Category Archives: Daily Market Update

Daily Market Update – June 2, 2014 (Close)

The week ahead has lots of events and news that could potentially move the markets.

Apparently, the once important ISM Manufacturing Index isn’t that important, anymore, as it came in with some awful numbers and the market really didn’t react very much. Then it also didn’t react much when the numbers were corrected due to an error in calculation that was spotted by some astute people.

As if that wasn’t bad enough, sometime later, a second revision to the statistics released this morning was made and for the most part the market just yawned, as all eyes were on Apple instead, hearkening back to the days when Apple ruled and lead the markets.

The always interesting Apple World Wide Developers Conference (WWDC) kicked off today in the week that the Apple stock split takes effect.

The week ends with the Employment Situation Report and in-between is a much awaited ECB announcement on interest rates, which are widely expected to be reduced.

While there may be some positive news ahead for Apple, at least in the short term, that may move shares even higher once the split occurs, I don’t know if anything this week really is of such magnitude that it can convincingly cause the market to create new highs, rather than eking them out.

With only two positions closed last week while I’m willing to dip into cash reserves for new purchases, I’m not willing to go in too much.

As has been the case of late, I would much rather generate income by being able to sell calls on currently uncovered positions rather than putting new money at risk and when all else fails just simply rollover existing positions, which is usually a good kind of failyre.

With the market setting new high after new high a rational person would likely jump in and join the fun, but I think a toe at a time is fun enough right now unless there is some evidence of a breakout higher.

At some point it would be nice to see some conviction, whether it takes us higher or lower, rather than a tepidly trading market that just can’t seem to make its mind up as to whether to trade the market we have opr the market of the future.

As far as what awaits us in the past the axiom was always that trading was discounting the future by 6 months and was more reflective of the future than the present.

If that’s the case the outlook for the next 6 months is clouded, at best and certainly not enthusiastically embraced.

A lot of emphasis is being placed this week on Thursday’s ECB report on interest rates. While it’s widely expected that Mario Draghi, the Janet Yellen of the EU will announce a rate reduction it doesn’t seem too likely that if that news is confirmed that it will drive markets higher, simply because it is so anticipated.

On the other hand if what is anticipated ends up becoming a disappointment, by either not happening or being different than anticipated, there’s no telling what the result may be.

The very next day after that ECB announcement is the Employment Situation Report and lately the association between that report and the market moving higher on that same day has been breaking down a bit, although the entire week association, that is the week moving higher, has been holding.

So with a bit of tentativeness, I think this week may end up being a net positive, but there may be some bumps along the way.

With a number of positions already set to expire this week and having been able to roll over a fair number of positions last week, I may be somewhat more interested in finding expirations for next week, as looking at any potential new purchases. Additionally, where feasible, it may make some sense to execute rollovers before the ESR on Friday and possibly even before Thursday morning’s ECB report.

At least that was the plan this morning.

Instead, during a very lackluster day with trading in a very narrow range there was vert little to get excited about and the only two opportunities that seemed to come along ended up getting weekly contracts written.

So much for planning out the course of action.

There’s always tomorrow and we’ll see whether it being a Tuesday lives up to its expectations.

Daily Market Update – June 2, 2014 (9:40 AM)

The week ahead has lots of events and news that could potentially move the markets.

The always interesting Apple World Wide Developers Conference (WWDC) kicks off today in the week that the Apple stock split takes effect.

The week ends with the Employment Situation Report and in-between is a much awaited ECB announcement on interest rates, which are widely expected to be reduced.

While there may be some positive news ahead for Apple, at least in the short term, that may move shares even higher once the split occurs, I don’t know if anything this week really is of such magnitude that it can convincingly cause the market to create new highs, rather than eking them out.

With only two positions closed last week while I’m willing to dip into cash reserves for new purchases, I’m not willing to go in too much.

AS has been the case of late, I would much rather generate income by being able to sell calls on currently uncovered positions rather than putting new money at risk.

With the market setting new high after new high a rational person would likely jump in and join the fun, but I think a toe at a time is fun enough right now unless there is some evidence of a breakout higher.

At some point it would be nice to see some conviction, whether it takes us higher or lower, rather than a tepidly trading market that just can’t seem to make its mind up as to whether to trade the market we have opr the market of the future.

In the past the axiom was always that the trading was discounting the future 6 months.

If that’s the case the outlook for the next 6 months is clouded, at best and certainly not enthusiastically embraced.

A lot of emphasis is being placed this week on Thursday’s ECB report on interest rates. While it’s widely expected that Mario Draghi, the Janet Yellen of the EU will announce a rate reduction it doesn’t seem to likely that if that news is confirmed that it will drive markets higher, simply because it is so anticipated.

On the other hand if what is anticipated ends up becoming a disappointment, there’s no telling what the result may be.

The very next day is the Employment Situation Report and lately the association between that report and the market moving higher on that same day has been breaking down a bit, although the entire week association, that is the week moving higher, has been holding.

