Category Archives: Daily Market Update

Daily Market Update – October 27, 2014 (Close)

There is very little scheduled news this week and not too much anticipated on the unscheduled side, unless the New York City Ebola patient suffers a downturn.

Otherwise the world is pretty quiet as this week starts. Even the Brazilian market’s meltdown in the morning’s future’s trading, dropping about 8% on news of the incumbent winning the presidential election seemingly barely got a notice by the US markets. When trading closed for the day you never would have known that the US cared about anything in Brazil, at all.

The only real story this week and it may be more important than usual, will be Wednesday’s release of the FOMC Statement.

Any alteration in the wording that we’ve become accustomed to that might support Federal Reserve Governor James Bullard’s belief that the Federal Reserve should delay exiting Quantitative Easing will have some kind of an impact

Although it could be coincidental it appears that the market’s sudden bounce higher from its 9% decline was triggered by Bullard’s comments. What’s never known is when those who are typically non-dissenting FOMC voting Governors say something whether it’s their opinion or reflective of what be the majority opinion.

But even if that’s not known the second unknown is how the market would react to news that the FOMC didn’t believe that the economy could withstand a complete exit by the Federal Reserve.

When Bullard made his comments the market embraced the idea and ran with it, but if it becomes reality it could easily be otherwise, as just another example of how the market reacts to rumors and to news. Once that specific reality hits the likely question would become “Seriously, the economy is that bad?” and that kind of forward looking doubt leads to selling.

After two weeks of not having made a single new purchase I was beyond anxious to do something but don’t have the confidence that there will be much reason to stick any necks out until Wednesday or Thursday.

Although there was finally an opportunity to execute a new purchase today, I expect and hope, that the Intel shares, which go ex-dividend next week, get assigned early. At this point I would trade off the dividend for the two weeks worth of premium and the ability to redeploy that cash.

Lately, however, even what may have looked like relatively sure things have been anything but.

For now I’d be content to see a repeat of the past week, even though there were very few trades to show for it and even while watching volatility drop and taking premiums along with it. At least there was some recovery of share prices. Of course, that’s only true if they were something other than energy and metals shares.

Sooner or later those have to jump out of their correction mode.

Today’s drop in energy was the result of a call by a Goldman Sachs analyst for $70 oil. That came from the same analyst who last called for $150 oil.

Never mind.

But other than the call about 9 months ago for falling precious metal prices, Goldman Sachs, as great as it is at everything else, has had a really rough past 10 years when it comes to predicting commodity price trends.

I think today’s call for $70 oil may be a sign of having reached or being very near the bottom.

For the time leading up to Wednesday’s FOMC Statement release there will be plenty of more earnings reports being released, including the always exciting Facebook and Twitter, but the companies that have the greatest likelihood of being able to move whole markets have already reported.

This morning the US futures market was just very mildly lower which lead you to believe that the drop in Brazil is considered to likely be a blip and to have limited consequence. Of course, the slightest suggestion by the incumbent that recognizes the need for some economic reforms would do wonders for their market, but there is precedent for victors believing that they have a mandate even when barely crossing the 50% support vote.

But we still probably don’t care very much, regardless of what direction Brazil takes, especially as their oil reserves and output mean less and less for the United States.

So today was likely to be another day to sit back and see where events would take us in what should have been a quiet day and did turn out to be a quiet day.

Whether tomorrow will do as expected, and also remain quiet is another question as those have been very rare in the past month as triple digit move days have become the new norm for now. Two such days in a row may be asking for too much.

Daily Market Update – October 27, 2014 (8:30 AM)

There is very little scheduled news this week and not too much anticipated on the unscheduled side, unless the New York City Ebola patient suffers a downturn.

Otherwise the world is pretty quiet as this week starts. Even the Brazilian market’s meltdown in the morning’s future’s trading, dropping about 8% on news of the incumbent winning the presidential election is seemingly barely getting a notice by the US markets.

The only real story this week and it may be more important than usual, will be Wednesday’s release of the FOMC Statement.

Any alteration in the wording that we’ve become accustomed to that might support Federal Reserve Governor James Bullard’s belief that the Federal Reserve should delay exiting Quantitative Easing will have some kind of an impact

Although it could be coincidental it appears that the market’s sudden bounce higher from its 9% decline was triggered by Bullard’s comments. What’s never known is when those who are typically non-dissenting FOMC voting Governors say something whether it’s their opinion or reflective of what be the majority opinion.

But even if that’s not known the second unknown is how the market would react to news that the FOMC didn’t believe that the economy could withstand a complete exit by the Federal Reserve.

When Bullard made his comments the market embraced the idea and ran with it, but if it becomes reality it could easily be otherwise, as just another example of how the market reacts to rumors and to news. Once that specific reality hits the likely question would become “Seriously, the economy is that bad?” and that kind of forward looking doubt leads to selling.

