Category Archives: Daily Market Update

Daily Market Update – March 23, 2015  (Close)

This should be a relatively quiet week on the news front 

I don’t usually look at “Existing Home Sales” very much, but that was one of the factors cited by the FOMC last week as being a reason to delay interest rate hikes, as those sales continue to be disappointing, having been on a downtrend for the past 9 months.

While the weather may still be at play as those figures are reported this morning any uptick leading into Friday’s GDP report and then Stanley Fischer’s scheduled speech could easily get markets fearful again of coming interest rate increases.

As it would turn out those Existing Home Sales were improved and Stanley Fischer spoke today, as well as still being scheduled on Friday and the world didn’t explode.

In fact, the market actually finally was almost able to string two higher days on the DJIA, missing out only in the final 2 minutes of trading. But the market did break that string of alternating triple digit moves.

It still is confusing why everyone is so afraid of the initiation of such increases, as the market has generally done very well during the early stages of such increases.

Unless there are real signs of an economy heating up too fast there shouldn’t be the fears that rates are going to start increasing too often and too quickly. That would definitely stifle stocks as investors would look for alternatives.

The technical indicators after the past 7 or 8 trading sessions point higher even as the market has been unable to even have 2 consecutive days higher.

This morning the market was perfectly flat as we awaited the beginning of trading. Lately, however, with only a single day’s exception, that pre-open trading hasn’t been an indicator of the direction nor the size of the move by the closing bell.

Today it was pretty good as the market traded in a fairly tight range, only showing a little bit of relative weakness in the closing 15 minutes.

What has been especially interesting is that in the time of those previous trading sessions there had also only been a single day in which the trading theme saw a reversal, so it was interesting to see whether the market would continue trading in a state of fugue as the week began.

With a couple of assignments last week and some cash added to the pile I was less reluctant to spend some money to establish new positions. Since there are only 2 positions set to expire this week the greatest likelihood is that I would look for opportunities with contracts also expiring this week, in order to increase the likelihood of being able to recycle money to re-deploy in the following week.

A couple of those opportunities did come along, but I’m still open to some more.

But as the volatility has moved again near its low point for the past year, despite all of those triple digit moves, there’s little attraction for looking at longer time frame contracts, as those premiums are just getting so low. With a smattering of contracts already set to expire for all of the weeks in the April 2015 cycle there’s not too much reason to look for opportunities to populate those at the moment.

Again, as has been the case for quite some time, I would most invite any opportunity to simply conserve cash and generate income through the sale of options on existing uncovered positions. After making those new purchases today I would now especially welcome a repeat of some of last week’s unfounded moves higher.

Last week was a good week for that and that always offers some enhancement to return as it generates cash flow. However, what has been especially frustrating is that the market’s inability to string together meaningful moves forward has resulted in lost opportunities to sell those call options. That’s because any hopes of seeing shares move even higher in anticipation of some sort of rally have generally been dashed, although there have also been some exceptions.

Despite those exceptions, such as with Astra Zeneca and Sinclair Broadcasting, I think that I would still jump at any opportunity at this point to lock in any premiums on moves higher, as more and more stocks are moving higher in isolated ways and unable to hold those levels.

This morning I waited until the Existing Home Sales data was released to see if there was any reason for the markets to forget about their celebration of a continued dovish stance on interest rates. The last time the market responded with relief it only lasted 2 days, so it seemed right to see how long the party would keep going this time.

And if the party does keep going?

I still wouldn’t mind a repeat of last week, with or without new positions to enjoy the ride.

Daily Market Update – March 23, 2015  (8:45 AM)

This should be a relatively quiet week on the news front Week in Review will be posted by 6 PM and the Weekend Update will be posted by Noon on Sunday.

I don’t usually look at “Existing Home Sales” very much, but that was one of the factors cited by the FOMC last week as being a reason to delay interest rate hikes, as those sales continue to be disappointing, having been on a downtrend for the past 9 months.

While the weather may still be at play as those figures are reported this morning any uptick leading into Friday’s GDP report and then Stanley Fischer’s scheduled speech could easily get markets fearful again of coming interest rate increases.

It still is confusing why everyone is so afraid of the initiation of such increases, as the market has generally done very well during the early stages of such increases.

Unless there are real signs of an economy heating up too fast there shouldn’t be the fears that rates are going to start increasing too often and too quickly. That would definitely stifle stocks as investors would look for alternatives.

The technical indicators after the past 7 or 8 trading sessions point higher even as the market has been unable to even have 2 consecutive days higher.

This morning the market is perfectly flat as we await the beginning of trading. Lately, however, with only a single day’s exception, that pre-open trading hasn’t been an indicator of the direction nor the size of the move ny the closing bell.

What has been especially interesting is that in that time there has also only been a single day in which the trading theme saw a reversal, so it will be interesting to see whether the market continues trading in a state of fugue

With a couple of assignments last week and some cash added to the pile I’m less reluctant to spend some money to establish new positions. Since there are only 2 positions set to expire this week the greatest likelihood is that I would look for opportunities with contracts also expiring this week, in order to increase the likelihood of being able to recycle money to re-deploy in the following week.

