Category: Daily Market Update

Daily Market Update – July 8,  2015  (8:00 AM)

You had to be impressed with yesterday’s 300 point turnaround on the DJIA.

Fortunately, that turnaround was in the right direction, because we’re not heading in the right direction this morning, as there were very large sell-offs in China overnight and those sell-offs spread to other Asian markets, even as European markets seem to be moving higher this morning.

The Chinese sell-off can’t be too much of a surprise, as lots of evidence shows that when there are attempts to manipulate markets those efforts tend to fall flat after a day or so. Generally, that is the situation seen during currency crises, when central banks move in to prop up their currencies, only to find that they can stem the tide for the briefest of moments. The only thing that can really correct the situation is time and following the natural cycle of ups and downs that characterize every market that has underlying value.

Ultimately, the force of markets isn’t very different from the forces of nature. Good luck trying to rein either in and showing them who’s the real boss.

Like most of these kind of events, they will pass, but it’s always of question of how long it will take and how we can withsatnd the pressures.

In the case of China, they aren’t very new to this capitalism game called the stock market and the speculative frenzy and heavy use of margin may have a depressing impact on their econopmy for quite a while, as debt is a heavy burden to lift.

You also have to wonder whether the Chinese government will know what to do, not that any government, including our own, has any kind of certainty over what to do when there is a bursting of a bubble. The fear is that the CHinese government will over-react and try to show the markets that they are the boss in a very heavy handed way.

The other question is how a Chinese stock market sell off will impact US markets.

This morning, the obvious impact is the one manifesting itself, as the futures are trading down triple digits, but that very first question applies here, too. 

Just how long will that impact persist, particularly since US markets can benefit from perceived weakness elsewhere.

While our futures are down triple digits this morning, it’s another of these much weaker sessions that are actually improved over where the futures had been trading, so there’s always some hope for moderation to sneak into the market.

SOme of that moderation can come tonight, as earnings season begins. While it’s not very much of a barometer anymore, there’s no question that some good numbers from Alcoa could give markets some hope of an economy that is moving forward, although there has to be some concern for what a Chinese slowdown may do to the prospects of future revenues.

Some more moderation could come if the EU and Greece begin acting like adults, now that the deadline has passed and the referendum is history. Anything constructive on that end, short of a Greek exit from the EU should be of benefit to the markets, but like everything else, just for the briefest of moments.

Today will in all likelihood be a day of watching and wondering where it ends. Wednesdays are usually slow trading days and today should be no exception. 

The only hope is that the hole that may be dug tod
ay isn’t so deep as to materially jeopardize the few positions scheduled for expiration this week and next.

Daily Market Update – July 7,  2015  (Close)

WIth dueling bad news over the weekend from Greece and China and seeing the depths to which the futures had traded on Sunday evening, there’s not much doubt that we got off easily yesterday.

While there really wasn’t any good news to account for yesterday’s very mild decline, there wasn’t any additional bad news to serve as fuel.

It’s hard to believe, given the constellation of events, that the market was even briefly positive nearly 90 minutes after the open.

That’s certainly a positive, but even more positive may be the fact that a couple of attempts to sell off the market again in the afternoon fizzled out.

When you start the morning with a loss that’s expected to be 200 points on the DJIA and after a recovery into positive territory starts to re-approach a triple digit loss, you begin to have a sinking feeling that the market had only been fooling itself and was taking us for a ride.

Monday of last week started off very badly and then recovered, only to see the bottom then fall out later in the afternoon and take the DJIA to a 350 point slide. There had to be a small part of the brain that kept thinking that yesterday might be the same.

But it wasn’t.

This morning the futures wee trading in a much more sedate fashion, just as the world seems to have calmed down.

Not that the problems are gone, but at least it appears as if Greece and The EU may at start speaking to one another in good faith and maybe bring some resolution to their joint crisis.

The issue in China, however, swamps that of Greece in size and importance to our stock and bond markets and we really have no template that might be able to describe what to expect.

The use of margin borrowing is rampant in China and that turns investing into speculation. 

Sometimes speculation ends well, but when so many are speculating in the same way, it’s hard to imagine a good outcome for all.

While China is trying to manipulate the market through various measures, including a cessation of all IPOs, there are very few examples of massive government intervention that can turn a ship on a dime when it’s going off course.

Unlike a Greek default, which wouldn’t have very much impact on our markets, other than perhaps to drive some European investment funds to our shores on the positive side and strengthen the USD on the negative side, China is the real deal.

