Category: Daily Market Update

Daily Market Update – November 10,  2015  (7:30 AM)

For people who like to track such things, yesterday’s very unexpected and unwarranted market decline brought the DJIA. on a YTD basis to a loss.

The S&P 500 isn’t very far behind and stands only about 20 points, or 1% away from the flat line, with only about 7 weeks left to go in 2015.

It’s really hard to say what was responsible for yesterday’s sharp decline, which was actually less of a sharp decline after it all settled.

It could be that some finally came to the realization that we’re about to enter into an era that we haven’t seen in about 9 years, as the FOMC has to be getting as ready as it ever has to institute that very first interest rate hike.

However, given the fact that no one believes that rate increase will be more than 0.5%, with most in the 0.25% camp, it’s equally hard to understand what the logical basis is for the belief that even the larger end of that rise would result in any meaningful slowing of any economic expansion.

That’s generally the fear, but it usually only becomes a real issue when in hindsight you come to the realization that the cumulative interest rate hikes over time have tipped the economy.

That’s just not likely to occur with the first in a series, especially when there’s no indication of a really heated up economy that’s in danger of boiling.

Besides, history shows that the early stages of interest rate increases are during a healthy economy and a healthy stock market.

That’s what you would expect if the market is looking at fundamentals and is also discounting the future 6 months, as is widely believed to be the case.

Who knows what accounted for yesterday, but this morning shows some moderation as the futures are trading, although they showed the same thing yesterday and then the bottom just dropped out when the bell finally rang.

With yesterday’s decline I wasn’t as enthused about spending money from cash reserves as I might have been had the decline been more moderate. I just like to have some idea of why a market is climbing strongly or declining strongly, especially the latter.

The exercise of hindsight may demonstrate that it would have been a good idea to dip further into cash reserves, as most declines since the August correction began have represented some good entry points.

The difference here, perhaps, is that even with yesterday’s decline, the S&P 500 is now only down about 3% from its all time highs. That leaves plenty of room for more downside, especially given the uninterrupted climb higher since the beginning of October.

I’ll still be on the lookout for anything that may seem like a bargain today and would be especially attracted to more dividend paying positions, but caution may still be warranted.

At this point, I’m more concerned with positions expiring next week and am hopeful that among them will be some assignments and rollovers. I don’t really want to add much to that list if buying any other new positions this week and would like to get much better diversified in terms of expiration dates.

That will be played by ear as the week plays itself out.

Daily Market Update – November 9,  2015  (Close)

Last week was another in a series of weeks with the market moving higher as it now seems as if it is fully ready to accept an increase in interest rates, maybe as early as this December.

This week may provide more of the data that the FOMC is seeking in order to justify their decision, but after last week’s Employment Situation Report that came in about 80% higher than what the FOMC indicated would be a level sufficient to warrant such an increase, it seems fairly certain that decision will be made very soon.

The data that’s coming this week will be from a number of national retailers and it will continue through to next week. Very much on an anecdotal level, I went into two big box retailers yesterday and they were packed

Also coming this week, at the very end of the week, will be the official Retail Sales figures. The government’s data never seems to be as compelling as what the CEOs and CFOs of those national big box retailers have to present.

What may really be key this week is not so much the top and bottom lines for retailers, although it would be nice to see some improvement on the top lines and a bottom line that is less manipulated by stock buy backs, but forward guidance. Most retailers tend to move on their forward guidance, which typically compounds the impact of the earnings that were just reported.

Insofar as the data being reported is already at least 3 months old, what may be far more important is what trends those retailers may be seeing in their stores.

They tend not to be overly optimistic when providing guidance, so any positive tone should be a signal that personal spending is finally on the move higher and the FOMC is sure to take note.

What we’re looking for is that inflection point that takes CEOs from cautious to optimistic as they finally see a consumer that feels confident that their new job has some security and now they are willing to make up for lost time not having done much in the way of discretionary spending.

As long as the market is going to continue interpreting good economic news as being good for the market, that should be a signal to move higher.

This morning, the pre-open futures were on the weak side, but only mildly so. Following last week, there was not too much reason to pay attention to the early direction of trading. What wasn’t terribly expected was the ferocity of the sell-off that started right at the opening bell and then lasted until noon.