Additionally, as the volatility has moved again near its low point for the past year, despite all of those triple digit moves, there’s little attraction for looking at longer time frame contracts, as those premiums are just getting so low. With a smattering of contracts already set to expire for all of the weeks in the April 2015 cycle there’s not too much reason to look for opportunities to populate those at the moment.

Again, as has been the case for quite some time, I would most invite any opportunity to simply conserve cash and generate income through the sale of options on existing uncovered positions.

Last week was a good week for that and that always offers some enhancement to return as it generates cash flow. However, what has been especially frustrating is that the market’s inability to string together meaningful moves forward has resulted in lost opportunities to sell those call options. That’s because any hopes of seeing shares move even higher in anticipation of some sort of rally have generally been dashed, although tehre have also been some exceptions.

Despite those exceptions, such as with Astra Zeneca and Sinclair Broadcasting, I think that I would still jump at any opportunity at this point to lock in any premiums on moves higher, as more and more stocks are moving higher in isolated ways and unable to hold those levels.

This morning I will likely wait until at least the Existing Home Sales data is released and see if there is any reason for the markets to forget about their celebration of a continued dovish stance on interest rates. The last time the market responded with relief it only lasted 2 days, so let’s see how long the party will keep going this time.

And if the party does keep going?

I still wouldn’t mind a repeat of last week, with or without new positions to enjoy the ride.

Daily Market Update – March 20, 2015  (9:00 AM)

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

The following trade outcomes are possible today:

Assignments:  GME, SBGI

Rollovers:  LXK

Expirations:  BAC, BP, DOW, EMC, GDX

The following were ex-dividend this week:  LVS (3/19 $0.65)

The following are ex-dividend next week:  DOW (3/27 $0.42)

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

Daily Market Update – March 19, 2015  (9:00 AM)

That was quite a gift that the FOMC gave to markets yesterday and it was also nice having Janet Yellen add to that gift.

The real gift, however, was the way in which markets reacted, because there really wasn’t very much contained in the FOMC Statement that should have given traders reason to believe that there was increased clarity.

In fact, it’s sort of amazing how the market reacted.

And not just the stock market which turned around over 300 points. But the precious metals, currencies and bond markets all rallied in a big way.

What was fascinating was that almost everyone had been arguing over whether the word “patience” would come out or not from the FOMC Statement. That word was thought to be the difference between getting an interest rate hike in June versus September.

While the word was removed, all that was said with regard to timing was that the rate hike would likely not come at the next FOMC meeting in April.

April? No one was expecting that, so what clarity was then added to justify the kind of response seen?

Hard to say, but it’s also hard to look a proverbial gift horse in the mouth.

The reality is and continues to be that the economy isn’t really showing much in the way of evidence to suggest that inflation is heating up. If you believe the FOMC as they continue to say that they are “data driven,” you have to believe that they don’t have the data to create the belief that the brakes have to be put on the economy as it was heating up too much.

No matter. It was nice seeing that turnaround, but I think it adds to the confusion that’s been seen in the market. Not only is it alternating once again between strong up and down days like it did in January, but there is a stealth bear market going on even as the S&P is less than 1% from its all time high.

That stealth bear market is seen in the large number of stocks that are actually below their 200 day moving averages and the increasing number where the 50 day moving average is approaching or dipping below the 200 day moving average.

In a bullish kind of market the pictures should be reversed.

That’s why you really don’t see or hear of too many people running around bragging about their performance.

Today the feel of the DJIA may be a little different as many are talking about how its volatility will increase now that APple has joined the index, as it is priced more than 3 times what AT&T had been. Since the index is price weighted and not market capitalization weighted, price matters. What’s been over-looked in that analysis is that a post-split Visa begins trading today and that has gone from about $268 to $68, so whatever volatility Apple may bring the split in Visa should be a tempering factor.

With 2 days now left in the week and no new trades, the likelihood is that any new positions opened will look at next week for their expirations. I would still prefer to get some uncovered positions to start generating some income and would be very happy with some assignments. Yesterday’s rally helped, but today doesn’t look as if tere will be any piling on.

Since the pre-futures trading is only moderately lower, anything can really happen once the bell rings. That’s certainly been the case for the past month, as the early trading has provided very little guidance with turnarounds happening for no reasons at all.

We’ll see whether any reason comes forward today and whether yesterday’s bulls come to the realization that their celebration may have been unwarranted.

Daily Market Update – March 18, 2015  (Close)

Well, at the very least we were to find out today what was in the FOMC’s mind, although even after the Chairman’s press conference we may still not have any greater sense of where our own sentiments are going to be on where the next set of worries is going to come from.

Other than the Employment Situation Report from a few weeks ago there really hasn’t been very much reason to believe that the economy is firing up. Job numbers have been growing, but wage growth hasn’t exactly been spectacular and there hasn’t been evidence that the job market is tightening, which is what begins an upward and inflationary spiral.