After two weeks of not having made a single new purchase I’m beyond anxious to do something but don’t have the confidence that there will be much reason to stick any necks out until Wednesday or Thursday.

I’d be content to see a repeat of the past week, even though there were very few trades to show for it and even while watching volatility drop and taking premiums along with it. At least there was some recovery of share prices.

For the time leading up to Wednesday’s FOMC Statement release there will be plenty of more earnings reports being released, including the always exciting Facebook and Twitter, but the companies that have the greatest likelihood of being able to move whole markets have already reported.

This morning the US futures market is just very mildly lower which leads you to believe that the drop in Brazil is considered to likely be a blip and to have limited consequence. Of course, the slightest suggestion by the incumbent that recognizes the need for some economic reforms would do wonders for their market, but there is precedent for victors believing that they have a mandate even when barely crossing the 50% support vote.

But we still probably don’t care very much, regardless of what direction Brazil takes, especially as their oil reserves and output mean less and less for the United States.

So today is likely to be another day to sit back and see where events take us in what should be a quiet day.

Whether it will be so is another question as those have been very rare in the past month as triple digit move days have become the new norm for now.

Daily Market Update – October 24, 2014 (8:30 AM)

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

The following outcomes are possible today:

Assignments:  none

Rollovers:  CHK

Expirations:  ANF, EBAY, GDX, JOY, LVS

In general, DOH Trades are preferred to expire, with the least preferable outcome being assignment. This past week had 3 DOH Trades and 2 early in the week rollovers, all trades that were made as volatility was somewhat higher than during the latter half of the week.

The past week’s ex-dividend positions were Fastenal (10/22 $0.25) and Blackstone (10/23 $0.44)

There are no ex-dividend positions next week.

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

Daily Market Update – October 23, 2014 (Close)

Since we always look for answers to everything, it’s most likely that the events in Canada influenced the market’s unexpected downturn yesterday, but it’s also not likely that was the case.

While it was unusually slow in being reported and events developed slowly, the market really didn’t have too much of a reaction until early in the afternoon.That reaction may have also been influenced by the continuing slide in oil prices.

This morning the futures are acting as if yesterday was an aberration.

On the other hand it may be possible that once again earnings are taking center stage as a number of good earnings were reported this morning, with the industrial side of things continuing to look good.

One of those companies reporting this morning, Caterpillar, may be a little like the kind of market leader that IBM used to be. These days when Caterpillar does well, it’s also taken as an indicator that China is doing well and increasingly China is where so much of our focus needs to be.

Those earnings, as well as for 3M, are as good of a reason as you can find to explain why today offset all of yesterday’s loss and then some, bringing this week, so far to a 3.4% gain.

Yesterday was a disappointing one as I was hoping for some chance to sell covered calls in a rising price environment. .

That didn’t happen, but with today’s early indication, perhaps today could have been that kind of day, although the volatility that had continued to fall as the market shoots higher served to make it less appealing to either take DOH related risks or less appealing to look at extended weekly trades.

Today wasn’t much better, at least in that regard.

The morning began with the S&P 500 about 4% below it’s September highs and while it was nice seeing the early morning indication higher, it did remove some of the inclination that I found myself with as yesterday’s market was coming to a close. I now felt less inclined to add positions as the increase just added another layer of uncertainty.

While the net result of the week thus far has been decidedly positive, the ease of the reversal lower, as seen yesterday is a reminder that the climb back from 9% lower may have some unsteadiness in it.

Although I certainly don’t mind watching net asset value increase as the market moves higher it’s really not the same if you’re not deriving some real and tangible benefit from the market’s actions.

So far this week there have been scant few trades and so there has been scant little income derived. While I would love to see that change during the remainder of the week, I just don’t know if that will be the case and with little to no assignments for the week the coming week may be one that continues the recent trend of little to no activity, especially on the new position purchase end of things.

That puts more reliance on the ability to rollover and sell new option positions.

Sooner or later we’ll get some more clear idea of what is really going on right now.

Are we climbing back from a 9% correction or is this just a trap?

Other than in hindsight there is just no way to know. Other than looking at data points from the past that strongly suggest that very large moves higher are illusory, there’s little to give an indication of what days like today mean. Certainly the previous 200 and 300 point gains over the past few weeks haven’t had the kind of short term impact that we would have expected or liked.

But maybe today was different? Tomorrow may give some clue to that question.

.

Daily Market Update – October 23, 2014 (9:15 AM)

Since we always look for answers to everything, it’s most likely that the events in Canada influenced the market’s unexpected downturn yesterday, but it’s also not likely that was the case.

While it was unusually slow in being reported and events developed slowly, the market really didn’t have too much of a reaction until early in the afternoon.That reaction may have also been influenced by the continuing slide in oil prices.

This morning the futures are acting as if yesterday was an aberration.

