Category: Daily Market Update

Daily Market Update – December 8, 2014 (Close)

There’s not too much too distinguish this week from the past two. 

Again, most of the focus will be on holiday retail sales and the price of oil. The general theme is likely to be that holiday sales in traditional brick and mortar outlets are falling while on-line sales are increasing.

No big surprise, but the overall sentiment is likely to be painted as one of lagging retail sales, because that’s pretty much what the script says every year until the final numbers are tallied and then everyone is pleasantly surprised.

The real surprise is probably still going to be contained in the oil story, especially if prices continue to move lower. It’s hard to imagine that they still can, but that was exactly the belief last week and the week before and the week before that.

And guess what?

They still can and did move even lower today and probably was the reason that the entire market was dragged lower today in a serious way.

Other than that it is an extremely slow news week and there is only one Federal Reserve Governor scheduled to give a speech, as opposed to last week when you would have thought they were all running for re-election. Last week, though, it seemed that nothing could really budge the markets in either direction. Not even outgoing voting member Richard Fisher could say anything to excite or scare people.

This week does have the JOLT Survey on Tuesday. That previously obscure report was a big mover of the market last month after Janet Yellen had earlier suggested that we should pay more attention to some of the information contained in the report. The piece that she believes is important, and if she believes so, we should, too, was the number of people leaving their jobs voluntarily in the belief that they would get better paying jobs quickly.

As that number goes higher it reflects optimism in the work place, which can only be a good thing for everyone. Put more jobs, better paying jobs and much lower energy prices together and you have a formula for increased retail sales, with the real prize coming at the reporting of the fourth quarter GDP in early 2015.

What wasn’t good, at least not for the markets as they get ready to start the week were the overnight economic numbers from China and Japan, reflecting weaker than expected growth.

At some point the realization will hit us that China couldn’t possibly keep growing at the pace it had been doing and we will also come to realize that no matter what Japan does it will continue to be mired in an aging population in a  nation with no natural resources other than tuna.

But at some point also comes the realization that decreasing economic activity, especially from China, also decreases demand for oil and introduces that factor along with production related over-supply.

With Europe continuing in its doldrums where else are you going to look other than to the US for economic leadership right now?

Unfortunately, the market isn’t looking as if it’s going to reflect that leadership this morning and by the time the day ended there was really no place to go or to hide.

After a number of assignments last week and some cash replenishment, I’m again not adverse to adding new positions, but once again don’t anticipate adding much more than 3 or 4 such positions. With the really nice flow of dividends of the past two weeks now dried up, there will be more need to generate the weeks’s income from a combination of new positions, rollovers and sales on existing positions.

Last week, despite no real action in the broader market, turned out to be a good one for achieving a nice combination of activity and I would love to see the same this week.

Despite adding two new positions this week at what seemed like good prices and actually getting calls sold on eBay shortly after the market opened, there wasn’t much chance to see anything else move higher as the day developed.

In the event that the JOLT Survey does bring us some good and actionable news tomorrow, with about an equal number of positions set to expire this week and next, which is the end of the December 2014 option cycle, I will probably look at expirations for any new trades to also reflect that distribution, as there is very little incentive to go out further as long as volatility remains so incredibly low.

Daily Market Update – December 8, 2014 (8:45 AM)

There’s not too much too distinguish this week from the past two. 

Again, most of the focus will be on holiday retail sales and the price of oil. The general theme is likely to be that holiday sales in traditional brick and mortar outlets are falling while on-line sales are increasing.

No big surprise, but the overall sentiment is likely to be painted as one of lagging retail sales, because that’s pretty much what the script says every year until the final numbers are tallied and then everyone is pleasantly surprised.

The real surprise is probably still going to be contained in the oil story, especially if prices continue to move lower. It’s hard to imagine that they still can, but that was exactly the belief last week and the week before and the week before that.

Other than that it is an extremely slow news week and there is only one Federal Reserve Governor scheduled to give a speech, as opposed to last week when you would have thought they were all running for re-election. Last week, though, it seemed that nothing could really budge the markets in either direction. Not even outgoing voting member Richard Fisher could say anything to excite or scare people.