After a quiet week of adding new positions last week and with no positions expiring this week, I would have liked to take cash reserves and do something with them, but when you see such a sharp decline and for no real reason, it usually doesn’t make too much sense to go on a spending spree.

After 2 assignments last week I’m at my highest cash level in quite a while, although I’d like to see it get even higher. However, that has to be balanced with a desire to generate some weekly income.

With any weakness to open the week, as opposed to last week, I would have been happy to part with some of those cash reserves, but as it would turn out, I was more reluctant than I would have expected.

With volatility remaining at such low levels after another week of the market having moved higher, I’d again like to focus on positions also paying dividends this week or next in an effort to supplement the cash stream in the coming weeks. Today’s new position stayed laser focused.

With a number of positions set to expire next week, the likelihood is that any new purchases this week will continue use either weekly options or seek to bypass the coming week and go straight to the first week of the December 2015 option cycle.

I hope that tomorrow turns out to be another of these week days to let the market take a little bit of a breath after its very impressive gains of the past 5 weeks. Sometimes it has to do s
o in big chunks, though.

Daily Market Update – November 9,  2015  (7:30 AM)

Last week was another in a series of weeks with the market moving higher as it now seems as if it is fully ready to accept an increase in interest rates, maybe as early as this December.

This week may provide more of the data that the FOMC is seeking in order to justify their decision, but after last week’s Employment Situation Report that came in about 80% higher than what the FOMC indicated would be a level sufficient to warrant such an increase, it seems fairly certain that decision will be made very soon.

The data that’s coming this week will be from a number of national retailers and it will continue through to next week. Very much on an anecdotal level, I went into two big box retailers yesterday and they were packed

Also coming this week, at the very end of the week, will be the official Retail Sales figures. The government’s data never seems to be as compelling as what the CEOs and CFOs of those national big box retailers have to present.

What may really be key this week is not so much the top and bottom lines for retailers, although it would be nice to see some improvement on the top lines and a bottom line that is less manipulated by stock buy backs, but forward guidance. Most retailers tend to move on their forward guidance, which typically compounds the impact of the earnings that were just reported.

Insofar as the data being reported is already at least 3 months old, what may be far more important is what trends those retailers may be seeing in their stores.

They tend not to be overly optimistic when providing guidance, so any positive tone should be a signal that personal spending is finally on the move higher and the FOMC is sure to take note.

What we’re looking for is that inflection point that takes CEOs from cautious to optimistic as they finally see a consumer that feels confident that their new job has some security and now they are willing to make up for lost time not having done much in the way of discretionary spending.

As long as the market is going to continue interpreting good economic news as being good for the market, that should be a signal to move higher.

This morning, the pre-open futures are on the weak side, but only mildly so. Following last week, there’s not too much reason to pay attention to the early direction of trading.

On the other hand, after a quiet week of adding new positions last week and with no positions expiring this week, I would like to take cash reserves and do something with them.

After 2 assignments last week I’m at my highest cash level in quite a while, although I’d like to see it get even higher. However, that has to be balanced with a desire to generate some weekly income.

With any weakness to open the week, as opposed to last week, I would be happy to part with some of those cash reserves.

With volatility remaining at such low levels after another week of the market having moved higher, I’d again like to focus on positions also paying dividends this week or next in an effort to supplement the cash stream in the coming weeks.

With a number of positions set to expire next week, the likelihood is that any new purchases this week will use either weekly options or seek to bypass the coming week and go straight to the first week of the December 2015 option cycle.

Daily Market Update – November 6,  2015  (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:  MS, WMT

Expirations:  BBY, F

The following were ex-dividend this week:  BP (11/4 $0.60), INTC (11/4 $0.24)

The following are ex-dividend next week:  IP (11/12  $0.44)

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

Daily Market Update – November 5,  2015  (Close)

So far, this week hasn’t really had anything terribly newsworthy, at least as far as the markets are concerned.

That didn’t stop the first 2 days of the week from showing nice gains, despite having had lackluster pre-opening futures sessions that offered no predictive guidance.

This morning looked to be another of those quiet opens, but today it may made more sense for the market to keep a relative lid on things, just as it did yesterday.

For a change, it actually did what it made sense to do.

While the week has been a quiet one on the news front, that can all change tomorrow as the Employment Situation Report is released before the market’s open.