On the other hand it may be possible that once again earnings are taking center stage as a number of good earnings were reported this morning, with the industrial side of things continuing to look good.

One of those companies reporting this morning, Caterpillar, may be a little like the kind of market leader that IBM used to be. These days when Caterpillar does well, it’s also taken as an indicator that China is doing well and increasingly China is where so much of our focus needs to be.

Yesterday was a disappointing one as I was hoping for some chance to sell covered calls in a rising price environment.

That didn’t happen, but with today’s early indication, perhaps today will be the day, although the volatility continues to fall as the market shoots higher and makes it less appealing to either take DOH related risks or less appealing to look at extended weekly trades.

The morning begins with the S&P 500 about 4% below it’s September highs and while it’s nice seeing the early morning indication higher, it does remove some of the inclination that I found myself with as yesterday’s market was coming to a close. I now feel less inclined to add positions as the increase just adds another layer of uncertainty.

While the net result of the week thus far has been decidedly positive, the ease of the reversal lower, as seen yesterday is a reminder that the climb back from 9% lower may have some unsteadiness in it.

Although I certainly don’t mind watching net asset value increase as the market moves higher it’s really not the same if you’re not deriving some real and tangible benefit from the market’s actions.

So far this week there have been scant few trades and so there has been scant little income derived. While I would love to see that change during the remainder of the week, I just don’t know if that will be the case and with little to no assignments for the week the coming week may be one that continues the recent trend of little to no activity, especially on the new position purchase end of things.

That puts more reliance on the ability to rollover and sell new option positions.

Sooner or later we’ll get some more clear idea of what is really going on right now.

Are we climbing back from a 9% correction or is this just a trap?

Other than in hindsight there is just no way to know. Other than looking at data points from the past that strongly suggest that very large moves higher are illusory, there’s little to give an indication of what days like today mean. Certainly the previous 200 and 300 point gains over the past few weeks haven’t had the kind of short term impact that we would have expected or liked.

But maybe today will be different?

.

Daily Market Update – October 22, 2014 (Close)

Earnings continue this week and next and with the exception of some high profile names in the DJIA, thus far earnings have been reasonably good.

They have also likely been the reason for the market reversing its downtrend, although the very factors that may have sent the market lower may now be the ones sending it higher as they all have taken a break.

Ebola, ISIS, dropping energy prices, you name it. There’s really nothing going on right now and that allows for attention to be placed to where it rightfully belongs.

In an ideal world all we would really need to focus upon would be fundamentals and prospects for growth. We wouldn’t have to have our attentions diverted by so many extraneous factors, especially the ones that cause us to worry or panic.

This morning the futures were indicating a calm opening, although that was the situation yesterday as well, but yesterday and on Monday, there was undue influence from earnings related declines in some big names that obscured the building strength in the rest of the market.

This morning there was none of that fog from bad numbers to confuse the situation and the S&P 500 and the DJIA may actually perform in line with one another, as opposed to the DJIA lagging by about 0.8% over the past two days.

A little bit of stability would have been a nice thing right about now. While the market had reached a low point of about a 9% decline from its September peak, it is still about 4% below that level. Committing funds to new positions is rarely a good idea when markets are heading straight in one direction or another, nor is it really a good idea when they wildly alternate between drops and climbs.

Over the past month, however, there haven’t been many alternatives. What we haven’t seen are many days of little to no movement.

And today was no different.

It was a triple digit loss, closer to 200 points than to 100 points, because the calm was broken in Canada and possibly because the briefly seen stability in oil prices was disrupted.

Normally that would have meant oil prices went higher, but these days it means that they are going lower.

With yesterday’s move higher, I was content seeing asset appreciation on paper but would have been much happier if able to convert some of those moves higher into opportunities to sell calls. What you may have noticed, though, is that the sharp climb higher yesterday and the stealth climb on Monday that was otherwise obscured by IBM, saw large drops in volatility and along with it, drops in premiums.

That drop in premium has made the DOH trades that I was hoping to execute look less appealing from a risk – reward perspective.

That may change tomorrow as volatility recaptured some of what was lost earlier in the week, as suddenly even volatility has volatility.

This morning I didn’t expect to be buying anything and this now may end up being the second consecutive week of refraining from adding any new positions. I could get used to that as long as there is some other source of recurring income, so that would require some consistency in rollovers  or sales of new covered positions. Ideally, both of those would be occurring, but so far this week has been slow in the latter, although there were already some early rollovers that took advantage of some price moves higher while still being out of the money.

As the afternoon wore on, however, I found myself beginning to get ready to possibly add some new positions, but given the uncertainty regarding today’s terrible events in Canada, it might be a good idea to wait until there is some clarity.

With a number of DOH Trades set to expire this week that means a need to roll them over in the event that assignment seems likely. Ideally, DOH trades are allowed to expire, unless the volatility is still very high, in which case the cost of the transaction could be easily offset by the transaction. With those DOH trades and the objective of not seeing them get assigned, I don’t anticipate too many assignments, if any, this week.