This week does have the JOLT Survey on Tuesday. That previously obscure report was a big mover of the market last month after Janet Yellen had earlier suggested that we should pay more attention to some of the information contained in the report. The piece that she believes is important, and if she believes so, we should, too, was the number of people leaving their jobs voluntarily in the belief that they would get better paying jobs quickly.

As that number goes higher it reflects optimism in the work place, which can only be a good thing for everyone. Put more jobs, better paying jobs and much lower energy prices together and you have a formula for increased retail sales, with the real prize coming at the reporting of the fourth quarter GDP in early 2015.

What wasn’t good, at least not for the markets as they get ready to start the week were the overnight economic numbers from China and Japan, reflecting weaker than expected growth.

At some point the realization will hit us that China couldn’t possibly keep growing at the pace it had been doing and we will also come to realize that no matter what Japan does it will continue to be mired in an aging population in a  nation with no natural resources other than tuna.

With Europe continuing in its doldrums where else are you going to look other than to the US for economic leadership right now?

Unfortunately, the market isn’t looking as if it’s going to reflect that leadership this morning.

After a number of assignments last week and some cash replenishment, I’m again not adverse to adding new
positions, but once again don’t anticipate adding much more than 3 or 4 such positions. With the really nice flow of dividends of the past two weeks now dried up, there will be more need to generate the weeks’s income from a combination of new positions, rollovers and sales on existing positions.

Last week, despite no real action in the broader market, turned out to be a good one for achieving a nice combination of activity and I would love to see the same this week.

With about an equal number of positions set to expire this week and next, which is the end of the December 2014 option cycle, I will probably look at expirations for any new trades to also reflect that distribution, as there is very little incentive to go out further as long as volatility remains so incredibly low.

Daily Market Update – December 5, 2014 (8:00 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 outcomes include:

Assignments:  DOW ($48), GPS ($39.50), MOS ($45)

Rollovers: GDX

Expirations:  eBay

The following positions were ex-dividend this week: JOY (12/2 $0.20), HFC (12/2 $0.32), MOS (12/2 $0.25), HAL (12/3 $0.18), COH (12/3 $0.34) NEM (12/3 $0.025)

The following will be ex-dividend next week: GM (12/8 $0.30)

This week, once again, due to the relatively high costs of some rollovers, I may prefer to let contracts elapse and try to simply sell new calls on positions next week.

Daily Market Update – December 4, 2014 (Close)

Ahead of this morning’s scheduled ECB policy statement the market didn’t look as if it was expecting too much.

At some point markets may give up on expecting anything tangible to come from Mario Draghi, but so far, that hasn’t been the case as his assurances have always sent markets higher. If news from the Bank of England this morning would have been any indicator there wouldn’t be any change coming out from the ECB today, either.

As far as predictors go, the Bank of England may be as good as any, at least when the ECB may be involved.

If and when the day comes that some substantive moves toward a European version of Quantitative Easing are actually made there’s going to be a big reaction, but it’s always a question of what direction that reaction will take us. A weak central currency and stalled economic growth would seem like the kind of things that a central bank would want to address with more than just words, but the longer the ECB delays action the better the situation is for the US economy and probably markets, as well.

Today, when it was all settled, turned out to be another quiet day as the ECB did nothing to heat things up and professional traders looked to position portfolios ahead of tomorrow’s Employment Situation Report. That may have explained the larger than usual trading range of late, but there really wasn’t much to explain the market’s early decline and then its subsequent recovery. What there was, was lots of confusion over where Mario Draghi stood, as he seemed to give conflicting messages.

For hedge fund managers the need to position portfolios before potentially important news generally that means to place hedges on portfolios in order to protect gains, but as 2014 is winding down there aren’t too many gains to be seen by those traders and reports are coming that predict a record year for closure of traditional hedge funds.

Yesterday was also another quiet day, coming off the previous day’s surprise move higher. Whatever it was that outgoing voting Federal Reserve Governor Richard Fisher said during his speech yesterday evening, it isn’t getting any media attention and isn’t seeming to have any impact on this morning’s future trading. Fisher may simply be falling into irrelevancy, as this month he will cast his final vote or perhaps he just had nothing to add to the conversation that could shake things up a bit the way he customarily did.

Fortunately, even with a relatively flat day yesterday there were some unexpected opportunities to sell calls and rollover positions and it would certainly have been nice to be able to do the same today and be left in good position to end the week.

