Category: Daily Market Update

Daily Market Update – September 16,  2015  (7:30 AM)

Yesterday was really a surprise.

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, with really not an instant in which that gain would come under attack throughoiut 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.

Today 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 today came despite the fact that China was again abysmal and our pre-open futures were comatose.

Since there was nothing to point a finger at as being responsible for the day’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 invetsors 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 at 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 played 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.

Daily Market Update – September 15,  2015  (Close)

Yesterday was a rare kind of day if you only look at the last month or two as your guide to what is normal.

Instead of the wild swings that we’ve gotten used to and that have helped volatility start returning toward what we used to consider normal levels, there was virtually no range in trading yesterday. The market traded in as tight of a range as we’ve seen for a while as there was absolutely no reason to get excited about anything.

Despite more weakness in Asia, which continues as we wee ready to get started this morning, the market was again looking as if it may be another flat day as it was moving away from trading in sympathy with Shanghai.

When you think about the fact that Shanghai has now fallen 40% in the past 3 months, we are pretty fortunate to find ourselves down only about 9% to start the morning, in what is nothing more than what should be thought of as a normally occurring correction, from which recovery is routine.

You can’t necessarily refer to anything about a 40% decline as routine, but it is good seeing that the co-dependence in trading seems to be waning as the realization comes that there’s no better place to be parking your money than in the United States.

By the time today’s trading was done, that 9% decline was more like 7.5% in what could only be described as a surprising day, but without any surprises to make it so.

With all attention being focused on this week’s FOMC Statement release and Chairman Yellen’s press conference to follow, there’s plenty of anticipation for something big to spring out from the market at that time, so for now, there’s not too much reason to expend much energy when it all may be called for on Thursday.

But that didn’t matter today, as the enthusiasm for something began to bubble over.

It’s was a little disappointing seeing the morning look as if it would be another flat or down kind of day, as I’d have liked to see more opportunity to do something with non-performing positions or find some opportunities to roll over those positions expiring this week.

While the market was very nicely higher today, the disappointment continued, as there really was nothing that popped up as a new opportunity.

As has been the case for quite a while, although less so now as volatility has been increasing, the relative costs of those rollovers is still higher than I would like. Although I really do dislike not being able to rollover a position, these days I’d rather not do a rollover than do one with virtually no benefit and obliging yourself to assignment.

While it’s perhaps unrealistic to expect that you can have it all, you really can have it all when volatility gets sustained at a higher level, so there may be reason to not rollover positions as a matter of reflex. There’s definitely more and more reason to look at some longer term contracts as long as there’s the chance to lock into higher premiums and get paid to wait out some bounce back in the market.

That is actually the case for a number of contracts expiring this Friday as those were sold as “Hail Mary” kind of sales to generate some income while awaiting some good news. As it is taking longer than we’ve become accustomed to for getting good news to return to the scene after a market dip, that may be the strategy for a while and just trying to grab any premium advantage while it’s available and while in waiting mode.

Today looked as if it might have been a quiet day for portfolio trading before things got out of hand in a sort of subdued buying frenzy, but despite yesterday not offering any surprises, it probably doesn’t make too much sense to completely discount the possibility of something popping up to create opportunity even as we may still be in a state of suspended animation until Thursday afternoon.

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Daily Market Update – September 15,  2015  (8:15 AM)

Yesterday was a rare kind of day if you only look at the last month or two as your guide to what is normal.

Instead of the wild swings that we’ve gotten used to and that have helped volatility start returning toward what we used to consider normal levels, there was virtually no range in trading yesterday. The market traded in as tight of a range as we’ve seen for a while as there was absolutely no reason to get excited about anything.

Despite more weakness in Asia, which continues as we are ready to get started this morning, the market is again looking as if it may be another flat day and continues its moving away from trading in sympathy with Shanghai.

When you think about the fact that Shanghai has now fallen 40% in the past 3 months, we are pretty fortunate to find ourselves down only about 9%, in what is nothing more than what should be thought of as a normally occurring correction, from which recovery is routine.

You can’t necessarily refer to anything about a 40% decline as routine, but it is good seeing that the co-dependence in trading seems to be waning as the realization comes that there’s no better place to be parking your money than in the United States.

With all attention being focused on this week’s FOMC Statement release and Chairman Yellen’s press conference to follow, there’s plenty of anticipation for something big to spring out from the market at that time, so for now, there’s not too much reason to expend much energy when it all may be called for on Thursday.

It’s a little disappointing seeing the morning look as if it will be another flat or down kind of day, as I’d like to see more opportunity to do something with non-performing positions or find some opportunities to roll over those positions expiring this week.

