Category: Daily Market Update

Daily Market Update – August 17, 2016 (Close)

The futures were again pointing to a flat open this morning.

That’s something that we should be getting used to, perhaps being a sign that the market is getting jittery about what is coming next.

The biggest reason to be worried is that maybe nothing is coming next.

If the economy continues as it has been going and there is no real evidence of the kind of growth that would justify even the smallest of interest rate increases, it’s going to be pretty hard to keep interest in buying sustained.

After hearing 2 of the Federal Reserve’s Presidents speak yesterday, ahead of today’s FOMC meeting minutes release, you would think that they’re seeing some kind of data or pattern that would justify a rate increase, but the market is getting far too many mixed signals.

Still, even with yesterday’s minor decline, it continues to be record high after record high.

We are even now at the point that this is only the 4th time in history that the market has gone up more than another 2% after surpassing its previous record closing high.

So this isn’t necessarily a unique period in time, but it is a pretty rare one.

At some point traders will wake up.

What we don’t know is whether they wake up to a realization that nothing has been warranted on the basis of fundamentals or whether they realized that as old as this bull market may now be, we’re still at the beginning.

It’s hard to believe that the latter will be the case, but as long as it’s surprises that you’re going to dismiss, you may as well dismiss everything that has already gotten us to where we are and whose reality has been validated.

As we were to come upon mid-week and the FOMC minutes were to be released, we did find reason for the market to wander from its flatness of the morning.

There were also some more earnings reports due and those were reason for an early market reaction, although yesterday’s news from Home Depot was met with a very muted response.

Today, the response was less muted, but it was also shorter.

That’s because the market liked what it saw in those FOMC minutes, even as they said nothing.

My expectations for any action today were small, but there were a couple of potential trades to open short call positions on currently uncovered positions.

That alone would have given me a reason to think that this week was worthwhile, but I’ll still be asking that question as tomorrow comes around.

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Daily Market Update – August 17, 2016 (7:30 AM)

The futures are again pointing to a flat open this morning.

That’s something that we should be getting used to, perhaps being a sign that the market is getting jittery about what is coming next.

The biggest reason to be worried is that maybe nothing is coming next.

If the economy continues as it has been going and there is no real evidence of the kind of growth that would justify even the smallest of interest rate increases, it’s going to be pretty hard to keep interest in buying sustained.

After hearing 2 of the federal Reserve’s Presidents speak yesterday, ahead of today’s FOMC meeting minutes release, you would think that they’re seeing some kind of data or pattern that would justify a rate increase, but the market is getting far too many mixed signals.

Still, even with yesterday’s minor decline, it continues to be record high after record high.

We are even now at the point that this is only the 4th time in history that the market has gone up more than another 2% after surpassing its previous record closing high.

So this isn’t necessarily a unique period in time, but it is a pretty rare one.

At some point traders will wake up.

What we don’t know is whether they wake up to a realization that nothing has been warranted on the basis of fundamentals or whether they realized that as old as this bull market may now be, we’re still at the beginning.

It’s hard to believe that the latter will be the case, but as long as it’s surprises that you’re going to dismiss, you may as well dismiss everything that has already gotten us to where we are and whose reality has been validated.

As we come upon mid-week and the FOMC minutes are released, we may have reason for the market to wander from its flatness of the morning.

There are also some more earnings reports due and there may yet be reason for a market reaction, although yesterday’s news from Home Depot was met with a very muted response.

My expectations for any action today are small, but there are a couple of potential trades to open short call positions on currently uncovered positions.

That alone would give me a reason to think that this week was worthwhile.

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Daily Market Update – August 16, 2016 (Close)

The futures were pointing to a flat open this morning as the market finished yesterday off from its highs, but still managing to post all time closing highs once again in all three major indexes.

That grind higher has been continual ever since we got over the “Brexit” vote and learned to move the market higher even in the absence of news.

With retailer reports still coming in this week, the morning started with DJIA component Home Depot reaffirming guidance.

Based on the way the market received last week’s retail news in which retailers surged higher on basically flat earnings and downgraded guidance, you would think that there would be a push to go much higher this morning, at least in that one stock.

But that wasn’t the case today.

Not only for the market, but neither for Home Depot itself.

