Category: Daily Market Update

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

After a couple of days of disappointing earnings from some big names, especially among those that had recently taken a run higher and carrying the NASDAQ on its shoulders, there was some better news coming yesterday evening and again this morning, although there were still some disappointments in the mix, as well.

If some of those price reductions hold as we bring the week to its end, there may be some good opportunities next week, but there’s a little too much uncertainty right now, as the market itself is having a hard time getting past its resistance level, to want to commit what limited cash I have.

In the past week we’ve completely gotten away from any discussion of international events and have really focused entirely on fundamental issues and have put forward guidance on the back burner.

Over the past few years it has been forward guidance that has sent many stocks higher or lower as earnings were released. If the market is truly a forward discounting mechanism, then that’s probably the way it should be.

However, it seems that this quarter, with continuing uncertainty over the strength of the US Dollar and energy prices, there hasn’t been too much emphasis placed on the future. Additionally, there’s also no telling what an interest rate hike, albeit, at the earliest coming near the end of the current quarter, might do to those numbers.

So, for the most part, the past week or so has been one of purity, one that has been backward looking. But the reactions to old news, on a net basis have been fairly subdued.

On an individual basis, however, if you were an owner of shares of some of those NASDAQ high fliers reporting earnings, you were brought back to earth. While the net market move hasn’t been really great, there have certainly been no shortage of very large moves coming after earnings have been released.

While I often find playing earnings a potentially appealing activity, those option premiums, whether calls or puts, just haven’t made the effort worth the risk and the options market has been consistently under-estimating the implied move, as a result.

At the moment that is the seeming paradox in markets and derivatives pricing.

The derivatives are priced as if there’s minimal risk, but the market feels as if there is lots of risk.

That usually works its way out, but it has really been taking a very long time for that to happen. Unfortunately, the way that sort of thing usually works out is for some kind of explosive move and typically that means an explosive move to the downside.

With the week now coming to its end and with only a single position set to expire, there’s not much action in the cards.

The morning’s futures trading is subdued, but for the most part this week the futures haven’t really given much indication of what the day’s trading will hold.

Daily Market Update – July 22,  2015  (Close)

More earnings came after yesterday’s closing bell and they continued the shift of the path of the first full week of earnings. That shift began before yesterday’s open.

While yesterday was another in a series of days in which the DJIA was lagging behind the S&P 500 and the NASDAQ 100, due in part to some large moves in DJIA components and a streak of forward moves by a very small handful of NASDAQ components, this morning, as we got ready to begin, the shoe was clearly on the other foot.

This time, the dual disappointments from Microsoft and Apple added a double dose of earnings disappointment to the NASDAQ, which is based on market capitalization, as opposed to the DJIA, which is based on share price.

That share price is one of the reasons, maybe the only real reason that Apple had to split 7 to 1. Had it not done so, this morning’s $9.50 decline in the futures trading would have detracted about 420 points from the DJIA, instead of the paltry 60 points.

Microsoft, on the other hand, despite being only half as much as Apple on a percentage basis, was costing the DJIA only about 10 points during the pre-opening trading.

On the other hand, the combined market capitalization of Apple and Microsoft was over $1.1 Trillion before this morning’s prices settle.

At that moment, before the opening bell was to rings, as a result of that one – two punch, the DJIA was down about 0.2%, the S&P 500 was down about 0.4% and the NASDAQ 100 was down 1.1%.

When it was all over Apple contributed about 35 points of the DJIA’s 68 point loss, while Microsoft accounted for about 11 points of that loss.

That’s a complete reversal of the picture as the market had been moving higher, but sooner or later that’s the way most things go. Whatever goes up goes down and whatever lags, tends to catch up in relative terms.

While the earnings reports after yesterday’s close were disappointing, it really remained to be seen what kind of an impact the most recent reports would have on today’s market. Yesterday’s early disappointments took their real toll on the DJIA, but there was enough pain to spread around as the broader market got progressively weaker as the morning went on.

What was also noticeable yesterday was the large hits taken by some lesser known stocks when reporting earnings disappointments. Even announcing the plans to cut jobs, normally something that offsets some of the price declines associated with disappointing earnings, did little, if anything to stem the decline in Lexmark, for example.

With a little bit of cash still in hand, I don’t think that I’ll be likely to spend any more for the remainder of the week unless there’s some significant weakness to capitalize on, such as in Lexmark, maybe.

