Category: Daily Market Update

Daily Market Update – November 20, 2014 (Close)

Yesterday’s FOMC Statement release turned out to be a non-event and was so for the second consecutive month.

Most every month there is some discussion of the nuances contained in the statement and the differences between it and the previous month. Adjectives and adverbs are dissected for their meaning and importance and algorithms pore over the frequency the keywords are used and make instantaneous trading decisions based on words, often without context being a factor.

This time around there wasn’t very much to talk about and there wasn’t very much for algorithms to ponder.

Maybe that reflects some adult like behavior in that a reasonable response was the outcome of not being faced with any surprises. The lack of any new information contained in the statement normally would be irrelevant to traders and the markets would respond wildly, most recently higher, after the initial knee-jerk reaction.

This time there was no knee-jerk, nor was there a delayed reaction.

While the day after the FOMC is frequently a day for significant movement, often opposite the movements of the previous day, it doesn’t appear as if today will require much in the way of correction, as there wasn’t any kind of an over-response yesterday.

Instead, the market simply looks as if today will begin with a moderately lower opening, but with no real cause to account for the weakness.

By the time the day would come to an end it was at least sporting a move that was double that of the daily moves of much of the past week. having moved 0.2% higher on the day.

Given the past week’s malaise, it would be nice to see any kind of movement and any kind of expression of sentiment to take the market decidedly in any direction. Although the streak of 5 consecutive days of not having moved more than 0.1% is now over, there hasn’t been much of a difference between the days that added to that record and the days that snapped the record.

Today may have been double that 0.1% threshold, but it sure didn‘t feel twice as active.

While there was a chance that today could have been a breakout as the pre-open futures were unfolding, the fact that there was no reason for a sell-off or a buying spree probably fell on newly rational ears. With  6 upcoming speeches by Federal Reserve Governors that could shed some additional light on what is really going on in the closed meeting room that guides the nation’s economic policy, there’s still some chance for some surprises.

But I doubt that anything substantive is going to come from any of those speeches, particularly as the market doesn’t seem overly nervous, although individual stocks are often very tentative and quickly cast out for the slightest disappointments, as the market continues to be one that is characterized by sector rotation and a general trend higher and higher.

For the rest of the week the challenge is to rollover, sometimes, avoid rollover, as in the case of DOH Trades, seek new cover and get assignments.

At least today offered some opportunity to get some additional cover on some laggards, but those premiums are still so woefully low that it’s hard to justify the risk – reward propositions.

For now, at least, the initial concern that a real adverse reaction to the FOMC would diminish chances of assignment aren’t as keen, but it would still be nice to finish the week wit
hout any surprises and be able to set up the December 2014 cycle with enough cash in hand to be able to take advantage of anything that may come along.

Daily Market Update – November 20, 2014 (8:30 AM)

Yesterday’s FOMC Statement release turned out to be a non-event and was so for the second consecutive month.

Most every month there is some discussion of the nuances contained in the statement and the differences between it and the previous month. Adjectives and adverbs are dissected for their meaning and importance and algorithms pore over the frequency the keywords are used and make instantaneous trading decisions based on words, often without context being a factor.

This time around there wasn‘t very much to talk about and there wasn‘t very much for algorithms to ponder.

Maybe that reflects some adult like behavior in that a reasonable response was the outcome of not being faced with any surprises. The lack of any new information contained in the statement normally would be irrelevant to traders and the markets would respond wildly, most recently higher, after the initial knee-jerk reaction.

This time there was no knee-jerk, nor was there a delayed reaction.

While the day after the FOMC is frequently a day for significant movement, often opposite the movements of the previous day, it doesn’t appear as if today will require much in the way of correction, as there wasn’t any kind of an over-response yesterday.

Instead, the market simply looks as if today will begin with a moderately lower opening, but with no real cause to account for the weakness.

