Author Archives: TheAcsMan

 

Daily Market Update – February 13, 2014 (Close)

The morning started with the realization that there was much more snow than anticipated.

That usually makes for a slower trading day when New York City is part of the blanket, despite the decreasing reliance on floor traders.

For some reason, the pre-opening futures were weak this morning and didn’t get better as Jobless Claims and Retail Sales information was eventually released.

The release was slightly delayed and without the usual lifting of the embargo fanfare, as the snow slowed down the way things work in Washington, DC.

While the jobless news was benign, except to those contained in the report, the Retail Sales should have come as no surprise, as there have been few rejoicing over the plight of retail shares. With everyone blaming the weather, the past week isn’t going to help.

As someone mentioned on Twitter this morning in weather like this it’s obvious that Yuppies would rather stay home and eat gluten than go out and stock up on quinoa.

Although there are still those talking about how good the earnings numbers have been it appears that the comparisons conveniently disregard the impact of share buy backs that only serve to inflate the earnings per share ratio. But beyond that, you don’t have to understand basic math and fundamental metrics. All you need to do is hear about retail weakness to know that in a consumer nation the lack of consumption isn’t a good thing.

As far as share price, even Amazon hasn’t been immune of late as its razor thin margins, when there are any, isn’t what sustains business models.

With what is likely to be a slow trading day, with or without a sizable move, there’s plenty of time for traders to wonder whether this morning’s trade lower is just a rest in the bounce back or a reconsideration of that bounce back. When you have nothing else to do your mind gets to ask those kind of questions, despite the fact that there’s no way in which to arrive at an answer that should instill confidence.

Last week broke the pattern of very weak Fridays. Hopefully today’s trading will not set the stage for a return to that pattern, as I was looking forward to some assignments and setting the stage for a busy end to the monthly cycle.

I suspected that today would just be another in a recent slow day of trading. The real challenge may just be in staying awake. Luckily I have the dog to see to it that boredom doesn’t overtake me as watching the monitors do nothing to fight off the sleep and there’s no way that I’ll be shoveling as a means to escape the tedium that may ensue once the news of the Comcast buyout of Time Warner Cable has been fully beaten to death.

Hopefully this morning’s snow won’t do anything to knock out power, although this may be the day in which there’s little to be missed

When the final bell rang it still wasn’t clear where the eventual optimism came from. I even surprised myself by making a purchase of MasterCard, a company I haven’t owned since long before the pre-split days when it traded at below $400.

For some reason, despite understanding that the actual price of shares means little, as far as value goes, sometimes it’s just difficult to pick up shares that cost $800. The 10 to 1 split was welcome, especially since the finance sector is under-represented in my portfolio.

While this week has been another in a series of slow ones, once again, I didn’t mind, as long as it meant watching assets grow.

As much as I like to trade I don’t like getting to a point where it is clearly an addiction. Sometimes you just have to resist the need to feed that beast, but it isn’t easy.

Today, I simply walked outside with a shovel in hand, having wired my computer to some powerful speakers and set the price alarms to alert me if anything was going on that needed my attention as I dealt with snow.

My wife, who apparently is “essential” personnel was picked up at home by the hospital security 4 wheel drive and as a result of her getting into work. I received a call from one of the Emergency Room physicians telling me that all he had done today was confirming patient deaths.

Guess what? From shoveling. Not only can snow be bad for earnings, but it can kill you, too.

So I won’t be doing that tomorrow, no matter how boring it may get, although I do like my speaker set up. I may keep that going.

 

Daily Market Update – February 13, 2014 (9:30 AM)

The morning started with the realization that there was much more snow than anticipated.

That usually makes for a slower trading day when New York City is part of the blanket, despite the decreasing reliance on floor traders.

For some reason, the pre-opening futures were weak this morning and didn’t get better as Jobless Claims and Retail Sales information was eventually released.

The release was slightly delayed and without the usual lifting of the embargo fanfare, as the snow slowed down the way things work in Washington, DC.

While the jobless news was benign, except to those contained in the report, the Retail Sales should have come as no surprise, as there have been few rejoicing over the plight of retail shares. With everyone blaming the weather, the past week isn’t going to help.

As someone mentioned on Twitter this morning in weather like this it’s obvious that Yuppies would rather stay home and eat gluten than go out and stock up on quinoa.