With still lots more earnings yet to be reported, there’s a need to erase the disappointments from yesterday and a need to paint a picture that’s consistent with an expanding economy.

Of course, that would re-introduce fears of an interest rate increase, but most are beginning to accept the likelihood that a rate increase will become reality by September.

Daily Market Update – July 22,  2015  (9:15 AM)

More earnings came after yesterday’s closing bell and they continued the shift of the path of the first full week of earnings. That shiftt began before yesterday’s open.

While yesterday was another in a series of days in which the DJIA was lagging behind the S&P 500 and the NASDAQ 100, due in part to some large moves in DJIA comoponents and a streak of forward moves by a very small handful of NASDAQ components, this morning, as we get ready to begin, the shoe is on the other foot.

This time, the dual disappointments from Microsoft and Apple add a double dose of earnings disappointment to the NASDAQ, which is based on market capitalization, as opposed to the DJIA, which is based on share price.

That share price is one of the reasons, maybe the only real reason that Apple had to split 7 to 1. Had it not done so, this morning’s $9.50 decline in the futures trading would have detracted about 420 points from the DJIA, instead of the paltry 60 points.

Microsft, on the other hand, despite being only half as much as Apple on a percentage basis, is costing the DJIA only about 10 points.

On the other hand, the combined market capitalization of Apple and Microsoft was over $1.1 Trillion before this morning’s prices settle.

At the moment, before the opening bell rings, as a result the DJIA is down about 0.2%, the S&P 500 is down about 0.4% and the NASDAQ 100 is down 1.1%.

That’s a complete reversal odf the picture as the market had been moving higher, but sooner or later that’s the way most things go. Whatever goes up goes down and whatever lags, tends to catch up in relative terms.

While the earnings reports after yesterday’s close were disappointing, it really remains to be seen what kind of an impact the most recent reports will have on today’s market. Yesterday’s early disappointments took their real toll on the DJIA, but there was enough pain to spread around as the broader market got progressively weaker as the morning went on.

What was also noticeable yesterday was the large hits taken by some lesser known stocks when reporting earnings disappointments. Even announcing the plans to cut jobs, normally something that offsets some of the price declines associated with disappointing earnings, did little, if anything to stem the decline in Lexmark, for example.

With a little bit of cash still in hand, I don’t think that I’ll be likely to spend any more for the remainder of the week unless there’s some significant weakness to capitalize on, such as in Lexmark, maybe.

With still lots more earnings yet to be reported, there’s a need to erase the disappointments from yesterday and a need to paint a picture that’s consistent with an expanding economy.

Of course, that would re-introduce fears of an interest rate increase, but most are beginning to accept the likelihood that a rate increase will become reality by September.

Daily Market Update – July 21,  2015  (Close)

Earnings are coming through this morning and some of the methodology differences in calculating the DJIA and S&P 500 resulted in another divergence between the two this morning and it widened during the day’s trading session.

That happens whenever a DJIA component, or two, that happen to be relatively high priced per shares, as was the case this morning, have large moves in the same direction. The size of those moves is more accentuated in the DJIA than in the broader index that is market capitalization weighted, rather than being price weighted.

For example, IBM’s move this morning had contributed about 56 points to the DJIA, although in the wrong direction. United Technologies is doing the same, but only reducing the index by about 25 points. Of course, they have some considerable impact on the S&P 500, as well, since they are so large, but much less than on the DJIA and none on the NASDAQ 100.

In fact, by the time the closing bell rang IBM and United Technologies accounted for about 110 points of the DJIA’s loss.

While that’s always interesting, sometimes those divergences actually say something more than simply reflecting on the way the indexes are calculated.

In the previous week that dichotomy existed all through the week and included the NASDAQ 100, as well, which was the great out-performer, with the DJIA lagging behind the S&P 500, as well.

What the recent market has been reflecting is that the advance from the 5% mini-correction has been very much led by a small number of very large market capitalization stocks. Those stocks also happen to have been NASDAQ 100 stocks.

Late this morning there was actually something on CNBC that highlighted just that point, but they went a step further by recalculating the NASDAQ 100 if the big gainers had been removed. Suddenly, those large cap NASDAQ stocks were seen as having contributed nearly 100% of the NASDAQ’s very impressive gain.

Suddenly the actually health of the NASDAQ 96 or so wasn’t that great.

While the market was just a hair away from setting a new high on the S&P 500 and while the NASDAQ has again closed at another new high, the advance has been nowhere near as broad as you might believe. It’s very much been a phenomenon of a handful of companies that are distorting the indexes, especially the S&P 500 and the NASDAQ 100.