Otherwise, today, at the mid-week point, it looked like a day for watching for any selective opportunities on an individual basis.

Of course, those really didn’t come along, so that wait is delayed until tomorrow.

Daily Market Update – October 22, 2014 (9:00 AM)

Earnings continue this week and next and with the exception of some high profile names in the DJIA, thus far earnings have been reasonably good.

They have also likely been the reason for the market reversing its downtrend, although the very factors that may have sent the market lower may now be the ones sending it higher as they all have taken a break.

Ebola, ISIS, dropping energy prices, you name it. There’s really nothing going on right now and that allows for attention to be placed to where it rightfully belongs.

In an ideal world all we would really need to focus upon would be fundamentals and prospects for growth. We wouldn’t have to have our attentions diverted by so many extraneous factors, especially the ones that cause us to worry or panic.

This morning the futures are indicating a calm opening, although that was the situation yesterday as well, but yesterday and on Monday, there was undue influence from earnings related declines in some big names that obscured the building strength in the rest of the market.

This morning there’s none of that fog from bad numbers to confuse the situation and the S&P 500 and the DJIA may actually perform in line with one another, as opposed to the DJIA lagging by about 0.8% over the past two days.

A little bit of stability would be a nice thing right about now. While the market had reached a low point of about a 9% decline from its September peak, it is still about 4% below that level. Committing funds to new positions is rarely a good idea when markets are heading straight in one direction or another, nor is it really a good idea when they wildly alternate between drops and climbs.

Over the past month, however, there haven’t been many alternatives. WHat we haven’t seen are many days of little to no movement.

With yesterday’s move higher, I was content seeing asset appreciation on paper but would have been much happier if able to convert some of those moves higher into opportunities to sell calls. What you may have noticed, though, is that the sharp climb higher yesterday and the stealth climb on Monday that was otherwise obscured by IBM, saw large drops in volatility and along with it, drops in premiums.

That drop in premium has made the DOH trades that I was hoping to execute look less appealing from a risk – reward perspective.

This morning I don’t expect to be buying anything and this may end up being the second consecutive week of refraining from adding any new positions. I could get used to that as long as there is some other source of recurring income, so that would require some consistency in rollovers  or sales of new covered positions. Ideally, both of those would be occurring, but so far this week has been slow in the latter, although there were already some early rollovers that took advantage of some price moves higher while still being out of the money.

With a number of DOH Trades set to expire this week that means a need to roll them over in the event that assignment seems likely. Ideally, DOH trades are allowed to expire, unless the volatility is still very high, in which case the cost of the transaction could be easily offset by the transaction. With those DOH trades and the objective of not seeing them get assigned, I don’t anticipate too many assignments, if any, this week.

Otherwise, today, at the mid-week point, it looks like a day of watching for any selective opportunities on an individual basis. As opposed to the past two days when most everything was lifted higher, today may be one of those more normal times when individual stocks or sectors fall in or out of favor as earnings receive attention.

Daily Market Update – October 21, 2014 (Close)

Yesterday was certainly a tale of two different indexes as for most of the day the DJIA was trading in negative territory while the S&P 500 actually had a very nice advance.

IBM’s really bad earnings and forward guidance that scuttled its famed “5 Year Plan” was enough to take as much as 105 points off of the DJIA at IBM’s lowest share price of the day. While it had some impact on the S&P 500, you’d never know it, because it is a relative speck in that index.

As a general rule every point move by a DJIA component is worth about 7 points in the index.

This morning there are 5 such components reporting and those results are mixed, but the early indication is for a mildly higher opening.

That mild opening took on a completely different character for no really obvious reason and ended 215 points higher.

Had IBM traded flat yesterday we would have been talking about yet another in a series of triple digit moves. It’s not everyday that you see a DJIA component move 7%. However, whenever you see any stock move that much, regardless of the direction, you really have to wonder how so many smart people, analysts and investors, could have gotten things so wrong.

Yet that happens all of the time. Maybe understandable with smaller and more speculative companies that aren’t followed by many, but IBM? Coca Cola?

If you would have excluded McDonalds, Coca Cola  and IBM, which had another abysmal dayfrom today’s DJIA, the climb would have been about another 70 points.

It’s funny how first IBM and now McDonalds and Coca Cola are all struggling as they lose market share in a changing world. Those were all once licenses to print money and aren’t going away in my lifetime, but they’re facing challenges that they never would have anticipated as one time market leaders.

What’s also worth realizing is how fortunate it was that IBM’s earnings were released yesterday morning to begin the week, rather than early last week.

While IBM is no longer the single stock that is able to change market tone and direction, it would have been really bad if it had come at a time that pessimism and selling was already the predominant sentiment and action. As bad as the early part of last week was, that IBM news would have greatly compounded the selling.

