Category: Daily Market Update

Daily Market Update – January 27, 2015 (Close)

Most mornings the pre-open futures don’t really mean too much as far as predicting how the day’s trading will go.

The late Mark Haines of CNBC used to say that all the time and always wondered why people got so excited about those numbers.

Certainly, the past week has been testament to just how irrelevant those early trading actions can be in predicting where the rest of the day will go as for most of those days the early indications were quickly reversed within the first hour of trading.

The exception to that general rule is when the pre-open futures moves very strongly in either direction and that was the story that was developing this morning and remained the story all throughout the day.

The main driver for the large drop was the bad earnings that came from DJIA components Microsoft, Caterpillar and United Technologies. That was already worth about 80 points of the 200 point early drop and represented both oil and currency factors and they were taking other innocent victims down along with them.

Somehow, even though the dollar has been gaining strength for a while, it seems strange that people whose job is to factor in all of the tangibles when coming up with earnings estimates somehow overlooked the impact of currency rates.

About another 50% of the pre-open loss was then added with the release of the “Durable Goods” data and the large downward revisions to the previous month. The powerful combination of disappointing earnings from imporatnt DJIA components and a sense that the economy wasn’t doing those sort of things that a robust and growing economy has to do was enough to see to it that the opening market followed the lead of the futures.

Heading into that opening bell there was plenty of reason to believe that the morning’s early indications would have some legs as the market was getting ready to begin trading for the day.

Lately, and for no good reason at all, the day before an FOMC Statement release day has been one that has seen some strong moves higher, in a show of investor confidence that the FOMC would continue being accommodative and that no substantive changes were going to get in the way of the market continuing to move higher.

That could easily have been the case today, but those earnings earnings disappointments and the very large moves seen in some key DJIA components going across sectors gave plenty of reason for the market to begin reclaiming gains this morning, despite would could be waiting ahead in terms of employment growth, wage growth and more discretionary income.

So today, as expected, ended up being a day of just watching and hoping for some kind of a bright spot.

The only thing is that briught spot never came, other than yet another chance to rollover some of the Dold mining ETF as precious metals also continue to ramp up their volatility and unpredictability.

Although most everyone loves the idea of buying stocks on weakness, there’s a limit to what kind of weakness most are willing to test and when. That’s true for individual stocks just as it is for the broader market.

I certainly like buying after declines in particular stocks when there is defined news and it seems to be overdone, but drops like the one that was developing this morning that aren’t very well defined aren’t very enticing. It’s hard to know what’s over done and what isn’t, so it may be best to stay away from the lures that keep popping up and they certainly did so today.

How often can you get a 10% discount on Microsoft and Caterpillar? Not often, but if the rest of the market is going to get infected over currency and growth related earnings, just as Microsoft and Caterpillar took the market lower, the market can then go and take Microsoft and Caterpillar lower, as well.

With expectations for a more sustained large drop in markets being validated with the sudden increase in large falls and rises and the lack of any upward momentum, it seems premature to want to jump in when a large decline characterizes the day. That’s especially true when even considering the pre-open futures decline the market would be barely 3% below its recent high.

Is that over done?

Time will tell and today it didn‘t give any indication that it was over done..

Just as the historically massive snowstorm that was supposed to hit New York City hasn’t really materialized as such, maybe this morning’s decline and the very dour guidances provided by a number of important companies won’t materialize either, but for now you have to believe that they will.

The difference is that the latter will take longer to figure out, but it’s the initial news that really gets our attention and we were all listening this morning.and will do the same again tomorrow.

Daily Market Update – January 27, 2015 (8:45 AM)

Most mornings the pre-open futures don’t really mean too much as far as predicting how the day’s trading will go.

The late Mark Haines of CNBC used to say that all the time and always wondered why people got so excited about those numbers.

Certainly, the past week has been testament to just how irrelevant those early trading actions can be in predicting where the rest of the day will go as for most of those days the early indications were quickly reversed within the first hour of trading.

