Category: Daily Market Update

Daily Market Update – May 12, 2015  (Close)

Whatever yesterday didn’t offer, in terms of a catalyst for moving markets forward, today was offering even less by the looks of the pre-opening futures.

On the contrary, markets were heading strongly lower, with the catalyst for that being another spike in bond interest rates. But later in the day, those same bond prices served as the catalyst to erase the very strong early losses.

What the catalyst for either of the bond movements seen during the day or the past couple of days is unclear, but the bond market seems to be putting its money on rates heading higher sooner than we may have all believed.

With retailers beginning to report earnings tomorrow and with the Retail Sales Report being released tomorrow, we’ll see whether the consumer based component of GDP is pointing toward expansion, just as we got to see this morning’s JOLT Survey indicating that there was no such upward wage pressure.

So far there isn’t too much indication of any kind of upward pressure on prices or wages, although there is some recent increase in commodity prices.

If those retail numbers don’t support the thesis that the bond market is backing at the moment, it would be reasonable to expect rates to head back lower, just as they did in March after a spike then, too. The JOLT Survey data may have also been the reason that those rates backed off this morning, as well.

What would remain to be seen, though, is whether the stock market would then rally in light of the fact that bonds would become less desirable in the context of disappointing retail sales. They did so today, although it wasn’t really a rally per se, more a case of just atoning for the significant early losses.

With the pre-open futures pointing to a steep decline to begin the day, that tends not to be the sort of thing that reverses itself once trading begins for real. Although  that’s exactly what did happen a month or so ago, generally that’s not the case.

But it was again the case today.

Thankfully.

While the bond market is predicting that rates are going to head up sooner rather than later, it’s hard to see where that upward pressure is going to come from in the immediate future.

It’s also hard to picture a scenario where the Retail Sales Report or the actual earnings releases from the major retailers are going to give any good reason to send stocks higher.

Numbers that are unexpectedly good will only serve to re-inforce the bond market’s move that reflects increasing inflation pressure.

Maybe what’s needed is something like last week’s Employment Situation Report, where the numbers simply meet expectations and neither surprised nor disappointed.

This may simply be the perfect time for a “no news is good news” kind of economic and earnings reports. For now the status quo would be just fine and that would give the bond market plenty of opportunity to make itself less competitive with stocks as it reconsiders it stance on the timing of interest rate increases.

While the various ma
rkets think about where they’re going and with some prices likely to be pushed further from their strikes, there is at least 3 more days to see some sort of recovery once today’s results are sealed.

That’s still plenty of time for some kind of bounce back from yesterday’s decline and what was a surprisingly benign day today.

I didn’t expect to be doing too much today other than watching the market unfold and hoping that there is some self-limiting mechanism that recognizes that things really aren’t that bad to warrant anything more than a small and short lived kind of adjustment to prices.

Luckily that hoping didn’t go to waste today. We’ll see if it has any staying power tomorrow.

Daily Market Update – May 12, 2015  (9:15 AM)

Whatever yesterday didn’t offer, in terms of a catalyst for moving markets forward, today is offering even less by the looks of the pre-opening futures.

On the contrary, markets are heading strongly lower, with the catalyst for that being another spike in bond interest rates.

What the catalyst for that is unclear, but the bond market seems to be putting its money on rates heading higher sooner than we may have all believed.

With retailers beginning to report earnings tomorrow and with the Retail Sales Report being released tomorrow, we’ll see whether the consumer based component of GDP is pointing toward expansion, just as we’ll see this morning whether the JOLT Survey indicates that there may be upward wage pressure.

So far there isn’t too much indication of any kind of upward pressure on prices or wages, although there is some recent increase in commodity prices.

If those retail numbers don’t support the thesis that the bond market is backing at the moment, it would be reasonable to expect rates to head back lower, just as they did in March after a spike then, too.

What would remain to be seen, though, is whether the stock market would then rally in light of the fact that bonds would become less desirable in the context of disappointing retail sales.

So far there isn’t too much indication of any kind of upward pressure on prices or wages, although there is some recent increase being seen in commodity prices.

With the pre-open futures pointing to a steep decline to begin the day, that tends not to be the sort of thing that reverses itself once trading begins for real. Although  that’s exactly what did happen a month or so ago, generally that’s not the case.

While the bond market is predicting that rates are going to head up sooner rather than later, it’s hard to see where that upward pressure is going to come from in the immediate future.

It’s also hard to picture a scenario where the Retail Sales Report or the actual earnings releases from the major retailers are going to give any good reason to send stocks higher.