That creates a condition where you can feel left behind, but are very much in the same boat as most people, unless they happen to have shares in those great gainers.

Hopefully some of the good fortune of those that have been carrying the markets will diffuse a little bit to the rest of the market and carry it along for the ride higher.

That, surprisingly, wasn’t going to be th case today, even though the DJIA was far worse than the S&P 500 to end the day.

After a good beginning to earnings season, this morning had brought some disappointing numbers, but no real surprises.

There are still lots more earnings reports to come and for the moment not too much economic news. Neither is there international events on the immediate horizon to hijack our attention.

While earnings will continue to come in at a strong pace for the next week or so the re-strengthening of the US Dollar may again begin to temper forward guidance, although that hasn’t been the case to this point.

While I’d like to see some increase in volatility in order to make option premiums more attractive, at the moment that’s outweighed by a hope that the market does get to follow in the path of some of those recent great NASDAQ gainers and simply move higher.

I would trade off opening new pos
itions for the time being for that kind of equilibration and spreading of the wealth.

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

Earnings are coming through this morning and some of the methodology differences in calculating the DJIA and S&P 500 are resulting in another divergence between the two this morning.

That happens whenever a DJIA component, or two, that happen to be relatively high priced per shares, as is the case this morning, have large moves in the same direction. The size of those moves is more accentuated in the DJIA than in the broader index that is market capitalization weighted, rather than being price weighted.

For example, IBM’s move thois morning is contributing about 56 points to the DJIA, although in the wrong direction. United Technologies is doing the same, but only reducing the index by about 25 points. Of course, they have some considerable impact on the S&P 500, as well, since they are so large, but much less than on the DJIA and none on the NASDAQ 100.

While that’s always interesting, sometimes those divergences actually say something more than simply reflecting on the way the indexes are calculated.

In the previous week that dichotomy existed all through the week and included the NASDAQ 100, as well, which was the great out-performer, with the DJIA lagging behind the S&P 500, as well.

What the recent market has been reflecting is that the advance from the 5% mini-correction has been very much led by a small number of very large market capitalizatoin stocks. Those stocks also happen to have been NASDAQ 100 stocks.

While the market was just a hair away from setting a new high on the S&P 500 and while the NASDAQ has again closed at another new high, the advance has been nowhere near as broad as you might believe. It’s very much been a phenomenon of a handful of companies that are distrorting the indexes, especially the S&P 500 and the NASDAQ 100.

That creates a condition where you can feel left behind, but are very much in the same boat as most people, unless they happen to have shares in those great gainers.

Hopefully some of the good fortune of those that have been carrying the markets will diffuse a little bit to the rest of the market and carry it along for the ride higher.

After a good beginning to earnings season, this morning has brought some disappointing numbers, but no real surprises.

There are still lots more earnings reports to come and for the moment not too much economic news. Neither is there international events on the immediate horizon to hijack our attention.

While earnings will continue to come in at a strong pace for the next week or so the re-strengthening of the US DOllar may again begin to temper forward guidance, although that hasn’t been the case to this point.

While I’d like to see some increase in volatility in order to make option premiums more attractive, at the moment that’s outweighed by a hope that the market does get to follow in the path of some of those recent great NASDAQ gainers and simply move higher.

I would trade off opening new positions for the time being for that kind of equilibration and sharing of the wealth.

Daily Market Update – July 20,  2015  (Close)

There is almost nothing happening this week on the economic calendar.

There’s also not too much expected on the international front as for now Greece and China seem to be quiet and Europe is getting ready for its month off. While Greece may be off the map for a while to come, it’s still anyone’s guess as to when we get back to realizing what a potential calamity may be forming in China.

But until any further indication that will be the case, it’s as if China doesn’t exist, at least in regard to presenting a level of liability that we’d prefer not to have to face.

What we do have this week is an avalanche of earnings and by all indications from last week, they are going to be better than expected.

The flow of positive information comes at a time that the market is just a fraction of a percent away from its all time highs and depending upon your persepctive is within easy reach of a technical resistance point or technical support point.

Depending upon how you look at it, that point is a launching pad for a climb higher or a jump off point to go lower.

But when you combine it with what may be a torrent of continuing good news there may be reason to think that it will end up being a launching pad more than anything else.

Considering that we’ve just bounced back from another one of those mini-corrections, although it was overdue, there’s not too much evidence over the past 3 years that we would turn around and head right back into another such correction without a substantive move higher and to new highs, first.