Pure luck, but that will never get recorded anywhere. IBM’s news, if having come last week, could easily have been the straw that broke the camel’s back and taken us beyond that 10% threshold and made that correction become official.

Apple reported earnings yesterday afternoon and the spin is placing heavy emphasis on iPhone sales and what futures quarters will bring, although there may be quite a bit of uncertainty coming in those future quarters as they not only roll out Apple Pay, but also introduce that much awaited Apple Watch.

Apple’s post-earnings move was really muted as iPad and iTunes sales are dropping, with the increase in the Mac line of computers and laptops seemingly coming at the expense of tablets.

Not that you can project from a single quarter’s earnings, but the lessons from icons like IBM, McDonalds and Coca Cola is that the world moves on, with or without you and no one is ultimately immune to that basic reality.

This morning’s pre-open futures pointed to a mildly higher opening. While, I liked the idea of seeing another pop higher so that perhaps there might be a chance to sell more call contracts on uncovered positions, I really would have preferred a narrow trading range session. While that would lower volatility, it might offer some confidence that it may be the time to buy something.

That confidence comes from either seeing a runaway train or the building of qa base. Today’s gains were nice, but they still aren’t the real confidence builder needed. It’s still hard to lose sight of the reality that these moves occur in a big picture and that big picture is one of a declining market.

That kind of confidence may still take a little while to build so in the meantime I would love to have the opportunity to generate some returns from more of the call sales. As has been the case over the past few weeks while volatility was rising I’ll keep looking at forward week or even forward month contract expirations, as long as the volatility can keep those premiums appealing enough.

However, today’s gains really drained volatility and there were decreasing opportunities to find good trades in forward weeks. Instead it was a good day to just wash net asset value grow.

Hopefully the growth won’t get washed away anytime soon.

Daily Market Update – October 21, 2014 (9:00 AM)

Yesterday was certainly a tale of two different indexes as for most of the day the DJIA was trading in negative territory while the S&P 500 actually had a very nice advance.

IBM’s really bad earnings and forward guidance that scuttled its famed “5 Year Plan” was enough to take as much as 105 points off of the DJIA at IBM’s lowest share price of the day. While it had some impact on the S&P 500, you’d never know it, because it is a relative speck in that index.

As a general rule every point move by a DJIA component is worth about 7 points in the index.

This morning there are 5 such components reporting and those results are mixed, but the early indication is for a mildly higher opening.

Had IBM traded flat yesterday we would have been talking about yet another in a series of triple digit moves. It’s not everyday that you see a DJIA component move 7%. However, whenever you see any stock move that much, regardless of the direction, you really have to wonder how so many smart peoplle, analysts and investors, could have gotten things so wrong.

Yet that happens all of the time. Maybe understandable with smaller and more speculative companies that aren’t followed by many, but IBM? Coca Cola?

It’s funny how first IBM and now McDonalds and Coca Cola are all struggling as they lose market share in a changing world. Those were all once licenses to print money and aren’t going away in my lifetime, but they’re facing challenges that they never would have anticipated as one time market leaders.

What’s also worth realizing is how fortunate it was that IBM’s earnings were released yesterday morning to begin the week, rather than early last week.

While IBM is no longer the single stock that is able to change market tone and direction, it would have been really bad if it had come at a time that pessimism and selling was already the predominant sentiment and action. As bad as the early part of last week was, that IBM news would have greatly compounded the selling.

Pure luck, but that will never get recorded anywhere. IBM’s news, if having come last week, could easily have been the straw that broke the camel’s back and taken us beyond that 10% threshold and made that correction become official.

Apple reported earnings yesterday afternoon and the spin is placing heavy emphasis on iPhone sales and what futures quarters will bring, although there may be quite a bit of uncertainty coming in those future quarters as they not only roll out Apple Pay, but also introduce that much awaited Apple Watch.

Apple’s post-earnings move was really muted as iPad and iTunes sales are dropping, with the increase in the Mac line of computers and laptops seemingly coming at the expense of tablets.

Not that you can project from a single quarter’s earnings, but the lessons from icons like IBM, McDonalds and Coca Cola is that the world moves on, with or without you and no one is ultimately immune to that basic reality.

This morning’s pre-open futures point to a mildly higher opening. While, I’d like to see another pop higher so that perhaps there might be a chance to sell more call contracts on uncovered positions, I wouldn’t mind that kind of narrow trading range session. While that would lower volatility, it might offer some confidence that it may be the time to buy something.

That kind of confidence may still take a little while to build so in the meantime I would love to have the opportunity to generate some returns from more of the call sales. As has been the case over the past few weeks while volatility was rising I’ll keep looking at forward week or even forward month contract expirations, as long as the volatility can keep those premiums appealing enough.

