some tie to China.

Thank you, Caterpillar. That was the most unnerving 3% market drop ever.

Not really, but memory is short and when it comes to the past only yesterday really matters.

However, with recent news of a deterioration in the Chinese economy also comes a deterioration of the emphasis that the Chinese economy has had on Caterpillar’s fortunes. For the past couple of years Caterpillar’s reliance on China has been overly exaggerated and shares have been adversely impacted well out of proportion to the company’s exposure when bad news was reported.

That link may now take a little bit of a break, but it’s still likely that Caterpillar’s detractors will still help keep a floor on shares as earnings news becomes dated.

In a way, I’m happy to see the good performance this morning, but I was hoping to be able to pick up shares below $85 on earnings news.

In the big picture, I’d rather see Caterpillar add some stability to the market than brood over losing an opportunity to pick up shares.

The market’s inconsistencies never cease to amaze me. In this case, besides the China thesis being conveniently being discarded, some may remember that barely a weak ago the Caterpillar CEO, Doug Oberhelman was being broadly pilloried, for among other things accusations that he engaged in share buy backs at too high prices specifically to prop up share price.

Yet today the market applauds the announcement of a new $10 billion share buyback as Caterpillar is hitting recent highs.

The only lesson to be learned is that it doesn’t really pay to pay attention.

This week will be one that is likely to be entirely defined by earnings and may see a number of gyrations as the numbers come across. Although there will be an FOMC meeting and minutes released on Wednesday, it’s likely to be the third consecutive meeting with little to no real impact on the market.

We start this week with prices looking much better, but the market’s stability at the opening today may actually just muddle the picture. I would have preferred some continuing weakness, albeit in a slow and methodical way. The problem with abrupt changes is that you really don’t have any inkling of whether there is reason to keep going in the same direction. Are you seeing an aberration or the beginning of a trend?

By the time you often feel comfortable enough to answer that question it’s likely to be too late.

While I like to exercise caution I don’t like to be frozen in place and always feel a need to put idle funds to work, as best as possible.

This week, however, just as the prior week, I didn’t see as many assignments as I would have expected and am sitting with a smaller cash reserve than usual to start the week.

For those that do have cash in reserve the question is whether you want to risk the strategic build up of that pile at a time when it isn’t clear where the direction is going.

I’m not very willing to go below 20%, which would mean on the order of 5 new positions this week.

Looking at those positions that are set to expire this Friday I’m encouraged that there’s a chance to replenish reserves, but that’s how I felt the previous two weeks, as well. As we get closer to the end of the week and the likelihood of assignments looks better, that may loosen up some of my inhibitions.

To start this week I’m mindful that several trading days last week started off on a positive note, but turned around fairly quickly and decidedly. So while encouraged by the morning’s trend, it’s probably best to wait to see if the commitment is really there once the bell rings.

While there may be some room for some more speculative trades this week, specifically earnings related, it’s probably a good idea to focus again on dividends and more staid stories.

Sometimes excitement is totally unnecessary.

.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 27, 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 mo
nthly option cycle

(see all trades this option cycle)

Daily Market Update – January 27, 2014 (9:15 AM)

While everyone has been spending their time loving to hate Caterpillar, they may owe an apology to the company for perhaps being what stood between a 300 point down day on Friday and its continuation today, as overseas markets opened the week much lower.

At a time when earnings may actually matter nothing speaks more loudly than a company that gets dirt under their fingernails and is actually making profits, particularly if those profits have some tie to China.

Thank you, Caterpillar. That was the most unnerving 3% market drop ever.

However, with recent news of a deterioration in the Chinese economy also comes a deterioration of the emphasis that the Chinese economy has had on Caterpillar’s fortunes. For the past couple of years Caterpillar’s reliance on China has been overly exaggerated and shares have been adversely impacted well out of proportion to the company’s exposure when bad news was reported.

That link may now take a little bit of a break, but it’s still likely that Caterpillar’s detractors will still help keep a floor on shares as earnings news becomes dated.

In a way, I’m happy to see the good performance this morning, but I was hoping to be able to pick up shares below $85 on earnings news.

In the big picture, I’d rather see Caterpillar add some stability to the market than brood over losing an opportunity to pick up shares.

This week will be one that is likely to be entirely defined by earnings and may see a number of gyrations as the numbers come across.

We start this week with prices looking much better, but the market’s stability at the opening today may actually just muddle the picture. I would have preferred some continuing weakness, albeit in a slow and methodical way. The problem with abrupt changes is that you really don’t have any inkling of whether there is reason to keep going in the same direction. Are you seeing an aberration or the beginning of a trend?

By the time you often feel comfortable enough to answer that question it’s likely to be too late.

While I like to exercise caution I don’t like to be frozen in place and always feel a need to put idle funds to work, as best as possible.

This week, however, just as the prior week, I didn’t see as many assignments as I would have expected and am sitting with a smaller cash reserve than usual to start the week.

For those that do have cash in reserve the question is whether you want to risk the strategic build up of that pile at a time when it isn’t clear where the direction is going.

I’m not very willing to go below 20%, which would mean on the order of 5 new positions this week.

Looking at those positions that are set to expire this Friday I’m encouraged that there’s a chance to replenish reserves, but that’s how I felt the previous two weeks, as well. As we get closer to the end of the week and the likelihood of assignments looks better, that may loosen up some of my inhibitions.

To start this week I’m mindful that several trading days last week started off on a positive note, but turned around fairly quickly and decidedly. So while encouraged by the morning’s trend, it’s probably best to wait to see if the commitment is really there once the bell rings.

While there may be some room for some more speculative trades this week, specifically earnings related, it’s probably a good idea to focus again on dividends and more staid stories.

Sometimes excitement is totally unnecessary.

.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 24, 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 – January 24, 2014 (9:00 AM)

The Weekend Update will be posted by 7 PM (EST) tonight and the Week in Review will be posted by noon on Sunday:

Today’s possible outcomes, include:

Assignment:  CHK, LLY

Rollover:  CSCO, HFC, LOW, MOS, MRO

Expiration:  LULU, WAG, WLT

Trades, if any, will be attempted to be made before 3:30 PM (EST), where possible.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 23, 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