So with a bit of tentativeness, I think this week may end up being a net positive, but there may be some bumps along the way.

With a number of positions already set to expire this week and having been able to roll over a fair number of positions last week, I may be somewhat more interested in finding expirations for next week, as looking at any potential new purchases. Additionally, where feasible, it may make some sense to execute rollovers before the ESR on Friday and possibly even before Thursday morning’s ECB report.

Daily Market Update – May 30, 2014 (9:00 AM)

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

Today’s possible outcomes include:

Assignment:

Rollover:  JPM, LLY, PFE

Expiration:  ANF (puts), EBAY

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





Daily Market Update – May 29, 2014 (Close)

Hard to believe that the morning wasn’t faced with the challenge of having to add to another previous day’s closing high.

With volatility so low and now even precious metals testing some resistance levels the thought that comes to mind is the inescapable reality that cycles rule everything in economics. It’s just the onset, length and magnitude of those cycles that are hard to divine.

With some occasional brief and shallow interruptions this has been a 5 year cycle that appears to have a slowing acceleration as it continues to move higher.

But don’t tell that to the market which decided to take a mediocre day trading and turn it around in the final minutes.

If you can’t stand the suspense, there was another new high set in the S&P 500 when it was all over for the day.

At the same time all of the fears surrounding the impact of the 10 Year Treasury rates on equities have been unfounded as even the direction of rates has been missed. First the fears focused on the rate approaching 3%, barely a couple of months ago and now the fears have followed the rate from 2.75% to 2.5% and still, nothing. The market just goes higher despite the well reasoned theories on why it should not do so.

For the rest of the week there is plenty of economic news scheduled to be released but none of it likely to move the needle very much as we’re on target to have a second consecutive week of gains.

Even the large revision in the GDP really did little to unsettle the market, whereas in a past era it would have sent it tumbling.

The big difference between setting record after record today versus 5 years ago or in the 1980s is that there isn’t the same kind of complacency. Back then there was often a belief that regardless of the investment it was bound to go higher, if only because it would be carried along with the rest of the market.

By and large that was true for certain times over the past 25 years and the complacency was justified until it wasn’t.

Sometimes the loss of justification came suddenly and caught most everyone by surprise, while at other times that lack of justification came with fair warning that was frequently ignored.

This time around the complacency isn’t there because the market has been very selective. Even while it moves higher and higher not all are taken for the ride and there appears to be much more sector rotation than ever, perhaps accounting for a divergence between the new market highs and the number of stocks in the new daily highs list.

Common sense would tell you that if the market, which is nothing more than the sum of its component parts keeps going higher its component parts must, as well. The fact that the number of stocks on new highs list is decreasing is telling of  the fleeting strength of individual positions, which may in part explain why the vast majority of hedge funds are trailing the market index.

I suppose that those may be concerns for next week.

For this week there aren’t too many positions set to expire, but I’m hoping that there is again a nice mix of assignments and rollovers, much as was the case last week.

The early market indication was for a flat open and if that is sustained through tomorrow’s close that would be just fine and create the right frame of mind to deal with all of those future concerns, even though it paradoxically must bring us closer to an inevitable top.





Daily Market Update – May 29, 2014 (8:30 AM)

Hard to believe that the morning isn’t faced with the challenge of having to add to another previous day’s closing high.

With volatility so low and now even precious metals testing some resistance levels the thought that comes to mind is the inescapable reality that cycles rule everything in economics. It’s just the onset, length and magnitude of those cycles that are hard to divine.

With some occasional brief and shallow interruptions this has been a 5 year cycle that appears to have a slowing acceleration as it continues to move higher.

At the same time all of the fears surrounding the impact of the 10 Year Treasury rates on equities have been unfounded as even the direction of rates has been missed. First the fears focused on the rate approaching 3%, barely a couple of months ago and now the fears have followed the rate from 2.75% to 2.5% and still, nothing. The market just goes higher despite the well reasoned theories on why it should not do so.

For the rest of the week there is plenty of economic news scheduled to be released but none of it likely to move the needle very much as we’re on target to have a second consecutive week of gains.

The big difference between setting record after record today versus 5 years ago or in the 1980s is that there isn’t the same kind of complacency. Back then there was often a belief that regardless of the investment it was bound to go higher, if only because it would be carried along with the rest of the market.

By and large that was true for certain times over the past 25 years and the complacency was justified until it wasn’t.

Sometimes the loss of justification came suddenly and caught most everyone by surprise, while at other times that lack of justification came with fair warning that was frequently ignored.

This time around the complacency isn’t there because the market has been very selective. Even while it moves higher and higher not all are taken for the ride and there appears to be much more sector rotation than ever, perhaps accounting for a divergence between the new market highs and the number of stocks in the new daily highs list.