Given the past week’s malaise, it would be nice to see any kind of movement and any kind of expression of sentiment to take the market decidedly in any direction. Although the streak of 5 consecutive days of not having moved more than 0.1% is now over, there hasn’t been much of a difference between the days that added to that record and the days that snapped the record.

Today may change that and there are also 6 upcoming speeches by Federal Reserve Governors that could shed some additional light on what is really going on in the closed meeting room that guides the nation’s economic policy.

I doubt that anything substantive is going to come from any of those speeches, particularly as the market doesn’t seem overly nervous, although individual stocks are often very tentative and quickly cast out for the slightest disappointments, as the market continues to be one that is characterized by sector rotation and a general trend higher and higher.

For the rest of the week the challenge is to rollover, sometimes, avoid rollover, as in the case of DOH Trades, seek new cover and get assignments.

For now, at least, the initial concern that a real adverse reaction to the FOMC would diminish chances of assignment aren’t as keen, but it would still be nice to finish the week without any surprises and be able to set up the December 2014 cycle with enough cash in hand to be able to take advantage of anything that may come along.

Daily Market Update – November 19, 2014 (Close)

Yesterday broke that string of 5 consecutive days with the S&P 500 moving less than 0.1%

It took 35 years to repeat the last time that happened, but yesterday’s small gain, although bigger than 0.1%, has made that bit of trivia obsolete.

This morning appears to be shaping up to be a typical quiet morning in advance of the FOMC Statement release. Last month’s statement wasn’t met with any kind of over the top reaction, which itself was surprising, as the event usually has resulted in significant knee-jerk reactions, as well as large moves after the information has been digested and often large moves the following day, although frequently in the opposite direction.

More surprisingly, last month there was reason to believe that the FOMC had shifted somewhat toward the sentiments of the more hawkish members as none of those dissented, while a notable dove did do so.

That itself led to something even more surprising.

Based on that perceived shift, you would have expected a sell-off, even if it wasn’t really justified, but it never happened. Maybe that was a good sign, since everyone knows what direction we are headed toward and how that direction includes increased interest rates. There should be nothing to fear and amazingly the continued suggestion that those increases were coming didn’t produce fear or surprise.

Today’s FOMC shouldn’t have held much of a surprise for anyone, particularly as the economy gives no evidence of backsliding. If Janet Yellen’s suggestion that we focus more on the JOLT Summary is also something that the FOMC is doing, then we would expect that the timing of those interest rate increases will be getting nearer and nearer.

And so it was very unlikely that I would make any new position trades today, at least before the FOMC Statement release.

That’s exactly how things played out and in the aftermath of the release, nothing happened.

There were no surprises and there was no reaction, pretty much like last month’s experience.

While there are six speeches scheduled to be presented by Federal Reserve Governors before the week’s end, none of those is likely to really have any impact on the market. The only one that may be of interest will be one given by the newest appointee, Loretta Mester, who is still somewhat of a mystery, but is thought to have more hawkish sentiments than most of the other Governors.

Someone has to pick up where Richard Fisher will soon be leaving off and it could be Mester.

Prior to today’s trade in Joy Global, the single new position trade for the week, the Best Buy put sale will play out tomorrow morning and otherwise the only thing to look for looks like will simply be on the prowl for any opportunity to sell new calls or execute rollovers.

Despite yesterday’s small gain, there has been essentially no movement in stocks and little opportunity to make those kind of trades. Today didn’t change that, despite the move being in excess of 0.1%.

While there have been some recent FOMC Statement release days where the market has gone on a buying spree the previous day and even in the hours before the release, it didn’t appear as if that would be the situation today, as the futures were trading about as flat as you can get. The way the rest of the day went, there’s not too much reason to suspect that tomorrow will be much different.

So the likelihood that the first half of today would be one of watching and hoping for any outliers that happened to unexpectedly move in the right direction did turn out to be the case. What didn’t materialize was seeing the hope for further a market move higher after the FOMC Statement come to fruition.

There are still two days left to this week and these monthly option cycle expirations can bring their own level of excitement and activity, but for now, that too, seems remote. Yet, there’s still some hope for some key assignments and rollovers before it’s all over.

