Category: Daily Market Update

Daily Market Update – February 23, 2015 (Close)

Although the pre-opening futures this morning didn’t look as if the week was going to get off to the kind of start that takes us to more record high closes, there will still be plenty of opportunities this week.

With most of the major retailers reporting earnings this week, and more importantly providing some  future guidance, we may finally get to know whether lower energy costs can translate into an expanding economy.

The week then ends with another GDP report which a number of months ago was predicted to greatly expand due to decreasing energy costs, as about 70% of the GDP is dependent on consumer spending.

Also during the week will be 2 days of congressional testimony by Janet Yellen and there is always the possibility of disclosing something, especially regarding the timing of any interest rate increases, that hasn’t been made public previously.

With Bernanke and Yellen the market rarely moved as much when they provided testimony as it did during the Greenspan years.

The real difference, though, was that when Bernanke or Yellen responded to questions posed to them the answers were generally understood. If there was something truly newsworthy, the market generally knew how to react. Instead, when Greenspan spoke, the market was never sure of what he meant and they would alternate between large drops and surges, often within minutes of one another.

That, at least isn’t likely to happen.

As another monthly option cycle gets ready to begin, it’s nice closing the previous month with a fair number of assignments and the cash to play along, if warranted.

Today there seemed to be some reason to add new positions, but the market stayed as tentative through the entire trading day as it did in the pre-open.

Last Friday’s very unexpected response to a temporary solution to the Greek crisis isn’t likely to have much impact on things going forward until approaching that 4 month date down the road when the crisis could start all over again.

Because Friday’s events were really a “one-off” kind of thing there’s not too much reason to believe that those new closing highs will be the starting point for even more due to some technical set of factors or newly discovered optimism.

Instead, this week will likely stand on its own merits based on the major events planned for the week.

With a few positions et to expire this week and with volatility once again falling, the emphasis will be on finding short term option expiration opportunities and trying to populate this week and perhaps next week, as well, with expiring contract positions. Actually, that’s probably a secondary emphasis. I would stil
l rather generate the week’s income stream from finding some chance to sell calls on existing uncovered positions.

Today, though, it was the secondary emphasis that took center stage as trading was pretty listless and very little moved in a meaningful way.

While retail sales and Yellen’s two days on Capital Hill will be the next center stage there is still plenty of reason to still reserve some focus for oil prices and interest rates.

It’s not always about stocks.

As long as those continue to bounce wildly it’s hard to envision any particular direction for the stock market. You can also add precious metals to that short list, too.

Among asset classes there is often a flow of money from major players as one opportunity looks better than the next. With the constant back and forth seen in some of those markets there’s reason not to be fully committed to any of the markets, even the ones that seem to be reasonably stable, as a collapse in the other markets could result in a quick outflow even from the relatively healthy market, such as to meet margin obligations in other markets.

It’s too bad that we’re not seeing some of the same back and forth in the broader stock market, as that would really drive premiums much higher, as is the case for many energy positions, right now. In the best case scenario even with all of that volatility prices would remain basically unchanged as they have recently been in the energy and precious metals markets.

For now, it’s an issue of waiting to see what character the market assumes this week and not being too reckless with what is left of this week’s newfound cash.

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

Although it doesn’t look as if the week is going to get off to the kind of start that takes us to more record high closes, there will be plenty of opportunities this week.

With most of the major retailers reporting earnings this week, and more importantly providing some  future guidance, we may finally get to know whether lower energy costs can translate into an expanding economy.

The week then ends with another GDP report which a number of months ago was predicted to greatly expand due to decreasing energy costs, as about 70% of the GDP is dependent on consumer spending.

Also during the week will be 2 days of congressional testimony by Janet Yellen and there is always the possibility of disclosing something, especially regarding the timing of any interest rate increases, that hasn’t been made public previously.

With Bernanke and Yellen the market rarely moved as much when they provided testimony as it did during the Greenspan years.

The real difference, though, was that when Bernanke or Yellen responded to questions posed to them the answers were generally understood. If there was something truly newsworthy, the market generally knew how to react. Instead, when Greenspan spoke, the market was never sure of what he meant and they would alternate between large drops and surges, often within minutes of one another.

That, at least isn’t likely to happen.

As another monthly option cycle gets ready to begin, it’s nice closing the previous month with a fair number of assignments and the cash to play along, if warranted.

Last Friday’s very unexpected response to a temporary solution to the Greek crisis isn’t likely to have much impact on things going forward until approaching that 4 month date down the road when the crisis could start all over again.

Because Friday’s events were really a “one-off” kind of thing there’s not too much reason to believe that those new closing highs will be the starting point for even more due to some technical set of factors or newly discovered optimism.