Common sense would tell you that if the market, which is nothing more than the sum of its component parts keeps going higher its component parts must, as well. The fact that the number of stocks on new highs list is decreasing is telling of  the fleeting strength of individual positions, which may in part explain why the vast majority of hedge funds are trailing the market index.

I suppose that those may be concerns for next week.

For this week there aren’t too many positions set to expire, but I’m hoping that there is again a nice mix of assignments and rollovers, much as was the case last week.

The early market indication is for a flat open and even if that is sustained through tomorrow’s close that would be just fine and create the right frame of mind to deal with all of those future concerns.





Daily Market Update – May 28, 2014 (Close)

Another new high.

Of course, that was in reference to yesterday. Today it was almost more of the same, but for the bulls out there, you can add the qualifier “barely missed.”

It’s said that the title to the movie “Annie Hall” was derived from “anhedonia,” which refers to the inability to experience pleasure.

While I don’t mind seeing all of these new highs as long as it translates into something equally good at home the amount of exhiliration is nothing close to what you would expect.

I’m not jumping up and down and certainly the market isn’t expressing any great optimism. The fact that you don’t see people pounding their chests and  raving about their successes is telling. Most people aren’t shy about letting the world know how great they’re doing.

This week, in addition to being a shortened trading week, also has almost no economic news of great importance.

That makes it one of those weeks with the potential to act as if in a vacuum. You could just as easily see large moves higher as you could see them go lower. You could also just as easily see very little happening as people will keep re-evaluating the old “Sell in May and go away” aphorism.

Today turned out to be a day of antipathy and give and take with neither bulls nor bears really wanting to take charge of things.

This morning saw a little reversal of the mildly positive pre-open trading by the time the morning bell rang but that means very little. In today’s case, though, that mild reversal of a mild gain was an encapulation of the trading day to come.

As with many days in the past couple of months the morning’s pre-open action warranted just sitting and watching during the first 30-60 minutes just to see how things would unfold, but there really was no over-riding theme in the markets at the moment trading started and none throughout the rest of the day, either.

While I continue to believe that there just has to be some kind of market retreat and an end to this historically low volatility, it just doesn’t happen. It continues to fascinate me that the market is able to continually go higher and higher. If not going higher and higher, at least it seems to stay in the same neighborhood.

While on the one hand you don’t want to miss out on the party, you also don’t necessarily be the last one to leave or come to a late realization that the party is over.

Sitting mid-week with plenty of cash to party it’s hard to resist joining in, but despite recent history indicating a really resilient market, the  simple question becomes one of a consideration of “the margins.”

“The margins” means looking at each incremental unit of change. At the market’s current level what is the likelihood of continued upside movement as compared to the potential for downside? Not only the likelihood, but in terms of the number of units of movement in both directions. Does the market have as much realistic potential to move to the upside by an amount that is greater than the potential to move to the downside?

I think that the downside risk and the amount of risk is now greater than the upside reward, even though the theoretical upside reward is much greater than the theoretical downside risk.

Most people have their own notion of what constitutes an acceptable risk to reward ratio. While there may continue to be upside reward, after all the market hasn’t exactly been rational in moving higher, it’s hard to discount the gap between the current level and where support exists below that level.

For some the small semi-corrections seen over the past two years means that there are ia number of intermediate support levels that could take the market down just a little at a time or if you’re really an optimist serve as a springboard to go even higher.

To the cynic those aren’t really support levels, rather just resting spots to get the market to finally have a meaningful correction.

The reality is that we just don’t know, because the historical precedence isn’t very strong and that is it’s own vacuum.

Like so many other times over the past few years sometimes it helps to sit back and wait for some indication of a macro move, whether based on market dynamics, external world events or anything else, before making too large of an additional commitment.

Hopefully the rest of this week will offer some additional opportunities to sell new cover and maybe a new purchase here or there, but for the moment, I want some sign before digging too deeply into my pockets for the entry fee to get into this party.

Reprinted from yesterday’s Close 

PS: For those with the Feb 18, 2014 Transocean lot, sorry about the late rollover trade. I was really on the fence with this one because I wasn’t certain that the June 21, 2014 $42 calls would be assigned early to capture tomorrow’s $0.75 dividend, despite closing at $43.35.

Despite being $1.35 in the money, I’m still not certain that shares have a high probability of early assignment to capture the dividend, but I really wanted to keep this dividend and believe that Transocean has more room to climb.

Ultimately, doing the “what-if” scenarios convinced me that taking a net debit on the rollover, which actually is still a net credit thanks to the premium received for the $42 sale last week, was worthwhile.

If shares were to have been assigned early at the $42 strike the ROI would have been 8% compared to 4% for the S&P 500 over the same period.

If shares wouldn’t be assigned early and the dividend was received the ROI, if assigned at the end of the June 2014 cycle would have been 9.7%. However, given that shares closed about $0.60 over the threshold level of $42.75 there was some chance of early assignment, even though nearly 4 weeks remain on the contract.