Maybe everyone always expects too much from them and have settled on lowered expectations for most everyone else.

It will be interesting to see how Wal-Mart is greeted this week as it has had lowered expectations for a while at this point.

In the meantime, with tomorrow being the release of the FOMC minutes it’s hard to know where the real push to go higher will come from easy as those who bet on those sort of things pushed up the likelihood of a September increase today and did so by 100%.

Now, the expected chance of such an increase is at 18%, following some words today from Federal reserve Presidents Dudley and Lockhart.

Other than the past 2 months Employment Statistics Reports, there really hasn’t been much news to validate the idea that the economy is expanding at a rate that might warrant the FOMC getting ready to roll out another rate hike, but at least one voting member expressed an opinion that one is likely.

For those that had good reason to expect multiple such rate increases in 2016, we are now facing the final 4 months of the year without having had a single one.

At the current record levels it’s hard to see anything other than disappointment as any kind of news comes in, given how the market has mostly been paradoxical in its responses over the past few years.

The only logical response at this point would be to drop that contrarian response to economic news and see the good as good and the bad, as bad.

I don’t know if that will start to happen this week.

After yesterday’s gain, but no real opportunity to do anything constructive, I don’t really know what the rest of the week will bring, other than having to watch two expiring positions.

I suppose I could do that from the beach.

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Daily Market Update – August 16, 2016 (7:30 AM)

The futures are pointing to a flat open this morning as the market finished yesterday off from its highs, but still managing to post all time closing highs once again in all three major indexes.

That grind higher has been continual ever since we got over the “Brexit” vote and learned to move the market higher even in the absence of news.

With retailer reports still coming in this week, the morning started with DJIA component Home Depot reaffirming guidance.

Based on the way the market received last week’s retail news in which retailers surged higher on basically flat earnings and downgraded guidance, you would think that there would be a push to go much higher this morning, at least in that one stock.

But so far that isn’t the case.

With tomorrow being the release of the FOMC minutes it’s hard to know where the real push to go higher will come from.

Other than the past 2 months Employment Statistics Reports, there really hasn’t been much news to validate the idea that the economy is expanding at a rate that might warrant the FOMC getting ready to roll out another rate hike.

For those that had good reason to expect multiple such rate increases in 2016, we are now facing the final 4 months of the year without having had a single one.

At the current record levels it’s hard to see anything other than disappointment as any kind of news comes in, given how the market has mostly been paradoxical in its responses over the past few years.

The only logical response at this point would be to drop that contrarian response to economic news and see the good as good and the bad, as bad.

I don’t know if that will start to happen this week.

After yesterday’s gain, but no real opportunity to do anything constructive, I don’t really know what the rest of the week will bring, other than having to watch two expiring positions.

I suppose I could do that from the beach.

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Daily Market Update – August 15, 2016 (Close)

Last week saw us hitting highs on all 3 major indexes, yet finishing basically unchanged on the week.

This week we could be facing a big push from earnings from national retailers once again.

Last week it was a strong push higher, but this week we really may be at an inflection point.

If the news is good, there may be reason to push the market even higher as there becomes a sense that perhaps the FOMC will act soon to raise interest rates.

If the numbers or the guidances are weak, then it’s really anyone’s guess.

My guess is that it would be hard to justify a market doing anything but going lower.

But if I was being judged on just today, that guess would have been pretty off base, as all 3 major indexes again hit new all time closing highs, as oil led the way, but retail was again strong.

For the coming week, coinciding with the end of the monthly cycle, there are 2 expiring positions and 2 ex-dividend positions.

While I do have money to spend, I really don’t see where the real attraction is going to come from, although there may be reason to consider the very small handful of choices this week.

I imagine that I’ll be doing a lot of watching this week.

The market looked as if it is going to open fairly flat, but you never do know what surprises there may be.

The only surprise today was more rebound strength in oil, but that was more than enough.

Last Thursday, for example, was a nice surprise higher, but it’s hard to imagine that this week’s retail earnings numbers will really continue to surprise.

That’s especially so when you consider that there really wasn’t anything very good to report last week.

Hopefully, that will change this week and we find a real reason to see the market take off.

In either direction.

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Daily Market Update – August 15, 2016 (7:30 AM)

Last week saw us hitting highs on all 3 major indexes, yet finishing basically unchanged on the week.