Instead, this week will likely stand on its own merits based on the major events planned for the week.

With a few positions et to expire this week and with volatility once again falling, the emphasis will be on finding short term option expiration opportunities and trying to populate this week and perhaps next week, as well, with expiring contract positions. Actually, that’s probably a secondary emphasis. I would still rather generate the week’s income stream from finding some chance to sell calls on existing uncovered positions.

While retail sales and Yellen’s two days on Capital Hill will be center stage there is still plenty of reason to still reserve some focus for oil prices and interest rates.

It’s not always about stocks.

As long as those continue to bounce wildly it’s hard to envision any particular direction for the stock market. You can also add precious metals to that short list, too.

Among asset classes there is often a flow of money from major players as one opportunity looks better than the next. With the constant back and forth seen in some of those markets there’s reason not to be fully committed to any of the markets, even the ones that seem to be reasonably stable, as a collapse in the other markets could result in a quick outflow even from the relatively healthy market, such as to meet margin obligations in other markets.

It’s too bad that we’re not seeing some of the same back and forth in the broader stock market, as that would really drive premiums much higher, as is the case for many energy positions, right now. In the best case scenario even with all of that volatility prices would remain basically unchanged as they have recently been in the energy and precious metals markets.

For now, it’s an issue of waiting to see what character the market assumes this week and not being too reckless with newfound cash.

Daily Market Update – February 20, 2015 (7:45 AM)

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

Today’s possible trades include:

Assignments:  DOW, GM, LXK, MET TMUS

Rollovers:  UAL

Expirations:  AZN, FAST

The following positions were ex-dividend this week:  MAT (2/17 $0.38), RIG (2/18 $0.75), AZN (2/18 $1.88), WNR (2/18 $0.30)

The following will be ex-dividend next week:  SBGI (2/25 $0.16)

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

Daily Market Update – February 19, 2015 (8:30 AM)

Yesterday’s FOMC Statement said essentially what I had written about yesterday and it confused stock traders and gave bond traders a reason to sell.

The 2 points that the FOMC raised were that low interest rates could have adverse effects and raising those rates too fast could also have adverse effects.

The net result of the comments was for many to believe that the once inveterate dovish FOMC was now leaning dovish after a brief dalliance with some more hawkish tones.

The release of their monthly statement did nothing to kindle optimism among stock traders, but for the moment, at least, caused bond traders to sell. While bond yields did go down about 4%, those yields are still well above where they were even 2 weeks ago.

With the FOMC Statement release now out of the way, there’s very little scheduled between now and the end of the February 2015 cycle.

Not that that means smooth sailing from here until Friday’s close, but even with events devolving in Europe, there doesn’t seem to be the kind of nervousness that would create a systemic retreat.

I nver feel comfortable counting those chickens before they’re hatched, as I’ve seen too many times when it doesn’t even take 2 full days to erase what should have been lots of rollovers and assignments.

Until tomorrow’s close I’m hoping that the market does still find time for some more increases.

Although most positions set to expire this week are within rollover or assignment range and I wouldn’t necessarily stand to benefit from the market going higher for the rest of the week, it could still offer some opportunity to sell more calls in an attempt to create some more income and enhance the week’s return.

While stocks haven’t moved very much this week, if you look around you’ll see that other asset classes, like bonds, precious metals and especially oil have been bouncing around wildly.

If you’ve owned the Gold Miners ETF or sold the puts you may be like me and wondering why all stocks couldn’t do that kind of frequent back and forth movement. Sometimes it is amazing at how those movements can give the opportunity to generate lots of accumulating premiums even when the net result of all of that movement is really minor.

It has been a while since stocks, other than some individual stocks, have done that sort of thing on a regular basis. Seeing what GDX has been doing
recently just adds to the reasons I’d love seeing a return of volatility to more than just individual stocks, but to the market as a whole.

As today unfolds, with the pre-open futures pointing just mildly lower, I don’t anticipate too much activity. For now, any rollovers that may be possible are still a little too expensive to buy back, relative to their forward week premiums.

With a few positions possibly in line to be assigned and with cash reserves moving higher, any rollovers would likely look at either next week’s or the following week’s expiration dates, as new purchases next week may do the same. With a small number of positions set to expire next week and currently in decent position either for assignment or rollover, that gives some leeway to consider the following week for contracts in an effort to keep March diversified throughout the month.

Those are the plans, anyway. We’ll see how all of that actually works out as plans and reality don’t always have great correlation.