Somehow, that’s how today worked out, as from an activity perspective it was almost a replay of yesterday, but also included the surprise of adding a new position in more shares of Sinclair Broadcasting

Unless there is some kind of precipitous move tomorrow the remaining positions expiring this week have reasonable prospects of either assignment or rollover, although I would prefer not to rollover the lone outstanding DOH position and instead see the position expire. As I mentioned yesterday, I’m inclined to prefer rollovers at the moment, and try to accumulate premiums, but still wouldn’t mind adding to cash reserves.

While I initially thought that today might be a day of simply being a passive observer, I’m glad that even in the environment of a stable market, despite further deterioration in the energy sector, there were some opportunities to generate more premiums..

Now with the non-event ECB issue having been moved out of the way early this morning, all that remains for the week is to see how tomorrow morning’s Employment Situation Report is received and to look forward to a weekend as calm as the week preceding it.

Daily Market Update – December 4, 2014 (7:30 AM)

Ahead of this morning’s scheduled ECB policy statement the market doesn’t look as if it is expecting too much.

At some point markets may give up on expecting anything tangible to come from Mario Draghi, but so far, that hasn’t been the case as his assurances have always sent markets higher. If news from the Bank of England this morning will be any indicator there won’t be any change coming out from the ECB today.

If and when the day comes that some substantive moves toward a European version of Quantitative Easing are actually made there’s going to be a big reaction, but it’s always a question of what direction that reaction will take us. A weak central currency and stalled economic growth would seem like the kind of things that a central bank would want to address with more than just words, but the longer the ECB delays action the better the situation is for the US economy and probably markets, as well.

Today, if nothing comes from the ECB to heat things up, it should be another quiet day as professional traders look to position portfolios ahead of tomorrow’s Employment Situation Report.

Generally that means to place hedges on portfolios in order to protect gains, but as 2014 is winding down there aren’t too many gains to be seen by those traders and reports are coming that predict a record year for closure of traditional hedge funds.

Yesterday was also another quiet day, coming off the previous day’s surprise move higher. Whatever it was that outgoing voting Federal Reserve Governor Richard Fisher said during his speech yesterday evening, it isn’t getting any media attention and isn’t seeming to have any impact on this morning’s future trading. Fisher may simply be falling into irrelevancy, as this month he will cast his final vote or perhaps he just had nothing to add to the conversation that could shake things up a bit the way he customarily did.

Fortunately, even with a relatively flat day yesterday there were some unexpected opportunities to sell calls and rollover positions and it would certainly be nice to be able to do the same today and be left in good position to end the week.

Unless there is some kind of precipitous move today or tomorrow positions expiring this week have reasonable prospects of either assignment or rollover. As I mentioned yesterday, I’m inclined to prefer rollovers at the moment, but still wouldn’t mind adding to cash reserves.

Today may be a day of simply being a passive observer and hoping for some stability and maybe even some continued improvement in the energy sector.

Once the ECB issue is moved out of the way early this morning we’ll have a better idea of where markets may be headed on their own and whether that passivity evolves into anything more interesting.

Daily Market Update – December 3, 2014 (Close)

Yesterday was a surprise.

While triple digit moves aren’t as important as they used to be they still get your attention, especially when there’s really not too much to account for the move.

Yesterday was a very quiet day on the news front, but at least there wasn’t any really negative news and there was some acknowledgement by a Federal Reserve Governor that falling energy prices will likely add to the nation’s GDP, as about 70% of it is consumer driven.

That acknowledgement may have been the driving force behind the positive tone to the market.

Today, however, there were to be three more speeches by Federal Reserve Governors that could have their own impacts, including one by the always influential Richard Fisher, although he speaks well after the market’s close and in less than a month he will no longer be a voting member of the FOMC.

In the meantime the ADP Employment Report was released this morning and although it is sometimes a prelude to what is in the Employment Situation Report that follows on Friday, very often it has a lack of concordance. The ADP Report rarely moves markets and lately neither has the Employment Situation Report, so there isn’t very much expectation for known events having too much influence for the remainder of the week.

The remainder of the week looks like it will be one of just simply waiting for any opportunities to pop up, although I wouldn’t mind some passivity, as it comes to assignments. I would like to see some so as to add to cash reserves, but increasingly I want to see rollovers right now in lieu of having to add new positions.

