Category: Daily Market Update

Daily Market Update – September 23,  2015  (Close)

Yesterday, despite the market coming well off of its lows, was still enough of a down day to make Monday’s bounce higher no more than merely a blip.

Following Thursday afternoon’s steep reversal and then Friday’s additional loss after the disappointment of no interest rate increase, analysts were looking everywhere they could to try and explain yesterday’s market action.

I think it was pretty simple and much like the lingering disappointment that may exist when something you wanted very badly failed to materialize.

In a very non-diagnostic kind of way, that feeling is called “the blues” and it’s hard to get into gear.

I think that’s all that the market is suffering from and it isn’t really responding to anything  other than being held hostage by that disappointment that things aren’t as good as they needed to be.

Just imagine being told that you weren’t good enough, whether personally or professionally. That’s what the market faced as it was told by the FOMC that the economy wasn’t good enough to warrant that rate increase, even if you had deluded yourself into believing that it was.

That has to make the market wonder, just as people might wonder, whether everything they had believed was a lie.

Did the market deserve to be at such high levels if the economy wasn’t as good as we thought?

So it’s all understandable.

This morning’s futures were flat and again showed no sign of following Shanghai, which was down sharply, even as its President Xi is trying to convince business leaders in the US that there’s no reason for concern about anything in China nor in the way China does business internally nor with its international partners.

Those business leaders are likely to have left last night’s meeting somewhat circumspect as they wondered whether the US-China relationship might undergo some sort of a re-set.

At this point separating from China’s markets and from its economy may be a very good thing as they are forced to speed up their evolutionary process and figure out how to re-balance personal freedoms with personal wealth as the latter may be dwindling.

While the futures were flat this morning that disappointment in the FOMC’s decision isn’t likely over, but Friday’s upcoming GDP data release could become the springing off point for another jump higher.

Unlike previous months when a disappointing GDP was met with a happy stock market, because it signaled the continuation of low interest rates, this time around every one wants to see better than expected GDP numbers. The hope is that there will be enough data coming in to prompt the FOMC to increase rates.

With earnings season ready to start in less than 3 weeks the real catalyst would be some evidence of earnings growth, especially if there’s also evidence of revenue growth.

That has been an elusive combination for a while and would really be embraced if the case could be made as those earnings start coming in that sales are increasing and profits are rising.

Until then, we should probably be prepared for more bouncing back and forth between being in correction territory and having escaped correction as markets create a foundation that will either end up serving as resistance or support.

It’s anyone’s guess and today the market didn’t even try to think about things, as it was about a listless day as you could find and with almost noting to hang your hopes upon nor to fear.

Daily Market Update – September 23,  2015  (9:00 AM)

Yesterday, despite the market coming well off of its lows, was still enough of a down day to make Monday’s bounce higher no more than merely a blip.

Following Thursday afternoon’s steep reversal and then Friday’s additional loss after the disappointment of no interest rate increase, analysts were looking everywhere they could to try and explain yesterday’s market action.

I think it was pretty simple and much like the lingering disappointment that may exist when something you wanted very badly failed to materialize.

In a very non-diagnostic kind of way, that feeling is called “the blues” and it’s hard to get into gear.

I think that’s all that the market is suffering from and it isn’t really responding to anything  other than being held hostage by that disappointment that things aren’t as good as they needed to be.

Just imagine being told that you weren’t good enough, whether personally or professionally. That’s what the market faced as it was told by the FOMC that the economy wasn’t good enough to warrant that rate increase, even if you had deluded yourself into believing that it was.

That has to make the market wonder, just as people might wonder, whether everything they had believed was a lie.

Did the market deserve to be at such high levels if the economy wasn’t as good as we thought?

So it’s all understandable.

This morning’s futures are flat and again show no sign of following Shanghai, which was down sharply, even as its Premier Xi is trying to convince business leaders in the US that there’s no reason for concern about anything in China nor in the way China does busness internally nor with its international partners.

Those business leaders are likely to have left last night’s meeting somewhat circumspect as they wondered whether the US-China relationship might undergo some sort of a re-set.

At this point separating from China’s markets and from its economy may be a very good thing as they are forced to speed up their evolutionary process and figure out how to re-balance personal freedoms with personal wealth as the latter may be dwindling.

