Category: Daily Market Update

Daily Market Update – April 20, 2015  (9:00 AM)

Last week ended on a really sour note, but luckily that didn’t get in the way of any assignments and rollovers that were being counted on as the week started.

This morning the futures looks like it wants to regain some of what was lost but without any real foundation for justifying that attempt at a recovery.

Since there wasn’t too much of a reason for the week ending loss either, it shouldn’t then be much of a surprise if reasons are thrown to the wind.

This week has very little of substantive economic news and is even light on the non-consequential kind of news so there aren’t likely to be too many catalysts coming at us, although items like the Petroleum Status Report, New Homes Starts and Durable Goods may take on more importance than they often do with so little competition for attention.

There’s also some speculation about European Union news and a Greek exit from the EU perhaps coming to a head this week, but it’s still difficult to envision how that would happen or be allowed to happen.

But what the week does have is lots of earnings reports, as this week and next will mark the peak and crescendo of this earnings season.

So far, the market has been taking less than stellar news with great stride and not punishing any company that’s following the path of under-delivering on already lowered expectations.Other than that little detour taken last Friday, the mediocre earnings that had been coming through were part of the formula that continued to send stocks higher.

With more assignments occurring last Friday than during any other week of 2015, it’s nice to have some more cash available. That’s especially true when assignments don’t happen as those stocks have run away from their strikes. That Friday sell-off helped to rein in some of those prices and even put them back into range for re-purchase.

With the May 2015 option cycle getting its start today, there are already positions set for expiration in each of the weeks of this monthly cycle.

With some cash in hand I expect to be adding some new positions, but will probably focus on those with a weekly expiration.

However, following that Friday sell-off and this morning’s indication of some kind of a rally, I’m not likely to rush in because there’s really not too much sense of where the needle will fall.

I would have liked to have seen some continuation of Friday’s sell-off or at least some effort to digest those losses before snapping back.

As the morning does get off to its start if the advance can hold, I would be especially happy if there’s more opportunity to sell calls on currently uncovered positions. Each of the last two weeks were good for that and that represents a way of generating income without having to put anything additional at risk.

As always the best of weeks has its combination of assignments, rollovers and newly covered positions and at least with the market getting off to a reasonable start for the week, so far there aren’t any hopes and dreams being dashed

Daily Market Update – April 17, 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:   Cisco. Lexmark, Marathon Oil, Sinclair Broadcasting

Rollovers:  Activision, The Gap

Expirations:   United States Brent Oil Fund

The following were ex-dividend this week: ABBV (4/13 $0.51), CHK (4/13 $0.09), FCX (4/13 $0.05)

The following will be ex-dividend next week: FAST (4/28 $0.28)

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

Daily Market Update – April 16, 2015  (Close)

With Citibank and Goldman Sachs reporting earnings this morning, they were in line with other major money center bank reports and so all seems well in the financial sector, as we get ready to move forward to the rest of the S&P 500.

So far the week is trading flatly, but that may be a little bit of a victory considering that this quarter will likely continue to be characterized by decreased guidance, decelerating growth in earnings and continued fears about currency.

All of those will also be happening in the context of the possibility of rising energy prices, but at least for the moment we’re not fretting about when interest rate rises will be coming.

What hasn’t been discussed at all, although may still be forthcoming when companies like Dow Chemical report, is what the impact of lower energy costs have been on their bottom lines. To this point we haven’t really seen any evidence of the hypothetical benefits of decreased energy costs, even though they have to be real.

When you consider that at some point the ability of stock buy backs to prop up EPS data is going to have to wane, there has to be something else to propel EPS or the market is going to be in for some major disappointment.

Since the most common way to cut costs and drive up the bottom line is to cut the workforce, that’s not a very good alternative means to grow EPS. It never is, but it would be even worse if coming before anyone  ever gets to believe that the marketplace ever even recovered from the 2008-9 drop in employment.

If lower energy costs won’t be the bump necessary to offset decreasing share buy backs, we had better hope that the dollar starts to demonstrate some weakness and that interest rates stay low, even though some rise in interest rates would probably be a good thing for the economy.