Today’s narrow range trading did at least offer some of those opportunities for rollovers and new cover sales. Unfortunately, some other trades that I tried to make just didn’t execute, such as option sales on General Motors, as the volume is still light and the spreads are still too wide for my liking.

Looking at charts makes it harder and harder to justify purchases at current levels for so many stocks. However, there are still many stocks that are not at their 52 week highs, but it is also increasingly clear that the cycle for many of those stocks to recover their price drops is longer and longer, as the market is less and less forgiving.

Stringing along some positions, sometimes even keeping them via rollover when assignment is likely or possible may be better in some cases rather than taking the assignment, unless you specifically want to add to an unused cash cushion.

For now, I think I want the best of all worlds and still want to add to the cash cushion but may be willing to add less in order to perpetuate the premium stream from current holdings.

This morning appeared as if it would be a very flat open and that there may not be too much excitement nor opportunity to do very much. Again, all eyes were on energy and retail and the thought that lower energy prices should drive more retail purchasing as the holiday season progresses.

What’s still needed are the anecdotal stories to back up the theory behind those expectations, but for now the few reports that have been made haven’t corroborated  the belief that consumers are better poised to be spending this holiday season.

If this December’s market performance is going to be up to par with Decembers past that kind of consumer fuel is really needed as fuel itself becomes less of a burden on household budgets.

The combination of more jobs, better paying jobs and more discretionary cash is a good one to start the new year, but this month would be an especially good time to really get it all started.

Daily Market Update – December 3, 2014 (8:00 AM)

Yesterday was a surprise.

While triple digit moves aren’t as important as they used to be they still get your attention, especially when there’s really not too much to account for the move.

Yesterday was a very quiet day on the news front, but at least there wasn’t any really negative news and there was some acknowledgement by a Federal Reserve Governor that falling energy prices will likely add to the nation’s GDP, as about 70% of it is consumer driven.

That acknowledgement may have been the driving force behind the positive tone to the market.

Today, however, there are three more speeches by Federal Reserve Governors that could have their own impacts, including one by the always influential Richard Fisher, although he speaks well after the market’s close and in less than a month he will no longer be a voting member of the FOMC.

In the meantime the ADP Employment Report is released this morning and is sometimes a prelude to what is in the Employment Situation Report that follows on Friday. The ADP Report rarely moves markets and lately neither has the Employment Situation Report, so there isn’t very much expectation for known events having too much influence for the remainder of the week.

The remainder of the week looks like it will be one of just simply waiting for any opportunities to pop up, although I wouldn’t mind some passivity, as it comes to assignments. I would like to see some so as to add to cash reserves, but increasingly I want to see rollovers right now in lieu of having to add new positions.

Looking at charts makes it harder and harder to justify purchases at current levels for so many stocks. However, there are still many stocks that are not at their 52 week highs, but it is also increasingly clear that the cycle for many of those stocks to recover their price drops is longer and longer, as the market is less and less forgiving.

Stringing along some positions, sometimes even keeping them via rollover when assignment is likely or possible may be better in some cases rather than taking the assignment, unless you specifically want to add to an unused cash cushion.

For now, I think I want the best of all worlds and still want to add to the cash cushion but may be willing to add less in order to perpetuate the premium stream from current holdings.

This morning appears as if it will a very flat open and there may not be too much excitement nor opportunity to do very much. Again, all eyes are on energy and retail and the thought that lower energy prices should drive more retail purchasing as the holiday season progresses.

What’s still needed are the anecdotal stories to back up the theory behind those expectations, but for now the few reports that have been made haven’t corroborated  the belief that consumers are better poised to be spending this holiday season.

If this December’s market performance is going to be up to par with Decembers past that kind of consumer fuel is really needed as fuel itself becomes less of a burden on household budgets.

The combination of more jobs, better paying jobs and more discretionary cash is a good one to start the new year, but this month would be an especially good time to really get it all started.

Daily Market Update – December 2, 2014 (Close)

While we wait for Friday’s employment Situation Report this seems like the perfect week, with otherwise little economic news, to stuff a total of eleven Federal Reserve Governor speeches into it.