The exception to that general rule is when the pre-open futures moves very strongly in either direction and that is the story that’s developing this morning.

The main driver for the large drop was the bad earnings that came from DJIA components Microsoft, Caterpillar and United Technologies. That was already worth about 80 points of the 200 point early drop and represented both oil and currency factors and they were taking other innocent victimes down along with them.

About another 50% was then added to the loss with the release of the “Durable Goods” data and the large downward revisions to the previous month, so there’s reason to believe that this morning’s early indications will have some legs as the market gets set to begin its trading for the day.

Lately, and for no good reason at all, the day before an FOMC Statement release day has been one that has seen some strong moves higher, in a show of investor confidence that the FOMC would continue being accommodative and that no substantive changes were going to get in the way of the market continuing to move higher.

That may still be the case but the very disappointing earnings and the very large moves seen in some key DJIA components going across sectors gives plenty of reason for the market to begin reclaiming gains this morning, despite would should be waiting ahead in terms of employment growth, wage growth and more discretionary income.

So today will likely end up being a day of just watching and hoping for some kind of a bright spot.

Although most everyone loves the idea of buying stocks on weakness, there;s a limit to what kind of weakness most are willing to test and when. That’s true for individual stocks just as it is for the broader market.

I certainly like buying after declines in particular stocks when there is defined news and it seems to be overdone, but drops like the one that is developing this morning aren’t very well defined and it’s hard to know what’s over done and what isn’t.

With expectations for a more sustained large drop in markets being validated with the sudden increase in large falls and rises and the lack of any upward momentum,
it seems premature to want to jump in when a large decline characterizes the day. That’s especially true when even considering the pre-open futures decline the market would be barely 3% below its recent high.

Is that over done?

Time will tell this morning.

Just as the historically massive snowstorm that was supposed to hit New York City hasn’t really materialized as such, maybe this morning’s decline and the very dour guidances provided by a number of important companies won’t materialize either.

The difference is that the latter will take longer to figure out, but it’s the initial news that really gets our attention and we’re all listening this morning.

.

Daily Market Update – January 26, 2015 (Close)

The morning, although appearing to be ready to get off to a lower start was far better than the overnight futures were indicating, after the larger than expected victory of the opposition party in Greece’s election.

After last week’s trading though, the pre-open futures should have meant nothing for the way the rest of the day would go, as 3 of the 4 trading days last week had very significant turnarounds from the early numbers in less than an hour after the opening bell.

Today was no different, except that there was no decisive character to the day, despite the turnaround from the early losses, as the market just meandered around the unchanged line for most of the day.

While the Greek election results may be a big story, even despite the ECB actions of last week that temporarily lifted the markets, the European economy may largely become irrelevant for us, other than the fact that it helps to prop up the strength of the US dollar.

For now, as opposed to a couple of years ago when the very existence of the EU was being threatened by a possible chain reaction of defaults among some members along its southern frontier, it doesn’t seem as if anyone is really worried about the spread of market contagion to our shores.

As with most things our crystal ball is always very cloudy and even the obvious is often far from assured, so we just wait and watch things unfold as the stronger states in the European Union figure out how to deal with the weaker ones and see their joint currency get devalued in the process, which may be the best solution to get the cycle moving back in their favor again.

This week, after the Greek news, there is actually very little scheduled economic news, but what there is could be of real importance.

The 2 big events are the FOMC Statement release and another set of GDP figures.

The latter may give us an idea of whether the logical increase in consumer spending that we all believed would come from the severely declining energy prices has actually started to happen yet. After the surprise of the Retail Sales report f a couple of weeks ago that showed no such increase, but was widely questioned by many, the GDP report could let us know whether the economy is heating up.

It’s that heating up that could be the cause of the FOMC beginning the process of raising interest rates, as we all have come to expect will happen sooner rather than later.