In fact, with the strength of the US Dollar at such highs, there’s every reason to believe that consumer prices will head lower, as imports become much more competitive. Of course, as gas prices still stay well beneath last year, although not part of the inflationary calculation, you can be certain that a data driven FOMC takes that into consideration, as well, as they may also be wondering why retail sales have fallen all during the period that gas prices have been going down.

Add to that the fact that the bond market seems to be betting in the opposite direction and you wonder where the fear has been coming from and what has been driving the market in March to act the way it did in January. Neither of those months were very good, as far as performance goes, but that’s much easier to accept when there appears to be a good reason.

Or any kind of reason.

Lately, there just hasn’t been any reason behind this large moves up and down. The fact they have taken on an alternating basis isn’t something that inspires lots of confidence when it comes to making any kind of decision to spend money. But it also doesn’t inspire confidence if you’re looking to sell stocks, either.

I’d still like to think that there’s some chance of making a purchase or two this week, but there would have to be something very compelling to do so before the FOMC report.

Nothing really compelling came before the FOMC’s release, but the 300 point turnaround to take markets higher was really an eye-opener.

What’s really amazing is that most people were looking for an interest rate hike as soon as June and what the FOMC said was that no rate hike would come until after the April meeting.

So I’m not sure where all of that unbridled joy came from, but I’ll happily be a recipient going forward.

With this out of the way, at least until the next bit of data gets someone afraid of inflation, a central story continues to be energy as those prices are again testing those lows form a few weeks ago, but this time around the market isn’t finding a way to capitalize on what would logically be considered as good news on a net basis.

Like the stock market, oil and precious metals also had signicant reversals today and headed higher after today’s FOMC, just as the 10 Year Treasury rates plummetd, but we’ll see what tomorrow will bring.

At this point of the week, as we were getting ready to approach the FOMC Statement release, at what is the mid-pont of the week’s trading, I would have just been very happy to have a repeat of Monday and have the chance to sell some more calls on currently uncovered positions. I think I would prefer that to putting any additional money at risk, as we await the end of the monthly option cycle just 2 days later.

At least today’s surge saw some paper gains and a rollover of a position that I didn‘t think would get a chance for a rollover this week, so there’s a little less to think about as this week now is getting ready to come to its end.

With always an eye on future weeks I wouldn’t mind being able to start populating some advance weeks with options, but would still really like to see the volatility climb higher.

While the past couple of weeks have been volatile on a daily basis, they haven’t been very volatile on an intra-daily basis and the latter is the kind that really helps to move volatility levels higher. So with all of this back and forth the net change in that volatility level hasn’t been very large, which makes it somewhat less advantageous to commit to longer term contracts.

This morning’s pre-open futures didn’t appear as if there was going to be too much opportunity to do much with regard to selling new option contracts before the FOMC Statement release, as that trading continued yesterday’s senseless negativity which followed Monday’s senseless positivity.

The turnaround after the release may have been just as senseless, but we may have better idea about that at this time tomorrow.

Today, hopefully the dulcet and somewhat monotonous tones from Janet Yellen will put some at enough ease to get us prepared for an April that will be more like February, in the realization that the best part of this economic expansion still awaits.

Daily Market Update – March 18, 2015  (8:45 AM)

Well, at the very least we’ll find out today what is in the FOMC’s mind, although even after the Chairman’s press conference we may not have any greater sense of where our own sentiments are going to be on where the next set of worries is going to come from.

Other than the Employment Situation Report from a few weeks ago there really hasn’t been very much reason to believe that the economy is firing up. Job numbers have been growing, but wage growth hasn’t exactly been spectaular and there hasn’t been evidence that the job market is tightening, which is what begins an upward and inflationary spiral.

In fact, with the strength of the US Dollar at such highs, there’s every reason to believe that consumer prices will head lower, as imports become much more competitive. Of course, as gas prices still stay well beneath last year, although not part of the inflationary calculation, you can be certain that a data driven FOMC takes that into consideration, as well, as they may also be wondering why retail sales have fallen all during the period that gas prices have been going down.

Add to that the fact that the bond market seems to be betting in the opposite direction and you wonder where the fear has been coming from and what has been driving the market in March to act the way it did in January. Neither of those months were very good, as far as performance goes, but that’s much easier to accept when there appears to be a good reason.

Or any kind of reason.

Lately, there just hasn’t been any reason behind this large moves up and down. The fact they have taken on an alternating basis isn’t something that inspires lots of confidence when it comes to making any kind of decision to spend money. But it also doesn’t inspire confidence if you’re looking to sell stocks, either.

I’d still like to think that there’s some chance of making a purchase or two this week, but there would have to be something very compelling to do so before the FOMC report.

A central story continues to be energy as those prices are again testing those lows form a few weeks ago, but this time around the market isn’t finding a way to capitalize on what would logically be considered as good news on a net basis.

At this point of the week, as we approach the FOMC Statement release, at what is the mid-pont of the week’s trading, I’d just be very happy to have a repeat of Monday and have the chance to sell some more calls on currently uncovered positions. I think I would prefer that to putting any additional money at risk, as we await the end of the monthly option cycle just 2 days later.