Conceivably, any of those could move markets, especially if speaking off script. The one most likely to do that is Richard Fisher, who speaks after Wednesday’s close. He is a hawkish member and will become a non-voting one next month.

Stanley Fischer, who is the Vice-Chairman and also thought to be relatively hawkish speaks twice this week, but thus far hasn’t ruffled any feathers in public, as Fisher has done throughout his tenure, dating back to Alan Greenspan’s time.

Meanwhile, Fischer spoke before the market’s open this morning and prior to the opening it didn‘t appear as if anything surprising or unintended had been said as the market’s modest open higher had been maintained since futures trading began earlier in the day.

In a week where there isn’t much news until the week’s end these speeches may end up being the only entertainment we get and possibly the only catalysts for some sort of movement.

It’s not really clear what sent the market higher today, but whatever it was it began shortly before the first 30 minutes of trading could even get done and then had another buying flurry start shortly after noon.

No real news of any sort to account for either of the moves higher, but interestingly while oil was giving back yesterday’s gains, oil stocks moved higher today, even though the broader sector was mixed.

Otherwise, the story will continue to focus on oil and retail for the week, at least until Friday’s Employment report. That report shouldn’t hold too many surprises and probably won’t be a springboard for any significant market moves higher. In fact, too good of a number would probably be construed as meaning wage inflation is ahead and a rising interest rate environment would come sooner than anticipated.

Most will probably be hoping for another month with job growth in the low to mid 200,000 range and  engendering little need for the market to react to the bland news.

While the focus is on retail, so far, the numbers for Black Friday and Cyber Monday are all over the place and their interpretations are also expressing a broad range. of opinion.

The same broad range of opinion is characterizing what sits behind OPEC’s decision to keep production steady. Many see it as an outright assault against the US shale industry, while a minority simply see it as another expression of Saudi Arabian duplicity in saying one thing but believing something very different. In this case the overt words are blatantly aimed at the fledgling US industry, but the real intent may be to bring no benefit to their enemies in Iran.

It just happens to be much easier to publicly fling arrows at the US, since there’s little worry of repercussion, as opposed to slinging those arrows at a
fellow OPEC member or the people who funnel arms to your enemies, not to mention your enemies.

Yesterday’s bounce higher in oil doesn’t appear to be replicating itself this morning and so energy may be on the radar screen for quite a while as we wait to see how lower prices to end users might impact the economy, even though the stock market may not see that same kind of potential benefit.

I would have loved the opportunity to take advantage of any possible moves higher today to sell some calls rather than adding more new positions, but while the market did move nicely higher the option market continued to be very quiet and had very low volume..

For now I’m content with some dividends this week and whatever additional premiums can be squeezed out of positions as the countdown to the year’s end has already begun. Another day like today would be welcome if investors can find any other reason to push levels even higher.

Daily Market Update – December 2, 2014 (9:00 AM)

While we wait for Friday’s employment Situation Report this seems like the perfect week, with otherwise little economic news, to stuff a total of eleven Federal Reserve Governor speeches into it.

Conceivably, any of those could move markets, especially if speaking off script. The one most likely to do that is Richard Fisher, who speaks after Wednesday’s close. He is a hawkish member and will become a non-voting one next month.

Stanley Fischer, who is the Vice-Chairman and also thought to be relatively hawkish speaks twice this week, but thus far hasn’t ruffled any feathers in public, as Fisher has done throughout his tenure, dating back to Alan Greenspan’s time.

Meanwhile, Fischer is speaking before the market’s open this morning and thus far it doesn’t appear as if anything surprising or unintended has been said as the market’s modest open higher has been maintained since futures trading began earlier in the day.

In a week where there isn’t much news until the week’s end these speeches may end up being the only entertainment we get and possibly the only catalysts for some sort of movement.

Otherwise, the story will continue to focus on oil and retail for the week, at least until Friday’s Employment report. That report shouldn’t hold too many surprises and probably won’t be a springboard for any significant market moves higher. In fact, too good of a number would probably be construed as meaning wage inflation is ahead and a rising interest rate environment would come sooner than anticipated.

Most will probably be hoping for another month with job growth in the low to mid 200,000 range and  engendering little need for the market to react to the bland news.

