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Daily Market Update – January 15, 2014 (Close)

After two diametrically different markets to start this week, each being attributed to remarks from FOMC members, it’s worth noting that in the next three days there are 5 more addresses scheduled by FOMC members, including outgoing Chairman Ben Bernanke.

While some were calling yesterday’s moves a “Key Reversal,” it didn’t really fit that billing, but even then those so designated days don’t always live up to their name and don’t necessarily predict future direction.

Then again, if today’s triple digit gain was foretold by the tape, I apologize, but am happy to do so, as it brings us one day closer to monthly expiration and one day closer to meeting goals.

With Bank of America also reporting good earnings the banks are continuing the same script of the past few quarters and that, too, has signified little as far as predicting the future goes.

There is clearly some nervousness in the market that is reflected in the size of moves in individual stocks as well as some of the intra-day moves being observed without obvious catalysts. While it’s still plausible to consider that some moves are the result of tax related strategies that plausibility shrinks with each day, as each day brings risk of creating a reduction in paper profits that exceeds the tax savings by deferring its payment by 12 months.

Today, for example there were large intra-day moves in Walgreen and Lexmark.

Walgreen was being prepared for a Trading Alert yesterday. Hd it been about 5 minutes earlier it would have come before a segment on CNBC about the stock, which then saw its price move higher and out of range. Later in the early evening it was featured on Jim Cramer’s “Mad Money.”

This morning after its price went higher initially, it came down to yesterday’s price point.

About an hour after the purchase shares fell about $0.40 in a 15 minute span on suddenly heavy volume, clearly someone dumping shares.

Later in the afternoon, Lexmark, which had gone nicely above its $36 strike price during trading also went down about $0.40 in 6 minutes on very heavy volume.

Go figure.

While the bank earnings have been good, Fastenal, which had pre-announced, yet again, a few weeks ago was lower, as it announced its earnings. At least this time it’s pre-open move wasn’t as severe as on previous occasions, whether up or down in direction. Fastenal is a metric of its own and lower sales are never a good sign, especially if their competition, Grainger, announces similar results next Friday.

The opening bell wasn’t as kind to shares, however. I’m still not certain why anyone is surprised when earnings are released following pre-announcement disappointments.

The good news about Fastenal is that it’s so resilient and just keeps hanging in at the $47 level. For those have have been along for the ride over the past 7 months and five bouts of ownership, the return is about 33%, even though shares haven’t budged in price.

Why can’t there be more stocks like that? It’s one of those shares that I would prefer to rollover than to see assigned. It looks as if after this morning’s reaction assignment is not in the cards. Hopefully rollover is, but the way things go, Friday is still an eternity away.

In fact, tomorrow is also an eternity away, as I wanted to sell calls on shares such as Eli Lilly today, but it doesn’t offer expanded options and the only choices available were either a paltry premium for this week or a paltry premium next month, due to having fewer strike selections and being in-between strikes.

For the rest of the week I’ll still be looking for some places to spend money, as I’m still willing to take cash reserves a little lower, especially if it looks as if a fair number may be assigned or rolled over on Friday.

The first
of the potentially market moving speeches is at 12:50 PM today and the second comes well after the market’s close, so there may be some tentativeness in trading up until those speeches and perhaps a little flurry after the first then becoming tentative over concerns about what may be said in the after hours.

But then there’s another speech prior to the market’s open, so there may be offsetting messages, leading up to Ben Bernanke at 11:10 AM.

By Friday at 12:30 no one is really going to care what Jeffrey Lacker has to say, as these monthly ending option cycles tend to have lives of their own and aren’t likely to turn on a dime.

With the month now at the midway point the DJIA is less than 200 points from its all tie record, yet everyone was spooked by Monday’s 1% decline. You can easily make a case for momentum continuing to pull the market forward, but it will either be helped out or battled back by earnings.

While I’m not expecting the 6% improved earnings, at least on a share adjusted basis, I also don’t expect any great surrender, either, so there’s still likley to be some personal spending ahead.

Hopefully, a strong finish to the week will see to it that there are sufficient assignments to fuel that kind of folly.

  

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 15, 2014

 * Assumes equal number of shares in positions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Posting of trades is not a recommendation to execute trades

 

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

Friday? See Week in Review for summary statistics and performance

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