This week we could be facing a big push from earnings from national retailers once again.

Last week it was a strong push higher, but this week we really may be at an inflection point.

If the news is good, there may be reason to push the market even higher as there becomes a sense that perhaps the FOMC will act soon to raise interest rates.

If the numbers or the guidances are weak, then it’s really anyone’s guess.

My guess is that it would be hard to justify a market doing anything but going lower.

For the coming week, coinciding with the end of the monthly cycle, there are 2 expiring positions and 2 ex-dividend positions.

While I do have money to spend, I really don’t see where the real attraction is going to come from, although there may be reason to consider the very small handful of choices this week.

I imagine that I’ll be doing a lot of watching this week.

The market looks as if it is going to open fairly flat, but you never do know what surprises there may be.

Last Thursday, for example, was a nice surprise higher, but it’s hard to imagine that this week’s retail earnings numbers will really continue to surprise.

That’s especially so when you consider that there really wasn’t anything very good to report last week.

Hopefully, that will change this week and we find a real reason to see the market take off.

In either direction.

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Daily Market Update – August 12, 2016 (7:30 AM)

The Week in Review will be posted by 10 PM and the Weekend Update will be posted by Noon on Sunday.

The following trade outcomes are possible today:

Assignments: none

Rollovers: MRO puts

Expirations:   none

The following were ex-dividend this week:   AZN (8/8 $0.44), IP (8/11 $0.44)

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

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Daily Market Update – August 11, 2016 (Close)

This morning’s futures, although only mildly higher, were already showing more of a move than the cumulative absolute value moves in the 3 previous days of this week.

When it was all over, all 3 of the major indexes closed at record highs.

When the morning started there was a chance that the move higher could grow if only retailer earnings that were set to begin in the morning could give some sense of hope that all was well on the consumer side of things.

With 2 big ones before the market’s open being interpreted as having been good news, despite word of 100 store closures at Macy’s and decreased guidance at Kohls, the market never looked back and was even buoyed by a bounce in oil later in the session.

As far as the news of the day goes, those retailers continue next week and oil is a potential issue day in and day out.

After we received reports from 3 key national retailers today, we also get the official retail Sales Report tomorrow morning.

The reasonably strong earnings reports today, even though not fueled by really positive guidance, could still be more meaningful to investors than tomorrow’s official numbers.

Even if earnings aren’t wonderful, if those upcoming retailers start to paint a brighter future for the quarters ahead, that guidance will likely be far more important than anything the government may have to report tomorrow, that will only be backward looking.

Strong guidance would give investors the belief that the FOMC is going to have more of a reason to raise interest rates sooner, rather than needing to wait until December, as is increasingly the consensus.

While yesterday was another in a series of flat days, wouldn’t you know it, the one position that did rally was the one going ex-dividend today?

I did get the opportunity to roll over that position for another month. The goal in that transaction was to get at least a premium as large as the dividend, in the event that the position would still be assigned early.

That was achieved and a bit more, as well, as the additional ROI for the rollover was about 1.3% versus an almost 1% quarterly dividend.

I actually would mind neither the prospect of an early assignment, which didn’t appear to be the case in the morning and was reported by no one as having been the case, or keeping the position alive and just adding to its cumulative ROI, even as the underlying security hasn’t gone very far. 

In this case, if the position does get assigned next month, the 10 month holding will yield an ROI of almost 19%, half of which is from dividends and premiums, while the comparable S&P 500 move was 3.6%, exclusive of dividends.

That’s the way it’s supposed to work, but those opportunities have been rare as the goal had been for shorter term holding periods. However, as markets have increasingly moved the strategy toward longer term holdings, the dual sources of income, dividends and premiums, have become increasingly welcome news.

With the one expiring position for the week that happens to be a short put, I do want to take assignment of shares as the position is ex-dividend on Monday.

Hopefully, if that does happen, there will be a quick and easy opportunity to sell some calls and then exit that new position or even continue rolling those calls over, as had been the case with some other recent new positions, whether short calls or puts.

Today, I actually came close to rolling the puts over as even factoring in the lost dividend, the net premium was pretty go
od
. if that position continues to hover around the strike price, I may try it again tomorrow.