With the rollover up to a $43 strike in exchange for going to a July 2014 expiration the likelihood of early assignment is virtually non-existent and if eventually assigned the ROI would be 11.5%

The final part of the equation was the question of what else could have been done with the money if assigned early. Given the recent low volatility the monthly ROI is at the low end of the range that I’ve been accustomed to achieving. In essence the question became could I achieve a 3.5% ROI over the 8 week period? While I like to believe that the answer is “yes” the belief that Transocean doesn’t have much in the way of near term downside ultimately made the decision relatively straightforward. I looked at the rollover as providing a relatively low maintenance return with greater safety than alternatives.



Daily Market Update – May 28, 2014 (9:45 AM)

Another new high.

It’s said that the title to the movie “Annie Hall” was derived from “anhedonia,” which refers to the inability to experience pleasure.

While I don’t mind seeing all of these new highs as long as it translates into something equally good at home the amount of exhiliration is nothing close to what you would expect.

I’m not jumping up and down and certainly the market isn’t expressing any great optimism. The fact that you don’t see people pounding their chests and  raving about their successes is telling. Most people aren’t shy about letting the world know how great they’re doing.

This week, in addition to being a shortened trading week, also has almost no economic news of great importance.

That makes it one of those weeks with the potential to act as if in a vacuum. You could just as easily see large moves higher as you could see them go lower. You could also just as easily see very little happening as people will keep re-evaluating the old “Sell in May and go away” aphorism.

This morning saw a little reversal of the mildly positive pre-open trading by the time the morning bell rang but that means very little.

As with many days in the past couple of months it warrants just sitting and watching during the first 30-60 minutes just to see how things unfold, but there really is no over-riding theme in the markets at the moment.

While I continue to believe that there just has to be some kind of market retreat and an end to this historically low volatility, it just doesn’t happen. It continues to fascinate me that the market is able to continually go higher and higher.

While on the one hand you don’t want to miss out on the party, you also don’t necessarily be the last one to leave or come to a late realization that the party is over.

Sitting mid-week with plenty of cash to party it’s hard to resist joining in, but despite recent history indicating a really resilient market, the  simple question becomes one of a consideration of “the margins.”

“The margins” means looking at each incremental unit of change. At the market’s current level what is the likelihood of continued upside movement as compared to the potential for downside? Not only the likelihood, but in terms of the number of units of movement in both directions. Does the market have as much realistic potential to move to the upside by an amount that is greater than the potential to move to the downside?

I think that the downside risk and the amount of risk is now greater than the upside reward.

Most people have their own notion of what constitutes an acceptable risk to reward ratio. While there may continue to be upside reward, after all the market hasn’t exactly been rational in moving higher, it’s hard to discount the gap between the current level and where support exists below that level.

For some the small semi-corrections means that there are intermediate support levels that could take the market down just a little at a time.

To the cynic those aren’t really support levels, rather just resting spots to get the market to finally have a meaningful correction.

The reality is that we just don’t know, because the historical precedence isn’t very strong and that is it’s own vacuum.

Like so many other times over the past few years sometimes it helps to sit back and wait for some indication of a macro move, whether based on market dynamics, external world events or anything else, before making too large of an additional commitment.

Hopefully the rest of this week will offer some additional opportunities to sell new cover and maybe a new purchase here or there, but for the moment, I want some sign before digging too deeply

PS: For those with the Feb 18, 2014 Transocean lot, sorry about the late rollover trade. I was really on the fence with this one because I wasn’t certain that the June 21, 2014 $42 calls would be assigned early to capture tomorrow’s $0.75 dividend, despite closing at $43.35.

Despite being $1.35 in the money, I’m still not certain that shares have a high probability of early assignment to capture the dividend, but I really wanted to keep this dividend and believe that Transocean has more room to climb.

Ultimately, doing the “what-if” scenarios convinced me that taking a net debit on the rollover, which actually is still a net credit thanks to the premium received for the $42 sale last week, was worthwhile.

If shares were to have been assigned early at the $42 strike the ROI would have been 8% compared to 4% for the S&P 500 over the same period.

If shares wouldn’t be assigned early and the dividend was received the ROI, if assigned at the end of the June 2014 cycle would have been 9.7%. However, given that shares closed about $0.60 over the threshold level of $42.75 there was some chance of early assignment, even though nearly 4 weeks remain on the contract.

With the rollover up to a $43 strike in exchange for going to a July 2014 expiration the likelihood of early assignment is virtually non-existent and if eventually assigned the ROI would be 11.5%

The final part of the equation was the question of what else could have been done with the money if assigned early. Given the recent low volatility the monthly ROI is at the low end of the range that I’ve been accustomed to achieving. In essence the question became could I achieve a 3.5% ROI over the 8 week period? WHile I like to believe that the answer is “yes” the belief that Transocean doesn’t have much in the way of near term downside ultimately made the decision relatively straightforward. I looked at the rollover as providing a relatively low maintenance return with greater safety that alternatiuves.