Numbers that are unexpectedly good will only serve to re-inforce the bond market’s move that reflects increasing inflation pressure.

Maybe what’s needed is something like last week’s Employment Situation Report, where the numbers simply meet expectations and neither surprised nor disappointed.

This may simply be the perfect time for a “no news is good news” kind of economic and earnings reports. For now the status quo would be just fine and that would give the bond market plenty of opportunity to make itself less competitive with stocks as it reconsiders it stance on the timing of interest rate increases.

While the various markets think about where they’re going and with some prices likely to be pushed further from their strikes, there is at least 3 more days to see some sort of recovery once today’s results are sealed.

That’s sti
ll plenty of time for some kind of bounce back from yesterday’s decline and what may be a disappointing day today.

I don’t expect to be doing too much today other than watching the market unfold and hoping that there is some self-limiting mechanism that recognizes that things really aren’t that bad to warrant anything more than a small and short lived kind of adjustment to prices.

Daily Market Update – May 11, 2015  (Close)

Generally, when the week opens following a large move higher to close the previous week, I like to see the market give back most, if not all of those gains.

That’s because those large Friday gains are usually associated with some assignments and with money in hand on Monday, I don’t like the idea of paying up for positions that went up sharply just the previous trading session.

This week is a little bit different, though.

For one thing, it was another week of not having any assignments or fewer than I had hoped to have. So there’s less cash available for new positions and I tend to be very reluctant to use margin credit for leverage, other than to sell covered puts.

So, with the prospect of not likely making any new purchases, I  would much rather see existing positions thrive.

That’s especially the case since this is the end of the May 2015 option cycle and I have a lot of positions riding on the week’s outcome. I would definitely like to see the market continue its climb higher and then end the week with some assignments, or at least rollovers to keep the cash stream flowing.

Even without many assignments over the past week the cash flow has been able to continue as rollovers have been possible for most positions. That at least makes day to day stock watching a little more palatable while waiting for an opportunity to be more pro-active.

As with most weeks the question remains the same, though.

What are the week’s upcoming catalysts to send us higher or to send us lower?

Just like last week this coming week is going to be a very slow one for economic news. It won’t even have anything akin to the previous week’s Employment Situation Report. That, alongside Janet Yellen’s unexpected comment, were the only two catalysts for the week and they sent markets in competing directions.

This week we have tomorrow’s JOLT Survey and Wednesday’s Retail Sales Report.

The former, despite Janet Yellen suggesting that it was an important measure of economic growth, has been widely ignored and the Retail Sales Report won’t hold a candle to the actual earnings reports coming this week from the nation’s leading retailers that actually kick off about an hour prior to the release of the Retail Sales Report.

Those company earnings may be far more important than anything else this week, especially if they give the slightest hint that consumers are finally starting to get involved with the discretionary spending that we’ve been waiting over 6 months to begin seeing.

The pre-opening futures were sitting on the flat line this morning, as might have been expected with such little news coming through, although there was some weekend news out of China that could have set the stage for some optimism in the US, as we are increasingly reliant upon a booming Chinese economy for our own health, but so far that doesn’t appear to be the case.

With that flat line seemingly preparing the market for its open,
I was hopeful there would continue to be some opportunities to sell calls on existing positions as has been the case the past few weeks, although there still may continue to be reason to look at extended option expiration dates to do so.

That didn’t happen, but  the decision to close the AbbVie, at a cost of only $0.06 on the in the money position likely to be assigned on Friday, did offer a little cushion to generate some revenue from new purchase positions.

One of those, Marathon Oil, goes ex-dividend next Monday. I sold the May 22 options in the hope that the shares will be assigned early at Friday’s close. That way, although not getting the dividend,  I would get 2 weeks of option premium and not have to shoulder any of the price reduction related to the dividend and also avoid the risk of an additional week of holding.

As with all great ideas – we’ll see.

Hopefully tomorrow will get back on track and find reasons to take the market higher in a meaningful way and get us one step closer to finishing the monthly option cycle on a decent note.

Daily Market Update – May 11, 2015  (8:30 AM)

Generally, when the week opens following a large move higher to close the previous week, I like to see the market give back most, if not all of those gains.

That’s because those large Friday gains are usually associated with some assignments and with money in hand on Monday, I don’t like the idea of paying up for positions that went up sharply just the previous trading session.

This week is a little bit different, though.

For one thing, it was another week of not having any assignments or fewer than I had hoped to have. So there’s less cash available for new positions and I tend to be very reluctant to use margin credit for leverage, other than to sell covered puts.

So, with the prospect of not likely making any new purchases, I  would much rather see existing positions thrive.