It really is anyone’s guess how the market will respond to any kind of number, but most people are of the belief that the FOMC’s new guideline of 150,000 newly created jobs will be easily surpassed, although last month could prove to be something other than an aberration.

The real question is what will now be the new “disappointment.”

Will traders be disappointed if that employment number from last month proves not to have been an aberration or will they revert back to their old selves and look at such bad news as prolonging a sort of free money environment.

For the longest time I’ve been waiting for traders to be of the more rational mindset that good economic news, especially at the beginning of a tangible up slope, has to be good for the market and for corporate profits.

But for the longest time those traders have looked at anything reflecting an improving economy as being bad for them.

Historically, that’s been true in the later phases of an expansion, but not really true in the early phases.

Despite slow and steady climbs in employment over the past few years, there still hasn’t been that obvious upswing in the economy that’s usually fueled by people going back to work and believing that they will be in work for some time to come.

Maybe tomorrow will finally get traders to believe that the economy is growing enough to begin their focus on such things as revenues and real profits, not the kind that are manufactured through stock buybacks or cost cuts.

With a number of positions set to expire tomorrow, I may be a little defensive if some offer an opportunity to rollover. That would be the case if I thought they would be less likely to be assigned, especially with tomorrow’s overhang.

As with last month, you can’t discount the possibility of a strong market reaction to the report’s release and then a strong counter- reaction to that reaction.

I would just like to end the week with some money to move forward next week and maybe some extra income.

That’s the case every week, but for now we may be held hostage by tomorrow.

Daily Market Update – November 5,  2015  (7:30 AM)

So far, this week hasn’t really had anything terribly newsworthy, at least as far as the markets are concerned.

That didn’t stop the first 2 days of the week from showing nice gains, despite having had lackluster pre-opening futures sessions that offered no predictive guidance.

This morning looks to be another of those quiet opens, but today it may make more sense for the market to keep a relative lid on things, just as it did yesterday.

While the week has been a quiet one on the news front, that can all change tomorrow as the Employment Situation Report is released before the market’s open.

It really is anyone’s guess how the market will respond to any kind of number, but most people are of the belief that the FOMC’s new guideline of 150,000 newly created jobs will be easily surpassed, although last month could prove to be something other than an aberration.

The real question is what will now be the new “disappointment.”

Will traders be disappointed if that employment number from last month proves not to have been an aberration or will they revert back to their old selves and look at such bad news as prolonging a sort of free money environment.

For the longest time I’ve been waiting for traders to be of the more rational mindset that good economic news, especially at the beginning of a tangible up slope, has to be good for the market and for corporate profits.

But for the longest time those traders have looked at anything reflecting an improving economy as being bad for them.

Historically, that’s been true in the later phases of an expansion, but not really true in the early phases.

Despite slow and steady climbs in employment over the past few years, there still hasn’t been that obvious upswing in the economy that’s usually fueled by people going back to work and believing that they will be in work for some time to come.

Maybe tomorrow will finally get traders to believe that the economy is growing enough to begin their focus on such things as revenues and real profits, not the kind that are manufactured through stock buybacks or cost cuts.

With a number of positions set to expire tomorrow, I may be a little defensive if some offer an opportunity to rollover. That would be the case if I thought they would be less likely to be assigned, especially with tomorrow’s overhang.

As with last month, you can’t discount the possibility of a strong market reaction to the report’s release and then a strong counter- reaction to that reaction.

I would just like to end the week with some money to move forward next week and maybe some extra income.

That’s the case every week, but for now we may be held hostage by tomorrow.

Daily Market Update – November 4,  2015  (Close)

After 2 days of really nice gains, despite some give back in yesterday’s trading, the S&P 500 was sitting only about 1.5% below its all time high as the day started.

There was certainly nothing to suggest that the market would have taken the opportunity to spend the past 2 days in a celebratory mode, especially since the final day of this week could be an antidote to the happiness.

It’s really hard to understand how the market will react to Friday’s Employment Situation Report, but it seems that everyone is again willing to accept the fact that the FOMC will either be really ready to raise rates very soon, or at the very least will increase their hawkish tone, as there’s little reason to believe that the upcoming Employment Situation Report won’t reach the fairly feeble threshold that was just set.

The difficulty in predicting what may happen at the end of the week is that there could be a “buy on the rumor, sell on the news” kind of situation being set up if the number is well above 150,000, as it had been for much of the past 3 years, other than last month.