Daily Market Update – May 27, 2014 (Close)

While I don’t like the smaller premiums that are generated on these 4 day trading weeks, I no longer dislike Monday holidays.

There was a time that I harbored some resentment for the market being closed on those Mondays. That was back in the days when such a holiday coincided with a day off for me and could have been used to hone some skills back when I couldn’t spend as much time as I wanted glued to the screen and ticker.

These days I can and suddenly, maybe not so surprisingly I like those shortened weeks and actually, on a day like Memorial Day, get a chance to understand and appreciate the reason for the holiday.

So now it’s Tuesday and inexplicably the market starts at another new high. What seems so unusual is that you really don’t see or hear a chorus of people gloating about their returns. The other day it was mentioned that some 70-80% of hedge funds were trailing the S&P 500. While that’s easy to understand if the market is going straight higher, it’s not easy to understand when the market is going lower or bouncing around.

My guess is that lots of hedge funds, after trailing the market in 2013 stopped hedging in anticipation of the need for protection and instead doubled up on the bullish end of things.

Bad timing if that’s the case and it is likely accurate to some degree. It’s not much different from the individual investor who waits until the start of the new year to get into last year’s hottest mutual fund.

While normally there would be some degree of euphoria here’s something that should be cause for concern:

That is that while the S&P 500 is going higher the number of new highs is going lower.

That’s just not the way things are supposed to work.

What that indicates is that the advance is really pretty narrow and there just isn’t a lot of participation.

Normally in a market making new highs over and over again everyone is happy because just about everything is moving higher getting swept by a rising tide.

Now, there’s a tide but it’s not doing too much sweeping and only taking a lucky few along for the ride.

I start this week with replenished cash from a decent number of assignments and having sold more new cover last week than in recent memory. On a personal note that leaves me happy, but I’m not overly anxious to plow even the full amount of the regenerated cash back into the market this week.

One of the reasons is that the reward is reduced as there are only 4 days worth of premiums this week. However, beyond that is that after 2 previous weeks of not seeing much in the way of assignments and some decidedly negative trading, I’m not entirely convinced that least week’s positive trading patterns are here to stay.

My initial sense is that the optimism that may be borne of last week’s trading may be for fools.

Of course, like most everything, I’m not fully willing to base everything on that belief that may end up being wrong. So I anticipate making some trades this week in an effort to open some new positions, but I would still prefer to see uncovered positions find coverage and make my weekly income in that manner rather than having to spend very much to generate that income.

As always, we’ll see.

We’ll see if the pre-open futures have any predictive capability for the rest of the day and whether any bargains may pop up to cause me to rethink the thriftiness I have planned for the week.

But the day did keep all of the pre-open gains and set another new closing record.

Unbelievable.

PS: For those with the Feb 18, 2014 Transocean lot, sorry about the late rollover trade. I was really on the fence with this one because I wasn’t certain that the June 21, 2014 $42 calls would be assigned early to capture tomorrow’s $0.75 dividend, despite closing at $43.35.

Despite being $1.35 in the money, I’m still not certain that shares have a high probability of early assignment to capture the dividend, but I really wanted to keep this dividend and believe that Transocean has more room to climb.

Ultimately, doing the “what-if” scenarios convinced me that taking a net debit on the rollover, which actually is still a net credit thanks to the premium received for the $42 sale last week, was worthwhile.

If shares were to have been assigned early at the $42 strike the ROI would have been 8% compared to 4% for the S&P 500 over the same period.

If shares wouldn’t be assigned early and the dividend was received the ROI, if assigned at the end of the June 2014 cycle would have been 9.7%. However, given that shares closed about $0.60 over the threshold level of $42.75 there was some chance of early assignment, even though nearly 4 weeks remain on the contract.

With the rollover up to a $43 strike in exchange for going to a July 2014 expiration the likelihood of early assignment is virtually non-existent and if eventually assigned the ROI would be 11.5%

The final part of the equation was the question of what else could have been done with the money if assigned early. Given the recent low volatility the monthly ROI is at the low end of the range that I’ve been accustomed to achieving. In essence the question became could I achieve a 3.5% ROI over the 8 week period? WHile I like to believe that the answer is “yes” the belief that Transocean doesn’t have much in the way of near term downside ultimately made the decision relatively straightforward. I looked at the rollover as providing a relatively low maintenance return with greater safety that alternatiuves.



Daily Market Update – May 27, 2014 (9:00 AM)

While I don’t like the smaller premiums that are generated on these 4 day trading weeks, I no longer dislike Monday holidays.

There was a time that I harbored some resentment for the market being closed on those Mondays. That was back in the days when such a holiday coincided wiith a day off for me and could have been used to hone some skills back when I couldn’t spend as much time as I wanted glued to the screen and ticker.