Those interest rates, especially in the past 2 weeks have been really volatile.

That combination of increasing interest rates, devaluation of the Euro and the ECB pumping lots of liquidity into their bond markets shouldn’t be good for US equity markets, but that’s also an example of trying to apply logic.

This week, with a little replenishment of cash, I was looking forward to spending some of it on new positions. However, because there are only 3 positions set to expire this week, despite all 3 being in a position to be assigned, thereby creating new funds for the following week, the likelihood is that I’ll be looking first at new positions with options to expire this week.

As it turned out, today started exactly like last week did, except that I didn’t add shares of Best Buy again, but did find reason to go the Intel and MetLife route again, at slightly lower prices than last week. It has been a long time since being able to do that and it felt good. Hopefully, it will continue feeling good about this time on Friday, too.

After a brief buying spree, very brief and not much f a spree, I’m content to just watch, as long as that’s watching things move higher,

As has frustratingly been the case for far too long, this week, again my preference is to be able to sell calls on existing positions in order to generate the cash stream for the week and hopefully there will be some good news coming on Wednesday from the FOMC and then again on Friday.

More importantly, if there is good news coming, we won’t revert back to that annoying “good news is bad news” kind of thinking that has been happily absent for a while.

Daily Market Update – January 26, 2015 (8:30 AM)

The morning, although appearing to be ready to get off to a lower start is far better than the overnight futures were indicating, after the larger than expected victory of the opposition party in Greece’s election.

After last week’s trading though, the pre-open futures may mean nothing for the way the rest of the day goes, as 3 of the 4 trading days last week had very significant turnarounds from the early numbers in less than an hour after the opening bell.

While the Greek election results may be a big story, even despite the ECB actions of last week that temporarily lifted the markets, the European economy may largely become irrelevant for us, other than the fact that it helps to prop up the strength of the US dollar.

For now, as opposed to a couple of years ago when the very existence of the EU was being threatened by a possible chain reaction of defaults among some members along its southern frontier, it doesn’t seem as if anyone is really worried about the spread of market contagion to our shores.

As with most things our crystal ball is always very cloudy and even the obvious is often far from assured, so we just wait and watch things unfold as the stronger states in the European Union figure out how to deal with the weaker ones and see their joint currency get devalued in the process, which may be the best solution to get the cycle moving back in their favor again.

This week, after the Greek news, there is actually very little scheduled economic news, but what there is could be of real importance.

The 2 big events are the FOMC Statement release and another set of GDP figures.

The latter may give us an idea of whether the logical increase in consumer spending that we all believed would come from the severely declining energy prices has actually started to happen yet. After the surprise of the Retail Sales report f a couple of weeks ago that showed no such increase, but was widely questioned by many, the GDP report could let us know whether the economy is heating up.

It’s that heating up that could be the cause of the FOMC beginning the process of raising interest rates, as we all have come to expect will happen sooner rather than later.

Those interest rates, especially in the past 2 weeks have been really volatile.

That combination of increasing interest rates, devaluation of the Euro and the ECB pumping lots of liquidity into their bond markets shouldn’t be good for US equity markets, but that’s also an example of trying to apply logic.

This week, with a little replenishment of cash, I’m looking forward to spending some of it on new positions. However, because there
are only 3 positions set to expire this week, despite all 3 being in a position to be assigned, thereby creating new funds for the following week, the likelihood is that I’ll be looking first at new positions with options to expire this week.

As has frustratingly been the case for far too long, this week, again my preference is to be able to sell calls on existing positions in order to generate the cash stream for the week and hopefully there will be some good news coming on Wednesday from the FOMC and then again on Friday.

More importantly, if there is good news coming, we won’t revert back to that annoying “good news is bad news” kind of thinking that has been happily absent for a while.

Daily Market Update – January 23, 2015 (8:00 AM)

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

The following trade outcomes are possible today:

Assignments: INTC, MET

Rollovers:  BBY

Expirations:  BAC, EMC

There were no ex-dividend positions this week.