But all of that is way too esoteric this morning.

We’re now just 1 day from the end of the April 2015 option cycle and we still have 2 weeks of trading for the month to live up to its hype of being among the best for the market year in and year out. So far the S&P 500 is up 2%, so it is doing its part when you realize that YTD the market is up only 2.3%.

Today did nothing to move any needles.

With this morning’s Housing Starts number being on the light side the market wasn’t capitalizing on the Citibank and Goldman Sachs news as it got ready to open for trading. Instead it is erased yesterday’s moderate gains and then some. Once trading started much of the day was spent in mildly positive territory, so at least we didn’t take much of a step backward

Thankfully there was enough moderation in pre-open selling to give this week a chance of ending with enough assignments to fund any buying in the coming weeks as we continue to try and figure out what there is out there that can push markets ahead in the weeks to come.

For now, bottom lines that aren’t as bad as we had expected is a good enough reason for stocks to move higher. But that isn’t the sort of excuse that has lasting power.

Unfortunately, an increase in subscriber numbers to Netflix, the kind th
at can give a 12% pop to shares in the pre-open, isn’t the kind of thing that finds its way trickling down to the rest of the market.

Someone else will have to do the heavy lifting while others watch House of Cards, but they need to move up soon, before we get tired of hearing the same old “better than expected” refrain to characterize lower earnings and decelerating growth.

Daily Market Update – April 16, 2015  (9:00 AM)

With Citibank and Goldman Sachs reporting earnings this morning, they were in line with other major money center bank reports and so all seems well in the financial sector, as we get ready to move forward to the rest of the S&P 500.

So far the week is trading flatly, but that may be a little bit of a victory considering that this quarter will likely continue to be characterized by decreased guidance, decelerating growth in earnings and continued fears about currency.

All of those will also be happening in the context of the possibility of rising energy prices, but at least for the moment we’re not fretting about when interest rate rises will be coming.

What hasn’t been discussed at all, although may still be forthcoming when companies like Dow Chemical report, is what the impact of lower energy costs have been on their bottom lines. To this point we haven’t really seen any evidence of the hypothetical benefits of decreased energy costs, even though they have to be real.

When you consider that at some point the ability of stock buy backs to prop up EPS data is going to have to wane, there has to be something else to propel EPS or the market is going to be in for some major disappointment.

Since the most common way to cut costs and drive up the bottom line is to cut the workforce, that’s not a very good alternative means to grow EPS. It never is, but it would be even worse if coming before anyone  ever gets to believe that the marketplace ever even recovered from the 2008-9 drop in employment.

If lower energy costs won’t be the bump necessary to offset decreasing share buy backs, we had better hope that the dollar starts to demonstrate some weakness and that interest rates stay low, even though some rise in interest rates would probably be a good thing for the economy.

But all of that is way too esoteric this morning.

We’re 2 days from the end of the April 2015 option cycle and we still have 2 weeks of trading for the month to live up to its hype of being among the best for the market year in and year out. So far the S&P 500 is up 2%, so it is doing its part when you realize that YTD the market is up only 2.3%.

With this morning’s Housing Starts number being on the light side the market isn’t capitalizing on the Citibank and Goldman Sachs news as it gets ready to open for trading. Instead it is erasing yesterday’s moderate gains and then some.

Hopefully there will be enough moderation in selling to let this week end with enough assignments to fund any buying in the coming weeks as we continue to try and figure out what there is out there that can push markets ahead.

For now, bottom lines that aren’t as bad as we had expected is a good enough reason for stocks to move higher. But that isn‘t the sort of excuse that has lasting power.

Unfortunately, an increase in subscriber numbers to Netflix, the kind that can give a 12% pop to shares in the pre-open, isn’t the kind of thing that finds its way trickling down to the rest of the market.

Someone else will have to do the heavy lifting while others watch House of Cards, but they need to move up soon, before we get tired of hearing the
same old “better than expected” refrain to characterize lower earnings and decelerating growth.