These days I can and suddenly, maybe not so surprisingly I like those shortened weeks and actually, on a day like Memorial Day, get a chance to understand and appreciate the reason for the holiday.

So now it’s Tuesday and inexplicably the market starts at another new high. What seems so unusual is that you really don’t see or hear a chorus of people gloating about their returns. The other day it was mentioned that some 70-80% of hedge funds were trailing the S&P 500. While that’s easy to understand if the market is going straight higher, it’s not easy to understand when the market is going lower or bouncing around.

My guess is that lots of hedge funds, after trailing the market in 2013 stopped hedging in anticipation of the need for protection and instead doubled up on the bullish end of things.

Bad timing if that’s the case and it is likely accuate to some degree. It’s not much different fromt the individual investor who waits until the start of the new year to get into last year’s hottest mutual fund.

While normally there would be some degree of euphoria here’s something that should be cause for concern:

That is that while the S&P 500 is going higher the number of new highs is going lower.

That’s just not the way things are supposed to work.

What that indicates is that the advance is really pretty narrow and there just isn’t a lot of participation.

Normally in a market making new highs over and over again everyone is happy because just about everything is moving higher getting swept by a rising tide.

Now, there’s a tide but it’s not doing too much sweeping and only taking a lucky few along for the ride.

I start this week with replenished cash from a decent number of assignments and having sold more new cover last week than in recent memory. On a personal note that leaves me happy, but I’m not overly anxious to plow even the full amount of the regenerated cash back into the market this week.

Oart of that reqason is that the reward is reduced as there are only 4 days worth of premiums this week. However, beyond that is that after 2 previous weeks of not seeing much in the way of assignments and some decidely negative trading, I’m not entirely convinced that least week’s positive trading patterns are here to stay.

My initial sense is that the optimism that may be borne of last week’s trading may be for fools.

Of course, like most everything, I’m not fully willing to base everything on that belief that may end up being wrong. So I anticipate making some trades this week in an effort to open some new positions, but I would still prefer to see uncovered positions find coverage and make my weekly income in that manner rather than having to spend very much to generate that income.

As always, we’ll see.

We’ll see if the pre-open futures have any predictive capability for the rest of the day and whether any barains may pop up to cause me to rethink the thriftiness I have planned for the week.



Daily Market Update – May 23, 2014 (9:00 AM)

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

Today’s possible outcomes include:

Assignment:  CMCSA, UA

Rollover:  EBAY, IP, MA, MET, SBUX, TXN

Expiration:  EBAY, GM, JPM

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

Daily Market Update – May 22, 2014 (Close)

It still seems very odd to me that the market came off of its large drop on Tuesday and recovered the loss on a Wednesday, but did so ahead of the FOMC statement release and subsequently did little afterward.

While yesterday marked about the 6th consecutive month with no expected surprises in the statement and none delivered, that hasn’t changed the pattern of trading. Hesitancy prior to the release and then incoherent reactions afterward was a fairly predictable pattern.

Yesterday was completely against long established script.

Given the uncertainty that has been permeating the market and the final realization that earnings really haven’t been that great, especially on the retail level, it’s surprising that investors would have gone counter to Tuesday’s large downward move, which itself was already counter to a Tuesday trend.

With the FOMC now out of the way and earnings season slowing down I’m not certain what the next catalyst will be, particularly as the situation in Ukraine also seems to be mitigated, although there is the little matter of a planned election on Sunday, which may bring out some emotions.

There was certainly no catalyst today, but sometimes that’s a good thing.

Depending on your perspective having a market vacation on Memorial Day may either be a good thing or bad thing for investors as the uncertainty that may attend Sunday’s elections makes itself known. Either we will be behind the eight ball having to wait an additional day to react or that additional day would allow some time to calm and digest.

Some may even use tomorrow as an opportunity to lighten up a little bit in advance of a long weekend, but that hasn’t been the case for the past couple of years. Uncertainty going into a weekend alone hasn’t been enough to derail bullish sentiment and the fear of missing out on a Monday rally.

Another day like yesterday will have us at another new record and anything is entirely plausible.

Today we did get just a little bit closer to those records. Not too much closer, but we didn’t move any further away.

The pre-open appeared to be pointing to a flat open, but just as yesterday’s pre-open provided absolutely no indication for what was to transpire when the bell rang, today turned out to be no different.

The late Mark Haines always used to say that the pre-open was meaningful of nothing, except when there was a very large move based on some unexpected news. We haven’t really had any of those for a long while. Instead, we’ve gotten fairly accustomed to early gains in the pre-open fading within about an hour or so and moderate losses in the pre-open foretelling nothing.

So this morning is another kind of sit back and watch, with the hope that there wouldn’t be a repeat of the past two weeks when many positions that were rollover candidates saw their prices deteriorate as the markets went much lower.