While the futures are flat this morning that disappointment in the FOMC’s decision isn’t likely over, but Friday’s upcoming GDP data release could become the springing off point for another jump higher.

Unlike previous months when a disappointing GDP was met with a happy stock market, because it signaled the continuation of low interest rates, this time around every one wants to see better than expected GDP numbers. The hope is that there will be enough data coming in to prompt the FOMC to increase rates.

With earnings season ready to start in less than 3 weeks the real catalyst would be some evidence of earnings growth, especially if there’s also evidence of revenue growth.

That has been an elusive combination for a while and would really be embraced if the case could be made as those earnings start coming in that sales are increasing and profits are rising.

Until then, we should probably be prepared for more bouncing back and forth between being in correction territory and having escaped correction as markets create a foundation that will either end up serving as resistance or support.

It’s anyone’s guess.

Daily Market Update – September 22,  2015  (Close)

This morning’s sharp decline in the futures was probably an invalidation of yesterday’s decent gain coming after a sharp reversal in fortunes last week.

Yesterday seemed like a day that traders were getting back to their previous behavior that welcomed the delay of any interest rate increase because it extended their handout, which was good for equity trading. They were more than happy to continue receiving that handout rather than seeing the economy show the kind of tangible and sustained improvement that would slow down the flow of those handouts.

That initial reversal of fortune was directly tied to the realization that no one of importance over at the FOMC could sway enough other voting members to vote to finally increase interest rates. That inability was a reflection of the belief that not enough of those people believed that the economy was showing enough building strength to warrant even the tiniest of taps on the brakes

More importantly, as the FOMC has indicated that it wants to finally push through a rate increase and that it has indicated that it would do so ahead of the curve, that seems to send a message that the kind of improvement in the economy to warrant a rate increase isn’t necessarily right around the corner.

Too bad that had to happen just at the same time that the market came to the realization that a rate increase wouldn’t mark the end of the world and instead had set its hopes up for that rate increase after years of pinning everything on the continuation of the Zero Interest Rate Policy.

Funny how those sort of things seem to happen.

For people who are supposed to understand the economy and investor psychology they certainly don’t do a very good job of it.

It continues to amaze me that there would ever be such sharp moves, especially on an alternating basis, as even the most clueless person would know that the basic health of the market and the economy could never change on a dime and then do so again in a back and forth manner. But it also still amazes me that there can be such large moves seen in so many individual stocks, given how many analysts follow so many of those companies and have as much of an informed position as almost anyone else in the world.

Yet, they get it wrong all the time.

So what did this morning’s marked weakness mean?

As I was pondering that question in the morning it meant nothing more than a buying opportunity, as we again were approaching a correction on the S&P 500 if the decline were to hold.

It was and it did.

What may be important this week, maybe more so than usual, will be Friday’s GDP release.

With some discussion that a rate hike may still be on the table in October, perhaps even before the next FOMC meeting, another strong GDP statistic could send an “all’s clear” to investors who now want to see a rate hike and would welcome that strong GDP number.

History shows that September is generally a very weak month and October not much better.

As we approach the end of September it would be nice to see an October that if not moving the market higher, at least continues this volatile kind of back and forth. The trick will be to attempt to capitalize on any strong move higher by finding any opportunity to sell some calls and also finding some of the braveness necessary to buy something on the way down.

I had some of that braveness today and hope that it’s not really more stupidity. If those best and brightest on Wall Street can’t readily tell the difference I’m not going to worry too much about being able to know so myself until all the cards are played.

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Daily Market Update – September 22,  2015  (8:30 AM)

This morning’s sharp decline in the futures is probably an invalidation of yesterday’s decent gain coming after a sharp reversal in fortunes last week.

Yesterday seemed like a day that traders were getting back to their previous behavior that welcomed the delay of any interest rate increase because it extended their handout, which was good for equity trading. They were more than happy to continue receiving that handout rather than seeing the economy show the kind of tangible and sustained improvement that would slow down the flow of those handouts.

That initial reversal of fortune was directly tied to the realization that no one of importance over at the FOMC could sway enough other voting members to vote to finally increase interest rates. That inability was a reflection of the belief that not enough of those people believed that the economy was showing enough building strength to warrant even the tiniest of taps on the brakes

More importantly, as the FOMC has indicated that it wants to finally push through a rate increase and that it has indicated that it would do so ahead of the curve, that seems to send a message that the kind of improvement in the economy to warrant a rate increase isn’t necessarily right around the corner.