Alternatively, if the number continues on the very low side and maybe teeters near 150,000 again, there may be some concern.

If the number is really strong and especially if there are revisions to last month’s low number, there could be reason for even more buying on the basis of “good news is again good news,” with traders believing that rates could possibly be raised even as early as December.

Friday will be a big day, but next week, as national retailers report, could be even bigger, if the top line numbers are strong.

While the bottom line is important, right now the real focus is on whether people are spending money and not as much on how businesses are managing their businesses.

With only a single purchase for the week and with all of those prospective dividend plays being ex-dividend today, I don’t think there will be too much more activity for the week, other than to keep an eye on those positions due to expire in a few days.

With the unknown of Friday’s Employment Situation report coming up and with volatility back down to its usual low levels, there’s very little reason now to think about taking the risk of 3 day options, as the reward is so very low. Any new purchase now would really have to look at an extended or a monthly option to be remotely appealing. But with big news looming on Friday, I don’t have much reason to get in front of that news.

At this point, I would have much rather seen the market continue the week’s trend and move higher. I didn’t mind going along for the ride, especially if energy was part of it, as it was yesterday and being able to roll over existing positions or see them assigned.

Maybe tomorrow.

But, if that’s the case, then the pattern starts over again and the wish is for some pullback to start next week, perhaps with more cash in hand to pick up relative bargains, as the evidence will continue coming in to suggest that the economy is heating up and may perhaps serve as the most appropriate catalyst for the market to begin testing and exceeding its highs.

.

Daily Market Update – November 4,  2015  (7:30 A.M.)

After 2 days of really nice gains, despite some give back in yesterday’s trading, the S&P 500 is now sitting only about 1.5% below its all time high.

There was certainly nothing to suggest that the market would have taken the opportunity to spend the past 2 days in a celebratory mode, especially since the final day of this week could be an antidote to the happiness.

It’s really hard to understand how the market will react to Friday’s Employment Situation Report, but it seems that everyone is again willing to accept the fact that the FOMC will either be really ready to raise rates very soon, or at the very least will increase their hawkish tone, as there’s little reason to believe that the upcoming Employment Situation Report won’t reach the fairly feeble threshold that was just set.

The difficulty in predicting what may happen at the end of the week is that there could be a “buy on the rumor, sell on the news” kind of situation being set up if the number is well above 150,000, as it had been for much of the past 3 years, other than last month.

Alternatively, if the number continues on the very low side and maybe teeters near 150,000 again, there may be some concern.

If the number is really strong and especially if there are revisions to last month’s low number, there could be reason for even more buying on the basis of “good news is again good news,” with traders believing that rates could possibly be raised even as early as December.

Friday will be a big day, but next week, as national retailers report, could be even bigger, if the top line numbers are strong.

While the bottom line is important, right now the real focus is on whether people are spending money and not as much on how businesses are managing their businesses.

With only a single purchase for the week and with all of those prospective dividend plays being ex-dividend today, I don’t think there will be too much more activity for the week, other than to keep an eye on those positions due to expire in a few days.

With the unknown of Friday’s Employment Situation report coming up and with volatility back down to its usual low levels, there’s very little reason now to think about taking the risk of 3 day options, as the reward is so very low. Any new purchase now would really have to look at an extended or a monthly option to be remotely appealing. But with big news looming on Friday, I don’t have much reason to get in front of that news.

At this point, I would much rather see the market continue the week’s trend and move higher. I don’t mind going along for the ride, especially if energy is part of it, as it was yesterday and being able to roll over existing positions or see them assigned.

If that’s the case, then the pattern starts over again and the wish is for some pullback to start next week, perhaps with more cash in hand to pick up relative bargains, as the evidence will continue coming in to suggest that the economy is heating up and may perhaps serve as the most appropriate catalyst for the market to begin testing and exceeding its highs.

.

Daily Market Update – November 3,  2015  (Close)

Yesterday was a really unexpected move higher to start the week.

When you think about how the market reacted to the last release of the Employment Situation Report, there was a quick shift in sentiment as the October numbers were disappointingly low.

Right up to that report the market had finally started looking at economic news in a rational way and its initial response to the bad news was exactly what a rational person would have predicted and the market added to its already 10% loss having started in the latter half of August.