Daily Market Update – February 18, 2015 (Close)

Yesterday was a rare quiet day for 2015, which has, so far, been far more broad in its daily trading ranges, but as that volatility had increased it has slowly started to retreat.

That’s usually what happens when the market goes higher and when the trading ranges are smaller from day to day and during the day.

Today, while no one was really expecting it to happen, the volatility could have gotten a push as the FOMC Statement was to be released this afternoon. Lately there’s been a lot of focus on the new wording that the FOMC has been using to semi-quantitatively give an idea of when interest rate increases could be expected.

Today, there turned out to be mixed signals about the need for higher rates but the potential danger of rates going higher, too fast and so the market did nothing in its response.

That was actually a pretty mature way to act.

Given the nearly 30% increase in the interest rate of the 10 Year Treasury Note over the past few weeks, albeit from incredibly low levels, the bond market may be suggesting that the increase will be coming sooner than many now believe, as the futurists of the world are split into two camps on the issue.

There are those that believe that interest rates will be raised by the FOMC sometime in the middle of the year and others are saying that we won’t see any rise until 2016.

Following what may have sounded like a net dovish statement from the FOMC rates actually tumbled, down nearly 4% for the day.

The first clue over who will be right may come this week and re-inforced next week as major national retailers start to report their quarterly earnings. If the general axiom that the bond traders are the smartest guys in the room is correct, then their recent action on the 10 Year Note would suggest that those rates are going higher sooner, rather than later.

Today, they just blinked a little.

For those old enough to remember, increasing interest rates can be pretty frightening, but you have to go back about 30 years for that memory. We’ve never known the kind of situation that Japan and now Europe have undergone where low interest rates have lost their ability to stimulate the economy and higher interest rates appear to be the tonic for the economy.

While there’s definitely a negative aspect to increasing rates, including competition for investor’s money away from stocks, like most everything else, there’s good things in moderation.

In this case, increased interest rates is a sign of things getting better, but based on the kind of recovery that this has been, having come from incredible depths from its nadir 6 years ago, there’s not too much reason to fear the kind of over-heating that was seen in the 1970s. Back then, the only beneficiaries of increasing rates were banks and energy companies, who produced the oil that contributed to much of the rise in prices and subsequently, interest rates.

So even if the FOMC had said anything that would have taken the market by surprise, that reaction probably would have been very short lived. As it was the market started the morning off by continuing yesterday’s cautious trading until getting some word that all was clear.

With a shortened trading week and a few new positions already purchased, there wasn’t too much likelihood of adding any new positions today and the same probably holds for the rest of the week.

At this point I’m simply hoping that the week will end somewhere close to where we are as we begin this morning, giving a better cash position to begin the March 2015 option cycle.

That’s not too much too ask for.

Daily Market Update – February 18, 2015 (9:00 AM)

Yesterday was a rare quiet day for 2015, which has, so far, been far more broad in its daily trading ranges, but as that volatility had increased it has slowly started to retreat.

That’s usually what happens when the market goes higher and when the trading ranges are smaller from day to day and during the day.

Today, while no one is really expecting it to happen, the volatility could get a push as the FOMC Statement is released this afternoon. Lately there’s been a lot of focus on the new wording that the FOMC has been using to semi-quantitatively give an idea of when interest rate increases could be expected.

Given the nearly 30% increase in the interest rate of the 10 Year Treasury Note over the past few weeks, albeit from incredibly low levels, the bond market may be suggesting that the increase will be coming sooner than many now believe, as the futurists of the world are split into two camps on the issue.

There are those that believe that interest rates will be raised by the FOMC sometime in the middle of the year and others are saying that we won’t see any rise until 2016.

The first clue over who will be right may come this week and re-inforced next week as major national retailers start to report their quarterly earnings. If the general axiom that the bond traders are the smartest guys in the room is correct, then their recent action on the 10 Year Note would suggest that those rates are going higher sooner, rather than later.

For those old enough to remember, increasing interest rates can be pretty frightening, but you have to go back about 30 years for that memory. We’ve never known the kind of situation that Japan and now Europe have undergone where low interest rates have lost their ability to stimulate the economy and higher interest rates appear to be the tonic for the economy.

While there’s definitely a negative aspect to increasing rates, including competition for investor’s money away from stocks, like most everything else, there’s good things in moderation.

In this case, increased interest rates is a sign of things getting better, but based on the kind of recovery that this has been, having come from incredible depths from its nadir 6 years ago, there’s not too much reason to fear the kind of over-heating that was seen in the 1970s. Back then, the only beneficiaries of increasing rates were banks and energy companies, who produced the oil that contributed to much of the rise in prices and subsequently, interest rates.