Although there are still those talking about how good the earnings numbers have been it appears that the comparisons conveniently disregard the impact of share buy backs that only serve to inflate the earnings per share ratio. But beyond that, you don’t have to understand basic math and fundamental metrics. All you need to do is hear about retail weakness to know that in a consumer nation the lack of consumption isn’t a good thing.

As far as share price, even Amazon hasn’t been immune of late as its razor thin margins, when there are any, isn’t what sustains business models.

With what is likely to be a slow trading day, with or without a sizable move, there’s plenty of time for traders to wonder whether this morning’s trade lower is just a rest in the bounce back or a reconsideration of that bounce back. When you have nothing else to do your mind gets to ask those kind of questions, despite the fact that there’s no way in which to arrive at an answer that should instill confidence.

Last week broke the pattern of very weak Fridays. Hopefully today’s trading will not set the stage for a return to that pattern, as I was looking forward to some assignments and setting the stage for a busy end to the monthly cycle.

I suspect that today will just be another in a recent slow day of trading. The real challenge may just be in staying awake. Luckily I have the dog to see to it that boredom doesn’t overtake me as watching the monitors do nothing to fight off the sleep and there’s no way that I’ll be shoveling as a means to escape the tedium that may ensue once the news of the Comcast buyout of Time Warner Cable has been fully beaten to death.

Hopefully this morning’s snow won’t do anything to knock out power, although this may be the day in which there’s little to be missed

Daily Market Update – February 12, 2014 (Close)

Despite doing almost nothing meaningful the past couple of days, I did enjoy yesterday.

I got over the frustration of another day of seeing trades not get executed as prices refused to give ground and instead simply watched the bottom line start returning to where it ended 2013, while doing so faster than the market seems to be doing it.

There are different paths to happiness, it seems.

Ultimately, having more is probably more meaningful than simply trading, but if you like to see that stream of income or especially if you rely on that stream, trading is important, as are the flow of dividends.

After yesterday’s initial Humphrey-Hawkins testimony by new Federal Reserve Chairman Janet Yellen in which she failed to deliver any surprises, today seems as if there will be a respite from celebration, as Part 2 still remains, although late in the day it was announced that due to weather concerns the final stage of testimony was being postponed.

In the meantime two Federal Reserve Governors gave their opinions yesterday, with one blaming  “feckless” politicians for the current state of the economy and fiscal policy and the other calling for legislation to prevent “too big to fail.”

Neither of those received too much attention, nor has the passing of a clean bill to lift the debt ceiling for another year, although prospects of the latter may have contributed to yesterday’s gain.

There are still more such appearances scheduled this week, weather pending.

I remember watching Alan Greenspan deliver his Humphrey-Hawkings testimony and watch the markets react wildly in response only to reverse the action when he concluded his testimony on the final day. I think he took delight in being able to do such things and I think he ratcheted up his obfuscation when sensing he was in control.

It’s not too likely Yellen will be in that mold and it appears as if she takes the dual mandate of the Federal Reserve into the real world and to heart, seeing the real impact on employment of people with names and faces.

With less than a 1.5% decline from the market’s recent highs there’s every reason to believe that the same pattern exhibited in nearly the past two years will come to play. That is an attempt at a correction and then a quick rebound that overshoots the original high.

With little reason to believe that the Federal Reserve will change its course, despite the likelihood that there will be greater dissension going forward as the composition of voting Governors has changed, there should continue to be accommodation even in the systematic reduction of the Federal Reserve in the Treasury market.

The problem is that when everything seems so rational and everything seems to point in a single direction is when strange things seem to happen and that somehow catch us off guard.

Neither too much optimism nor too much pessimism is really a good thing.

With only a handful of new positions this week and last, it seems like an eternity since the days of 10 new positions in a week. Looking back on a few years of pursuing a covered call strategy the decrease in trading is very definitely a hallmark of decreasing or flat markets and is also very much my favorite time to be owning stocks.

The ideal scenario ends up being fewer stock positions, fewer new positions and more and more rollovers, but for longer time periods.

For just a brief moment last week as the market was heading lower and volatility was headed higher it looked as if we might be heading into that kind of environment that really simplifies trading.

Just like everything else when it all looks to be falling into place is precisely when you should begin to believe that it won’t.

