Option to Profit
Week in Review
July 20 – 24, 2015
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Weekly Up to Date Performance
Today’s weakness to close out the week simply helped the market return nearly every bit of the 2.4% gain it saw the previous week.
It was yet another week in which energy and commodities continued their downward spiral, erasing all the the gains that had been made in the prior month or two.
This was the kind of week that it was a good idea to resist what looked as if they were bargains, because those prices got even cheaper the next day, so for yet another week there was little reason to go chasing new positions.
There was one new position opened for the week and it out-performed both the adjusted and unadjusted S&P 500 by 2.9%.
That position was 0.7% higher for the week while the S&P 500 was down by 2.2%.
Last week’s 2.4% gain was almost entirely accomplished in a single day. The rest of the week and all of this week were spent getting beaten back by the market’s resistance point.
While the previous weeks successfully tested support, so far it hasn’t been successful in testing that resistance.
With no assignments for the week, the 46 closed lots in 2015 continue to outperform the market. They are an average of 5.0% higher, while the comparable time adjusted S&P 500 average performance has been 1.3% higher. That difference represents a 283.3% performance differential.
There was virtually no news this week other than earnings to complicate things, but now that the week is done, we could have used some diversions.
All had been going well with earnings during the previous week, which was the first full week of this current cycle. Unfortunately, things began falling apart when IBM reported yet another disappointing quarter, but the real surprise is that some others followed, including those that rarely do anything that comes as a disappointment.
Most of all, it was a week with some out-sized moves higher and lower, but the prevailing trend was clearly lower.
What started becoming clear, although it’s hard to understand what took so long for analysts and talking heads to realize that there were some significant divergences developing between the major indexes. Even more fascinating is that it was only in the past few days that anyone was so analytical as to realize that the reason the indexes were rising, but at the same time people weren’t really feeling any richer, is that the gains were really concentrated among a very few names.
While huge moves in some very large market capitalization companies can do wonders for the index that it’s in, that doesn’t necessarily mean that other members of that index are going to get any trickle down glory.
That is essentially the difference between how things are supposed to be, on paper, at least and how things really are.
With only one position for the week and only one scheduled for expiration, there wasn’t much to be done other than watch the weakness accumulate.
Next week there are a few positions set to expire, but with what little cash reserve I currently have I’m not overly anxious to spend much or any of it, despite what feel and look like bargains.
Earlier this week I mentioned those bargains, yet also mentioned how I wasn’t quite ready to run after them. Instead, I was hoping that those bargains might persist as the coming week was getting ready to begin.
For now, that looks like how we are set to begin next week, so even with some reluctance to spend money, there may be some reason to do so. However, it is possible that after the very recent test of the market’s support level, we may be getting ready to test it once again.
That second assault on the S&P 500 level of about 2045 gives some reason for concern, because there’s not much between that level at the 2000 level. That lower point would bring us to about a 7% decline, after having recently rebounded from an intra-day low that took the market to a 5% decline, only to see it quickly erased.
Most technicians are probably not too thrilled about testing support again. When so many focus on momentum, the kind of momentum that comes with bouncing off resistance and heading back towards a support level isn’t the kind that typically leads to a higher bounce first.
Caution seems like a good way to go for now.
Next week will be another very busy one for earnings releases and although there isn’t too much in the way of scheduled economic news, what little there is may be meaningful.
That includes an FOMC Announcement, Jobless Claims and GDP, so there could be some additional downside pressure if there’s any reason to believe that the economy is heating up enough to merit an interest rate increase by September.
So I will most likely be watching rather than spending, but wouldn’t totally preclude the loosening of purse strings as watching more earnings reports.
(Note: Duplicate mention of positions reflects different priced lots):
New Positions Opened: BBY
Puts Closed in order to take profits: none
Calls Rolled over, taking profits, into the next weekly cycle: BBY
Calls Rolled over, taking profits, into extended weekly cycle: none
Calls Rolled over, taking profits, into the monthly cycle: none
Calls Rolled Over, taking profits, into a future monthly cycle: none
Calls Rolled Up, taking net profits into same cycle: none
New STO: none
Put contracts expired: none
Put contracts rolled over: none
Long term call contracts sold: none
Calls Assigned: none
Calls Expired: none
Puts Assigned: none
Stock positions Closed to take profits: none
Stock positions Closed to take losses: none
Calls Closed to Take Profits: none
Ex-dividend Positions: FAST (7/29 $0.28)
Ex-dividend Positions Next Week: KMI (7/29 $0.49)
For the coming week the existing positions have lots that still require the sale of contracts: AGQ, ANF, AZN, CHK, CLF, FCX, GDX, GM, GPS, HAL, INTC, JCP, JOY, KMI, KSS, LVS, MCPIQ, MOS, RIG, WFM, WLTGQ (See “Weekly Performance” spreadsheet or PDF file)
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