So if the FOMC says anything that takes the market by surprise, whatever reaction there will be will probably be short lived, but this morning the market is continuing yesterday’s cautious trading until getting some word that all is clear.

With a shortened trading week and a few new positions already purchased, there’s n
ot too much likelihood of adding any new positions today.

At this point I’m simply hoping that the week will end somewhere close to where we are as we begin this morning, giving a better cash position to begin the March 2015 option cycle.

That’s not too much too ask for.

Daily Market Update – February 17, 2015 (Close)

Another day and another day of snow on the east coast.

This week there’s very little going on in economic news other than tomorrow’s FOMC Statement release, so snow may be the top issue for the next few days.

Coming off of last week’s nice gains and adding to what has been a nice February, so far, I wouldn’t mind if this was a quiet week for the markets. The latest pattern of recovery from the last of several drops lower has been very different from the previous recoveries.

Instead of jumping straight back from those drops, usually about 5% lower, this time around the market has been taking two steps forward and then either a small step back or simply digesting the move higher.

Considering that in the past two months these market drops have been coming on a much more frequent basis, there was reason to start getting concerned. When they had been coming on a regular basis, just about every 2 months for nearly the past 3 years, it does get your attention when you get about 4 of those drops in the period of time that you normally would have seen just one. 

The manner in which Friday’s record close was set was a much better way to do so than those straight lines to the top. This week would be a perfect one to digest those gains for the month and take a rest to move even higher.

When looking at the pre-open futures it looked as if it would be a totally non-committal kind of opening and it stayed that way all day long with trading ending up in a pretty narrow range.

Last month was the first time in several months that the market didn’t go substantially higher on the day before an FOMC Statement release, which was a return to the more logical way of trading in advance of the release. Today was another month that returned to a more rational pattern of not getting too far ahead of the curve before some potentially substantive policy change may be made known.

As it is interest rates of the 10 Year Treasury shot up by 6% and is getting itself ahead of the FOMC.

With lots of positions expiring this week I hope that the FOMC Statement, whatever nuanced phrases it may contain that do or don’t signal a change in policy, does nothing to move the markets in any substantial way.

Since there are so many positions expiring this week and that currently are in a position to be assigned and there was some replenishment in cash from last week’s assignments, the likelihood is that if there are any new purchases for this trade shortened week I would want to look at expirations that are somewhere in the March 2015 cycle.

The problem with going out too far in those contracts is that while the market moves higher the general trend will be that those premiums will be getting relatively smaller. In the face of an advanci
ng market you really don’t want to commit your positions too far in advance and possibly miss more of the upside, especially at such low premiums.

With already a number of positions set to expire on the final week of the March 2015 option cycle, any new contracts would try to look at expiration dates in between, although some of this week’s potential stock picks have only monthly options available, so those go a little counter to strategies to diversify positions by expiration and optimize premiums.

For this morning my expectation was that I’ll be sitting tightly on the cash pile waiting to see if any thing of interest looks like it’s going on further sale or at least firming up and maybe poised for a small comeback.

That didn’t last long as there seemed to be enough reason to loosen up those purse strings, including for a position expiring this week, among others.

With a number of the week’s expiring positions in or near the money, there is a little bit of a cushion in the event that the market reacts poorly after the FOMC Statement, so there’s not too much need to think about doing rollovers early in the week, although even when there is reason to think about doing so there most often isn’t a worthwhile trade to be made.

The exception to that, however, was the GDX, once again, as gold took a big hit this morning and took the Gold Miners ETF along with it. That particular holding has been a joy as the premiums keep piling up on the position. Too bad others can’t do that on a regular basis.

Hopefully, then, this week will have little drama and little of that market heat for anything other than offering some more chance to sell calls on uncovered positions and melt some snow.

All in all, however, today was a good way to get a short week off the ground.

Daily Market Update – February 17, 2015 (9:00 AM)

Another day and another day of snow on the east coast.

This week there’s very little going on in economic news other than tomorrow’s FOMC Statement release, so snow may be the top issue for the next few days.

Coming off of last week’s nice gains and adding to what has been a nice February, so far, I wouldn’t mind if this was a quiet week for the markets. The latest pattern of recovery from the last of several drops lower has been very different from the previous recoveries.

Instead of jumping straight back from those drops, usually about 5% lower, this time around the market has been taking two steps forward and then either a small step back or simply digesting the move higher.

Considering that in the past two months these market drops have been coming on a much more frequent basis, there was reason to start getting concerned. When they had been coming on a regular basis, just about every 2 months for nearly the past 3 years, it does get your attention when you get about 4 of those drops in the period of time that you normally would have seen just one. 