With always an eye on future weeks I wouldn’t mind being able to start populating some advance weeks with options, but would still really like to see the volatility climb higher.

While the past couple of weeks have been volatile on a daily basis, they haven’t been very volatile on an intra-daily basis and the latter is the kind that really helps to move volatility levels higher. So with all of this back and forth the net change in that volatility level hasn’t been very large, which makes it somewhat less advantageous to commit to longer term contracts.

This morning’s pre-open futures don’t appear as if there’s going to be too much opportunity to do much with regard to selling new option contracts before the FOMC Statement release, as that trading is continuing yesterday’s senseless negativity which followed Monday’s senseless positivity.

Today, hopefully the dulcet and somewhat monotonous tones from Janet Yellen will put some at enough ease to get us prepared for an April that will be more like February, in the realization that the best part of this economic expansion still awaits.

Daily Market Update – March 17, 2015  (Close)

Yesterday was really a surprise and a reminder that sometimes those surprises can be good.

Today was another surprise and a reminder that sometimes they’re not so good.

Lately, at least for the last 2 or 3 months the trading in the days right before the FOMC Statement release have been really cautious, whereas in the months prior it tended to be very strongly bullish.

Yesterday was a throwback to those longer ago days, probably reflecting some optimism that whatever will be the decision of the FOMC regarding how they signal their interest rate intentions, it will be more clear than is currently the case.

Today was a much more reasonable way to be trading ahead of a day of uncertainty, except that there shouldn’t be too much uncertainty about the meaning of whatever decision the FOMC will make.

Last week I believed that no matter the outcome of the FOMC Statement, whether the wording was changed or not, it would be a positive for equity markets. While that may or may not be true these alternating moves of sufficient magnitude may be good for volatility, but they’re not very good for markets.

When markets can consistently have such large moves and be entirely directionless that generally indicates lots of nervousness.

At the moment, given where we really are in an economic cycle, there’s not too much reason for that kind of nervousness. This most current cycle has been one of very measured growth and without any of the usual fires that accompany the thing that we’re usually rightfully afraid of.

That’s inflation. But right now, a little bit of inflation would likely be a good thing as it would represent continuing growth and prospects for profits.

The fact that the US Dollar is much stronger than anyone expected is a diversion and interest rates, even if headed higher are still bargains. Besides, in an age of multinational corporations, companies in the need of capital can now easily turn to overseas markets where the rates are heading lower as our may be teetering higher.

This morning the market was looking to return to that more recent form of normal before tomorrow’s FOMC Statement release and looked like it would  be giving back some of yesterday’s gains.

That appearance never changed, as there was never really any attempt to beat back the bears today.

I was happy to have had some opportunity to create some income from the sale of options on uncovered positions yesterday, but will still likely continue to hold some resistance toward spending down any of the available cash, as I would like to see some more assurance of some assignments at the end of this week that could replenish anything spent.

Since yesterday was really a surprise and was another in a string of days that didn’t really follow the pre-opening futures, it was still anyone’s guess how today would have progressed, so I wasn’t entirely closed to the idea of any new purchases. However, despite the broad price declines there was nothing appealing enough to  spend any of the pile down.

Interestingly, housing starts were just reported and they were down this month, likely due to weather, but that’s still another piece of data just in time for today’s FOMC meeting and can be part of the equation as to whether the economy is heating up sufficiently to warrant some gentle braking.

My guess is that we’re going to see another market rally sometime after Janet Yellen gives her press conference and I don’t mind sitting it out with new purchases in mind, as long as there continues to be some opportunity to sell new call positions, get those rollovers as the monthly cycle ends this Friday or see some assignments.

Sometimes passively awaiting is the only way to go when you seem to have a fifty – fifty proposition awaiting you.

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

Yesterday was really a surprise and a reminder that sometimes those surprises can be good.

Lately, at least for the last 2 or 3 months the trading in the days right before the FOMC Statement release have been really cautious, whereas in the months prior it tended to be very strongly bullish.

Yesterday was a throwback to those longer ago days, probably reflecting some optimism that whatever will be the decision of the FOMC regarding how they signal their interest rate intentions, it will be more clear than is currently the case.

Last week I believed that no matter the outcome of the FOMC Statement, whether the wording was changed or not, it would be a positive for equity markets. While that may or may not be true these alternating moves of sufficient magnitude may be good for volatility, but they’re not very good for markets.

When markets can consistently have such large moves and be entirely directionless that generally indicates lots of nervousness.

At the moment, given where we really are in an economic cycle, there’s not too much reason for that kind of nervousness. This most current cycle has been one of very measured growth and without any of the usual fires that accompany the thing that we’re usually rightfully afraid of.

That’s inflation. But right now, a little bit of inflation would likely be a good thing as it would represent continuing growth and prospects for profits.

The fact that the US Dollar is much stronger than anyone expected is a diversion and interest rates, even if headed higher are still bargains. Besides, in an age of multinational corporations, companies in the need of capital can now easily turn to overseas markets where the rates are heading lower as our may be teetering higher.

This morning the market is looking to return to that more recent form of normal before tomorrow’s FOMC Statement release and may be giving back some of yesterday’s gains.