Too bad that had to happen just at the same time that the market came to the realization that a rate increase wouldn’t mark the end of the world and instead had set its hopes up for that rate increase after years of pinning everything on the continuation of the Zero Interest Rate Poiicy.

Funny how those sort of things seem to happen.

For people who are supposed to understand the economy and investor psychology they certainly don’t do a very good job of it.

It continues to amaze me that there would ever be such sharp moves, especially on an alternating basis, as even the most clueless person would know that the basic health of the market and the economy could never change on a dime and then do so again in a back and forth manner. But it also still amazes me that there can be such large moves seen in so many individual stocks, given how many analysts follow so many of those companies and have as much of an informed position as almost anyone else in the world.

Yet, they get it wrong all the time.

So what does this morning’s marked weakness mean?

I’m looking at it, for the moment, as nothing more than a potential buying opportunity, as we again approach a correction on the S&P 500 if the decline holds up.

What may be important this week, maybe more so than usual, will be Friday’s GDP release.

With some discussion that a rate hike may still be on the table in October, perhaps even before the next FOMC meeting, another strong GDP statistic could send an “all’s clear” to investors who now want to see a rate hike and would welcome that strong GDP number.

History shows that September is generally a very weak month and October not much better.

As we approach the end of September it would be nice to see an October that if not moving the market higher, at least continues this volatile kind of back and forth. The trick will be to attempt to capitalize on any strong move higher by finding any opportunity to sell some calls and also finding some of the braveness necessary to buy something on the way down.

Daily Market Update – September 21,  2015  (Close)

Last week the market finally started doing the right thing and followed the logical direction with regard to their expectations for the FOMC’s action.

It’s just that the FOMC didn’t do what everyone had only very recently come to expect. Even more recent than that expectation was the decision to act accordingly.

Acting accordingly meant sending the market higher in advance of the expected announcement of that initial interest rate increase and then sending stocks lower when that expectation was dashed.

This morning’s futures were indicating a recovery of at least the further loss that occurred on Friday, although that still leaves us in the hole for the very large reversal that took place during the course of Janet Yellen’s press conference.

Normally, when Janet Yellen has spoken at the post-FOMC press conferences, her words have either supported the initial rise higher in stocks after the announcement or sent them even higher, so this past week’s reversal of fortune was a real surprise.

What seems to have occurred is that traders felt disappointed, but for the right reason.

Over the past 18 months as expectations for an eventual rate increase began, the disappointments that were expressed all had to do with fearing the end of the Federal Reserve’s handout through their Zero Interest Rate Policy. Now the concern seems to have become that the economy may not be as strong as we had hoped and was unable to withstand an increase in interest rates.

This morning’s futures bounce didn’t really provide much in the way of sentiment. It could easily be nothing more than some bargain hunting on small volume.

The way the day traded you could interpret it any way you pleased. Most of all it was some kind of ambivalence and maybe some kind of fear of missing out.

The market kept its triple digit gain for much of the session, having been up nearly 200 points at one point and then gave it all back, only to end the day right where the futures said it was going to be.

That doesn’t happen too often, but it definitely wasn’t a very direct route.

The story, as it almost always does, began for real at the opening bell and while I was hopeful that the next series of sustained moves would be higher and move us further away from the line between correction and no correction, it’s just not that clear that will be the case, despite the gain on the day.

At least China wasn’t a factor as this week has now begun, as Shanghai moved higher to open their week, but lately our own markets have discounted their wild swings.

Instead, we seem much more likely to start focusing on economic news and fundamentals.

This week brings a GDP report, but not much else.

Earnings start again in about 3 weeks, but otherwise it may just be a period of time for investors to either tread water or speculate over the meaning of every bit of economic news.

With some more cash in hand after a couple of assignments last week and with only one position set to expire this week and only a single ex-dividend position, I wouldn’t mind adding some new positions in an effort to create some income for the week.

Ordinarily, I’d like to do that with weekly expirations in mind, but a number of the potential trades this week may require the use of expanded weekly options due to the dividend dates involved in those stocks and while providing income may make it more difficult to be prepared to open even more new positions the following week if  those positions aren’t assigned early to capture dividends.