Daily Market Update – April 15, 2015  (Close)

Over the course of Wednesday and Thursday there will be no fewer than 7 speeches being given by Federal Reserve Governors, any of which could get enough attention to cause some shifts in the market. Considering that there isn’t really any compelling reason to believe that the economy is getting so heated that interest rate hikes are going to be necessary very soon, for the most part, however, those seven speeches should be offering nothing new.

In the meantime earnings will continue having now gotten off to a decent start.

With Bank of America reporting this morning and being roughly in line with expectations there will be more to come from Citibank, Morgan Stanley and Goldman Sachs and after those we’ll have a good idea of where the financial sector has been and where it thinks it may be going. At least from what we’ve heard so far the past quarter was just a sleepy one that still paid all of the bills and left a little something over for everyone’s efforts.

That’s no small accomplishment for banks when interest rates are so low, so there is something positive coming out of even mediocre kind of earnings reports.

Of particular importance yesterday were Johnson and Johnson, before trading started and Intel, after trading ended.

Different businesses for certain, but both have significant stakes overseas and both reported significant currency related issues decreasing their bottom line.

More importantly after both cut guidance for the coming quarter due to the expectation of continuing currency head winds the market didn’t act surprised and didn’t punish the companies on top of whatever has already been factored into their prices. 

While it would seem logical for it to not over-react to news that had been widely expected, you wouldn’t be overly confident in predicting a calm and rational response if you factored in past responses to what were widely expected events.

I still think back to the winter of 2014 when retail stocks were feeling the pressure of the bad weather and their share prices went lower in expectation of what would eventually be reported. Then when the reports became reality they all went down sharply as if it was the first time anyone had considered that weather could have been an earnings factor.

Sometimes you just look for good news wherever you can find it and so far, the restrained response to reduced guidance is promising.

If looking for a catalyst to drive the markets higher it may not require anything more than simply wiping the collective brow of the market in relief that the earnings and forward guidances being given just aren’t as bad as we had all been expecting.

As we come up on the middle of the week and the end of the monthly option cycle now easily in sight, I would just like to see the next few days at least tread water so that the week can end with a combination of assignments and rollovers that is skewed toward more assignments.

Today, the market did more than just tread water, even as it lost some steam in the final 30 minutes of trading.

That was despite a sharp climb in energy prices that was to the same level as the recent 5% decline, neither of which seemed to matter, despite the superficial importance that was attached to those gyrations when they first started months ago.

It’s unlikely that there will be any additional new purchases for the week, but as always, it’s hard to stick to the script if an opportunity appears to pop up. But otherwise, I would be happy to raise some cash to be in a better position to take advantage of any future opportunities that may be awaiting next week.

Today’s market just gave a little bit an added cushion while awaiting Friday and happily offered some chance to sell some more calls on uncovered positions.

Hopefully some of the paper gains today will become realized gains sooner rather than later.

Daily Market Update – April 15, 2015  (8:00 AM)

Over the course of the next two days there will be no fewer than 7 speeches being given by Federal Reserve Governors, any of which could get enough attention to cause some shifts in the market. Considering that there isn’t really any compelling reason to believe that the economy is getting so heated that interest rate hikes are going to be necessary very soon, for the most part, however, those seven speeches should be offering nothing new.

In the meantime earnings will continue having now gotten off to a decent start.

With Bank of America reporting this morning and being roughly in line with expectations there will be more to come from Citibank, Morgan Stanley and Goldman Sachs and after those we’ll have a good idea of where the financial sector has been and where it thinks it may be going. At least from what we’ve heard so far the past quarter was just a sleepy one that still paid all of the bills and left a little something over for everyone’s efforts.

That’s no small accomplishment for banks when interest rates are so low, so tere is something positive coming out of even mediocre kind of earnings reports.

Of particular importance yesterday were Johnson and Johnson, before trading started and Intel, after trading ended.

Different business for certain, but both have significant stakes overseas and both reported significant currency related issues decreasing their bottom line.