As has been the case for quite a while, although less so now as volatility has been increasing, the relative costs of those rollovers is still higher than I would like. Although I really do dislike not being able to rollover a position, these days I’d rather not do a rollover than do one with virtually no benefit and obliging yourself to assignment.

While it’s perhaps unrealistic to expect that you can have it all, you really can have it all when volatility gets sustained at a higher level, so there may be reason to not rollover positions as a matter of reflex. There’s definitely more and more reason to look at some longer term contracts as long as there’s the chance to lock into higher premiums and get paid to wait out some bounce back in the market.

That is actually the case for a number of contracts expiring this Friday as those were sold as “Hail Mary” kind of sales to generate some income while awaiting some good news. As it is taking longer than we’ve become accustomed to for getting good news to return to the scene after a market dip, that may be the strategy for a while and just trying to grab any premium advantage while it’s available and while in waiting mode.

Today looks as if it may be a quiet day for portfolio trading, but despite yesterday not offering any surprises, it probably doesn’t make too much sense to completely discount the possibility of something popping up to create opportunity even as we may be in a state of suspended animation until Thursday afternoon.

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Daily Market Update – September 14,  2015  (Close)

Last week at least had the good news of our markets disassociating themselves from China.

Even if the Shanghai market goes higher, it’s probably a good thing if we go our own and independent ways.

This morning, as both Shanghai and Japan were sharply lower, our own market is doing nothing as it prepared to begin the week.

That’s not too surprising considering that this is the week that many expect the FOMC Statement release to finally announce an interest rate increase for the first time in nearly a decade.

In all likelihood, at this point there are only two things that would make the market take any news badly.

The first is if no interest rate increase is announced.

Markets seem to have finally matured enough to understand that a rate hike is only a reflection of all of the good and future good things  that are developing in our economy and are ready to move on instead of being paralyzed with fear that a rate hike would choke off anemic growth.

The second thing, though, is the very unlikely event of a rate hike larger than has been widely expected. That means a 0.5% hike, or even worse, a full 1% hike.

That would likely be met with crazed selling.

This week’s FOMC Statement release comes at a fairly inopportune time, regardless of what it may hold.

It will be on Thursday, instead of its usual Wednesday afternoon.

That gives one less day for markets to recover in the event of a quick reaction to the downside.

Additionally, this is the end of the September 2015 option cycle and as is usually the case, that means more than the typical number of expiring positions that could be subject to becoming even less likely to be assigned.

This time, however, that’s not too much of a concern as many of those expiring contracts were written  on positions that were already well out of the money at the time and not really expected to be in contention for assignment.

My expectation this week, regardless of the FOMC Statement was that most of those positions would expire and that we would look for any new opportunity to simply sell calls on them at the first sign of any price strength, trying to take advantage of some higher volatility and getting whatever premium possible while in waiting mode for a price rebound.

This week, with really very little cash and lots of uncertainty about what will be happening, I didn’t expect to be adding new positions, but you never know what mood will strike, especially if a dividend is involved, as turned out to be the case with adding General Electric, once again.

I hope, just as with last week that there is some opportunity to sell new call contracts or get some rollovers achieved, as the number of ex-dividend positions this week is much reduced from the past 2 weeks and it would be nice to get some more income flowing.

With markets set to open the week flat I didn’t know if any of those opportunities would come today. But just as we’ve seen over the past few weeks, if we’ve seen anything at all, its that they’ve been very unpredictable. Even on those mornings that the futures were pointing toward sharp moves, sadly especially when they were higher, those moves often didn’t survive the day.

Today it pointed at minimal activity, but it ended up being a day that flirted with a triple digit loss for much of the day, finally closing 62 points lower on the DJIA.

For now, all that matters is for portfolios to survive the
day and hopefully add some additional income to do a bit better than simply surviving.

Daily Market Update – September 14,  2015  (8:30 AM)

Last week at least had the good news of our markets disassociating themselves from China.

Even if the Shanghai market goes higher, it’s probably a good thing if we go our own and independent ways.

This morning, as both Shanghai and Japan are sharply lower, our own market is doing nothing as it prepares to begin the week.

That’s not too surprising considering that this is the week that many expect the FOMC Statement release to finally announce an interest rate increase for the first time in nearly a decade.

In all likelihood, at this point there are only two things that would make the market take any news badly.

The first is if no interest rate increase is announced.

Markets seem to have finally matured enough to understand that a rate hike is only a reflection of all of the good and future good things  that are developing in our economy and are ready to move on instead of being paralyzed with fear that a rate hike would choke off anemic growth.