Daily Market Update – November 19, 2014 (8:00 AM)

Yesterday broke that string of 5 consecutive days with the S&P 500 moving less than 0.1%

It took 35 years to repeat the last time that happened, but yesterday’s small gain, although bigger than 0.1%, has made that bit of trivia obsolete.

This morning appears to be shaping up to be a typical quiet morning in advance of the FOMC Statement release. Last month’s statement wasn’t met with any kind of over the top reaction, which itself was surprising, as the event usually has resulted in significant knee-jerk reactions, as well as large moves after the information has been digested and often large moves the following day, although frequently in the opposite direction.

More surprisingly, last month there was reason to believe that the FOMC had shifted somewhat toward the sentiments of the more hawkish members as none of those dissented, while a notable dove did do so.

That itself led to something even more surprising.

Based on that perceived shift, you would have expected a sell-off, even if it wasn’t really justified, but it never happened. Maybe that was a good sign, since everyone knows what direction we are headed toward and how that direction includes increased interest rates. There should be nothing to fear and amazingly the continued suggestion that those increases were coming didn’t produce fear or surprise.

Today’s FOMC shouldn’t hold much of a surprise for anyone, particularly as the economy gives no evidence of backsliding. If Janet Yellen’s suggestion that we focus more on the JOLT Summary is also something that the FOMC is doing, then we would expect that the timing of those interest rate increases will be getting nearer and nearer.

It’s very unlikely that I will make any new position trades today, at least before the FOMC Statement release.

While there are six speeches scheduled to be presented by Federal Reserve Governors before the week’s end, none of those is likely to really have any impact on the market. The only one that may be of interest will be one given by the newest appointee, Loretta Mester, who is still somewhat of a mystery, but is thought to have more hawkish sentiments than most of the other Governors.

So far, the single new position trade for the week, the Best Buy put sale will play out tomorrow morning and otherwise the only thing to look for is any opportunity to sell new calls or execute rollovers.

Despite yesterday’s small gain, there has been essentially no movement in stocks and little opportunity to make those kind of trades.

While there have been some recent FOMC Statement release days where the market has gone on a buying spree the previous day and even in the hours before the release, it doesn’t appear as if that will be the situation today, as the futures are trading about as flat as you can get.

So the likelihood is that the first half of the day will be one of watching and hoping for any outliers that happen to unexpectedly move in the right direction and then further hoping that any market moves after the FOMC Statement release will take us in a direction that will make rollovers and assignments more likely to occur.

Daily Market Update – November 18, 2014 (Close)

It has been a really long time since the S&P 500 has gone 4 days without a daily move of more than 0.1%.

That was back in 1979 and now it’s actually up to 5 consecutive days having remained virtually unchanged since that one day pop that came with the release of a previously obscure JOLT Summary.

The early indications weren’t for anything different today, although over the past few months the day before an FOMC Statement release has been a strongly higher moving kind of day. Today turned out to be a moderately higher day, but without any bells and whistles accompanying the move higher to leave the streak at 5 days, the first of such length since 1969.

Yesterday there was a comment about how much professional traders hate  those kind of days when nothing actually happens, much less when you string a few of them together. Traders make their living by the continuing moves up and down. They don’t particularly care about the direction, it’s change that they crave.

So if you were looking for change the stock market has been the wrong place to be for the past week, although it is still stunning to see how harshly some names are treated, with or without bad news and how punishing the market has become.

Yesterday was another of those one time unthinkable Mondays when I could find absolutely no trades that could be made, The nice thing about change is that in the event of a price drop you can consider a purchase of shares or the sale of puts or in the event of a price surge higher you can consider the sale of call options.

When there’s nothing happening there’s not much to be done. It’s otherwise not very different from flipping a coin. While you always hope for the best, it’s nice to feel that you have some kind of advantage when going in. Sometimes that feeling of advantage stems from following the trend and sometimes that advantage comes from going counter-trend.