I was happy to have had some opportunity to create some income from the sale of options on uncovered positions, but will still likely continue to hold some resistance toward spending down any of the available cash, as I would like to see some more assurance of some assignments at the end of this week that could replenish anything spent.

Since yesterday was really a surprise and was another in a string of days that didn’t really follow the pre-opening futures, it may be anyone’s guess how today will progress, so I won’t entirely close the door on any new purchases.

Interestingly, housing starts were just reported and they were down this month, likely due to weather, but that’s still another piece of data just in time for today’s FOMC meeting and can be part of the equation as to whether the economy is heating up sufficiently to warrant some gentle braking.

My guess is that we’re going to see another market rally and I don’t mind sitting it out with new purchases in mind, as long as there continues to be some opportunity to sell new call positions, get those rollovers as the monthly cycle ends this Friday or see some assignments.

Sometimes passively awaiting is the only way to go when you seem to have a fifty – fifty proposition awaiting you.

Daily Market Update – March 16, 2015 ()

Last week was another one wasted in worries over interest rates.

This week the worries may come to an end as the FOMC Statement is released on Wednesday and we’ll learn whether the word “patience” will continue to be used in offering some kind of a timeframe for the start of interest rate increases.

While everything was upended with the most recent Employment Situation Report, I still have to think that the recent words of Janet Yellen may carry more weight that the data from a single month of collection, particularly as that data is frequently adjusted in subsequent months,

While the stock market was getting bogged down with concerns about interest rate increases, which history has shown actually sends markets higher during the early stages of increase, the bond market was actually sending rates lower.

That has to add to some of the confusion as you would have to wonder on what basis they could believe that was the appropriate direction.

Very possibly, however, that’s the right decision regardless of what the FOMC does, as whether “patience” remains or not, it should provide either some comfort or clarity.

The real question may be what, if anything, further Janet Yellen may say during her press conference following the release of the FOMC Statement..

This morning, to start the week the pre-open futures were pointing moderately higher, but if the past two weeks have shown anything at all, it’s that these kind of pre-opening moves, whether mildly or moderately higher and in either direction, have no predictive value for the rest of the trading day.

That was definitely again the case today.

There’s been lots of volatility over the past couple of weeks and some of the trading has opened bearing no resemblance at all to what preceded it in the pre-opening trades.

With a little bit of money spared up from assignments last week there’s some opportunity to add some new positions. However, with a number of positions set to expire this week as the monthly contract comes to an end, the concern is that the last 2 weeks have moved them further and further from assignment or rollover.

Ordinarily I wouldn’t want to add more expiring positions to an already lengthy list, but insofar as there’s a need to try and re-generate funds through assignments for subsequent weeks, there may be reason to go against initial instincts.

Other than this week’s FOMC Statement, there isn’t very much else expected to be able to rock markets, but energy and interest rates still remain volatile, as so precious metals and currencies. Any of those, especially if facing another strong leg downward could put trickle down pressure on stocks, as well.

For a number of months in the recent past the Tuesday before the FOMC Statement release had been unexpectedly positive, as usually the market had been reserved in anticipation of the unknown, but had for a time become optimistic that the dovish position would prevail.

For the past two months that reservation has returned, so I expected the week to be fairly sedate until Wednesday, as right now there’s neither reason to be optimistic nor pessimistic about the dove’s ability to withstand pressure. Still, the market thought otherwise and it traded higher all day, never really looking back.

Why? Who knows.

I expected to be watchful as the morning was set to begin and as always, was hopeful, that there would come some opportunity to make sales of calls on uncovered positions, even though those have been scant of late.

At least that hope become true as there was no reason to chase stocks today, but plenty of reason to capitalize on whatever could be capitalized upon.

Any more of that surprise that may be offered by the FOMC giving a further green light to party on would be just fine by me, even if I end up spending nothing to be part of the party..

Daily Market Update – March 16, 2015 (8:15 AM)

Last week was another one wasted in worries over interest rates.

This week the worries may come to an end as the FOMC Statement is released on Wednesday and we’ll learn whether the word “patience” will continue to be used in offering some kind of a timeframe for the start of interest rate increases.

While everything was upended with the most recent Employment Situation Report, I still have to think that the recent words of Janet Yellen may carry more weight that the data from a single month of collection, particularly as that data is frequently adjusted in subsequent months,

While the stock market was getting bogged down with concerns about interest rate increases, which history has shown actually sends markets higher during the early stages of increase, the bond market was actually sending rates lower.

That has to add to some of the confusion as you would have to wonder on what basis they could believe that was the appropriate direction.

Very possibly, however, that’s the right decision regardless of what the FOMC does, as whether “patience” remains or not, it should provide either some comfort or clarity.

The real question may be what, if anything, further Janet Yellen may say during her press conference following the release of the FOMC Statement..

This morning, to start the week the pre-open futures are pointing moderately higher, but if the past two weeks have shown anything at all, it’s that these kind of pre-opening moves, whether mildly or moderately higher and in either direction, have no predictive value for the rest of the trading day.