More importantly after both cut guidance for the coming quarter due to the expectation of continuing currency head winds the market didn’t act surprised and didn’t punish the companies on top of whatever has already been factored into their prices. 

While it would seem logical for it to not over-react to news that had been widely expected, you wouldn’t be overly confident in predicting a calm and rational response if you factored in past responses to what were widely expected events.

I still think back to the winter of 2014 when retail stocks were feeling the pressure of the bead weather and their share prices went lower in expectation of what would eventually be reported. Then when the reports became reality they all went down sharply as if it was the first time anyone had considered that weather could have been an earnings factor.

Sometimes you just look for good news wherever you can find it and so far, the restrained response to reduced guidance is promising.

If looking for a catalyst to drive the markets higher it may not require anything more than simply wiping the collective brow of the market in relief that the earnings and forward guidances being given just aren’t as bad as we had all been expecting.

As we come up on the middle of the week and the end of the monthly option cycle now easily in sight, I would just like to see the next few days at least tread water so that the week can end with a combination of assignments and rollovers that is skewed toward more assignments.

It’s unlikely that there will be any additional new purchases for the week, but as always, it’s hard to stick to the script if an opportunity appears to pop up. But otherwise, I would be happy to raise some cash to be in a better position to take advantage of any future opportuni
ties that may be awaiting next week.

Daily Market Update – April 14, 2015  (Close)

It started this morning with Johnson and Johnson reporting, then followed by JP Morgan and Wells Fargo.

Those three have a combined market capitalization that so large that it’s even about 10% larger than that of Apple.

But the good news is that the first 2 major banks to report did nothing to surprise markets and actually beat on revenues.

Johnson and Johnson, which was the first of this season to report with significant currency considerations did report the effects of the stronger dollar and did reduce forward guidance, but as expected, investors were prepared to hear that kind of news. More importantly, the news wasn’t so bad as to have exceeded those expectations.

That’s a good start for what may still be a challenging few weeks ahead, but at the very least the major banks do very often at least set a tone when they’re not behaving badly and thus far this morning the behavior is unremarkable and restrained.

The market too, during its pre-open futures trading is equally restrained and unremarkable.

Given the 3 options of behavior that existed as earnings season gets underway, the same 3 options that exist every day, being restrained and unremarkable can be a good one, if it’s sustained for a while and if any deviations from restraint are soon brought back into line.

Given a portfolio of holdings, some of which are covered, some of which are longing for cover, you can have different hopes for what trend the broader market will be following.

If I had all positions covered I would love seeing a restrained, unremarkable and flat market with occasional punctuations higher and lower. That would make a nice environment for rollovers. That’s the best of all situations when you just roll over position after position and see the income come in on a regular basis.

But when there are uncovered positions the hope is for the ability to see new cover and that typically requires the kind of high tide that pulls everything along. That usually also leads to assignments and rollovers, as well.

So with all of those uncovered positions a flat and restrained market just won’t do it.

While it’s definitely better than a downward moving market at this moment, I’d still like to see this morning’s earnings reports perhaps be the first among a series of non-disappointing reports, that could perhaps serve as the fuel for a move higher.

Until more positions are covered there’s no reason to want to see a lower move by the market. Those are nice to have when you’re sitting on a pile of cash or had a large portion of your holding suddenly called away by a large move higher.

I don’t think that’s going to be the case, although this week’s expiring positions are still in good shape for assignment if the market can avoid any large move lower.

This morning’s early indications following the earnings releases of Johnson and Johnson, JP Morgan and Wells Fargo at least gave some hope for the prospects of the rest of the week. It was nice to see the market trade
reasonably well for the day, especially continuing some recovery in energy positions after the rough day last Friday.

With Intel releasing its earnings this afternoon and the post-sessions market’s first response being a positive one, there’s at least some hope that currency headwinds won’t be the kind of drag that was feared, although there’s still lots more to go.

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

It started this morning with Johnson and Johnson reporting, then followed by JP Morgan and Wells Fargo.

Those three have a combined market capitalization that so large that it’s even about 10% larger than that of Apple.