While there are still some potential new positions I might like to add this week I don’t expect to be pursuing them very much over the next few days. Instead, if the market is kind enough to continue moving forward my hope would be to continue getting some coverage, even if only the short term “D’oh” trades. Every cent of premium and every additional retained dividend just adds to performance, especially when the market is flat or just trying to decide what direction to take.

I’m not proud. I’ll take the extra pennies when the market is treading water, as long as I can add them to the premiums and growing stream of dividends.

Daily Market Update – February 12, 2014 (9:00 AM)

Depite doing almost nothing meaningful the past couple of days, I did enjoy yesterday.

I got over the frustration of another day of seeing trades not get executed as prices refused to give ground and instead simply watched the bottom line start returning to where it ended 2013, while doing so faster than the market seems to be doing it.

There are different paths to happiness, it seems.

Ultimately, having more is probably more meaningful than simply trading, but if you like to see that stream of income or especially if you rely on that stream, trading is important, as are the flow of dividends.

After yesterday’s initial Humphrey-Hawkins testimony by new Federal Reserve Chairman Janet Yellen in which she failed to deliver any surprises, today seems as if there will be a respite from celebration, as Part 2 still remains.

In the meantime two Federal Reserve Governors gave their opinions yesterday, with one blaming  “feckless” politicians for the current state of the economy and fiscal policy and the other calling for legislation to prevent “too big to fail.”

Neither of those received too much attention, nor has the passing of a clean bill to lift the debt ceiling for another year, although prospects of the latter may have contributed to yesterday’s gain.

I remember watching Alan Greenspan deliver his Humphrey-Hawkings testimony and watch the markets react wildly in response only to reverse the action when he concluded his testimony on the final day. I think he took delight in being able to do such things and I think he ratcheted up his obfuscation when sensing he was in control.

It’s not too likely Yellen will be in that mold and it appears as if she takes the dual mandate of the Federal Reserve into the real world and to heart, seeing the real impact on employment of people with names and faces.

With less than a 1.5% decline from the market’s recent highs there’s every reason to believe that the same pattern exhibited in nearly the past two years will come to play. That is an attempt at a correction and then a quick rebound that overshoots the original high.

With little reason to believe that the Federal Reserve will change its course, despite the likelihood that there will be greater dissension going forward as the composition of voting Governors has changed, there should continue to be accommodation even in the systematic reduction of the Federal Reserve in the Treasury market.

The problem is that when everything seems so rational and everything seems to point in a single direction is when strange things seem to happen and that somehow catch us off guard.

Neither too much optimism nor too much pessimism is really a good thing.

With only a handful of new positions this week and last, it seems like an eternity since the days of 10 new positions in a week. Looking back on a few years of pursuing a covered call strategy the decrease in trading is very definitely a hallmark of decreasing or flat markets and is also very much my favorite time to be owning stocks.

The ideal scenario ends up being fewer stock positions, fewer new positions and more and more rollovers, but for longer time periods.

For just a brief moment last week as the market was heading lower and volatility was headed higher it looked as if we might be heading into that kind of environment that really simplifies trading.

Just like everything else when it all looks to be falling into place is precisely when you should begin to believe that it won’t.

While there are still some potential new positions I might like to add this week I don’t expect to be pursuing them very much over the next few days. Instead, if the market is kind enough to continue moving forward my hope would be to continue getting some coverage, even if only the short term “D’oh” trades. Every cent of premium and every additional retained dividend just adds to performance, especially when the market is flat or just trying to decide what direction to take.

I’m not proud. I’ll take the extra pennies when the market is treading water, as long as I can add them to the premiums and growing stream of dividends.

Daily Market Update – February 11, 2014 (Close)

As frustrating as it is not making very made trades, especially during the first two days of the week, which tend to be the busiest for opening new positions, I guess I didn’t really mind too much watching the markets run with reinforcement of what most everyone already knew.

Yesterday was a very subdued day as the conventional wisdom held that most everyone was awaiting to hear Janet Yellen’s congressional testimony.

It’s wasn’t too likely that there would be any surprises coming from the prepared text which was distributed prior to the planned testimony. It also seemed unlikely that anyone would be surprised by the lack of surprise, but you can never really predict human behavior, which includes the buying or selling response to news or even the lack of news.