The manner in which Friday’s record close was set was a much better way to do so than those straight lines to the top. This week would be a perfect one to digest those gains for the month and take a rest to move even higher.

So far, looking at the pre-open futures it looks as if it will be a totally non-committal kind of opening.

Last month was the first time in several months that the market didn’t go substantially higher on the day before an FOMC Statement release, which was a return to the more logical way of trading in advance of the release. Today may be another month that returns to a more rational pattern of not getting too far ahead of the curve before some potentially substantive policy change may be made known.

With lots of positions expiring this week I hope that the FOMC Statement, whatever nuanced phrases it may contain that do or don’t signal a change in policy, does nothing to move the markets in any substantial way.

Since there are so many positions expiring this week and that currently are in a position to be assigned and there was some replenishment in cash from last week’s assignments, the likelihood is that if there are any new purchases for this trade shortened week I would want to look at expirations that are somewhere in the March 2015 cycle.

The problem with goiung out too far in those contracts is that while the market moves higher the general trend will be that those premiums will be getting relatively smaller. In the face of an advancing market you really don’t want to commit your positions too far in advance and possibly miss more of the upsi
de, especially at such low premiums.

With already a number of positions set to expire on the final week of the March 2015 option cycle, any new contracts would try to look at expiration dates in between, although some of this week’s potential stock picks have only monthly options available, so those go a little counter to strategies to diversify positions by expiration and optimize premiums.

FOr this morning my expectation is that I’ll be sitting tightly on the cash pile waiting to see if any thing of interest looks like it’s going on further sale or at least firming up and maybe poised for a small comeback.

With a number of the week’s expiring positions in or near the money, there is a little bit of a cushion in the event that the market reacts poorly after the FOMC Statement, so there’s not too much need to think about doing rollovers early in the week, although even when there is reason to think about doing so there most often isn’t a worthwhile trade to be made.

Hopefully, then, this week will have little drama and little of that market heat for anything other than offering some more chance to sell calls on uncovered positions and melt some snow.

.

Daily Market Update – February 13, 2015 (8:30 AM)

The Week in Review will be posted by 6 PM tonight and the Weekend Update will be posted by Noon on Monday, as markets are closed in celebration of Presidents Day.

The following trade outcomes are possible this week:

Assignments:  ATVI, MSFT

Rollovers:  GPS, MET

Expirations:   GDX puts

The following position was ex-dividend this past week: BP (2/11 $0.60)

The following will be ex-dividend next week.  MAT (2/17 $0.38), RIG (2/18 $0.75), AZN (2/18 $1.88)

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

Daily Market Update – February 12, 2015 (Close)

This morning, based on the pre-opening futures, looked to have a similar opening to that seen on Tuesday.

The futures were pointing nicely higher, approaching a triple digit gain on the DJIA, and those kind of larger moves tend to have more staying power. At least they tend to give a little more direction to trading once the market actually opens.

That would have been a welcome move, particularly as the week was coming to its end and the fate of those positions set to expire this week are being determined during the final hours of trading for the week.

Luckily that is exactly the way the day worked out as the market was never trading at a loss for the day and actually closed near its highs for the day and ended up within easy distance of an all time high, not having done so since the end of December.

The news that seems to be responsible for the move actually started shortly after yesterday’s market closed and the S&P 500 futures went up about 12 points and the DJIA went nearly 100 points higher.

That news was that there was some kind of an agreement between the the ECB, EU and Greece over its debt.

That gain disappeared in the late afternoon and early evening yesterday, but then returned and seemed to be holding as the morning’s session was set to begin. It was, however, weakened a little by another weaker than expected “Retail Sales” report, that will hopefully be undone as the major retailers begin reporting earnings over the next two weeks and start focusing on the future, rather than the past, to look at the potential impact of lower energy prices, more people at work and more people receiving higher salaries.

With 5 positions set to expire this week and 8 the following week, I would much prefer seeing assignments this week rather than rolling over those positions. However, if rollovers are called for, or if there may be some other reason for a rollover, such as to capture Microsoft’s dividend, I would likely want to look at an expiration date sometime after next week.

The slightly elevated volatility makes that a little more palatable.

As it is  next week offers only 4 days of premium, due to the Presidents Day holiday and there are more than enough expiring positions than to add too many more and increase risk of a sudden market drop just before that expiration.

If tomorrow can add to today’s gain, it will hopefully position those expiring contracts to be more likely to be assigned and may even offer a miracle of selling some more new call contracts on existing positions, as was the case today.

Anyway, that’s my dream and I’m sticking to it for at least one more day.