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Daily Market Update – August 11, 2016 (7:30 AM)

This morning’s futures, although only mildly higher, is already showing more of a move than the cumulative absolute value moves in the 3 previous days of this week.

That may become an even greater move as retailer earnings begin to get released this morning and continue after the day’s close to trading.

Those reports will also continue through next week.

After we receive reports from 3 key national retailers today, we also get the official retail Sales Report tomorrow morning.

Strong earnings today, coupled with strong guidance would likely be more meaningful to investors than tomorrow’s official numbers.

Even if earnings aren’t wonderful, if those retailers start to paint a brighter future for the quarters ahead, that guidance will likely be far more important than anything the government may have to report tomorrow, that will only be backward looking.

Strong guidance would give investors the belief that the FOMC is going to have more of a reason to raise interest rates sooner, rather than needing to wait until December, as is increasingly the consensus.

While yesterday was another in a series of flat days, wouldn’t you know it, the one position that did rally was the one going ex-dividend today?

I did get the opportunity to roll over that position for another month. The goal in that transaction was to get at least a premium as large as the dividend, in the event that the position would still be assigned early.

That was achieved and a bit more, as well, as the additional ROI for the rollover was about 1.3% versus an almost 1% quarterly dividend.

I actually would mind neither the prospect of an early assignment, which doesn’t appear to be the case so far this morning or keeping the position alive and just adding to its cumulative ROI, even as the underlying security hasn’t gone very far. 

In this case, if the position does get assigned next month, the 10 month holding will yield an ROI of almost 19%, half of which is from dividends and premiums, while the comparable S&P 500 move was 3.6%, exclusive of dividends.

That’s the way it’s supposed to work, but those opportunities have been rare as the goal had been for shorter term holding periods. However, as markets have increasingly moved the strategy toward longer term holdings, the dual sources of income, dividends and premiums, have become increasingly welcome news.

With the one expiring position for the week that happens to be a short put, I do want to take assignment of shares as the position is ex-dividend on Monday.

Hopefully, if that does happen, there will be a quick and easy opportunity to sell some calls and then exit that new position or even continue rolling those calls over, as had been the case with some other recent new positions, whether short calls or puts.

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Daily Market Update – August 10, 2016 (Close)

Yesterday and Monday both started the week very quietly and the futures this morning seemed as if they were going to carry on with that tradition of the past week.

And once again, they did.

Things may change in a big way if retail earnings start coming in and are surprisingly strong or surprisingly weak. Last week’s Employment Situation Report gave interest rate hawks a little more to believe in, but the GDP was an argument in favor of the other side.

This week, as retailers begin to report and as Retail Sales data is released on Friday, we can either find validation for the hawks or another nail in the coffin for those betting on an interest rate hike coming in 2016, which is rapidly coming to its end.

Otherwise, once the retail reports are in, there won’t be very much left in this earnings season to move markets and so we’re back to an FOMC watch as meandering economic data comes in and everyone gets back to work on fiscal policy once Labor Day has come and gone.

With a single expiring position this week that happens to be a short put position that also goes ex-dividend on Monday, I actually wouldn’t mind being assigned the position, even as the dividend is a paltry one. Because of that dividend, I don’t have too much interest in rolling the position over, unless the net from the rollover is still going to be 1% or higher.

In that case, it may be worth giving up on the dividend and continuing to collect the premiums on the position.

Either way, it would be nice to either milk that position for even more or at least get some cash out of the position through assignment, as long as there’s an opportunity to recycle it somewhere.

Right now, those opportunities seem slight, though.

It’s pretty sad when the most exciting thing for the week may end up being whether to consider rolling over a position that goes ex-dividend tomorrow in order to either get more premium in exchange for early assignment or simply add to the accumulation of premium while still getting that dividend.

But that’s all today was expected to bring and at least in that regard it didn’t disappoint.

With an opportunity, or even a need to roll over that position in International Paper, now I actually hope that it does get assigned early, but I’m not counting on it.

Going forward another month with a new expiration date in exchange for 1.3% in premium in exchange for possibly giving up a 1% dividend would be worth it if assigned tomorrow. Even if not, I wouldn’t mind rolling up more premiums in the position if having to take it beyond the September expiration.

Longer term is becoming the name of the game.

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