I expect th
is to be another relatively quiet week with regard to personal portfolio trading, but would be very anxious to capitalize on any opportunity to sell some calls on unhedged positions, especially after some rebound in volatility to close the week.

That would likely also look to see whether it makes sense to use some longer term contracts, as was the case with the new position opened in Cypress Semiconductor today, in an effort to lock in some higher premiums while awaiting some long overdue price rebounds as 2015 is now heading into the final stretch.

Let’s see if tomorrow brings any more clarity, but at least there wasn’t reason to continue the pessimism of the latter part of last week.

Who knows, maybe what little is left in the month of September can do something to dispel the reality that September tends not to be a very good month to count on market gains.

Daily Market Update – September 21,  2015  (8:30 AM)

Last week the market finally started doing the right thing and followed the logical direction with regard to their expectations for the FOMC’s action.

It’s just that the FOMC didn’t do what everyone had only very recently come to expect. Even more recent than that expectation was the decision to act accordingly.

Acting accordingly meant sending the market higher in advance of the expected announcement of that initial interest rate increase and then sending stocks lower when that expectation was dashed.

This morning’s futures are indicating a recovery of at least the further loss that occurred on Friday, although that still leaves us in the hole for the very large reversal that took place during the course of Janet Yellen’s press conference.

Normally, when Janet Yellen has spoken at the post-FOMC press conferences, her words have either supported the initial rise higher in stocks after the announcement or sent them even higher, so this past week’s reversal of fortune was a real surprise.

What seems to have occurred is that traders felt disappointed, but for the right reason.

Over the past 18 months as expectations for an eventual rate increase began, the disappointments that were expressed all had to do with fearing the end of the Federal Reserve’s handout through their Zero Interest Rate Policy. Now the concern seems to have become that the economy may not be as strong as we had hoped and was unable to withstand an increase in interest rates.

This morning’s futures bounce doesn’t really provide much in the way of sentiment. It could easily be nothing more than some bargain hunting on small volume.

The story, as it almost always does, begins for real at the opening bell and while I’m hopeful that the next series of sustained moves will be higher and move us further away from the line between correction and no correction, it’s just not that clear.

At least China wasn’t a factor as this week is set to begin, as Shanghai moved higher to open their week, but lately our own markets have discounted their wild swings.

Instead, we seem much more likely to start focusing on economic news and fundamentals.

This week brings a GDP report, but not much else.

Earnings start again in about 3 weeks, but otherwise it may just be a period of time for investors to either tread water or speculate over the meaning of every bit of economic news.

With some more cash in hand after a couple of assignments last week and with only one position set to expire this week and only a single ex-dividend position, I wouldn’t mind adding some new positions in an effort to create some income for the week.

Ordinarily, I’d like to do that with weekly expirations in mind, but a number of the potential trades this week may require the use of expanded weekly options due to the dividend dates involved in those stocks and while providing income may make it more difficult to be prepared to open even more new positions the following week if  those positions aren’t assigned early to capture dividends.

I expect this to be another relatively quiet week with regard to personal portfolio trading, but would be very anxious to capitalize on any opportunity to sell some calls on unhedged positions, especially after some rebound in volatility to close the week.

That would likely also look to see whether it makes sense to use some longer term contracts in an effort to lock in some higher premiums while awaiting some long overdue price rebounds as 2015 is now heading into the final stretch.

Daily Market Update – September 18,  2015  (7:45 AM)

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

The following trade outcomes are possible today:

Assignments:  CVC

Rollovers:  HPQ

Expirations:  CY, GDX, GPS, KO, KSS, MOS, NEM

The following were ex-dividend this week: GE (9/17 $0.23), LVS (9/18 $0.65)

The following will be ex-dividend next week: CY (9/22 $0.11)

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

Daily Market Update – September 17,  2015  (Close)

The last couple of days were pretty impressive, especially given that today’s FOMC Statement release coming at 2 PM and the ensuing Chairman’s press conference report still held some uncertainty.

What has been surprising is that it suddenly seemed as if investors no longer feared the idea of an interest rate increase and that they made that change of heart so quickly.

But it’s also surprising that they seemed so certain of what the FOMC would do this afternoon.