So far, as some more good earnings were released this morning, the market looked as if it will be getting the week off to a quiet start and it stayed subdued all day long. Considering the kinds of gains that were made last week, simply staying in place isn’t necessarily a bad thing as trying to create some solid and firm ground underneath that rapid ascent tends to be a better way to reach new highs.

With a little bit of cash from not having spent any last week and with no positions set to expire this week as the August 2015 cycle begins, I’m anxious to do something to create some income for the week beyond the single ex-dividend position for the week. Biut beyond the single purchase today in Best Buy, I don’t know how much more it will take to enice me to dip in even more.

Of course, the dilemma is not really wanting to spend that money in a chase of prices moving higher. The greater that everyone feels certain that the next move will be higher makes you get concerned that the crowd will be, as it usually is, wrong.

With the absence of overhanging or unresolved bad news and with earnings continuing to surprise to the upside, it is hard, though to see the near term reason for the market to not move to a higher point.

For that reason I am more likely to want to spend some money this week, but again will be looking at short term expirations in an effort to make some quick income and to hopefully be able to recycle cash from anticipated assignments.

While I usually would prefer to add those positions while the market shows some weakness, it’s possible that a mildly higher opening may represent relative weakness and that may be the best possible as market confidence has reason to be growing.

Daily Market Update – July 20,  2015  (8:45 AM)

There is almost nothing happening this week on the economic calendar.

There’s also not too much expected on the international front as for now Greece and China seem to be quiet and Europe is getting ready for its month off. While Greece may be off the map for a while to come, it’s still anyone’s guess as to when we get back to realizing what a potential calamity may be forming in China.

But until any further indication that will be the case, it’s as if China doesn’t exist, at least in regard to presenting a level of liability that we’d prefer not to have to face.

What we do have this week is an avalanche of earnings and by all indications from last week, they are going to be better than expected.

The flow of positive information comes at a time that the market is just a fraction of a percent away from its all time highs and depending upon yoour persepctive is within easy reach of a technical resistance point or technical support point.

Depending upon how you look at it, that point is a launching pad for a climb higher or a jump off point to go lower.

But when you combine it with what may be a torrent of continuing good news there may be reason to think that it will end up being a launching pad more than anything else.

Considering that we’ve just bounced back from another one of those mini-corrections, although it was overdue, there’s not too much evidence over the past 3 years that we would turn around and head right back into another such correction without a substantive move higher and to new highs, first.

So far, as some more good earnings are released this morning, the market looks as if it will be getting the week off to a quiet start. Considering the kinds of gains that were made last week, simply staying in place isn’t necessarily a bad thing as trying to create some solid and firm ground underneath that rapid ascent tends to be a better way to reach new highs.

With a little bit of cash from not having spent any last week and with no positions set to expire this week as the August 2015 cycle begins, I’m anxious to do something to create some income for the week beyond the single ex-dividend position for the week.

Of course, the dilemma is not really wanting to spend that money in a chase of prices moving higher. The greater that everyone feels certain that the next move will be higher makes you get concerned that the crowd will be, as it usually is, wrong.

With the absence of overhanging or unresolved bad news and with earnings continuing to surprise to the upside, it is hard, though to see the near term reason for the market to not move to a higher point.

For that reason I am more likely to want to spend some money this week, but again will be looking at short term expirations in an effort to make some quick income and to hopefully be able to recycle cash from anticipated assignments.

While I usually would prefer to add those positions while the market shows some weakness, it’s possible that a mildly higher opening may represent relative weakness and that may be the best possible as market confidence has reason to be growing.

Daily Market Update – July 17,  2015  (8:30 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:  none

Rollovers:  KSS

Expirations: GDX, GM

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

The following were ex-dividend this week: FCX (7/13$0.05)

The following will be ex-dividend next week: FAST (7/29 $0.28)

Daily Market Update – July 16,  2015  (Close)

Yesterday was another one of those breather kind of days when you could have reasonably expected some fireworks.

Instead, it was a boring day in which not even the first of 2 days of Janet Yellen’s Congressional Humphrey-Hawkins testimony could get markets excited. There were no inciteful moments, no great insights during the testimony and probably more of the same is expected today.

While Greenspan always said whatever was on his mind and the market went wild in trying to decipher what he had said, often gyrating back and forth in magnitude with his words, Bernanke and now Yellen, are much more measured and thoughtful of their words. 