But sedate or otherwise, those pre-opening futures shed no light at all on what today would be like as the market traded in a range of more than 300 points.

Importantly, the low side, down more than 200 points happened first. The upswing, that saw a triple digit gain until the final moments of trading still acquitted the market nicely.

With a couple of new positions opened yesterday an
d 1 additional new position today, I haven’t had the same pessimism about committing new funds as I’ve had the past few weeks, despite really wanting to preserve cash.

Sometimes, what you want to do and what you actually do can be two very different things. When that’s the case, the only thing that you can hope for is that there won’t be a period of regret to follow.

At least today didn’t offer the regret.

We’ll see if we can add another day of no negative news to add to today’s nice turnaround.

Daily Market Update – July 7,  2015  (8:45 AM)

WIth dueling bad news over the weekend from Greece and China and seeing the depths to which the futures had traded on Sunday evening, there’s not much doubt that we got off easily yesterday.

While there really wasn’t any good news to account for yesterday’s very mild decline, there wasn’t any additional bad news to serve as fuel.

It’s hard to believe, given the constellation of events, that the market was even briefly positive nealy 90 minutes after the open.

That’s certainly a positive, but even more positive may be the fact that a couple of attempts to sell off the market again in the afternoon fizzled out.

When you start the morning with a loss that’s expected to be 200 points on the DJIA and after a recovery into positive territory starts to re-approach a triple digit loss, you begin to have a sinking feeling that the market had only been fooling itself and was taking us for a ride.

Monday of last week started off very badly and then recovered, only to see the bottom then fall out later in the afternoon and take the DJIA to a 350 point slide. There had to be a small part of the brain that kept thinking that yesterday might be the same.

But it wasn’t.

This morning the futures are trading in a much more sedate fashion, just as the world seems to have calmed down.

Not that the problems are gone, but at least it appears as if Greece and The EU may at start speaking to one another in good faith and maybe bring some resolution to their joint crisis.

The issue in China, however, swamps that of Greece in size and importance to our stock and bond markets and we really have no template that might be able to describe what to expect.

The use of margin borrowing is rampant in China and that turns investing into speculation. 

Sometimes speculation ends well, but when so many are speculating in the same way, it’s hard to imagine a good outcome for all.

While China is trying to manipulate the market through various measures, including a cessation of all IPOs, there are very few examples of massive government intervention that can turn a ship on a dime when it’s going off course.

Unlike a Greek default, which wouldn’t have very much impact on our markets, other than perhaps to drive some European investment funds to our shores on the positive side and strengthen the USD on the negative side, China is the real deal.

With a couple of new positions opened yesterday and 2 additional new position trades awaiting the right price point for execution, I didn’t have the same pessimism about committing new funds as I’ve had the past few weeks, despite really wanting to preserve cash.

Sometimes, what you want to do and what you actually do can be two very different things. When that’s the case, the only thing that you can hope for is that there won’t be a period of regret to follow.

Daily Market Update – July 6,  2015  (Close)

Waking up this morning was like a throwback to last week at the same time.

Both Monday mornings were preceded by a meltdown of the S&P 500 Futures trading on Sunday, but both seemed to recover as Monday morning’s futures trading got underway prior to  heading into the opening bell.

Last Monday it ended up actually further deteriorating instead of improving, once the bell rang.

This morning the futures, while greatly improved from yesterday evening’s levels, were not really showing any movement higher from their preliminary opening levels, as we all waited to see what the next step of this Greek tragedy will be.

Still, with the S&P 500 Futures having been down by as much as 28 points last night, a decline of 16 points with an hour to go until the opening was a rally of sorts.

It’s still bad, just not as bad.

Somehow, for a brief moment, the market was actually in the green in the late morning.

With the announcement of the resignation of the controversial Greek Finance Minister, who threatened to resign in the event of a “Yes” vote and did so anyway even with a resoundinly large “No” vote, there may be some room for compromise between the EU and Greece, both of whom were willing to play their cards.

While the Greek Prime Minister is thought to be a polarizing figure, his Finance Minister was even more so and has likely been the architect of the greek strategy in dealing with the EU and plotting out a course that could be followed in a post-EU membership Greece.

The very thought that a major impediment to any reasonable resolution to the debt crisis has left the picture could be a very positive event.

What happens next is still anyone’s guess, as we are really in uncharted territory.