Daily Market Update – October 20, 2014 (Close)

There was a time when earnings reports like this morning’s delivered by IBM would have cast a pall on the market, especially coming before the opening bell on a Monday.

Luckily, it’s not your father’s IBM, anymore and it doesn’t have the same impact as it once did.

But still, we’re probably lucky these disappointing earnings weren’t unveiled last week, because they could easily have caused some harm, especially if in the earlier part of the week. At least by coming today we had the continuing good feelings left over from Friday, instead of coming on the heels of a few hundred points loss. 

You do have to wonder how the  company has seemed to lose its way and there certainly can be a new and better era ahead of it, but more importantly you have to wonder in this day and age how any company can ever maintain its predominance for very long.

With the DJIA being price weighted, IBM plays a big role in its calculation, although no quite as much at the moment. Still a lot, though, as it accounts for the entirety of the pre-open futures decline that at least temporarily puts a damper on Friday’s strong rally.

As a rule, each point of a DJIA component stock has a weighting of 7 times on the index, so when IBM was $15 lower, that was about 105 points. That fully explains the huge dichotomy between today’s closes on the DJIA and S&P 500 of about 0.8%.

Hopefully the week will see some kind of price stability in net terms, although I would love to see lots of intra-day movements. In an ideal market there’s minimal net movement but lots of activity. That inefficiency in net movement is great for premiums.

If you would have taken IBM out of today’s DJIA it would have closed the day with a gain of nearly 110 points.

Coming off last week and having finally gone a week without any new purchases, it may be easier to resist spending any money this week again. Certainly easier than the first time, as there’s still no reason to believe that any given day’s strength is the antidote to the past 4 weeks of declines.

I did the resisting today, but there really wasn’t anything that compelling today anyway, so the resisting was pretty easy.

As tempting as so many stock prices look right now there have been so many reasons to avoid those temptations, but like most everything in life, it takes a good degree of hindsight to have some certainty about  that conclusion. Without a doubt, at some point in the future, hindsight will also question why those purchases weren’t made sooner, forgetting all that transpired before.

Last week, other than a few new sales of option contracts on existing positions, was so devoid of activity. I don’t really want to repeat it, but at least there was an overall out-performance in a market that is still trending downward.

Imagine where that market would be if those explosively higher moves hadn’t occurred?

While those higher moves may have sucked people back into the market chasing new positions, even if they represent false promises, at least they have tempered the decline. Without those 200 and 300 point like moves higher we would have been looking at a 10% correction level from the wrong side of 10%.

So this week is another in which I don’t anticipate much in the way of new position additions.

Unlike last week, which was also the monthly cycle ending with the smallest number of expiring positions that I can recall in years, this week already has double the number of last week. I would just love to see some assignments from among that group, but would really be content if at least the opportunity to execute rollovers and make those new call contract sales came to being.

While volatility took a little decline on Friday’s straight climb higher, there may still be reasons to consider some longer term option sales if the forward week premiums show some evidence of that volatility. The two solitary trades for the day both looked to the November 2014 cycle, although Campbell Soup only offered a monthly option, anyway, but I did consider the December cycle.

The diversification by time that was re-initiated a few weeks ago as those premiums started to climb has already had some benefit by being able to lock in some of those premiums and to not be entirely at risk on any single day.

Given the kind of price movements that we’ve seen in the past month, any single day could fall on just the wrong day as it comes to risk of a contract going unassigned, so it is nice not to have all of those contracts subject to the whims of an irrationally adverse price decline.

For the week there may also continue to be opportunity and reason to pursue DOH Trades and attempt to squeeze whatever income is possible out of beaten down stocks, especially if receiving what may be a temporary bump higher.

Any little bit helps.

Daily Market Update – October 20, 2014 (9:00 AM)

There was a time when earnings reports like this morning’s delivered by IBM would have cast a pall on the market, especially coming before the opening bell on a Monday.

Luckily, it’s not your father’s IBM, anymore.

You do have to wonder how the  company has seemed to lose its way and there certainly can be a new and better era ahead of it, but more importantly you have to wonder in this day and age how any company can ever maintain its predominance.

With the DJIA being price weighted, IBM plays a big role in its calculation, although no quite as much at the moment. Still a lot, though, as it accounts for the entirety of the pre-open futures decline that at least temporarily puts a damper on Friday’s strong rally.

Hopefully the week will see some kind of price stability in net terms, although I would love to see lots of intra-day movements. In an ideal market there’s minimal net movement but lots of activity. That inefficiency in net movement is great for premiums.

Coming off last week and having finally gone a week without any new purchases, it may be easier to resist spending any money this week again. Certainly easier than the first time, as there’s still no reason to believe that any given day’s strength is the antidote to the past 4 weeks of declines.

As tempting as so many stock prices look right now there have been so many reasons to avoid those temptations, but like most everything in life, it takes a good degree of hindsight to have some certainty about  that conclusion. Without a doubt, at some point in the future, hindsight will also question why those purchases weren’t made sooner, forgetting all that transpired before.