That’s especially the case since this is the end of the May 2015 option cycle and I have a lot of positions riding on the week’s outcome. I would definitely like to see the market continue its climb higher and then end the week with some assignments, or at least rollovers to keep the cash stream flowing.

Even without many assignments over the past week the cash flow has been able to continue as rollovers have been possible for most positions. That at least makes day to day stock watching a little more palatable while waiting for an opportunity to be more pro-active.

As with most weeks the question remains the same, though.

What are the week’s upcoming catalysts to send us higher or to send us lower?

Just like last week this coming week is going to be a very slow one for economic news. It won’t even have anything akin to the previous week’s Employment Situation Report. That, alongside Janet Yellen’s unexpected comment, were the only two catalysts for the week and they sent markets in competing directions.

This week we have tomorrow’s JOLT Survey and Wednesday’s Retail Sales Report.

The former, despite Janet Yellen suggesting that it was an important measure of economic growth, has been widely ignored and the Retail Sales Report won’t hold a candle to the actual earnings reports coming this week from the nation’s leading retailers that actually kick off about an hour prior to the release of the Retail Sales Report.

Those company earnings may be far more important than anything else this week, especially if they give the slightest hint that consumers are finally starting to get involved with the discretionary spending that we’ve been waiting over 6 months to begin seeing.

The pre-opening futures are sitting on the flat line, as might have been expected with such little news coming through, although there was some weekend news out of China that could have set the stage for some optimism in the US, as we are increasingly reliant upon a booming Chinese economy for our own health, but so far that doesn’t appear to be the case.

With that flat line seemingly preparing the market for its open, hopeful
ly there will continue to be some opportunities to sell calls on existing positions as has been the case the past few weeks, although there still may continue to be reason to look at extended option expiration dates to do so.

Otherwise, I expect it to be a fairly passive morning and don’t expect too much action to start the week as I hold on tightly to what little cash is in my pockets at the moment.

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

The Week in Review will be posted by 6:00 PM and the Weekend Update will be posted by Noon on Sunday.

The following trade outcomes are possible today:

Assignments:  none

Rollovers:  ANF

Expirations:  AZN, LVS, WFM

The following positions were ex-dividend this week:  INTC (5/5 $0.24), BP (5/6 $0.60).  

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

Daily Market Update – May 7 , 2015  (Close)

The one lesson that can be learned from Alan Greenspan and Janet Yellen is that the market doesn’t like it when they vocalize an opinion that essentially says that they believe stocks are too expensive.

Whether it’s Greenspan’s “frothy exuberance” or Yellen’s questioning of bio-technology stock prices, yesterday’s comment  that equities were “priced quite high,” seemed to get an immediate response.

While the knee-jerk reaction is hard to argue, the longer term consequence is less clear cut, as such statements have tended to lead toward the market or the sector to move higher.

Despite a late minute reduction in the decline, taking it out of triple digit territory, yesterday was a very negative trading session, adding onto the decline from the day before.

Lately, when faced with a decline of some note there has been a reflexive bounce back the following day, so yesterday did stand out a little for not following that pattern.

In a week that has basically no scheduled news sometimes it doesn’t take too much to make things happen and yesterday was a good example of that. Tomorrow, however, as the Employment Situation Report is released and most expect a bounce much higher from last month’s disappointing report, anything can happen.

Both “too good” and “bad” are likely to lead in the same downward direction and even “as expected” may be seen as a disappointment.

This morning’s futures, just prior to the Jobless Claims Report had already shown quite a bit of improvement and was only very slightly lower, hopefully putting the brakes on the past couple of days and giving those positions expiring this week a chance to either be assigned or get rolled over. The past few days put either of those goals a little further off the horizon.

With the Jobless Claims Report released and essentially showing no change, the market also showed essentially no change from its improved position and looked at least be ready to start the day without the extreme prejudice that was hanging over it yesterday.

Instead, it actually provided a nice surprise, as the market actually spent quite a bit of the day in triple digit gain territory and at least was there long enough to allow a couple of rollovers. Of course, that doesn’t leave too much for tomorrow, although there may at least be one rollover or assignment still in contention.

Hopefully there will be some more rally tomorrow, even a relief rally would be fine right now, as long as giving some chance to generate some more income from holdings.

As we close in on next week’s month ending expirations and with enough expiring positions to get my attention, we will hopefully not be taken further away from the goal line heading into the expiration date.

After that anything is fair game

Daily Market Update – May 6 , 2015  (Close)

Yesterday, should have been a quiet day, but then someone remembered that bonds were starting to pose a threat to stocks, as their interest rate has been climbing higher and higher.