The second thing, though, is the very unlikely event of a rate hile larger than has been widely expected. That means a 0.5% hike, or even worse, a full 1% hike.

That would likley be met with crazed selling.

This week’s FOMC Statement release comes at a fairly inopportune time, regardless of what it may hold.

It will be on Thursday, instead of its usual Wednesday afternoon.

That gives one less day for markets to recover in the event of a quick reaction to the downside.

Additionally, this is the end of the September 2015 option cycle and as is usually the case, that means more than the typical number of expiring positions that could be subject to becoming even less likely to be assigned.

This time, however, that’s not too much of a concern as many of those expiring contracts were written  on positions that were already well out of the monet at the time and not really expected to be in contention for assignment.

My expectation this week, regardless of the FOMC Statement was that most of those positions would expire and that we would look for any new opportunity to simply sell calls on them at the first sign of any price strength, trying to take advantage of some higher volatility and getting whatever premium possible while in waiting mode for a price rebound.

This week, with really very little cash and lots of uncertainty about what will be happening, I don’t epect to be adding new positions, but you never know what mood will strike.

I hope, just as with last week that there is some opportunity to sell new call contracts or get some rollovers achieved, as the number of ex-dividend positions this week is much reduced from the past 2 weeks and it would be nice to get some more income flowing.

With markets set to open the week flat I don’t know if any of those opportunities will come today, but if the past few weeks have been anything, they’ve been very unpredictable. Even on those mornings that the futures were pointing toward sharp moves, sadly especially when they were higher, those moves often didn’t survive the day.

For now, all that matters is for portfolios to survive the day and hopefully add some additional income to do a bit better than simply surviving.

Daily Market Update – September 11,  2015  (8:00 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:  GE

Rollovers:  none

Expirations   none

The following were ex-dividend this week:  NEM (9/8 $0.025), WY (9/9 $0.31), GM (9/10 $0.36), KO (9/11 $0.33)

The following are ex-dividend next week:  LVS (9/18 $0.65)

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

Daily Market Update – September 10,  2015  (Close)

Yesterday was a really disappointing day, even if your portfolio ended up in relative out-performance.

The idea that we could put together consecutive large moves higher was taken off the table after a tease of an open and then a gradual decline that ended up picking up lots of speed into the close.

There really was no reason for the opening strength nor for the closing weakness.

This morning the futures were pointing to a flat open.

It was hard to know what to make of that and after today’s close, it’s still hard to know what to make of any of it.

After our market’s decline yesterday, overseas markets, first in Asia and now in Europe went into sharp decline.

It’s hard to know whether they did so in reaction to our market or whether they are continuing in being the stick that stirs our markets.

For most of the summer we’ve been in an unusual position of having overseas markets tell us where to go and we haven’t been able to find any reason to return the relationship to the one that we used to know as being more normal.

Maybe the realization that our economy is in good shape and likely to get better while the rest of the world is floundering, and maybe the fact that our markets still offer the best combination of value and safety would be enough to get things back to normal.

But for now, it doesn’t look as if anything will serve as the catalyst to get more rational action going, unless of course the FOMC finally decides to do what they’ve been telegraphing for so long and finally raise interest rates against the advice of nearly everyone outside of the United States.

With only a single position set to expire this week and now just i day remaining, I’m reasonably satisfied with the combination of new call sales, rollovers and dividends for the week and don’t expect to find any reason to spend any money on new positions this week.

I’m especially glad to have rolled over the two Best Buy lots, which go ex-dividend tomorrow. They were each rolled over in the past two weeks, despite being weeks before their expiration dates, simply to squeeze additional time premium in the face of a good chance at early assignment to capture tomorrow’s dividend.

The seep in the money $33.50, now expiring October 23, 2015 has a good chance of being assigned early, but the $37 options may not be, although I’d prefer if they were, at this point.

With yesterday’s action only serving to introduce even more uncertainty I would like to continue a focus on trying to find a way to use volatility to squeeze out some more premium from existing positions and not think too much about adding new positions, even while they continue to look so bargain priced.

Neither of those goals are always so easy, but at least this and last week have offered some reasonable opportunities to take advantage of the market.

Hopefully, that volatility that we’ve been seeing will continue, but will do so in a way that there’s not much in the way of net change in the market. For now, as you often see in the early phase of a volatility spike is that the market declines. It’s in that period where the volatility stays at a relatively higher level and settles into a higher range that there begin to come good opportunities to find attractive premiums and enhanced income streams.