At best, the messages from the Federal Reserve Governors have been mixed and the data has been less than compelling, but there has really been a very palpable change in acceptance of what can only be validation that the economy is improving,

This morning, less than 90 minutes from the opening of trading, the futures were once again subdued, as they have been all week. This morning, as China again had another large market decline overnight, it looked like another day of not caring what is going on there and we continue to focus on our own fundamentals and prospects for the economy.

As the morning was ready to open for trading, the S&P 500 was still about 7% below its highs from exactly 2 months ago, but that’s far better than what has been happening overseas, where there’s still no indication of what will turn things around. At this point, the only thing that should provide any encouragement about the economy in China can come from the earnings reports of US companies doing significant business there, if they report stability or growth in their revenues coming from China.

At the very least that would indicate something about the economy that may have much more validity than anything that the government’s official numbers can provide. But still, that doesn’t mean that their stock markets will follow suit.

But so long as that remains the case and the Chinese markets lack the ability to provide investors confidence, that can only be good for our own markets, especially if the Chinese economy continues to support business activities of US companies.

To a large degree, it may be that seeing the meltdown in China has been the factor that finally caused US investors to come to the realization that a small interest rate increase by the Federal Reserve may not be such a bad thing, after all, given what may be going on in the rest of the world. At least that interest rate increase is a reflection of the fact that we’re heading in the right direction and have a lot more transparency about everything than can be readily found elsewhere.

For now, that may be next week’s story, as all that will matter this week and certainly for the last 2 trading days of this monthly option cycle was to have been that FOMC Statement.

About that.

So, no change in rates and the statement includes a comment about events in “overseas markets.”

China?

Who else could they be referring to? So now the mandate is being expanded overseas?

That’s news.

What ended up happening was that a 170 point gain after the announcement of no change ended up going into neagitive territory as Janet Yellen’s press conference came to its end.

From there, it actually got worse.

No one expected that, especially since markets have always climbed during a Yellen post-FOMC Statement release press conference, except for the very first one.

So we’ll see what the mood will be tomorrow, including what the reaction will be in those overseas markets greeting us when we awaken.

Even though the past few days have seen a large drop in volatility, I’ve been glad to see some recovery from the 10% decline that we had and would be happy to see things stabilize at this level for a while as we get ready to head into yet another earnings season, which is now barely 3 weeks away.

For the rest of the week it’s otherwise just more of the same.

In the event that the market decides to add more onto its gains for the week after digesting FOMC Statement,  I’ll look for any possible opportunity to roll something over, or better yet, sell some calls on new options, but for now I’d be happy seeing whatever can be assigned, actually getting assigned.

While anything is still possible, at the least it does look as if a couple of positions will be assigned this week, helping to add some cash to reserves as the new monthly cycle gets ready to begin in a few days.

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Daily Market Update – September 17,  2015  (8:30 AM)

The last couple of days were pretty impressive, especially given that today’s FOMC Statement release coming at 2 PM and the ensuing Chairman’s press conference report still hold some uncertainty.

What has been surprising is that it suddenly seemed as if investors no longer feared the idea of an interest rate increase and that they made that change of heart so quickly.

But it’s also surprising that they seem so certain of what the FOMC will do this afternoon.

At best, the messages have been mixed and the data has been less than compelling, but there has really been a very palpable change in acceptance of what can only be validation that the economy is improving,

This morning, less than 90 minutes from the opening of trading, the futures were once again subdued, as they have been all week. This morning, as China again had another large market decline overnight, it looks like another day of not caring what is going on there and we continue to focus on our own fundamentals and prospects for the economy.

As the morning is ready to open for trading, the S&P 500 is still about 7% below its highs from exactly 2 months ago, but that’s far better than what has been happening overseas, where there’s still no indication of what will turn things around. At this point, the only thing that should provide any encouragement about the economy in China can come from the earnings reports of US companies doing significant business there, if they report stability or growth in their revenues coming from China.

At the very least that would indicate something about the economy that may have much more validity than anything that the government’s official nuvbers can provide. But still, that doesn’t mean that their stock markets will follow suit.

But so long as that remains the case and the Chinese markets lack the ability to provide investors confidence, that can only be good for our own markets, especially if the Chinese economy continues to support business activities of US companies.