Today the response was unbridled buying and even the sounds of people yelling “risk on,” again.

It’s was also equally unlikely that the ensuing questions from elected officials would elicit much in the way of deviation from the planned course, of which Yellen was an active architect. Whether she says anything that may be over-interpreted is a different manner, but like her predecessor, she seems to value the meaning of every word ands speaks slowly enough that she’s not trying to slip anything through.

What is somewhat interesting and different is that a response panel has been invited to also present and be questioned by the congressional panels after Yellen’s testimony, similar to how the opposition gets to respond to the State of the Union Message. While that may have happened in the past, I just can’t remember that to be the case. But as most would agree, what’s really missing is more politicization of the Federal Reserve.

I think that the upcoming testimony may have played a role in Monday’s quiet trading, but not to be overlooked is the roller coaster of the week before and the lack of indication of which end of the week was the one that foretells where we are headed next.

While Charles Dickens just had his 202nd birthday celebrated, it might be appropriate to think that last week was “the best of times and the worst of times.” Dickens didn’t really focus on an analysis of the net result of the times, but last week the net result was a positive one, especially when you consider the growing negative sentiment that had come from the background and into the foreground.

So far this morning the futures also seem to be muted, just as they were to open the week. They did, however, improve as the opening bell rang and the initial comments had their embargo lifted.

Again, probably not a surprise, but given the previous couple of weeks and the nervousness that pervaded the trading floors, it’s also not surprising that there’s still caution abounding.

With only a single new position it was the quietest Monday in over 2 years and I thought that low level of activity was likely to continue today, although my focus was on a couple of positions that go ex-dividend tomorrow, looking for an opportunity to justify their purchase. Other than those I didn’t see many prospects unless something breaks in either direction.

In the meantime I didn’t mind watching prices move higher and getting closer to the point that they can get cover. Granted, while they do so it’s just a paper exercise, but getting cover is tangible and justifies sitting around all day.

The market  at the beginning of the day was less than 3% below its current peak having recovered about half of the loss that sent even brave traders quivering into retreat. It’s precisely that kind of ambivalence, straddling that mid-point that makes it difficult to establish positions that commit assets.

With the equally sudden retreat of volatility the reward for taking the risk has also fallen and without reward the mattress begins to look appealing, but we all know, that’s never the right way to go.

As the market exploded higher the drop from the peak was cut in another half.

Whether warranted or not, unless stocks are already deep in the money, these kinds of moves are always welcome, so I thank Janet Yellen. Despite not having done or said anything differently, those in a position to create market moods saw her calming voice as just the tonic for getting back to where 2013 had left off.

Maybe even the GOP leadership is due some thanks for possibly putting forward a debt ceiling expansion bill without any strings attached.

PS: Of you purchased Microsoft today, it goes ex-dividend on Tuesday, February 18th. However, because Monday is a stock market holiday, if it is to be assigned early, it will happen after Friday’s close.

 

Daily Market Update – February 11, 2014 (10:00 AM)

Yesterday was a very subdued day as the conventional wisdom held that most everyone was awaiting to hear Janet Yellen’s congressional testimony.

It’s not too likely that there will be any surprises coming from the prepared text which was distributed prior to the planned testimony. It also seems unlikely that anyone would be surprised by the lack of surprise, but you can never really predict human behavior, which includes the buying or selling response to news or even the lack of news.

It’s equally unlikely that the ensuing questions from elected officials will elicit much in the way of deviation from the planned course, of which she was an active architect. Whether she says anything that may be over-interpreted is a different manner, but like her predecessor, she seems to value the meaning of every word ands speaks slowly enough that she’s not trying to slip anything through.

What is somewhat interesting and different is that a response panel has been invited to also present and be questioned by the congressional panels after Yellen’s testimony, similar to how the opposition gets to respond to the State of the Union Message. While that may have happened in the past, I just can’t remember that to be the case. But as most would agree, what’s really missing is more politicization of the Federal Reserve.

I think that the upcoming testimony may have played a role in Monday’s quiet trading, but not to be overlooked is the roller coaster of the week before and the lack of indication of which end of the week was the one that foretells where we are headed next.