Last week, other than a few new sales of option contracts on existing positions, was so devoid of activity. I don’t really want to repeat it, but at least there was an overall out-performance in a market that is still trending downward.

Imagine where that market would be if those explosively higher moves hadn’t occurred?

While those higher moves may have sucked people back into the market chasing new positions, even if they represent false promises, at least they have tempered the decline. Without those 200 and 300 point like moves higher we would have been looking at a 10% correction level from the wrong side of 10%.

So this week is another in which I don’t anticipate much in the way of new position additions.

Unlike last week, which was also the monthly cycle ending with the smallest number of expiring psotions that I can recall in years, this week already has double the number of last week. I would just love to see some assignments from among that group, but would really be content if at least the opportunity to execute rollovers and make those new call contract sales came to being.

While volatility took a little decline on Friday’s straight climb higher, there may still be reasons to consider some longer term option sales if the forward week premiums show some evidence of that volatility.

The diversification by time that was re-initiated a few weeks ago as those premiums started to climb has already had some benefit by being able to lock in some of those premiums and to not be entirely at risk on any single day.

Given the kind of price movements that we’ve seen in the past month, any single day could fall on just the wrong day as it comes to risk of a contract going unassigned, so it is nice not to have all of those contracts subject to the whims of an irrationally adverse price decline.

For the week there may also continue to be opportunity and reason to pursue DOH Trades and attempt to squeeze whatever income is possible out of beaten down stocks, especially if receiving what may be a temporary bump higher.

Any little bit helps.

Daily Market Update – October 17, 2014 (8:00 AM)

The Weekend in Review will be posted by Saturday 10 AM and the Weekend Update will be posted by 8 AM on Monday. The usual schedule will resume next week, as this weekend we celebrate my oldest son’s wedding.

The following outcomes are possible during this week’s final trading day:

Assignments:   none

Rollovers:        none

Expirations:    CPB, CY, FAST, TMUS

The following positions were ex-dividend this week: none

The following position will be ex-dividend next week:

While no rollovers are expected this week, particularly as three of the positions are monthly contracts and are too expensive to buy back, hopefully there will be some continued opportunity to make some call sales on uncovered positions and continue to diversify the dates of expiration among holdings

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

Daily Market Update – October 16, 2014 (Close)

Yesterday morning began with these words:

“Despite yesterday’s decent closing action and despite somewhat positive results from Intel, the market is back to its recent ways and is headed sharply lower this morning.”

This morning you could say almost the exact same thing:

“Despite yesterday’s decent closing action and despite positive results from Goldman Sachs, the market is back to its recent ways and is headed sharply lower this morning.”

At some point that has to get discouraging, but the discouragement should be delayed until there is reason to believe that this correction will go beyond the 10% that was once a fairly common and not overly frightening phenomenon.

Once you get beyond that 10% level the natural concern becomes where the floor will be. Right now, if looking at a chart of the S&P 500 you would look for support levels, which exist at 1816, 1792 and 1742.

At that 1742 level we would be looking at a 13% decline, while the 1816 level is just about a 10% decline from the S&P 500 high point.

The 7% decline in the S&P 500 heading into this morning was just about near the mid-way point between what we’ve become accustomed to and what we used to be accustomed to. What’s strange is seeing interest rates, oil and gold all so low at the same time, as if there are no viable alternatives for people to invest their money.

Yesterday was a really wild ride and today my early thought was that today might be the same as the futures had already shown quite a bit of movement, but paled compared to the movement in the 10 Year Treasury Note yesterday, which actually sank below a 2% level before bouncing about 5% higher by the close of its trading.

As it would turn out there was quite a bit of movement today, but at least the bad part of the movement didn’t last very long. It turned out to be a day with lots of volatility but without real price erosion.

As the day was getting ready to begin it didn’t seem as if there would really be much to do for the morning and perhaps for the rest of the week. Fortunately, that changed and some DOH trades could finally be made.

Even with today’s reasonably steady performance it’s certainly becoming easier to ignore what at first have appeared to be bargains as they took on a different appearance with just a little bit of time passage. That has been a consistent theme for nearly 4 weeks. What looks appealing has consistently been a place where money goes to die.

With only 4 positions set to expire this Friday and at their current pricing, there’s not too much likelihood of rollovers, particularly since 3 of those are monthly contracts and are generally too expensive to buy back if denominated in $0.05 increments.

As the morning was getting ready to start there was even less likelihood of adding any new positions this week, but I continued to hold out hope of being able to sell call contracts on existing positions, despite having been thwarted a number of times earlier in the week as there had been very little call buying activity, as the options market hasn’t been a hotbed of speculation regarding prices moving higher and there has been a much wider than usual gap between bid and ask prices on positions that normally don’t have wide bids.