But the good news is that the first 2 major banks to report did nothing to surprise markets and actually beat on revenues.

Johnson and Johnson, which was the first of this season to report with significant currency considerations did report the effects of the stronger dollar and did reduce forward guidance, but as expected, investors were prepared to hear that kind of news. More importantly, the news wasn’t so bad as to have exceeded those expectations.

That’s a good start for what may still be a challenging few weeks ahead, but at the very least the major banks do very often at least set a tone when they’re not behaving badly and thus far this morning the behavior is unremarkable and restrained.

The market too, during its pre-open futures trading is equally restrained and unremarkable.

Given the 3 options of behavior that existed as earnings season gets underway, the same 3 options that exist every day, being restrained and unremarkable can be a good one, if it’s sustained for a while and if any deviations from restraint are soon brought back into line.

Given a portfolio of holdings, some of which are covered, some of which are longing for cover, you can have different hopes for what trend the broader market will be following.

If I had all positions covered I would love seeing a restrained, unremarkable and flat market with occasional punctuations higher and lower. That would make a nice environment for rollovers. That’s the best of all situations when you just roll over position after position and see the income come in on a regular basis.

But when there are uncovered positions the hope is for the ability to see new cover and that typically requires the kind of high tide that pulls everything along. That usually also leads to assignments and rollovers, as well.

So with all of those uncovered positions a flat and restrained market just won’t do it.

While it’s definitely better than a downward moving market at this moment, I’d still like to see this morning’s earnings reports perhaps be the first among a series of non-disappointing reports, that could perhaps serve as the fuel for a move higher.

Until more positions are covered there’s no reason to want to see a lower move by the market. Those are nice to have when you’re sitting on a pile of cash or had a large portion of your holding suddenly called away by a large move higher.

I don’t think that’s going to be the case, although this week’s expiring positions are still in good shape for assignment if the market can avoid any large move lower.

This morning’s early indications following the earnings releases of Johnson and Johnson, JP Morgan and Wells Fargo at least give some hope for the prospects of the rest of the week.

&nbs
p;

Daily Market Update – April 13, 2015  (Close)

While there are some economic reports of interest this week they’re not likely to be anywhere near as important as the real beginning of earnings season this week.

It may have started with Alcoa last week, but tomorrow begins the series of reports from the major money center banks.

While they can do well and not bring the rest of the market higher with it, it’s not to common for those banks to report disappointing earnings and then to see the rest of the market thrive. However, that was the case in the final quarter of 2014, when the relatively disappointing earnings reports from the banks didn’t drag markets lower.

So it could happen.

This time around there aren’t really great expectations for the banks and instead most attention is going to be focused on those companies that may have significant currency exposure, such as Intel, which also reports this week.

We’ve been talking and fretting for so long about currency impact that you would have to think that it would have to be much worse than expected for the actual reports to bring stocks down very much. You might also think that companies with lots of cash overseas and earning lots of money overseas are involved in fairly sophisticated currency hedging that would finally start to pay off.

However, coming off a relatively strong 2 weeks to start April after a really disappointing March, there’s room to give up some of those recent gains. On the other hand, though, April is just an historically strong month for markets and our lowered expectations for earnings may be just the environment necessary for the next phase higher.

Each of those is reasonable and we’ll find out soon enough whether there is enough contained in the upcoming earnings reports to push markets higher, as we’re running out of other reasons to see growth.

At this point it looks as if we’re going back to good old fundamentals, which normally would be a good thing, unless some one comes up with the realization that current levels are just artificially so high and to a degree are based on engineering of EPS data through years of buy backs that have probably now seen their peak.

Just look at the performance of GE today, just a day after its 10% gain following announcement of a $50 Billion buyback that will be funded from selling its non-industrial pieces. Never mind that those pieces were now making money.

That GE buyback may truly have been the peak of the corporate strategy that has been soaking up shares and helping to create an illusion of greater comparative earnings.

GE actually reports earnings this week, too. That could be interesting.