For today, however, it turned out not to be as bad as it looked, although that brief moment in the morning did give way to more selling. No matter how you looked at the weakness, though, it was pretty orderly and muted.

While the markets were weaker this morning as we got ready for trading to begin for the week the only real downside for US stocks, once the dust settles, is that the USD may again begin its march to parity with the Euro. The cessation of that march is something that I’ve been expecting to be the good news coming out of this new earnings season, which begins after the market close on Wednesday.

However, always as important and sometimes more important than earnings, which represent old news, is the forward guidance. If the USD looks as if it may go back to getting stronger and stronger against the EUro, that forward guidance may have to be tempered.

With another large decline looming this morning, there’s always the temptation of looking for bargains. With a little bit of cash in reserve I would ordinarily be reluctant to dip into that reserve, but I started the morning with a belief that the market may have discounted much of the worst that could occur with this crisis, including factoring in an exit from the EU by Greece.

That may make it a reason to be buying on this dip, as if it occurs to the level that the Futures are indicating, will be bringing us into “mini-correction” territory.

The fact that I also have no option contracts expiring this week, and therefore none that could be potentially assigned or rolled over, may also have played into the decision to loosen up the purse strings just a little.

I actually had more trades entered beyond the 2 new positions established, but there’s always tomorrow, as well.

Other than Greece, there’s not too much economic news this week to contend with, other than earnings. Those earnings, however, don’t really get going for real until next week and by then you would think that whatever will happen in Greece will have settled down by then.

So I will began the morning as an observer, but didn’t take too long to test the waters, as there’s not likely to be the kind of bad news ahead that we haven’t already thought about, unless you want to start thinking about China and its attempts to manipulate their stock market.

That may be a story for another time.

Daily Market Update – July 6,  2015  (8:45 AM)

Waking up this morning was like a throwback to last week at the same time.

Both Monday mornings were preceded by a meltdown of the S&P 500 Futures trading on Sunday, but both seemed to recover as Monday morning’s futures trading got underway prior to  heading into the opening bell.

Last Monday it ended up actually further deteriorating instead of improving, once the bell rang.

This morning the futures, while greatly improved from yesterday evening’s levels, are not really showing any movement higher from their preliminary opening levels, as we all wait to see what the next step of this Greek tragedy will be.

Still, with the S&P 500 Futures having been down by as much as 28 points last night, a decline of 16 points with an hour to go until the opening is a rally of sorts.

It’s still bad, just not as bad.

With the announcement of the resignation of the controversial Greek Finance Minister, who threatened to resign in the event of a “Yes” vote and did so anyway even with a resoundinly large “No” vote, there may be some room for compromise between the EU and Greece, both of whom were willing to play their cards.

While the Greek Prime Minister is thought to be a polarizing figure, his Finance Minister was even more so and has likely been the architect of the greek strategy in dealing with the EU and plotting out a course that could be followed in a post_EU membership Greece.

The very thought that a major impediment to any reasonable resolution to the debt crisis has left the picture could be a very positive event.

What happens next is still anyone’s guess, as we are really in uncharted territory.

While the markets are weaker this morning as we get ready for trading to begin for the week the only real downside for US stocks, once the dust settles, is that the USD may again begin its march to parity with the Euro. The cessation of that march is something that I’ve been expecting to be the good news coming out of this new earnings season, which begins after the market close on Wednesday.

However, always as important and sometimes more important than earnings, which represent old news, is the forward guidance. If the USD looks as if it may go back to getting stronger and stronger against the EUro, that forward guidance may have to be tempered.

With another large decline looming this morning, there’s always the temptation of looking for bargains. With a little bit of cash in reserve I would ordinarily be reluctant to dip into that reserve, butI start the morning with a belief that the market may have discounted much of the worst that could occur with this crisis, including factoring in an exit from the EU by Greece.

That may make it a reason to be buying on this dip, as if it occurs to the level that the Futures are indicating, will be bringing us into “mini-correction” territory.

The fact that I also have no option contracts expiring this week, and therefore none that could be potentially assigned or rolled over, may also play into the decision to loosen up the purse strings just a little.

Other than Greece, there’s not too much economic news this week to contend with, other than earnings. Those earnoings, however, don’t really get going for real until next week and by then you would think that whatever will happen in Greece will have settled down by then.

So I will begin the morning as an observer, but may be willing to test the waters, as there’s not likely to be the kind of bad news ahead that we haven’t already thought about, unless you want to start thinking about China and its attempts to manipulate their stock market.