While the focus is on retail, so far, the numbers for Black Friday and Cyber Monday are all over the place and their interpretations are also expressing a broad range. of opinion.

The same broad range of opinion is characterizing what sits behind OPEC’s decision to keep production steady. Many see it as an outright assault against the US shale industry, while a minority simply see it as another expression of Saudi Arabian duplicity in saying one thing but believing something very different. In this case the overt words are blatantly aimed at the fledgling US industry, but the real intent may be to bring no benefit to their enemies in Iran.

It just happens to be much easier to publicly fling arrows at the US, since there’s little worry of repercussion, as opposed to slinging those arrows at a fellow OPEC member.

Yesterday’s bounce higher in oil doesn’t appear to be replicating itself this morning and so energy may be on the radar screen for quite a while as we wait to see how lower prices to end users might impact the economy, even though the stock market may not see that same kind of potenti
al benefit.

This morning I would love the opportunity to take advantage of any possible move higher to sell some calls rather than adding more new positions, but the indication higher isn’t terribly strong and could easily wither once the bell rings.

For now I’m content with some dividends this week and whatever additional premiums can be squeezed out of positions as the countdown to the year’s end has already begun.

Daily Market Update – December 1, 2014 (Close)

Weak oil begins the week that begins the month that is often the best of the year.

For now it doesn’t look as if the month will get off to a good start, but the drop in oil seen late last night, that was a continuation of the real plunge on Friday, had already started greatly moderating before the market opened, so there’s always hope.

In what some think was just a relief bounce, oil ended up having a decent day, now all it has to do is string together about 15 similar increases to get back to its baseline.

This week we have an Employment Situation Report, and while it has been a non-event the past couple of months, the market could use its boost this time around. Otherwise, there’s not too much going on, with the exception of some Federal Reserve Governors making speeches.

Like last week, this week has lots of ex-dividend positions, so there is already a revenue stream in hand. With a reasonable number of positions set to expire in each of the next three weeks when the December 2014 option comes to its end, any purchases this week could fit in well into any of those three choices. However, I would like to be able to recycle some cash through assignments, so I may look a little bit more at those contracts expiring this week.

With energy trading so low it would seem like a good buying opportunity, but so far those who said oil would go below $75 have been right and many continue to talk about $50 being the next stop. Given that the crowd was right on that one, it’s not likely a good time to go against the crowd at the moment. Today was nice, but far from an indication that the pain is done if you’re already knee deep in energy.

While low oil prices seem to logically be a good thing for stock markets that hasn’t necessarily been borne out in reality, although low oil prices are usually driven by low demand which is rarely good for stock markets.

This time around it’s being driven by high supply and middling demand. What remains to be seen is whether that mediocre demand will be increased after having been enticed by what may be a rare opportunity to lock into low prices.

Other than oil being the big story now, retail is on everyone’s radar, as it is every Thanksgiving until the end of the year.

For at least the past 10 years it has seemed as if the same story has unfolded.

Sales are always reported to be weak after the frenzy surrounding Thanksgiving and dour projections are made for the holiday season. When it’s all done and the numbers are finally tallied after Christmas, it always seems to turn out to be better than expected.

This year, so far, it is all going according to script, as in-store numbers have been reported as being weak. Given how the “Black Friday” phenomenon has been very much downplayed this year, maybe the decrease shouldn’t come as too much of a surprise and may also be offset by on-line shopping, which we’re now being told may be more safe, as far as credit card identity theft goes, than actually shopping in a s
tore.

In all likelihood, unless something unforeseen breaks on the international news front the two stories in front of us this morning are going to be the key two stories for the final trading month of the year.

Neither of those would appear to offer the kind of fuel that would send the market to even more highs.

However, as the US keeps looking comparatively better than most anyone else in the world our markets may become a magnet for more and more international funds to come to our shores and that could be the source of growth. Given efforts taken by the Bank of Japan and the ECB the expectation would have been that those stock markets would have benefitted just as ours had done during Quantitative Easing. However, with the real strength of the dollar, the reality may end up being very different.

I won’t be on a shopping spree this week and would like to see some reason to believe that the market can get beyond the heavy burden placed at the moment by the representation of the energy sector in the indexes.

Hopefully the direction will be higher this week if only anyone could figure out what will take us there, or anywhere.