While Charles Dickens just had his 202nd birthday celebrated, it might be appropriate to think that last week was “the best of times and the worst of times.” Dickens didn’t really focus on an analysis of the net result of the times, but last week the net result was a positive one, especially when you consider the growing negative sentiment that had come from the background and into the foreground.

So far this morning the futures also seem to be muted, just as they were to open the week. They did, however, improve as the opening bell rang and the initial comments had their embargo lifted.

Again, probably not a surprise, but given the previous couple of weeks and the nervousness that pervaded the trading floors, it’s also not surprising that there’s still caution abounding.

With only a single new position it was the quietest Monday in over 2 years and I think that low level of activity is likely to continue today, although my focus will be on a couple of positions that go ex-dividend tomorrow, looking for an opportunity to justify their purchase. Other than those I don’t see many prospects unless something breaks in either direction.

In the meantime I don’t mind watching prices move higher and get closer to the point that they can get cover. Granted, while they do so it’s just a paper exercise, but getting cover is tangible and justifies sitting around all day.

The market is currently less than 3% below its current peak having recovered about half of the loss that sent even brave traders quivering into retreat. It’s precisely that kind of ambivalence, straddling that mid-point that makes it difficult to establish positions that commit assets.

With the equally sudden retreat of volatility the reward for taking the risk has also fallen and without reward the mattress begins to look appealing, but we all know, that’s never the right way to go.

Daily Market Update – February 10, 2014 (Close)

After least week’s bookend, but opposite triple digit moves to open and close the week we’re left feeling a bit more optimistic than just a week ago.

It just didn’t rally show today, although you can spin today’s flat performance with the perspective of a bull or a bear, as you like.

Whether or not that optimism was justified is hard to say, but we’re now slowly moving away from the real market movers reporting their earnings and may once again fall prey to speculating about what every little nuance or event means.

This week, for example, Janet Yellen will give Congressional testimony on Tuesday and five other Federal Reserve Governors will be giving addresses. Any of those can slip in a phrase, make a joke or simply use a single word with perceived emphasis that will send traders into fits and take the market with them.

No doubt everyone will want to know how Janet Yellen feels about the past two months of employment statistics, particularly since she seems interested in pursuing a lower unemployment threshold than previously was the case. For traders it also means having to decide whether her intent means that the course of the tapering to Quantitative Easing will be altered.

While we don’t know what she will say when faced with questions we do know that there is always some layer of obfuscation in the answers. With Yellen, we just don’t know how much there will be. Maybe she’ll continue the example set by her predecessor and be more decipherable than was his predecessor.

Of course, if there is even the slightest suggestion that the path may be altered that then brings the question as to whether altering that path is good or bad as regards the economy and then whether what’s good or bad for the economy is bad or good for the stock market.

For individual traders it makes absolutely no sense trying to understand that which can’t be understood. Trying to apply logical processes to understand the unpredictable or the illogical is itself illogical.

Given their performance last week, it’s only logical that in hindsight I wish that I had opened more new positions. I don’t think, however, I’m going to be interested in over-compensating this week. While for now it appears that the market is fairly resistant to anything more than a 5% decline in the S&P, the previous pattern has been to erase that loss and go even further on the upside. I think that I will look for a little more evidence that we’ll be on that path rather than assuming we already are on our way.

I would rather miss a percent on the upside than be first on line to capture a few percent on the downside.

With cash at about 34% to start the week but only 6 positions set to expire this week I’m likely to be conservative with cash and will also likely look at weekly options or those that may be able to bypass the February 22, 2014 monthly expiration.

With a number of potentially good dividend plays this week I may also preferentially look in their direction, particularly as volatility has again died down and the premiums are reflecting that to be the case.

In previous weeks the first hour, if the market was moving higher, turned out to be very unreliable in predicting direction for the rest of the day as many investors took the opportunity to secure some profits whenever they could in anticipation of further market declines.

For that reason I will probably be an observer early in the sessions this week and see where this week’s sentiment takes us.

Watching the pre-open market it appears that no one has an idea of where we’re going to start the week. When there’s that little resolve it’s often easier to have an event get blown out of proportion and trigger a mood. Other than potentially being prompted by this week’s scheduled events or something unexpected on the international front, the mood would do well to just stay flat.

And that’s exactly what it did today as it was very hard to justify doing much of anything as the market seems to be in a state of suspended animation awaiting the beginning of the congressional testimony.