But the past week has been absolutely trendless.

That could change as the FOMC Statement release draws closer, but despite the generally positive reaction to it over the past year, that too, still has a “flipping a coin” kind of characteristic to it. Since there are a number of components to the statement that are pored over and over-analyzed, any one of those could cause a significant movement. Trying to predict what will be contained in the statement, particularly if there are any substantive changes from the previous month and then trying to predict the market’s reaction is really a fool’s game.

That’s what makes the past few months so confusing. Why traders would have bid prices much higher the day before the release really made no sense at all and seemed to be very risky. Of course, it turned out not to be risky and so it has to make you wonder what the signal was that made traders go from their traditional pre-FOMC caution to one of bullishness.

If you’re cynical, there can only be one answer.

Today there didn’t appear to be any reason to be cynical, as it appeared that some caution is back at play. While the market did move higher and set even more new closing records, it was still a pretty quiet day, all in all.

Ultimately, this may end up being a week that doesn’t really begin until 2 PM on Wednesday as some of the uncertainty may then be lifted and traders can get back to trading and attempting to make some money.

Daily Market Update – November 18, 2014 (8:00 AM)

It has been a really long time since the S&P 500 has gone  4 days without a daily move of more than 0.1%.

That was back in 1979 and now it’s actually up to 5 consecutive days having remained virtually unchanged since that one day pop that came with the release of a previously obscure JOLT Summary.

The early indications aren’t for anything different today, although over the past few months the day before an FOMC Statement release has been a strongly higher moving kind of day.

Yesterday there was a comment about how much professional traders hate  those kind of days when nothing actually happens, much less when you string a few of them together. Traders make their living by the continuing moves up and down. They don’t particularly care about the direction, it’s change that they crave.

So if you were looking for change the stock market has been the wrong place to be for the past week, although it is still stunning to see how harshly some names are treated, with or without bad news and how punishing the market has become.

Yesterday was another of those one time unthinkable Mondays when I could find absolutely no trades that could be made, The nice thing about change is that in the event of a price drop you can consider a purchase of shares or the sale of puts or in the event of a price surge higher you can consider the sale of call options.

When there’s nothing happening there’s not much to be done. It’s otherwise not very different from flipping a coin. While you always hope for the best, it’s nice to feel that you have some kind of advantage when going in. Sometimes that feeling of advantage stems from following the trend and sometimes that advantage comes from going counter-trend.

But the past week has been absolutely trendless.

That could change as the FOMC Statement release draws closer, but despite the generally positive reaction to it over the past year, that too, still has a “flipping a coin” kind of characteristic to it. Since there are a number of components to the statement that are pored over and over-analyzed, any one of those could cause a significant movement. Trying to predict what will be contained in the statement, particularly if tehre are any substantive changes from the previous month and then trying to predict the market’s reaction is really a fool’s game.

That’s what makes the past few months so confusing. Why traders would have bid prices much higher the day before the release really made no sense at all and seemed to be very risky. Of course, it turned out not to be risky and so it has to make you wonder what the signal was that made traders go from their traditional pre-FOMC caution to one of bullishness.

If you’re cynical, there can only be one answer.

Today there doesn’t appear to be any reason to be cynical, as it appears that some caution is back at play, so it will likely be another quiet day. This may end up being a week that doesn’t really begin until 2 PM on Wednesday as some of the uncertainty may then be lifted and traders can get back to trading and attempting to make some money.

Daily Market Update – November 17, 2014 (Close)

Lately the FOMC Statement Release has been the market’s friend. That’s been the case even before the Federal Reserve announced its intention to begin tapering of the most recent Quantitative Easing, about this time last year. It definitely hasn’t changed since Janet Yellen assumed leadership.

There aren’t too many things that are predictable, but lately the market’s move higher to close the week of an FOMC statement has been a pretty good bet, although the ferocity of the moves have been getting less and less.