It got down to about a 12% loss and then just turned around on a dime early in the morning of that release, getting to where it ended up yesterday, now less than 2% below its all time highs as the day was set to begin.

By the time today’s final bell tolled, the market was closing in on just about a 1% loss from those highs.

So yesterday’s and today’s moves higher in advance of this Friday’s release of the next round of employment numbers means only one of two things now that the FOMC seems to be saying that the number that we thought was so disappointing last month, is actually just fine and dandy in justifying an interest rate increase.

So, either the market went higher these past 2 days in expectation of continued bad news, meaning bad news is good news, or it went higher in expectation that Friday will bring good news.

It’s hard to believe that the former is the case and maybe the market is setting itself up to respond in a rational way, although you would have expected some negative response, given how so much of the rise from the 12% drop seemed to be fueled by the “bad news is good news” kind of mentality.

But that’s the problem with applying rational thought processes to what is really an irrational entity, despite all of its metrics, charting and analyses.

This morning’s pre-opening futures weren’t indicating that it would add to yesterday’s gains, but you certainly wouldn’t have predicted yesterday’s gain from yesterday’s p[re-opening futures.

You would have been a fool to predict today, even though it didn’t finish at its highs. It was still higher enough.

With the fairly rapid and sustained climb yesterday there wasn’t very much opportunity to jump in and buy anything. Most of what I had my eye on this week were dividend related and today was the last day to make those purchases, but today came and went without those buying opportunities, so it may end up being a very quiet week, despite a single new position being added in the afternoon.

With a few positions set to expire this week there are still some opportunities to either rollover those positions or potentially see assignments, but as the week progresses and as those dividend related opportunities have disappeared, the likelihood is that any more new trades will now look at an expiration the following week.

After having rolled over next week’s sole expiring position yesterday, I wouldn’t mind being able to populate next week’s list of expiring positions, particularly if there may be a chance of getting some assignments this week.

Otherwise, it will be another morning of watching and waiting to see how sentiment unfolds. I wouldn’t mind a little weakness, although it never did come in time for those ex-dividend positions.

Daily Market Update – November 3,  2015  (7:00 AM)

Yesterday was a really unexpected move higher to start the week.

When you think about how the market reacted to the last release of the Employment Situation Report, there was a quick shift in sentiment as the October numbers were disappointingly low.

Right up to that report the market had finally started looking at economic news in a rational way and its initial response to the bad news was exactly what a rational person would have predicted and the market added to its already 10% loss having started in the latter half of August.

It got down to about a 12% loss and then just turned around on a dime early in the morning of that release, getting to where it ended up yesterday, now less than 2% below its all time highs.

So yesterday’s move higher in advance of this Friday’s release of the next round of employment numbers means only one of two things now that the FOMC seems to be saying that the number that we thought was so disappointing last month, is actually just fine and dandy in justifying an interest rate increase.

So, either the market went higher yesterday in expectation of continued bad news, meaning bad news is good news, or it went higher in expectation that Friday will bring good news.

It’s hard to believe that the former is the case and maybe the market is setting itself up to respond in a rational way, although you would have expected some negative response, given how so much of the rise from the 12% drop seemed to be fueled by the “bad news is good news” kind of mentality.

But that’s the problem with applying rational thought processes to what is really an irrational entity, despite all of its metrics, charting and analyses.

This morning’s pre-opening futures aren’t yet indicating that it would add to yesterday’s gains, but you certainly wouldn’t have predicted yesterday’s gain from yesterday’s p[re-opening futures.

With the fairly rapid and sustained climb yesterday there wasn’t very much opportunity to jump in and buy anything. Most of what I have my eye on this week are dividend related and today would be the last day to make those purchases. If today comes and goes without those buying opportunities, it may end up being a very quiet week.

With a few positions set to expire this week there are still some opportunities to either rollover those positions or potentially see assignments, but as the week progresses, if those dividend related opportunities disappear, the likelihood is that any new trades will then look at an expiration the following week.

After having rolled over next week’s sole expiring position yesterday, I wouldn’t mind being able to populate next week’s list of expiring positions, particularly if there may be a chance of getting some assignments this week.

Otherwise, it will be another morning of watching and waiting to see how sentiment unfolds. I wouldn’t mind a little weakness, especially in those ex-dividend positions in an effort to set up some trades for the week.