FAST will be ex-dividend next week (1/28 $0.28)

The following positions will be reporting earnings next week:

COH (1/27), FCX (1/27), LXK (1/27), EMC (1/28), LVS (1/28), BX (1/29), DOW (1/29), MAT (1/29), PBR (1/30)

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

Daily Market Update – January 22, 2015 (Close)

All eyes were on this morning’s announcement from the European Central Bank regarding an initiation of its version of Quantitative Easing.

Over the past few months as all eyes had previously been focused on the ECM in expectation of the very same announcement, there had been nothing but disappointment, as Mario Draghi, the President of the ECB talked a great game and occasionally spoke with a John Wayne like swagger and confidence, but delivered on none of it.

This morning, although this has been said before, had the appearances of being different.

The reason it was being given some greater likeliness of finally really be different was because of a credible leak yesterday that gave details of the monthly size of the ECB bond buybacks. The figures suggested seemed to be right along the lines of what many believed it needed to be and was received warmly, although with nowhere near the enthusiasm of previous  well placed source leaks or educated guesses regarding the FOMC’s upcoming actions, from the Wall Street Journal’s Jon Hilsenrath.

Yesterday’s leak may have been what was responsible for the market’s decisive turnaround shortly after the opening bell.

This morning, ahead of the expected announcement the futures were just mildly higher, so it remained to be seen what effect, if any and in what size the reaction might be and, of course, for how long that reaction would last.

About an hour before the official announcement came word that European interest rates would remain unchanged and even though that was not a surprise it gave a small bump to the futures.

Later, when Draghi spoke, not only confirming that action was going to begin, he indicated that the size of the monthly European bond buyback would be 20% larger than thought and would last longer than anyone thought and in fact would be open-ended, lasting until at least September 2016.

The initial response was ebullient in the futures market, but did calm down a little.

In fact, shortly after the opening bell the market actually turned negative, but somewhere along the line, about 45 minutes after the open, the market took off, having really embraced the news.

While the news may be beneficial for European stock markets in the longer term, there’s really no reason to think that it will be the kind of news or provide the kind of fuel needed to send US markets higher for anything much more than a day or so, but it was certainly good to see, even if it is short lived.

The real impetus for further increases could still be upcoming earnings, although thus far, they haven’t been very impressive, although we really haven’t heard anything yet from those businesses that would reasonably be expected to benefit from a severe drop in energy prices.< /span>

Interestingly, in an interview yesterday, the CEO of Dow Chemical, which has small oil holdings as part of a Kuwaiti partnership and has seen its shares drop sharply in concert with oil prices, said that the net result of energy price declines was very good for Dow Chemical, because it is a far greater user of energy than it is a producer of energy. That’s something that hasn’t really been factored in yet and Dow Chemical reports its earnings next week.

As with many companies, the earnings may be of interest, but it’s the future guidance that may hold the key.

Hopefully this morning’s ECB announcement will bring some happy news to the US markets as that would be a good way to bring a shortened trading week to its end.

With a few positions set to expire tomorrow, I’d like to see them positioned to either be assigned or rolled over and a couple of good days in succession would really help.

So, Mario, we wanted to know “What’s it going to be?” and this time you didn’t disappoint, but what have you done for us lately?

Daily Market Update – January 22, 2015 (7:30 AM)

All eyes are on this morning’s announcement from the European Central Bank regarding an initiation of its version of Quantitative Easing.

Over the past few months as all eyes had previously been focused on the ECM in expectation of the very same announcement, there had been nothing but disappointment, as Mario Draghi, the President of the ECB talked a great game and occasionally spoke with a John Wayne like swagger and confidence, but delivered on none of it.

This morning, although this has been said before, may be different.