This week has a large number of rollover candidates as the low volatility continues to make it unappealing to diversify by time of expiration. Hopefully a fair share of those will be assigned or rolled over, as currently appears to be the case.

Unfortunately, despite knowing better, and the past two weeks should have reinforced that knowledge, I continue to count those chickens before their hatched. However, there does seem to be a slightly optimistic tone after yesterday’s trading and thus far, nothing seems to be on the horizon that is likely to upset things.

With Monday being a market holiday, there is a chance that some new purchases may still be made this week in an attempt to get a full week’s premium from call sales, as opposed to just 4 days that would be reflected in the prices. Not what I usually do on Thursdays or Fridays, but it’s my small way of celebrating.

Otherwise, I’d have been perfectly content to see the market keep share prices where they are or a bit higher and execute those rollovers today or tomorrow and simply enjoy a nice three day weekend.

That played out nicely for today as more of those trades were made than is usually the case on a Thursday. Hopefully, tomorrow will bring even more, as a number of positions are uin good shape for either assignment or rollover, as long as those chickens do their job.

Daily Market Update – May 22, 2014 (8:45 AM)

It still seems very odd to me that the market came off of its large drop on Tuesday and recovered the loss on a Wednesday, but did so ahead of the FOMC statement release and subsequently did little afterward.

While yesterday marked about the 6th consecutive month with no expected surprises in the statement and none delivered, that hasn’t changed the pattern of trading. Hesitancy prior to the release and then incoherent reactions afterward was a fairly predictable pattern.

Yesterday was completely against long established script.

Given the uncertainty that has been permeating the market and the final realization that earnings really haven’t been that great, especially on the retail level, it’s surprising that investors would have gone counter to Tuesday’s large downward move, which itself was already counter to a Tuesday trend.

With the FOMC now out of the way and earnings season slowing down I’m not certain what the next catalyst will be, particularly as the situation in Ukraine also seems to be mitigated, although there is the little matter of a planned election on Sunday, which may bring out some emotions.

Depending on your perspective having a market vacation on Memorial Day may either be a good thing or bad thing for investors as the uncertainty that may attend Sunday’s elections makes itself known. Either we will be behind the eight ball having to wait an additional day to react or that additional day would allow some time to calm and digest.

Some may even use tomorrow as an opportunity to lighten up a little bit in advance of a long weekend, but that hasn’t been the case for the past couple of years. Uncertainty going into a weekend alone hasn’t been enough to derail bullish sentiment and the fear of missing out on a Monday rally.

Another day like yesterday will have us at another new record and anything is entirely plausible.

The pre-open appears to be pointing to a flat open, but just as yesterday’s pre-open provided absolutely no indication for what was to transpire when the bell rang, today could be no different.

The late Mark Haines always used to say that the pre-open was meaningful of nothing, except when there was a very large move based on some unexpected news. We haven’t really had any of those for a long while. Instead, we’ve gotten fairly accustomed to early gains in the pre-open fading within about an hour or so and moderate losses in the pre-open foretelling nothing.

So this morning is another kind of sit back and watch, with the hope that there woun’t be a repeat of the past two weeks when many positions that were rollover candidates saw their prices deteriorate as the markets went much lower.

This week has a large number of rollover candidates as the low volatility continues to make it unappealing to diversify by time of expiration. Hopefully a fair share of those will be assigned or rolled over, as currently appears to be the case.

Unfortunately, despite knowing better, and the past two weeks should have reinforced that knowledge, I continue to count those chickens before their hatched. However, there does seem to be a slightly optimistic tone after yesterday’s trading and thus far, nothing seems to be on the horizon that is likely to upset things.

With Monday being a market holiday, there is a chance that some new purchases may still be made this week in an attempt to get a full week’s premium from call sales, as opposed to just 4 days that would be reflected in the prices. Not what I usually do on Thursdays or Fridays, but it’s my small way of celebrating.

Otherwise, I’d be perfectly content to see the market keep share prices where they are or a bit higher and execute those rollovers today or tomorrow and simply enjoy a nice three day weekend.

Daily Market Update – May 21, 2014 (Close)

It seems as if we had an FOMC Statement just yesterday, but this afternoon was the scheduled release of the latest iteration.

While there weren’t too many expectations for any substantive kind of change in language, tone or intent, you never know how the market interprets status quo, much less change, so anything is always possible.

In addition to the immediate, knee jerk reactions to the minutes as the words are flash parsed by algorithms that scan the printed text, there is always the next wave or reaction minutes later as well as the following day for some more rational, or less rational thought to take hold.

Yesterday was an interesting day as it was really the first time that there was some widespread concern about retail sales despite having had at least 6 months of warning signs that the economy wasn’t reflecting some of that good news coming from the Jobs Numbers and Employment Situation Reports.

That disconnect seemed so obvious yet had been completely ignored. You would expect that increased employment would lead to increased discretionary spending at all levels of the chain. It just seems incongruous that only the higher levels of the retail chain seem to be thriving in what is thought to be an improving environment. Today’s earnings report from Tiffanys just adds to that observation that something is amiss.