Because of that pattern the occurrence of the end of a monthly option cycle, which tends to be more active than when weekly cycles end, a couple of days after the FOMC Statement haven’t been very unnerving.

That wasn’t always the case, though.

In the past few years I can recall a number of occasions when the smug belief that positions would be assigned or easily rolled over quickly evaporated as the response to the FOMC was decidedly negative and stayed that way to end the week.

Because of those few times I’m always aware of what could happen and frequently think about trying to execute rollovers, where possible, before the Wednesday afternoon meeting, but rarely ever actually get those trades done.

This week will probably be no different.

However, with 11 lots set to expire this week and relatively few in future weeks due to the low premiums, I never like seeing an over-dependence on a single week. That’s just too much risk and too much at stake on the basis of a report that will take about 10 seconds to summarize and immediately evokes responses before thinking can take place.

Other than the FOMC and some relatively inconsequential earnings reports, but from companies that usually make the process interesting, this week has relatively little to cause much movement in either direction.

However, the FOMC is enough news for one week.

As with most weeks when there is an FOMC Statement release, especially not accompanied by a press conference, which tends to further buoy markets, I’m not very excited about adding new positions in advance of the announcement.

If doing so I’d like to look at the possibility of using some forward week expirations, rather than adding to the exposure this week. Of course that introduces the prob
lem of not getting very much additional premium for the additional time, as the volatility is just so low.

With some additional cash available for investment this week it’s always hard to resist the temptation to pick something up. The morning’s futures trading looks as if it may be continuing some of last week’s listless trading, which nonetheless offered some opportunities for purchases, new call sales and rollovers, so I wouldn’t necessarily mind a repeat of that scenario.

Still, despite the low volatility and the prospect of it moving even lower if the market goes higher, I would prefer some incremental move in that direction this week, if only to be able to secure some additional assignments and add to the cash pile.

For now, as has become the case for a few months, I expected to just sit back and watch how the market is set to begin the week and would have been especially happy to put some stragglers to work even if not adding any new positions.

What I didn’t expect was that the S&P 500 would add to its 35 year old record of the number of consecutive days with less than a 0.1% daily change and that the day would end without a single trade of any kind.

There’s always tomorrow, I suppose and if the past 3 months will serve as an indication, then tomorrow will inexplicably head nicely higher in anticipation of the following day’s FOMC.

That’s a pattern I could learn to like.

Daily Market Update – November 17, 2014 (8:45 AM)

Lately the FOMC Statement Release has been the market’s friend. That’s been the case even before the Federal Reserve announced its intention to begin tapering of the most recent Quantitative Easing, about this time last year. It definitely hasn’t changed since Janet Yellen assumed leadership.

There aren’t too many things that are predictable, but lately the market’s move higher to close the week of an FOMC statement has been a pretty good bet, although the ferocity of the moves have been getting less and less.

Because of that pattern the occurrence of the end of a monthly option cycle, which tends to be more active than when weekly cycles end, a couple of days after the FOMC Statement haven’t been very unnerving.

That wasn’t always the case, though.

In the past few years I can recall a number of occasions when the smug belief that positions would be assigned or easily rolled over quickly evaporated as the response to the FOMC was decidedly negative and stayed that way to end the week.

Because of those few times I’m always aware of what could happen and frequently think about trying to execute rollovers, where possible, before the Wednesday afternoon meeting, but rarely ever actually get those trades done.

This week will probably be no different.

However, with 11 lots set to expire this week and relatively few in future weeks due to the low premiums, I never like seeing an over-dependence on a single week. That’s just too much risk and too much at stake on the basis of a report that will take about 10 seconds to summarize and immediately evokes responses before thinking can take place.

Other than the FOMC and some relatively inconsequential earnings reports, but from companies that usually make the process interesting, this week has relatively little to cause much movement in either direction.

However, the FOMC is enough news for one week.

As with most weeks when there is an FOMC Statement release, especially not accompanied by a press conference, which tends to further buoy markets, I’m not very excited about adding new positions in advance of the announcement.