The reason it may finally really be different is because of a credible leak yesterday that gave details of the monthly size of the ECB bond buybacks. The figures suggested seemed to be right along the lines of what many believed it needed to be and was received warmly, although with nowhere near the enthusiasm of previous  well placed source leaks or educated guesses regarding the FOMC‘s upcoming actions, from the Wall Street Journal’s Jon Hilsenrath.

Yesterday’s leak may have been what was responsible for the market’s decisive turnaround shortly after the opening bell.

This morning, ahead of the expected announcement the futures are just mildly higher, so it remains to be seen what effect, if any and in what size the reaction might be and, of course, for how long that recation will last.

While the news may be beneficial for European stock markets in the longer term, there’s really no reason to think that it will be the kind of news or provide the kind of fuel needed to send US markets higher for anything much more than a day or so.

The real impetus could still be upcoming earnings, although thus far, they haven’t been very impressive, although we really haven’t heard anything yet from those businesses that would reasonably be expected to benefit from a severe drop in energy prices.

Interestingly, in an interview yesterday, the CEO of Dow Chemical, which has small oil holdings as part of a Kuwaiti partnership and has seen its shares drop sharply in concert with oil prices, said that the net result of energy price declines was very good for Dow Chemical, because it is a far greater user of energy than it is a producer of energy. That’s something that hasn’t really been factored in yet and Dow Chemical reorts its earnings next week.

As with many companies, the earnings may be of interest, but it’s the future guidance that may hold the key.

Hopefully this morning’s ECB announcement will bring some happy news to the US markets as that would be a good way to bring a shortened trading week to its end.

With a few positions set to expire tomorrow, I’d like to see them positioned to either be assigned or rolled over and a couple of good days in succession would really help.

So, Mario? What’s it going to be?

Daily Market Update – January 21, 2015 (Close)

Yesterday was not very different from much of the rest of this month.

It was actually a very volatile day, only the magnitude was missing.

This past week Jamie Dimon mentioned that JP Morgan traders  were victims of “bad volatility,” making the kind of distinction that isn’t really discussed very much, especially as the concept of volatility itself is so complex.

Yesterday, though, was an example of the good kind of volatility, as the market made intra-day moves in alternating directions. The more about faces in a single day and the less the net result of those moves, the better is the volatility, which is also sometimes considered to be a measure of uncertainty felt by traders.

The moves back and forth keep you on your toes and you never can really develop any confidence about direction. What can be more uncertain than that?

Yesterday finished virtually unchanged after positive indications in the pre-open futures trading that didn’t last very long. The ensuing decline after the open looked as if it might convincingly take the market toward another of the now familiar triple digit losses, but it reversed itself as inexplicably as the reverse from the futures occurred.

During the early part of yesterday’s decline I surprised myself by actually liking some positions during a time that I was thinking in terms of conserving cash.

I’m still surprised, but after last week’s incredibly slow trading and waiting for something to happen, I wasn’t particularly interested in repeating that, even though the outcome was acceptable.

But passivity has its limits and if the volatility seen thus far is any indication of what’s to come in 2015, passivity isn’t going to have the kind of success that it had in 2014.

This morning the market was pointing lower in the pre-open trading, very similar to the level at which it was pointing higher yesterday. In neither situation was there much reason for the moderate gain or loss, respectively and when there was no real reason to account for futures trading, those mild or moderate moves often have a way of disappearing once trading gets started for real.

So despite the indication of a loss to begin the day, I was still hopeful that there will be some new opportunities arising, especially when it comes to selling calls on uncovered positions. I think that the 3 new positions opened yesterday may end up being the sum total for the week, but even as cash shrinks away, it’s hard to think in terms of absolutes.

As it would turn out, today was pretty much the mirror opposite of yesterday, as the early losses in the futures turned out within the first 30 minutes of trading and the day ended with a decent gain, but again with a fairly wide trading range
due to the early triple digit decline.

More good volatility.