It’s not very likely that much news will be made tomorrow, but that alone may lead to a relief rally, as that has been a pattern in the past. Since the testimony will be released before the hearing we’ll already have the early tone set, but anything goes once questioning starts.

(see all trades this option cycle)

Daily Market Update – February 10, 2014 (9:30 AM)

After least week’s bookend, but opposite triple digit moves to open and close the week we’re left feeling a bit more optimistic than just a week ago.

Whether or not that’s justified is hard to say, but we’re now slowly moving away from the real market movers reporting their earnings and may once again fall prey to speculating about what every little nuance or event means.

This week, for example, Janet Yellen will give Congressional testimony on Tuesday and five other Federal Reserve Governors will be giving addresses. Any of those can slip in a phrase, make a joke or simply use a single word with perceived emphasis that will send traders into fits and take the market with them.

No doubt everyone will want to know how Janet Yellen feels about the past two months of employment statistics, particularly since she seems interested in pursuing a lower unemployment threshold than previously was the case. For traders it also means having to decide whether her intent means that the course of the tapering to Quantitative Easing will be altered.

While we don’t know what she will say when faced with questions we do know that there is alwys some layer of obfuscation in the answers. With Yellen, we just don’t know how much there will be. Maybe she’ll continue the example set by her predecessor and be more decipherable than was his predecessor.

Of course, if there is even the slightest suggestion that the path may be altered that then brings the question as to whether altering that path is good or bad as regards the economy and then whether what’s good or bad for the economy is bad or good for the stock market.

For individual traders it makes absolutely no sense trying to understand that which can’t be understood. Trying to apply logical processes to understand the unpredictable or the illogical is itself illogical.

Given their performance last week, it’s only logical that in hindsight I wish that I had opened more new positions. I don’t think, however, I’m going to be interested in over-compensating this week. While for now it appears that the market is fairly resistant to anything more than a 5% decline in the S&P, the previous pattern has been to erase that loss and go even further on the upside. I think that I will look for a little more evidence that we’ll be on that path rather than assuming we already are on our way.

I would rather miss a percent on the upside than be first on line to capture a few percent on the downside.

With cash at about 34% to start the week but only 6 positions set to expire this week I’m likely to be conservative with cash and will also likely look at weekly options or those that may be able to bypass the February 22, 2014 monthly expiration.

With a number of potentially good dividend plays this week I may also preferentially look in their direction, particularly as volatility has again died down and the premiums are reflecting that to be the case.

In previous weeks the first hour, if the market was moving higher, turned out to be very unreliable in predicting direction for the rest of the day as many investors took the opportunity to secure some profits whenever they could in anticipation of further market declines.

For that reason I will probably be an observer early in the sessions this week and see where this week’s sentiment takes us.

Watching the pre-open market it appears that no one has an idea of where we’re going to start the week. When there’s that little resolve it’s often easier to have an event get blown out of proportion and trigger a mood. Other than potentially being prompted by this week’s scheduled events or something unexpected on the international front, the mood would do well to just stay flat.

 

(see all trades this option cycle)

Daily Market Update – February 9, 2014 (Close)

The Week in Review  and the Weekend Update are now posted.

Access prior Daily Market Updates by clicking here

OTP Sector Distribution* as of February 7, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – February 7, 2014 (Close)

The Week in Review is now posted by 6 PM and the Weekend Update will be posted by Sunday 12 Noon.

The following outcomes may be possible today:

Access prior Daily Market Updates by clicking here

OTP Sector Distribution* as of February 6, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – February 7, 2014 (9:00 AM)

The Week in Review will be posted by 6 PM and the Weekend Update will be posted by Sunday 12 Noon.

The following outcomes may be possible today:

Assignment:  EBAY, GPS*, MET

Rollover:   BMY, TXN, WAG

Expiration:  AIG, ANF,  CHK, CLF, HFC,

* GPS unexpectedly announced sales, revenues and improved guidance after yesterday’s close, sending stock higher in the after-hours. The decision and announcement to do so was likely made yesterday or after Wednesday’s trading close, as there was a tremendous increase in the remaining time value of the 2/7/14 option on Thursday morning. Additionally, there was a tremendous spike in option volume at about 9:45 AM, accounting for nearly the entire day’s volume, suggesting something substantive occurred between Wednesday’s close and Thursday’s open. The same spike in option premium did not extend into the next week, suggesting that there would be some event occurring prior to the close of the week’s trading.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of February 6, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – February 6, 2014 (Close)

Today’s big stories were likely to be inconsequential as far as anything will ever go.