There’s been lots of volatility over the past couple of weeks and some of the trading has opened bearing no resemblance at all to what preceded it in the pre-opening trades.

With a little bit of money spared up from assignments last week there’s some opportunity to add some new positions. However, with a number of positions set to expire this week as the monthly contract comes to an end, the concern is that the last 2 weeks have moved them further and further from assignment or rollover.

Ordinarily I wouldn‘t want to add more expiring positions to an already lengthy list, but insofar as there’s a need to try and re-generate funds through assignments for subsequent weeks, there may be reason to go against initial instincts.

Other than this week’s FOMC Statement, there isn’t very much else expected to be able to rock markets, but energy and interest rates still remain volatile, as so precious metals and currencies. Any of those, especially if facing another strong leg downward could put trickle down pressure on stocks, as well.

For a number of months in the recent past the Tuesday before the FOMC Statement release had been unexpectedly positive, as usually the market had been reserved in anticipation of the unknown, but had for a time become optimistic that the dovish position would prevail.

For the past two months that reservation has returned, so I expect the week to be fairly sedate until Wednesday, as right now there’s neither reason to be optimistic nor pessimistic about the dove’s ability to withstand pressure.

I expect to be watchful this morning and as always, hopeful, that there comes some opportunity to make sales of calls on uncovered positions, even though those have been scant of late.

However, all it may take is a pleasant surprise from the FOMC giving the green light to party on.

Daily Market Update – March 13, 2015 (8:45 AM)

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

The following trade outcomes are possible today:

Assignments:  SNDK, UAL

Rollovers:  BAC

Expirations:   CHK, GDX, HAL, KO

The following were ex-dividend this week:  NEM (3/10 $0.02), KO (3/12 $0.33), GME (3/13 $0.36)

The following will be ex-dividend next week: LVS (3/19 $0.65)

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

Note:   Just a word about the rollover trade in GameStop late yesterday afternoon.

Shares go ex-dividend tomorrow for $0.36 and the option contract had a week to run. Further, the company reports earnings during the first week of the April 2015 cycle.

With shares trading about $0.44 above the threshold price for early assignment, the fact that a week still remained and that there could be some speculative trading in the days before earnings on March 26th, there was a chance the the $39 strikes wouldn’t be assigned early.

However, I wanted to do something to at least be able to get part of that dividend, especially since the position was more than 3 months old and I felt like I “deserved” the dividend.

The way to do that was by rolling shares over from $39 to $39.50 and using the same expiration date. Doing so incurred an ND of $0.27 in exchange for an additional $0.50 in the strike, which yields a net $0.23.

That’s the case if the shares are assigned early tonight.

With shares closing at $39.79 the chances of the March 20 $39.50 strikes being assigned early is very small, but there still remains a fair chance that the $39 strikes will face early assignment.

If neither the $39 nor $39.50 options are exercised early you also get to keep the dividend.

However, if you were able to roll over to the $39.50, then, based on the trading of shares subsequently, you can make the decision to rollover again, but this time, maybe even back down to $39 in order to get some additional premium to offset the reduction in strike price, in order that there is a better chance of getting out of the position prior to earnings.

Daily Market Update – March 12, 2015 (Close)

With another loss, albeit a small one yesterday, after having spent most of the session in the green, the market was about 3.7%.lower to start the day.

That’s the level of the declines seen in January 2015, when there were actually 3 such declines in succession during the course of that month. That period really stood out in contrast to the preceding 30 months or so that had been progressing in a very regular fashion, having declines every 2 months.

That was reason to take notice.

As the pilot episode of a basic cable show had one of its stars say “you don’t just break bad.”

But in looking back there really was a black and white difference between the market’s behavior from the end of 2014 to the beginning of 2015. It wasn’t just the difference between closing 2014 at a record high and then tradiung below those highs to start 2015, it was the quality of the trading. Not only increased volatility, since we hqad seen that a few times earlier in 2014, but the rapid stacatto behavior of the markets.

Not just the stock markets, but just about everything else surrounding it that can have direct and indirect impacts. While markets in such commodities as corn, lumber and cocoa may be interesting, they’re not the kind that have much impact on stock markets. On the other hand, government bonds, currencies, precious metals and oil markets do and they have been equally wild of late.

It’s hard, though, to explain the behavior. Although the simple thing is to point fingers at the dislocation in the oil markets, the dislocation isn’t that clear.

What is surprising is to hear so many well regarded analysts talk about being caught off guard by the trickle down effects of events, as if the impacts of a stronger US Dollar had never been studied before. Almost any middle school aged child could tell you that in an economy that runs a trade deficit that deficit is likely to increase as our goods become more expensive and competing goods get less expensive and begin coming into the country in greater numbers.

So you might think that someone along the line would have already used some logic, the kind that had proven itself correct in the past, to surmise that lower prices for goods in Europe and fewer exports of goods to Europe, would have an adverse impact on the earnings of companies that have business in Europe.

But as with so many things in economics, that’s just part of a well defined cycle, that you would have thought would have taken no one by surprise, especially the people that control the great majority of the stock market’s trading volume.