In those cases that’s a reflection of a seller who is looking at a realistic selling price and a buyer who feels that the realistic is unrealistic and there has been very little effort to bridge their positions.

As a seller I understand the reluctance to give in to the buyer right now particularly since you can easily have a large surge higher at a moment’s notice. Even if that surge is reversed the next trading day, it may be a day too late if your expiration date was the day of the surge.

While “DOH” trades may make sense in an environment of increasing volatility, it may not make sense when there may be reason to suspect that the volatility will move against you.

So while this morning it seemed as if it was right back to that usual pattern of sitting and watching and hoping for some opportunity to sell something on any sign of market strength or individual stock strength, it actually lived up to that hope.

It all started with Chesapeake Energy, as it announced the sale of some assets.

That is a good example, though of the surges that can take place, as I had tried to get a weekly DOH trade for Chesapeake earlier in the week at a $19.50 strike when shares were at their weekly high of $18.22 for an $0.11 premium.

As Chesapeake was trading in the pre-open at $19.55, up $1.78 it is testament to how quickly things can move and necessitate offsetting action under a ticking clock, as contracts expire tomorrow.

On the other hand, how much higher will Chesapeake go on the basis of an asset sale? There’s not too much reason to think that the sale would propel it too much more, so there may still be a quick opportunity there, but even then, too few, far too few of those opportunities this week.

But don’t get me wrong. I was grateful for each and every one.

Daily Market Update – October 16, 2014 (8:45 AM)

Yesterday morning began with these words:

“Despite yesterday’s decent closing action and despite somewhat positive results from Intel, the market is back to its recent ways and is headed sharply lower this morning.”

This morning you could say almost the exact same thing:

“Despite yesterday’s decent closing action and despite positive results from Goldman Sachs, the market is back to its recent ways and is headed sharply lower this morning.”

At some point that has to get discouraging, but the discouragement should be delayed until there is reason to believe that this correction will go beyond the 10% that was once a fairly common and not overly frightening phenomenon.

Once you get beyond that 10% level the natural concern becomes where the floor will be. Right now, if looking at a chart of the S&P 500 you would look for support levels, which exist at 1816, 1792 and 1742.

At that 1742 level we would be looking at a 13% decline, while the 1816 level is just about a 10% decline from the S&P 500 high point.

The 7% decline in the S&P 500 heading into this morning is just about near the mid-way point between what we’ve become accustomed to and what we used to be accustomed to. What’s strange is seeing interest rates, oil and gold all so low at the same time, as if there are no viable alternatives for people to invest their money.

Yesterday was a really wild ride and today may be the same as the futures had already shown quite a bit of movement, but paled compared to the movement in the 10 Year Treasury Note yesterday, which actually sank below a 2% level before bouncing about 5% higher by the close of its trading.

There’s really not much to do this morning and perhaps for the rest of the week.

It’s certainly becoming easier to ignore what at first appeared to be bargains as they took on a different appearance with just a little bit of time passage. That has been a consistent theme for nearly 4 weeks.

With only 4 positions set to expire this Friday and at their current pricing, there’s not too much likelihood of rollovers, particularly since 3 of those are monthly contracts and are generally too expensive to buy back if denominated in $0.05 increments.

At the moment, there’s even less likelihood of adding any new positions this week, but I continue to hold out hope of being able to sell call contracts on existing positions. There have been a couple of opportunities this week to have put in trade offers but there has been very little call buying activity, as the options market hasn’t been a hotbed of speculation regarding prices moving higher and there has been a much wider than usual gap between bid and ask prices on positions that normally don’t have wide bids.

In those cases that’s a reflection of a seller who is looking at a realistic selling price and a buyer who feels that the realistic is unrealistic and there has been very little effort to bridge their positions.

As a seller I understand the reluctance to give in to the buyer right now particularly since you can easily have a large surge higher at a moment’s notice. Even if that surge is reversed the next trading day, it may be a day too late if your expiration date was the day of the surge.

While “DOH” trades may make sense in an environment of increasing volatility, it may not make sense when there may be reason to suspect that the volatility will move against you.

So this morning it’s right back to that usual pattern of sitting and watching and hoping for some opportunity to sell something on any sign of market strength or individual stock strength, such as with Chesapeake Energy this morning, as it announced the sale of some assets.

That is a good example, though of the surges that can take place, as I had tried to get a weekly DOH trade for Chesapeake earlier in the week at a $19.50 strike when shares were at their weekly high of $18.22 for an $0.11 premium.

As Chesapeake is trading in the pre-open at $19.55, up $1.78 it is testament to how quickly things can move and necessitate offsetting action under a ticking clock, as contracts expire tomorrow.

On the other hand, how much hire will Chesapeake go on the basis of an asset sale? There’s not too much reason to think that the sale would propel it too much more, so there may still be a quick opportunity tehre, but even then, too few, far too few this week.