If doing so I’d like to look at the possibility of using some forward week expirations, rather than adding to the exposure this week. Of course that introduces
the problem of not getting very much additional premium for the additional time, as the volatility is just so low.

With some additional cash available for investment this week it’s always hard to resist the temptation to pick something up. The morning’s futures trading looks as if it may be continuing some of last week’s listless trading, which nonetheless offered some opportunities for purchases, new call sales and rollovers, so I wouldn’t necessarily mind a repeat of that scenario.

Still, despite the low volatility and the prospect of it moving even lower if the market goes higher, I would prefer some incremental move in that direction this week, if only to be able to secure some additional assignments and add to the cash pile.

For now, as has become the case for a few months, I will sit back and watch how the market is set to begin the week and would be especially happy to put some stragglers to work even if not adding any new positions.

Daily Market Update – November 14, 2014 (8:30 AM)

The Week in Review will be posted by 9 PM and the Weekend Update will be posted by 6 PM on Sunday.

The following trading outcomes are possible today:

Assignments:  EMC, INTC

Rollovers:  none

Expirations: GDX, JOY, TMUS

The following stocks were ex-dividend this week: CLF (11/12 $0.15), RIG (11/13 $0.75)

The following will be ex-dividend next week:  TGT (11/17 $0.51)

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

Daily Market Update – November 13, 2014 (Close)

The news coming in from retail is mixed, as far as investors are concerned.

They always look at the top line and the bottom line.

The top line represents revenues and the bottom line represents profits. Then they add into the mix forward guidance, which is far from an exact science, just as imaginative accounting removes the simple arithmetic behind profit and loss sheets from the realm of being an exact science.

The mixed news is that the trend is that the bottom lines are increased, but the top lines aren’t always so, although Wal-Mart reported this morning higher on both.

The consequence to that is that the bottom line represents sales and expenses, while the top line represents sales. One can be reflective of a company’s efficiencies, while the other can be much more reflective of what is going on in the economy, in addition to the particular popularity of a company at a moment in time.

So while seeing a general trend of increasing profits investors may be happy, especially if also guiding higher, but that may overlook the bigger picture.

On the other hand, if the revenue trend is flat or lower among a group of retailers, there has to be some concern that the consumer isn’t really participating, especially as employment statistics are suggesting that more and more people are at work and increasingly capable of spending their money.

Nothing propels an economy and creates confidence like consumer spending.

While we all love the very low interest rate environment that we have been in for so long, the one thing that we don’t think about too much is that the low interest rates are very much a by-product of the inability to consume. The pressure to drive prices higher by everyone seeking to satisfy personal demand for goods just isn’t there.

Somewhere is q happy medium that allows for some reasonable increase in interest rates as discretionary spending and business expansion is growing.

For the past few years and in particular the past year, there has been lots of concern about the Federal Reserve raising rates and the very idea of them going higher has placed a ceiling on the market’s climb higher, despite all of the advances that have been made.

Barely a year ago, the market was concerned at 10 year rates were approaching 3%. Then it got concerned at rates were beginning to climb to 2.5%. Just a few weeks ago the rate fell to 1.9% and had then taken a very strong bounce higher to its current  2.35%, having reached its bottom and begun its rise concurrent with the stock market in mid-October.

However, unless increasing employment will lead to increasing consumer demand for things big and small and not just European trips to take advantage of the strong dollar, the
re isn’t going to be anything to really drive those top lines and there is only so much that can be done by companies to increase their profits without those top line increases.

But those are all issues for another day, or at least until Target reports its earnings next week.

For now, it’s all about how to end up the week with some assignments, rollovers and call sales in preparation for the final week of the November cycle.

This morning looked like it will begin as yet another quiet day in a week that was expected to be that way. The day tutned out to have a little more character than the preceding 3 days, but was still fairly listless.

Who knows, maybe something will create a further spark, hopefully higher, but for now there’s nothing really in sight as the clock ticks to tomorrow’s close.