That may be a story for another time.

Daily Market Update – July 2,  2015  (8:15 AM)

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

The following trade outcomes are possible today:

Assignments:  none

Rollovers:  none

Expirations: CSCO, DOW, WY

The following were ex-dividend this week: EMC (6/29 $0.12), WFM (6/30 $0.13), CSCO (7/1 $0.21)

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

Daily Market Update – July 1, 2015  (Close)

Well, the first 6 months of the year have now come to a close, and so far, 2015 isn’t much to crow about.

Maybe today will get the back half of the year back on track.

For a short while, at the very beginning of the year, the back and forth triple digit moves were reminiscent of the volatility last seen in the latter half of 2011, but that didn’t last very long.

There were still lots of triple digit moves during the rest of the first 6 months, but the net result had been to move markets higher and volatility actually declined.

With the spike in volatility on Monday following the 350 point drop it was a little better, but still not terribly enticing. Along with low premiums you would tend to expect an increase in buying demand, but that hasn’t been the case, as even speculators aren’t betting that the market will move in any significant way in either direction. Volume in the options market has been drying up and the bid – ask spreads have generally gotten larger, making it more difficult to get trades done.

I can’t recall the last time I’ve had so many trades go unexecuted at the end of the day, as has been the situation in the past month.

With yesterday’s minimal gain after a pre-opening futures session that was looking at triple digit gains, both the DJIA and S&P 500 finished the first half of the year virtually unchanged and it was yet another day with no trades of any sort.

This morning, on news that the technically in default nation of Greece may now be coming closer to some kind of agreement with some of its debtors, is sending the market higher. For the most part, the US equity markets don’t care how much the creditors give in on loan terms, until the realization that how Greece is handled may be a template for what awaits as other debtor nations in the EU are closely looking on.

The talk of contagion means nothing, whether in banking or in infectious disease, until that tipping point is activated. Then it becomes clear what the concerns were all about and why they were justified.

But for now, all anyone can see is the tip of their nose. And if an agreement can come on Greek debt to the IMF, then all will be fine with the world, until the next banking crisis occurs, which it will. Maybe even with Greece again.

But that doesn’t matter for now.

Again it was a matter of another triple digit gain in the futures as this morning brought a preview of tomorrow’s Employment Situation Report as the ADP Report was released.

Since the story is that a decision on any Greece agreement wouldn’t come until after Sunday’s referendum, there should be reason to believe that the Greek induced rally could have legs, but the ADP report could have presented some challenges to that, if it showed too strong job growth.

Instead, those numbers were right in line and so traders could fantasize about a happy outcome to Sunday’s Greek referendum.

With the early morning gains, my only hope was that there would be some broad lifting and give some possibility for any kind of trad
e today that can either result in more cash in the reserve or more income in my pocket.

There was, but not enough. Hopefully there will be more of the same tomorrow.

Right now, either of those kinds of trades look fairly bleak, but a couple of good market days could change that and get the July 4th celebration off to a better start than what was appearing to be the case as Monday came to its close.

Daily Market Update – June 30, 2015  (Close)

Yesterday’s 350 point loss on the realization that a deadline was looming for Greece and the European Union to come to some kind of a short term agreement was, as these things usually are, well overblown.

I’m not necessarily of the belief that the market is entitled to just keep going higher and higher and I would like to see some kind of correction and ensuing increase in volatility, but yesterday’s action wasn’t really warranted.

The situation in Greece is also not the kind of thing that should be expected to supress our own markets for very long as, if anything, instability in Europe just makes us a better alternative, in the same way that the introduction of Quantitative Easing by the ECB made Europe a better investing alternative.

There can be no sane person who would have thought that a solution to the Greek debt crisis would come at any time other than at the 11th hour. To have waited until then to express surprise by dumping stocks doesn’t make too much sense, particularly if you still hold onto the belief that the market is a discounting mechanism.

This morning there’s some guarded optimism that a solution, at least for the current problem of a payment due to the ECB, may be at hand. Of course, that still leaves a payment that will be due to the IMF in about a month and it leaves a bigger picture of just what happens if Greek debt is written down or forgiven, as the Greek government believes is appropriate, to the other debtor nations in the EU.

For the EU, Greece itself is small potatoes, but what it may unleash could be the real thing.