For now, I hope we fall into that narrow range and don’t have the kind of moves higher of the kind of large moves that we’ve seen. Those are just too prone to lead to tumbles and those are just too precipitous to be able to defend against and they leave you in a state of shell shock for far too long.

As is usually the case, there’s something go
od about consolidation in prices. Forming a base that gives the market someplace to return to and stay with some degree of confidence is a good thing. The same tends to be the case with volatility, as well. With volatility having spiked to the 50 level and come down by nearly 50%, a small further climb to the 30 level would be a nice place to settle in for a while. That may still take a small amount of market pain, but could end up being a very good place for a while.

Daily Market Update – September 10,  2015  (8:30 AM)

Yesterday was a really disappointing day, even if your portfolio ended up in relative out-performance.

The idea that we could put together consecutive large moves higher was taken off the table after a tease of an open and then a gradual decline that ended up picking up lots of speed into the close.

There really was no reason for the opening strength nor for the closing weakness.

This morning the futures are pointing to a flat open.

It’s hard to know what to make of that.

After our market’s decline yesterday, overseas markets, first in Asia and now in Europe went into sharp decline.

It’s hard to know whether they did so in reaction to our market or whether they are continuing in being the stick that stirs our markets.

For most of the summer we’ve been in an unusual position of having overseas markets tell us where to go and we haven’t been able to find any reason to return the relationship to the one that we used to know as being more normal.

Maybe the realization that our economy is in good shape and likely to get better while the rest of the world is floundering, and maybe the fact that our markets still offer the best combination of value and safety would be enough to get things back to normal.

But for now, it doesn’t look as if anything will serve as the catalyst to get more rational action going, unless of course the FOMC finally decides to do what they’ve been telegraphing for so long and finally raise interest rates against the advice of nearly everyone outside of the United States.

With only a single position set to expire this week and just 2 days remaining, I’m reasonably satisfied with the combination of new call sales, rollovers and dividends for the week and don’t expect to find any reason to spend any money on new positions this week.

With yesterday’s action only serving to introduce even more uncertainty I would like to continue a focus on trying to find a way to use volatility to squeeze out some more premium from existing positions and not think too much about adding new positions, even while they continue to look so bargain priced.

Neither of those goals are always so easy, but at least this and last week have offered some reasonable opportunities to take advantage of the market.

Hopefully, that volatility that we’ve been seeing will continue, but will do so in a way that there’s not much in the way of net change in the market. For now, as you often see in the early phase of a volatility spike is that the market declines. It’s in that period where the volatility stays at a relatively higher level and settles into a higher range that there begin to come good opportunities to find attractive premiums and enhanced income streams.

For now, I hope we fall into that narrow range and don’t have the kind of moves higher of the kind of large moves that we’ve seen. Those are just too prone to lead to tumbles and those are just too precipitous to be able to defend against and they leave you in a state of shell shock for far too long.

As is usually the case, there’s something good about consolidation in prices. Forming a base that gives the market someplace to return to and stay with some degree of confidence is a good thing. The same tends to be the case with volatility, as well. With volatility having spiked to the 50 level and come down by nearly 50%, a small further climb to the 30 level would be a nice place to settle in for a while. That may still take a small amount of market pain, but could end up being a very good place for a while.

Daily Market Update – September 9,  2015  (Close)

So China didn’t take the path lower after having had its financial markets closed for a total of 4 days and so our markets had no reason to continue on the strong path lower, having left off there before Labor Day.

Despite the Shanghai market actually being down sharply until the final hour of trading in its afternoon session, very likely the result of government buying, the US markets were sharply higher from the beginning of futures trading on Monday evening.

How long that disconnect may last is anyone’s guess, but this morning the US was poised to head higher in concert with China’s strong overnight market.

Not too many would have guessed that the market would end up squandering an early 177 point gain, only to end the day with nothing but disappointment and a loss that would turn out to be even larger than the early session gains.

It’s not often that we’ve been able to put a couple of consecutive days sharply higher together, but today looked as if it would be the second of that kind of a series, but the market just couldn’t continue in the same direction, although it did its best to keep to the same magnitude as the morning’s futures trading.

With little this week to keep markets back or to push them forward it might be hard to rationalize any kind of strong move that the market could possibly make. Heading strongly higher makes as much sense as heading sharply lower, only less.

No one even tried explaining yesterday’s nearly 400 point gain, because there really was no plausible reason for such enthusiastic buying. Especially as the past month has seen only tepid buying on the dip and the end result, unless you’re basically a day trader, has only been disappointing, as markets simply gave up those gains.