To a large degree, it may be that seeing the meltdown in China has been the factor that finally caused US investors to come to the realization that a small interest rate increase by the Federal Reserve may not be such a bad thing, after all, given what may be going on in the rest of the world. At least that interest rate increase is a reflection of the fact that we’re heading in the right direction and have a lot more transparency about everything than can be readily found elsewhere.

For now, that may be next week’s story, as all that will matter this week and certainly for the last 2 trading days of this monthly option cycle will be that FOMC Statement.

Even though the past few days have seen a large drop in volatility, I’m glad to see some recovery from the 10% decline that we had and would be happy to see things stabilize at this level for a while as we get ready to head into yet another earnings season, which is now barely 3 weeks away.

For the rest of the week it’s otherwise just more of the same.

In the event that the market decides to add more onto its gains for the week after the FOMC Statement is released, as has been the case for many of the months over the past couple of years, I’ll look for any possible opportunity to roll something over, or better yet, sell some calls on new options.

While anything is still possible, at the least it does look as if a couple of positions will be assigned this week, helping to add some cash to reserves as the new monthly cycle gets ready to begin in a few days.

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Daily Market Update – September 16,  2015  (Close)

Yesterday was really a surprise.

Today too.

It was funny to hear so many people refer to the fact that the day before an FOMC Statement release the market has a tendency to move significantly higher.

That was their explanation for a 228 point gain in the DJIA on Tuesday, with really not an instant in which that gain would come under attack throughout the day.

That observation about the day before an FOMC Statement release, actually has been true for about the past 18 months, with an occasional outlier or two. Still, the odds have been very good that if you were investing during the Janet Yellen era the market went higher on the Tuesday ahead of the Wednesday release.

What no one really seemed to make note of was that today was really like the Monday before a Wednesday release and there has been no identifiable Monday pattern.

Yesterday, however, was the equivalent of a Monday because this week’s FOMC Statement release is on Thursday and not it’s usual Wednesday.

So if you believe in patterns, and I do, there’s still no reason to believe that a pattern was involved in yesterday’s really strong showing that just got better and better as the day went along. At least there were appearances of there being a reason to explain what was really not so rational.

Our gains yesterday came despite the fact that China was again abysmal and our pre-open futures were comatose.

Our gains today came as China rebounded, but we were slow getting out of the gate in the pre-open, but did do some catching up by the end of the day.

Since there was nothing to point a finger at as being responsible for neither yesterday’s nor today’s gain, it can only be that investors are finally at peace with whatever the FOMC will decide to do this week, as long as what they decide to do is within the narrow range of anticipated actions.

It’s like your parents being at peace with whatever you decided to do with your life, as long as it was becoming either a doctor or a lawyer.

When Thursday afternoon does roll around It’s very unlikely that there will be anything of a surprise, but if there happened to be a surprise, such as a 0.5% or greater increase or any suggestions by Chairman Yellen during her press conference that economic data couldn’t support an increase in interest rates, I would be prepared for a major sell-off.

I don’t expect that, but if the interest rate isn’t increased on Thursday, someone is bound to ask the obvious question during the press conference.

No matter how Yellen might nuance that answer, the bottom line would be that things aren’t as good as had been hoped.

Considering that there appears to be growing sentiment within the FOMC that a rate increase is due, if it doesn’t come through this week, all of those mindsets that had come around to not feeling threatened by the increase might instead feel threatened by the lack of an increase.

Does that make sense?

It shouldn’t, because up until yesterday, there probably hasn’t been a single day when investors seemed to understand that there was nothing in our past to suggest that the early stages of such rate increases is anything but a good thing.

Anyway, now just past mid-week and with very little trading activity, it becomes a question of just waiting for events and seeing whether any opportunities will be created as the monthly cycle will come to its end.

I hope so, but very little has p
layed according to script the past few months, so there’s not too much reason to suspect that things will become more predictable any time soon.

The one trade not made, and we’ll see whether it would have been warranted, was rolling over the $24.50 September 25 and $25 October 2 General Electric contracts, as shares are ex-dividend tomorrow.  As volatility has fallen strongly the past two days the premiums have also dried up to some degree and there wasn’t very much to be gained from doing those rollovers in an attempt to retain the dividend.

As with everything else, we’ll see.