That realization was poorly timed because it took one of our Tuesdays, which invariably see the market go higher and just wasted it on all of the concerns about the economy not reflected consumer optimism and more importantly, consumer spending.

Following yesterday’s triple digit loss it wasn’t too terribly surprising to see some early bounce back prior to the opening bell, but what was surprising was to see that early advance just continue to strengthen through the day and leading up to the 2 PM release of the FOMC statement. While I thought that any advance wasn’t likely to be sustained and especially unlikely to be potent the market is always full of surprises. Usually FOMC days tend to have tentative trading leading up to the report, but not today.

Additionally, there was almost no reaction to the release. Certainly not an immediate one, although about 6 minutes later the market did add on to its already substantial gains that offset Tuesday’s losses.

As with recent past weeks with Wednesday rolling around my thoughts were turned toward possible rollovers, which were definitely in short supply the past week. However, as opposed to last week, unless there is some real surprise in today’s FOMC, there isn’t too much reason to suspect a repeat of the deterioration seen during the latter half of last week that took so many positions out of contention for rollovers.

With the market now within even more easy striking distance of another new high and seeing how often it has shown resilience, it’s noteworthy how nervous traders appear to be. The immediate historical precedence would have you being optimistic for another scaling of the wall and overcoming any short term selling pressure.

However, the best reason those nerves is the breakdown of the high momentum names, as that has its own historical precedence. That history is one that has been tied to leading to an overall market decline.

That can’t be lost on some traders, especially the ones that have been around for a while and have been in up and down markets.

Not that there is any parallel, but we are now in that same period as between 1982 and 1987.

During that time the market just went straight higher and many drawn into the market, but as investors and brokers, had no idea that markets could go down, after a 5 year run.

Well, now its 2009 to 2014. That same 5 year run and there is a generation that may be unaware that the  downside even exists.

On a positive note when so many start talking about the downside, the risk and the disappointments it becomes a less likely scenario. It’s almost always when you don’t see it coming that it happens, so I hope those warnings keep coming and caution becomes more the norm.

Daily Market Update – May 21, 2014 (9:15 AM)

It seems as if we had an FOMC Statement just yesterday, but this afternoon is the scheduled release of the latest iteration.

While there aren’t too many expectations for any substantive kind of change in language, tone or intent, you never know how the market interprets status quo, much less change, so anything is possible.

In addition to the immediate, knee jerk reactions to the minutes as the words are flash parsed by algorithms that scan the printed text, there is always the next wave or reaction minutes later as well as the following day for some more rational, or less rational thought to take hold.

Yesterday was an interesting day as it was really the first time that there was some widespread concern about retail sales despite having had at least 6 months of warning signs that the economy wasn’t reflecting some of that good news coming from the Jobs Numbers and Employment Situation Reports.

That disconnect seemed so obvious yet had been completely ignored. You would expect that increased employment would lead to increased discretionary spending at all levels of the chain. It just seems incongruous that only the higher levels of the retail chain seem to be thriving in what is thought to be an improving environment. Today’s earnings report from Tiffanys just adds to that observation that something is amiss.

That realization was poorly timed because it took one of our Tuesdays, which invariably see the market go higher and just wasted it on all of the concerns about the economy not reflected consumer optimism and more importantly, consumer spending.

Following yesterday’s triple digit loss it’s not terribly surprising to see some early bounce back prior to the opening bell, but it’s not too likely to be sustained or to move higher in advance of today’s report. Most FOMC days tend to have tentative trading leading up to the report.

As with recent past weeks with Wednesday rolling around my thoughts are turned toward possible rollovers, which were definitely in short supply the past week. However, as opposed to last week, unless there is some real surprise in today’s FOMC, there isn’t too much reason to suspect a repeat of the deterioration seen during the latter half of last week that took so many positions out of contention for rollovers.

With the market still within easy striking range of another new high and seeing how often it has shown resilience, it’s noteworthy how nervous traders appear to be. The immediate historical precedence would have you being optimistic for another scaling of the wall and overcoming any short term selling pressure.

However, the best reason those nerves is the breakdown of the high momentum names, as that has its own historical precedence. That history is one that has been tied to leading to an overall market decline.

That can’t be lost on some traders, especially the ones that have been around for a while and have been in up and down markets.

Not that there is any parallel, but we are now in that same period as between 1982 and 1987.

During that time the market just went straight higher and many drawn into the market, but as investors and brokers, had no idea that markets could go down, after a 5 year run.

Well, now its 2009 to 2014. That same 5 year run and there is a generation that may be unaware that the  downside even exists.

On a positive note when so many start talking about the downside, the risk and the disappointments it becomes a less likely scenario. It’s almost always when you don’t see it coming that it happens, so I hope those warnings keep coming and caution becomes more the norm.