With this being a shortened trading week and with a little bit of that volatility being built into premiums, if those opportunities do show up, there’s reason to look at establishing some contracts for next week, particularly since it would be nice to get diversified in time again and lock in some of the premiums that reflect some of that volatility.

Additionally, while there’s very little economic news coming from our shores this week to really move markets, there is a chance that the ECB may be able to move markets in one direction or another when it either makes an announcement regarding the implementation of quantitative easing or again simply defers action.

While most want to hear news of an European QE becoming reality and it would likely give a momentary boost to our markets, especially if there are those who still doubt its announcement tomorrow, I think that it would serve to detract from US equity liquidity by removing some money from our markets to European markets.

For those who believed that was the mechanism that fueled our own market’s rally from 2009, it would be difficult to ignore the same mechanism helping Europe to some degree and that money for new investment in European equities  has to come from somewhere.

So while European QE may be a good idea and while ECB President Draghi has certainly been dragging, I’m fine with him continuing to talk the talk and leaving it at that.

Daily Market Update – January 21, 2015 (8:00 AM)

Yesterday was not very different from much of the rest of this month.

It was actually a very volatile day, only the magnitude was missing.

This past week Jamie Dimon mentioned that JP Morgan traders  were victims of “bad volatility,” making the kind of distinction that isn’t really discussed very much, especially as the concept of volatility itself is so complex.

Yesterday, though, was an example of the good kind of volatility, as the market made intra-day moves in alternating directions. The more about faces in a single day and the less the net result of those moves, the better is the volatility, which is also sometimes considered to be a measure of uncertainty felt by traders.

The moves back and forth keep you on your toes and you never can really develop any confidence about direction. What can be more uncertain than that?

Yesterday finished virtually unchanged after positive indications in the pre-open futures trading that didn’t last very long. The ensuing decline after the open looked as if it might convincingly take the market toward another of the now familiar triple digit losses, but it reversed itself as inexplicably as the reverse from the futures occurred.

During the early part of yesterday’s decline I surprised myself by actually liking some positions during a time that I was thinking in terms of conserving cash.

I’m still surprised, but after last week’s incredibly slow trading and waiting for something to happen, I wasn’t particularly interested in repeating that, even though the outcome was acceptable.

But passivity has its limits and if the volatility seen thus far is any indication of what’s to come in 2015, passivity isn’t going to have the kind of success that it had in 2014.

This morning the market is pointing lower in the pre-open trading, very similar to the level at which it was pointing higher yesterday. In neither situation was there much reason for the moderate gain or loss, respectively and when there is no real ereason to account for futures trading, those mild or moderate moves often have a way of disappearing once trading gets started for real.

So despite the indication of a loss to begin the day, I’m still hopeful that there will be some new opportunities arising, especially when it comes to selling calls on uncovered positions. I think that the 3 new positions opened yesterday may end up being the sum total for the week, but even as cash shrinks away, it’s hard to think in terms of absolutes.

With this being a shortened trading week and with a little bit of volatility being built into premiums, if those opportunities do show up, there’s reason to look at establishing some contracts
for next week, particularly since it would be nice to get diversified in time again and lock in some of the premiums that reflect some of that volatility.

Additionally, while there’s very little economic news coming from our shores this week to really move markets, there is a chance that the ECB may be able to move markets in one direction or another when it either makes an announcement regarding the implementation of quantitative easing or again simply defers action.

While most want to hear news of an European QE becoming reality and it would likely give a momentary boost to our markets, especially if there are those who still doubt its announcement tomorrow, I think that it would serve to detract from US equity liquidity by removing some money from our markets to European markets.

For those who believed that was the mechanism that fueled our own market’s rally from 2009, it would be difficult to ignore the same mechanism helping Europe to some degree and that money for new investment in European equities  has to come from somewhere.

So while European QE may be a good idea and while ECB President Draghi has certainly been dragging, I’m fine with him continuing to talk the talk and leaving it at that.

.