Since most stocks of any consequence are majority owned by institutions the moves you see on a daily basis, including the ones that feel so irrational, are all institutionally inspired.

This morning’s mild gain in the pre-open futures didn’t bring too much in the way of comfort and as always was the kind that could end up being meaningless as the day began to trade for real. At that moment in the morning that I was looking at the early numbers, I recalled that in the past 2 weeks there was no justification in counting chickens before they were hatched. Despite that there was still the possibility of some assignments this week and maybe even a rollover or two.

What no one had counted on, and there’s absolutely no reason for the market’s behavior today, but it simply went up 250 points as easily as it went down 300 points earlier in the week.

So that means that the assignments and rollovers are still in contention, at least, but there’s still tomorrow to contend with. Those would be nice if they could end up happening that way, but there’s still a lot of dust that has to settle as 2015 has thus far had 3 months of trading with extremely different characters that turned on and off on a dime and without much connection to real news.

Next week we get what may be a very consequential FOMC Statement release and a Chairman’s press conference where we may possibly be able to put some of the irrational fears of a small interest rate increase behind us and finally move on.

Note:   Just a word about the rollover trade in GameStop late in the afternoon.

Shares go ex-dividend tomorrow for $0.36 and the option contract had a week to run. Further, the company reports earnings during the first week of the April 2015 cycle.

With shares trading about $0.44 above the threshold price for early assignment, the fact that a week still remained and that there could be some speculative trading in the days before earnings on March 26th, there was a chance the the $39 strikes wouldn’t be assigned early.

However, I wanted to do something to at least be able to get part of that dividend, especially since the position was more than 3 months old and I felt like I “deserved” the dividend.

The way to do that was by rolling shares over from $39 to $39.50 and using the same expiration date. Doing so incurred an ND of $0.27 in exchange for an additional $0.50 in the strike, which yields a net $0.23.

That’s the case if the shares are assigned early tonight.

With shares closing at $39.79 the chances of the March 20 $39.50 strikes being assigned early is very small, but there still remains a fair chance that the $39 strikes will face early assignment.

If neither the $39 nor $39.50 options are exercised early you also get to keep the dividend.

However, if you were able to roll over to the $39.50, then, based on the trading of shares subsequently, you can make the decision to rollover again, but this time, maybe even back down to $39 in order to get some additional premium to offset the reduction in strike price, in order that there is a better chance of getting out of the position prior to earnings.

Daily Market Update – March 12, 2015 (8:30 AM)

With another loss, albeit a small one yesterday, after having spent most of the session in the green, the market is now now about 3.7%.

That’s the level of the declines seen in January 2015, when there were actually 3 such declines in succession during the course of that month. That period really stood out in contrast to the preceding 30 months or so that had been progressing in a very regular fashion, having declines every 2 months.

That was reason to take notice.

As the pilot episode of a basic cable show had one of its stars say “you don’t just break bad.”

But in looking back there really was a black and white difference between the market’s behavior from the end of 2014 to the beginning of 2015. It wasn’t just the difference between closing 2014 at a record high and then tradiung below those highs to start 2015, it was the quality of the trading. Not only increased volatility, since we hqad seen that a few times earlier in 2014, but the rapid stacatto behavior of the markets.

Not just the stock markets, but just about everything else surrounding it that can have direct and indirect impacts. While markets in such commodities as corn, lumber and cocoa may be interesting, they’re not the kind that have much impact on stock markets. On the other hand, government bonds, currencies, precious metals and oil markets do and they have been equally wild of late.

It’s hard, though, to explain the behavior. Although the simple thing is to point fingers at the dislocation in the oil markets, the dislocation isn’t that clear.

What is surprising is to hear so many well regarded analysts talk about being caught off guard by the trickle down effects of events, as if the impacts of a stronger US Dollar had never been studied before. Almost any middle school aged child could tell you that in an economy that runs a trade deficit that deficit is likely to increase as our goods become more expensive and competing goods get less expensive and begin coming into the country in greater numbers.

So you might think that someone along the line would have already used some logic, the kind that had proven itself correct in the past, to surmise that lower prices for goods in Europe and fewer exports of goods to Europe, would have an adverse impact on the earnings of companies that have business in Europe.

But as with so many things in economics, that’s just part of a well defined cycle, that you would have thought would have taken no one by surprise, especially the people that control the great majority of the stock market’s trading volume.

Since most stocks of any consequence are majority owned by institutions the moves you see on a daily basis, including the ones that feel so irrational, are all institutionally inspired.

This morning’s mild gain in the pre-open futures doesn’t bring too much in the way of comfort and could end up being meaningless as the day begins to trade for real. At the moment, recalling that in the past 2 weeks there was no justification in counting chickens before they were hatched, there is still the possibility of some assignments this week and maybe even a rollover or two.

Those would be nice if they could end up happening that way, but there’s still a lot of dust that has to settle as 2015 has thus far had 3 months of trading with extremely different characters that turned on and off on a dime and without much connection to real news.