Both, still were able to move markets, but did and do so much less frequently, although both Bernanke and Yellen were more likely to move markets higher, rather than unpredictably, as did Greenspan.

The only real excitement yesterday came in the final hour of trading as some attempts of rioting in the streets of Athens in advance of the Parliamentary vote on the proposed Greek debt relief proposal was about to get underway. It was in the final hour that market gains disappeared as maybe for a moment some doubt was cast as to the outcome of the scheduled vote, although most of the doubt was whether the vote would be able to take place and not its actual outcome.

With pretty much everyone disavowing support of the proposed plan, even the person who has agreed to it and has to implement the increased austerity measures, ultimately the vote was as expected in favor of accepting the deal.

That may have been the impetus for this morning’s moderately higher trading in the futures and certainly the lack of any bad news as the day progressed helped to create a very bene3volenty environment, especially as earnings news coming forth has not scared any one off.

Otherwise, earnings continue and so far there is no over-riding theme casting negativity on the past quarter, nor more importantly on the quarter ahead. There are some important companies reporting earnings today, both before the opening bell and after the closing bell and then again tomorrow morning. They could at least get the market to be responsive to fundamentals for the time being as international events may begin to fade for now.

With only a very small number of positions set to expire this week and with only one of those in a position for wither expiration or assignment, it’s going to be a quiet week right through until the end.

With the market up strongly for the week, most of which came on Monday, there’s not too much reason to think that the week will see those gains evaporate, as the technical lows were decisively tested and only served as a springboard to begin approaching record highs. After yesterday’s failure to add to the string of higher moving days the market was still only 1.5% below its all time record highs and the pattern of the past 3 years has been fairly unequivocal.

After today’s close we got even closer to those records, almost as if nothing had recently happened to have brought us to a 5% decline and at the precipice of testing a technical level of support.

Hopefully that pattern of moving higher as a springboard to even greater heights will continue, even if it means not taking the opportunity to add to the roster of new positions. At this point I would prefer to see asset value go along for the ride higher and to be able to take whatever opportunity may present itself to add additional income through the sale of calls on uncovered positions.

Daily Market Update – July 16,  2015  (7:00 AM)

Yesterday was another one of those breather kind of days when you could have reasonably expected some fireworks.

Instead, it was a boring day in which not even the first of 2 days of Janet Yellen’s Congressional Humphrey-Hawkins testimony could get markets excited. There were no inciteful moments, no great insights during the testimony and probably more of the same is expected today.

While greenspan always said whatever was on hos mind and the market went wild in trying to decipher what he had said, often gyrating back and forth in magnitude with his words, Bernanke and now Yellen, are much more measured and thoughtful of their words. 

Both, still were able to move markets, but did and do so much less frequently, although both Bernanke and Yellen were more likely to move markets higher, rather than unpredictably, as did Greenspan.

The only real excitement yesterday came in the final hour of trading as some attempts of rioting in the streets of Athens in advance of the Parliamentary vote on the proposed Greek debt relief proposal was about to get underway. It was in the final hour that market gains disappeared as maybe for a moment some doubt was cast as to the outcome of the scheduled vote, although most of the doubt was whether the vote would be able to take place and not its actual outcome.

With pretty much everyone disavowing support of the proposed plan, even the person who has agreed to it and has to implement the increased austerity measures, ultimately the vote was as expected in favor of accepting the deal.

That may be the impetus for this morning’s moderately higher trading in the futures.

Otherwise, earnings continue and so far there is no over-riding theme casting negativity on the past quarter, nor more importantly on the quarter ahead. There are some important companies reporting earnings today, both before the opening bell and after the closing bell and tomorrow and they could at least get the market to be responsive to fundamentals for the time being as international events may begin to fade for now.

With only a very small number of positions set to expire this week and with only one of those in a position for wither expiration or assignment, it’s going to be a quiet week right through until the end.

With the market up strongly for the week, most of which came on Monday, there’s not too much reason to think that the week will see those gains evaporate, as the technical lows were decisively tested and only served as a springboard to begin approaching record highs. After yesterday’s failure to add to the string of higher moving days the market is still only 1.5% below its all time record highs and the pattern of the past 3 years has been fairly unequivocal.

Hopefully that pattern will continue, even if it means not taking the opportunity to add to the roster of new positions. At this point I would prefer to see asset value go along for the ride higher and to be able to take whatever opportunity may present itself to add additional income through the sale of calls on uncovered positions.