The market has a long way to go if it’s going to erase yesterday’s 350 point loss. This morning’s pre-open futures indicated that it may at least try, but that attempt wouldn’t even be close to recapturing the losses even if it had been able to be sustained throughout the session.

Which it wasn’t

While a triple digit gain in the futures would ordinarily be a reason to feel optimistic, this morning it could only raise the quetion of “that’s all?”

While yesterday’s decline was the largest in quite a while, it is emblematic of a market that has alternated between ups and downs and made little net movement in 2015. Yesterday’s loss wiped out index gains for 2015. While for a single day a 350 point decline is big, if that was your margin between a gain and a loss after 6 months, you really didn’t accomplish too much in the course of those 6 months.

And when the 6 months did come to its end at the end of today’s trading, you really do have to wonder why all of that energy was expended to end up having gone nowhere.

With a little bit of cash still remaining after actually having made a purchase yesterday, I would be more than content to sit back and let the market regain whatever it could and just bring us to Thursday’s sentinel event; the Employment Situation Report.

Unfortunately, it didn’t regain too much today and so that still leaves Thursday.

There
‘s reason to believe that the employment statistics will again reflect a strengthening economy and that could easily upset those worried about interest rates.

But that’s another issue where you have to wonder what it is that will catch anyone by surprise. Janet Yellen has more than telegraphed that an interest rate increase will be coming and that it will likely be small and it would be an automatically recurring one.

So why panic?

Why not discount the high likelihood that the rate increase will happen and just move on?

I know that there’s no answer to that question, but it is a continually frustrating one especially when it’s so apparent that there’s limited capability of learning from the past.

At least we’ll have earnings season beginning once again to maybe act as a counter-balance to external events and get stocks to react to fundamentals, even if only for a short while.

Daily Market Update – June 30, 2015  (8:45 AM)

Yesterday’s 350 point loss on the realization that a deadline was looming for Greece and the European Union to come to some kind of a short term agreement was, as these things usually are, well overblown.

I’m not necessarily of the belief that the market is entitled to just keep going higher and higher and I would like to see some kind of correction and ensuing increase in volatility, but yesterday’s action wasn’t really warranted.

The situation in Greece is also not the kind of thing that should be expected to supress our own markets for very long as, if anything, instability in Europe just makes us a better alternative, in the same way that the introduction of Quantitative Easing by the ECB made Europe a better investing alternative.

There can be no sane person who would have thought that a solution to the Greek debt crisis would come at any time other than at the 11th hour. To have waited until then to express surprise by dumping stocks doesn’t make too much sense, particularly if you still hold onto the belief that the market is a discounting mechanism.

This morning there’s some guarded optimism that a solution, at least for the current problem of a payment due to the ECB, may be at hand. Of course, that still leaves a payment that will bve due to the IMF in about a month and it leaves a bigger picture of just what happens if Greek debt is written down or forgiven, as the Greek government believes is appropriate, to the other debtor nations in the EU.

For the EU, Greece itself is small potatoes, but what it may unleash could be the real thing.

The market has a long way to go if it’s going to erase yesterday’s 350 point loss. This morning’s pre-open futures indicate that it may at least try, but that attempt wouldn’t even be close to recapturing the losses.

While a triple digit gain in the futures would ordinarily be a reason to feel optimistic, this morning it may only raise the quetion of “that’s all?”

While yesterday’s decline was the largest in quite a while, it is emblematic of a market that has alternated between ups and downs and made little net movement in 2015. Yesterday’s loss wiped out index gains for 2015. While for a single day a 350 point decline is big, if that was your margin between a gain and a loss after 6 months, you really didn’t accomplish too much in the course of those 6 months.

With a little bit of cash still remaining after actually having made a purchase yesterday, I would be more than content to sit back and let the market regain whatever it could and just bring us to Thursday’s sentinel event; the Employment Situation Report.

There’s reason to believe that the employment statistics will again reflect a strengthening economy and that could easily upset those worried about interest rates.

But that’s another issue where you have to wonder what it is that will catch anyone by surprise. Janet Yellen has more than telegraphed that an interest rate increase will be coming and that it will likely be small and it would be an automatically recurring one.

So why panic?

Why not discount the high likelihood that the rate increase will happen and just move on?

I know that there’s no answer to that question, but it is a continually frustrating one especially when it’s so apparent that there’s limited capability of learning from the past.

At least we’ll have earnings season beginning once again to maybe act as a counter-balance to external events and get stocks to react to fundamentals, even if only for a short while.