Twitter and Green Mountain Coffee Roasters were grabbing all of the headlines in the morning, which wasn’t necessarily a bad thing, as we awaited tomorrow’s Employment Situation Report.

Why anyone was surprised over the market’s response to Twitter’s earnings report is amazing. No one had any right to expect anything other than some sort of a surprise, unless the market had fully already understood Twitter and had fully discounted all possibilities. Considering that Twitter was a black box even after its IPO and considering the absence of support levels due to its rapid rise in share price, anything could have been possible as earnings were released.

What is surprising is that user engagement is already decreasing. To me it’s also surprising that they have any revenue to report at all, as many have already figured out how to get their commercial Tweets spread through the system through viral campaigns, like the supposed drunken JC Penney Tweeter during the Super Bowl.

Green Mountain is a different story.

It has a long history of making large earnings related moves and it also has a history of either delaying scheduled earnings or releasing some big news that deflects from attention to earnings related detail. Not to mention allegations of accounting irregularities and some questionable activities by its founder and past Chairman and CEO.

In this case, I think there’s a second overlay, as well, as Brian Kelly, the new and untarnished CEO of Green Mountain struck a deal with Coca Cola, his alma mater. He had been a rising star there, named as President and CEO of Coca Cola Refreshments. No small feat.

I wonder if this deal was one of Coca Cola emulating Microsoft when it made its Nokia deal in an effort to secure a potential CEO successor and bringing Stephen Elop, the Nokia CEO and a Microsoft alumnus, back home.

In that case there was also an element of Microsoft sending a lifesaver in Nokia’s direction and given Green Mountain’s core business growth Coca Cola may have done the same.

Today, I’d rather see the market’s engaged in discussing and analyzing these issues than over analyzing what tomorrow’s data may be or trying to guess what direction the market may go in response to the data.

Also, hopefully the European Central Bank’s policy statement this morning will either be a non-event for us or a net positive, as late in the week adverse news is hard to overcome when contracts expire the very next day. In the recent past the ECB has usually sent our markets higher as they’ve followed an accommodative policy, as had our own Federal Reserve.

Interestingly, as our markets have reached that 5% pullback level and we’re nearing the end of earnings season more attention is being placed on government and other economic reports. The response to Monday’s ISM is an example of a response that has otherwise been really muted for the past year. For the most part the only items the market has cared about during the bull run higher have been the FOMC minutes and the Employment Report.

That may be changing as we become used to the idea of a continued taper and as some political dysfunction shows sign of abating and leaving us with fewer manufactured crises.

If we can get a decent employment number tomorrow, and the ADP data yesterday gives some hope for that, suddenly there appears to be less reason to expect a further drop in markets and I’m beginning to feel some optimism going forward.

Based on the way today’s market went, optimism was the call of the day.

That optimism would really take hold if we could also see volatility maintained at this level or even higher. Instead volatility for the broad market decreased, while for some individual stocks and sectors it remains at its recent highs, in fact, even higher than just yesterday. A good example of that is in the retail sector where suddenly good results from L Brands and Kohls have sent this week’s premiums rocketing higher compared to yesterday.

Today, as yesterday, I was looking for possible DOH Trades as well as any early rollovers,  as I wasn’t expecting much exciting to happen and certainly wasn’t expecting an unbridled march higher.

As would happen nothing exciting did happen except that was enough to send the market nearly 200 points higher.

The speculation is that today’s rise was in expectation of tomorrow’s employment numbers which are thought to be spectacular, perhaps in the 300,000 range or more and that the unemployment rate is going to come in at 6.5%.

For those keeping track, 6.5% was one of the thresholds that we were told the FOMC had set when deciding whether to initiate the taper program. Reportedly Janet Yellen prefers a 6% level, so in some wild scenario it could be conceivable that the next FOMC would have announcement of a slowing or postponement of the taper. If the market believes that may be the case today’s gain could vanish.

The speculation about the fun never ends.

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