That move isn’t the first one in the past couple of months, as an earlier one mis-read the likelihood of the FOMC making an interest rate change and then very quickly retreated.

This week Friday’s Employment Situation Report could make the difference between those rates going higher or returning below 2%.

Last month’s report was pretty abysmal, but this time around the expectations are for some good numbers, returning to a stronger path that had been the case up until very recently.

Whether a strong earnings number heats up concerns over an interest rate increase is anyone’s guess, but it probably would do so.

In light of bond rates moving higher and the FOMC removing any calendar references to the timing of an increase, while re-iterating its dependence on data, would make you think that the slightest evidence of an economy heating up might finally be enough to move those rates higher.

Then we will probably get a collective sigh and maybe that will prove to be the catalyst for the market itself moving higher. After all, even at 2.2%, the bond market isn’t that much of an attractive competitor to stocks.

Yesterday’s plunge seemed to be entirely related to bond worries and this morning the market, if it follows the recent pattern, will be setting itself up for a recovery bounce higher, albeit on much lower volume.

As the morning futures are trading, at least there was a mild move higher in advance of the ADP release. That release, unless it is really somewhere unexpectedly high or low, doesn’t do too much to move the needle, but does give people a sense of where the government employment statistics may be leaning.

As usual, despite a somewhat disappointing ADP statistic, the market didn‘t really seem to care.

What it did care about was an errant comment by Janet Yellin who said that she believed that equities were priced “quite high.”

That’ll do it.

And so the market put together another of these decidedly negative days, so much so that the DJIA is now unchanged for 2015

For now, my eyes and attention are focused on trying to extricate from any positions that are due to expire this week. Yesterday’s decline made both the prospects or rollovers and assignments become more and more distant, but lately big moves have become more frequent, so you never do know what may unfold over the next couple of trading days, especially with a big event on Friday.

Today did nothing to help things.

More importantly, though, at this point, is being left in a good position so that next week’s monthly option cycle ending week goes off smoothly and delivers a good combination of rollovers and assignments.

For that, we will need Thursday and Friday to cooperate.

Daily Market Update – May , 2015  (Close)

Yesterday, was as it should have been, a fairly quiet day, even though it did spend a bit of time in the triple digit gain arena.

Other than this week’s Employment Situation Report coming on Friday, there’s not too much to drive markets, as earnings reports are also now going to begin slowing down.It ended the day with a much more moderated gain and that looked as it will be the polar opposite to this morning, as the futures were setting up for a moderately lower day.

Again, there’s no news that should play much of a hand in shaping the day’s trading. Other than tomorrow’s ADP report, which is just a precursor to Friday’s Employment Situation Report, there’s nothing on the docket.

Even after a period of time when there was a quiet period on FOMC speeches, it’s a pretty quiet week on that end, as well.

At some point, especially if it continues heading in its recent direction, someone is going to take note of where bond traders have been taking the rate on the 10 Year Treasury. It’s still below that recent 2.3% high point from a couple of months ago, but it has gone about 15% higher in just a week. As it moves higher not only does it create more pressure in other interest sensitive areas, but it may finally start offering some competition for whatever uncommitted investment dollars are out there.

However, if you listen to the people at TD Ameritrade, it doesn’t seem as if there is that much un-invested money sitting in accounts, at least not for individual investors. On top of that, margin debt is at an all time high.

Take those bits of information together and you have less of a catalyst for upward move in stocks and the prospects that any move into bonds would have to come at the expense of money already invested in stocks.

So the burden of proof is definitely on the bulls, maybe even more than usual.

By the early afternoon, as the DJIA was at a triple digit loss, came the first suggestions that bonds may have been the source of the weakness being seen.

Maybe, but we’ll see where those rates keep going. It wasn’t too long ago that they did the same thing and then had to reverse course as it was getting more and more clear that the FOMC wasn’t going anywhere fast with any decision on raising rates.

With a couple of purchases yesterday, I think that i am done for the week. Not that I have the cash reserves to go on, but the rest of the week will likely be spent looking for any opportunity to generate some additional revenue. As always, the includes the need to keep fingers crossed and to hope for any of a few different outcomes.

Most of all, I would love to see those prayers answered with some assignments.Those are still looking a little bleak, so I may be willing to actually let the Market Vectors Gold Miners ETF go, rather than rolling if it is in the money, as I’ve been doing repeatedly over the past few months.

With today’s negative opening looming and then becoming a reality, I was hopeful of seeing some isolated bumps in individual positions and would again have gladly taken any opportunity to generate some revenue from any uncovered positions.

Maybe tomorrow.