With only a single assignment last week I’m not expecting to be very actively looking for new positions this week, just as last week was restrained.

With a number of positions set to expire this Friday as the monthly cycle comes to its end, I’d be very happy to have a repeat of last week. Being able to get rollovers done and execute the sale of some calls on existed uncovered positions would satisfy my need to generate income for the week.

However, as much as I was happy with last week, this week I would like to see some more emphasis on the assignment side of the equation.

At the moment a number of positions are candidates for assignment but it’s not a done deal until the final closing bell rings on Friday and even then it’s not really a done deal until as much as another 90 minutes passes.

So I won’t be making too many plans with all of that money from assignments that still may not ever become reality until they do.

However, with the likelihood of at least some and with the additional likelihood of at least being able to get some rollovers accomplished, any new positions may equally look at expirations this Friday or in some future weeks.

With volatility getting lower and lower and bringing premiums down, as well, there’s not too much attraction for looking at the extended weekly options unless earnings come into play and help to boost up some premiums.

The market appeared to be getting ready to open the week on a flat note, so the early direction could have then gone anywhere, but it ended up getting progressively weaker as the day wore on, in the complete absence of news.

For whatever there was today the week won’t begin for real until tomorrow morning when JP Morgan and Wells Fargo get it all going.

Daily Market Update – April 13, 2015  (7:30 AM)

While there are some economic reports of interest this week they’re not likely to be anywhere near as important as the real beginning of earnings season this week.

It may have started with Alcoa last week, but tomorrow begins the series of reports from the major money center banks.

While they can do well and not bring the rest of the market higher with it, it’s not to common for those banks to report disappointing earnings and then to see the rest of the market thrive. However, that was the case in the final quarter of 2014, when the relatively disappointing earnings reports from the banks didn’t drag markets lower.

So it could happen.

This time around there aren’t really great expectations for the banks and instead most attention is going to be focused on those companies that may have significant currency exposure, such as Intel, which also reports this week.

We’ve been talking and fretting for so long about currency impact that you would have to think that it would have to be much worse than expected for the actual reports to bring stocks down very much. You might also think that companies with lots of cash overseas and earning lots of money overseas are involved in fairly sophisticated currency hedging that would finally start to pay off.

However, coming off a relatively strong 2 weeks to start April after a really disappointing March, there’s room to give up some of those recent gains. On the other hand, though, April is just an historically strong month for markets and our lowered expectations for earnings may be just the environment necessary for the next phase higher.

Each of those is reasonable and we’ll find out soon enough whether there is enough contained in the upcoming earnings reports to push markets higher, as we’re running out of other reasons to see growth.

At this point it looks as if we’re going back to good old fundamentals, which normally would be a good thing, unless some one comes up with the realization that current levels are just artificially so high and to a degree are based on engineering of EPS data through years of buy backs that have probably now seen their peak.

With only a single assignment last week I’m not expecting to be very actively looking for new positions this week, just as last week was restrained.

With a number of positions set to expire this Friday as the monthly cycle comes to its end, I’d be very happy to have a repeat of last week. Being able to get rollovers done and execute the sale of some calls on existed uncovered positions would satisfy my need to generate income for the week.

However, as much as I was happy with last week, this week I would like to see some more emphasis onthe assignment side of the equation.

At the moment a number of positions are candidates for assignment but it’s not a done deal until the fiunal closing bell rings on Friday and even then it’s not really a done deal until as much as another 90 minutes passes.

So I won’t be making too many plans with all
of that money from assignments that still may not ever become reality until they do.

However, with the likelihood of at least some and with the additional likelihood of at least being able to get some rollovers accomplished, any new positions may equally look at expirations this Friday or in some future weeks.

With volatility getting lower and lower and bringing premiums down, as well, there’s not too much attraction for looking at the extended weekly options unless earnings come into play and help to boost up some premiums.

For now, the market appears to be getting ready to open the week on a flat note, so the early direction can be anywhere, as can the opportunities, but the week may not begin for real until tomorrow morning when JP Morgan and Wlls Fargo get it all going.