Next week we get what may be a very consequential FOMC Statement release and a Chairman’s press conference where we may possibly be able to put some of the irrational fears of a small interest rate increase behind us and finally move on.

Daily Market Update – March 11, 2015 (Close)

After yesterday’s 300 point loss, following a nearly similar loss last Friday which was only half recovered to open the week, this morning’s small gains in the pre-open futures trading were no where close to recovering what’s been lost.

It still astonishes me that people can keep a straight face and talk about how it’s the realization that currency exchange rates are now serious challenges to corporate earnings, that was responsible for yesterday’s decline.’

The S&P 500 was now about 3.5% below its high from less than 2 weeks ago, as the morning was set to begin. However, the rise to that high occurred over a 4 week period. For the 6 weeks preceding that rise the market had been toying with 3-5% drops every 2 weeks. For the 2 1’2 years before that it was more like every 2 months that some sort of sell-off got our attention.

I’m not of the belief that there’s reason to believe that this time we’ll finally see the 10% kind of decline that everyone agrees is long overdue. While you can’t deny that it’s long overdue, it’s hard to point at any surprises that would be responsible for taking us there. However, based on yesterday’s market, apparently surprises aren’t a necessary component in the mix.

While so many, including myself wouldn’t have been surprised by a “dead cat bounce” today, it’s probably better that one didn’t occur. You saw what happened on Monday when we got one in response to Friday’s decline.

I’d rather see digestion of large moves, whether gains or losses. Today turned out to be a day for digesting.

While all of this is going on with stocks the volatility in other markets is also striking. Precious metals, interest rates, currencies and oil continue to move in big ways and all of those have direct and indirect influences on US equity markets, as well.

Is all of what’s going on, including the initiation of European Quantitative Easing now constituting a “Perfect Storm” that conspires against stocks?

I don’t think so, but it is making things unnecessarily challenging right now.

With a couple of new purchases for the week and little indication of anything positive to come for the rest of the week, my guess is that I won’t be adding any new positions and instead will be focusing on trying to get rollovers or maybe get lucky and get an assignment, or two to end out the week.

It’s always tempting, however, to want to buy something after the kind of price drops that we’ve seen in the past few days. The problem is that as we begin to approach the next earnings season, which begins in just 4 weeks, we may start getting earnings warnings from companies before their official reports, that reflect the currency exchange rates of late.

It’s hard to want to get in front of that kind of news. At the very least you would want to see some kind of evidence that there’s some stability ahead sooner rather than later.

With only a paltry advance in the pre-open futures, that wasn’t not the kind of advance that I’d be looking for to signal some kind of stability, although when it was all other it did turn out that way, even though the direction at the end of the day was reverse that of the futures, but at least the magnitude was predictive.

At this point, you have to believe that there may be another 1.5-2% left in the current decline, so I might rather be content to be wrong about that while I’m on the sidelines watching existing positions recover.

Daily Market Update – March 11, 2015 (9:00 AM)

After yesterday’s 300 point loss, following a nearly similar loss last Friday which was only half recovered to open the week, this morning’s small gains in the pre-open futures trading is no where close to recovering what’s been lost.

It still astonishes me that people can keep a straight face and talk about how it’s the realization that currency exchange rates are now serious challenges to corporate earnings, that was responsible for yesterday’s decline.’

The S&P 500 is now about 3.5% below its high from less than 2 weeks ago, but the rise to that high occurred over a 4 week period. For the 6 weeks preceding that rise the market had been toying with 3-5% drops every 2 weeks. For the 2 1’2 years before that it was more like every 2 months that some sort of sell-off got our attention.

I’m not of the belief that there’s reason to believe that this time we’ll finally see the 10% kind of decline that everyone agrees is long overdue. While you can’t deny that it’s long overdue, it’s hard to point at any surprises that would be responsible for taking us there. However, based on yesterday’s market, apparently surprises aren’t a necessary component in the mix.

While all of this is going on with stocks the volatility in other markets is also striking. Precious metals, interest rates, currencies and oil continue to move in big ways and all of those have direct and indirect influences on US equity markets, as well.

Is all of what’s going on, including the initiation of European Quantitative Easing now constituting a “Perfect Storm” that conspires against stocks?

I don’t think so, but it is making things unnecessarily challenging right now.

With a couple of new purchases for the week and little indication of anything positive to come for the rest of the week, my guess is that I won’t be adding any new positions and instead will be focusing on trying to get rollovers or maybe get lucky and get an assignment, or two to end out the week.

It’s always tempting, however, to want to buy something after the kind of price drops that we’ve seen in the past few days. The problem is that as we begin to approach the next earnings season, which begins in just 4 weeks, we may start getting earnings warnings from companies before their official reports, that reflect the currency exchange rates of late.

It’s hard to want to get in front of that kind of news. At the very least you would want to see some kind of evidence that there’s some stability ahead sooner rather than later.

With only a paltry advance in the pre-open futures, that’s not the kind of advance that I’d be looking for to signal some kind of stability. At this point, you have to believe that there may be another 1.5-2% left in the current decline, so I might rather be content to be wrong about that while I’m on the sidelines watching existing positions recover.