It was, therefore, easier to explain today’s loss. After all, what reason could there have been to keep going higher?

The past 6 weeks or so have seen a fair number of large moves higher, almost always following large moves lower, with the net result still being to the downside.

Why has the net result been lower?

Twofold.

For the most part the declines have been larger than the rebound gains that followed and then those rebounds were under-cut the following day.

Hard to get a warm and fuzzy feeling over that kind of action.

While still in the early phases, the current market is very reminiscent of the latter half of 2011 when the market ended precisely unchanged for the year and rocked back and forth with such large moves, while going nowhere and seeing volatility increase fairly sharply.

The volatility has now given back some of those gains, but there’s no reason to believe that it won’t get back on that path toward more historically normal levels, as there’s plenty of reason to feel uncertain about where the next stop may be.

We may get some idea of where that next stop may be soon enough as the FOMC meets and may finally put to rest all of the fear of a tiny interest rate increase that no one believes will be bad for the economy, yet those same people still run to the exits selling when professing how little such a rate increase matters.

Until then, despite the temporary divergence of our market from CHina, any more bad news coming from there, including more dumping of foreign assets, especially US Treasuries, could give our stock market more reason for concern, until coming to the realization that there is no logical stock market investment alternative.

While bonds may become an alternative for some if selling continues and rates rise, it’s not too likely that China will continue to do the equivalent of burning money in an effort to defeat market f
orces. Even they would likely come to the conclusion that they can’t control everything.

I don’t think that I’ll be in the market for any new positions this week, as I don’t have much cash and I hate chasing prices.

Instead, I would welcome any other opportunities to get some rollovers, even if in forward weeks and, better yet, find some way to sell call options on uncovered positions.

While it may end up being a quiet week for trades, I wouldn’t complain if the only result of the week is to drive paper profits for a change.

Maybe tomorrow, but that’s what I thought yesterday, too.

Daily Market Update – September 9,  2015  (8:30 AM)

So China didn’t take the path lower after having had its financial markets closed for a total of 4 days and so our markets had no reason to continue on the strong path lower, having left off there before Labor Day.

Despite the Shanghai market actually being down sharply until the final hour of trading in its afternoon session, very likely the result of government buying, the US markets were sharply higher from the beginning of futures trading on Monday evening.

How long that disconnect may last is anyone’s guess, but this morning the US is poised to head higher in concert with China’s strong overnight market.

It’s not often that we’ve been able to put a couple of consecutive days sharply higher together, but today may be the second of that kind of a series, if the market can continue in the same direction and magnitude as the morning’s futures trading.

With little this week to keep markets back or to push them forward it might be hard to rationalize any kind of strong move that the market could possibly make. Heading strongly higher makes as much sense as heading sharply lower, only less.

No one even tried explaining yesterday’s nearly 400 point gain, because there really was no plausible reason for such enthusiastic buying. Especially as the past month has seen only tepid buying on the dip and the end result, unless you’re basically a day trader, has only been disappointing, as markets simply gave up those gains.

The past 6 weeks or so have seen a fair number of large moves higher, almost always following large moves lower, with the net result still being to the downside.

While still in the early phases, the current market is very reminiscent of the latter half of 2011 when the market ended precisely unchanged for the year and rocked back and forth with such large moves, while going nowhere and seeing volatility increase fairly sharply.

The volatility has now given back some of those gains, but there’s no reason to believe that it won’t get back on that path toward more historically normal levels, as there’s plenty of reason to feel uncertain about where the next stop may be.

We may get some idea of where that next stop may be in a couple of week as the FOMC meets and may finally put to rest all of the fear of a tiny interest rate increase that no one believes will be bad for the economy, yet those dame people still run to the exits selling when professing how little such a rate increase matters.

Until then, despite the temporary divergence of our market from CHina, any more bad news coming from there, including more dumping of foreign assets, especially US Treasuries, could give our stock market more reason for concern, until coming to the realization that there is no logical stock market investment alternative.

While bonds may become an alternative for some if selling continues and rates rise, it’s not too likely that China will continue to do the equivalent of burning money in an effort to defeat market forces. Even they would likely come to the conclusion that they can’t control everything.

I don’t think that I’ll be in the market for any new positions this week, as I don’t have much cash and I hate chasing prices.

Instead, I would welcome any other opportunities to get some rollovers, even if in forward weeks and, better yet, find some way to sell call options on uncovered positions.

While it may end up being a quiet week for trades, I wouldn’t complain if the only result of the week is to drive paper profits for a change.