Monthly Archives: January 2014

(see all trades this option cycle)

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

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – January 15, 2014 (10:00 AM)

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.

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.

While the bank earnings have been good, Fastenal, which had pre-announced, yet again, a few weeks ago is lower, as it announced its earnings. At least this time it’s pre-open move wan’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.

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 14, 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

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – January 14, 2014 (Close)

It’s hard to believe that a dovish, non-voting member of the FOMC could have said anything that would have sent the market down nearly 200 points. That was the widely blamed reason for yesterday’s market in which there really was no substantive news.

Maybe it was the carryover from the really disappointing Employment Situation numbers.

Maybe it is the really horrible retail sales statistics that makes people wonder why no one is involved in discretionary spending if the economy is improving.

But at least this morning there’s some good news, just as in the past few quarters. That news is that JP Morgan and Wells Fargo are making money and are likely to make even more as interest rates creep higher. Although there were some signs of slowdown, such as decreased mortgage applications, the overall tone was positive and the numbers were higher.

Unfortunately, that news doesn’t necessarily mean anything for the other 498 members of the S&P 500.

I didn’t really have to scour my records to know that yesterday was the slowest trading Monday in a long time. It’s one thing to not make many new purchases when you don’t have too much cash, but it’s entirely different matter when the cash is there and prices are dropping.

That perfectly describes yesterday.

All revved up with no place to go is a frustrating way to spend the day.

Today’s rally, on the other hand, was possibly fueled by the words of a hawkish FOMC member, Richard Fischer, who spoke in terms that could only be described as being dovish.

All of this just goes to show that it’s a completely wasted effort trying to understand anything.

You could, for example, have spent all day trying to understand the on the dime turns in  intra-day prices of such stocks as Starbucks, Sears Holdings, YUM Brands and others. Sometimes it’s fascinating looking at the minute by minute charts and seeing the graphic representation of those changes, but you’re still left wondering what happened.

In the past year having cash and falling prices has been a perfect formula to pick up some bargains. However, it just didn’t feel that way to me yesterday. Some of the falls in stocks were just too large and represented what appeared to be over-reactions.

Over-reactions are common, especially on momentum stocks. I suppose you can also make a case that so many stocks have risen so much that they are also due for some kind of give back, but yesterday was definitely a case of taking action  first and then asking questions later.

Those kind of reactions aren’t very healthy, but more importantly they do give you a glimpse of how your fellow investors might react in the face of truly bad news.

That alone is a good reason to be defensive. Very few market declines are insidious. They tend to be precipitous, but history also shows that sitting on the sidelines in fear of those kinds of drops only means missed opportunities.

The compromise is to not be fully invested when you have doubts, even though that may mean missing some of the party. The upside is that if you are correct and the market does move downward in a decisive fashion, not only do you suffer less, but you’re likely to overcome what you missed by  finally deploying sideline cash at bargain levels.

I’ve been in that mindset now for a long time, much longer than I ever believed I could have emotionally sustained, but I don’t feel as if I’ve missed very much.

I am beginning to believe that we’re at a transition phase right now, with more and more emphasis about to be paid to company fundamentals rather than to the Federal Reserve’s intentions.

During the latter, with most everything going higher it was only natural for investors to dump anything that disappointed, perhaps accounting for some very pronounced moves, unlike what had been seen in the past. After all, why hold onto something that’s falling when absolutely everything else is going higher, buoyed by a Federal Reserve stimulated market?

However, with an emphasis on fundamentals and the belief that stocks can go up or down and not just higher, even in a falling market individual stock drops may be less frightening and less severe.

I think that this earnings season may see a moderation to the market and that would be a great environment in which to spend that money  that’s now on the sidelines.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 14, 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

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Al
erts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – January 14, 2014 (9:30 AM)

It’s hard to believe that a dovish, non-voting member of the FOMC could have said anything that would have sent the market down nearly 200 points. That was the widely blamed reason for yesterday’s market in which there really was no substantive news.

Maybe it was the carryover from the really disappointing Employment Situation numbers.

Maybe it is the really horrible retail sales statistics that makes people wonder why no one is involved in discretionary spending if the economy is improving.

But at least this morning there’s some good news, just as in the past few quarters. That news is that JP Morgan and Wells Fargo are making money and are likely to make even more as interest rates creep higher. Although there were some signs of slowdown, such as decreased mortgage applications, the overall tone was positive and the numbers were higher.

Unfortunately, that news doesn’t necessarily mean anything for the other 498 members of the S&P 500.

I didn’t really have to scour my records to know that yesterday was the slowest trading Monday in a long time. It’s one thing to not make many new purchases when you don’t have too much cash, but it’s entirely different matter when the cash is there and prices are dropping.

That perfectly describes yesterday.

All revved up with no place to go is a frustrating way to spend the day.

In the past year having cash and falling prices has been a perfect formula to pick up some bargains. However, it just didn’t feel that way to me yesterday. Some of the falls in stocks were just too large and represented what appeared to be over-reactions.

Over-reactions are common, especially on momentum stocks. I suppose you can also make a case that so many stocks have risen so much that they are also due for some kind of give back, but yesterday was definitely a case of taking action  first and then asking questions later.

Those kind of reactions aren’t very healthy, but more importantly they do give you a glimpse of how your fellow investors might react in the face of truly bad news.

That alone is a good reason to be defensive. Very few market declines are insidious. They tend to be precipitous, but history also shows that sitting on the sidelines in fear of those kinds of drops only means missed opportunities.

The compromise is to not be fully invested when you have doubts, even though that may mean missing some of the party. The upside is that if you are correct and the market does move downward in a decisive fashion, not only do you suffer less, but you’re likely to overcome what you missed by  finally deploying sideline cash at bargain levels.

I’ve been in that mindset now for a long time, much longer than I ever believed I could have emotionally sustained, but I don’t feel as if I’ve missed very much.

I am beginning to believe that we’re at a transition phase right now, with more and more emphasis about to be paid to company fundamentals rather than to the Federal Reserve’s intentions.

During the latter, with most everything going higher it was only natural for investors to dump anything that disappointed, perhaps accounting for some very pronounced moves, unlike what had been seen in the past. After all, why hold onto something that’s falling when absolutely everything else is going higher, buoyed by a Federal Reserve stimulated market?

However, with an emphasis on fundamentals and the belief that stocks can go up or down and not just higher, even in a falling market individual stock drops may be less frightening and less severe.

I think that this earnings season may see a moderation to the market and that would be a great environment in which to spend that money on the sidelines.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 13, 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

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – January 13, 2014 (Close)

With one third of January now part of history, history is at risk of not repeating itself this year unless the market does something with the next two weeks. The pre-market didn’t offer any suggestion that anything would begin today in that regard.

By the time it was all over it would turn out to be one of the worst days in quite a while, as Goldman Sachs raised concerns that stocks were getting to be over-valued.

With earnings season really getting into full swing this week comes word that a 6% increase in comparable period earnings are expected. That alone should help increase the broad market, unless of course there’s an inexplicable shrinking of the market multiple.

But that 6% seems high, unless that’s the result of some optics secondary to share buy backs. Fewer shares can result in increased earnings per share even if net earnings decrease.The only problems is that optics can only take you so far. At some point no one is fooled.

The continuing difficulty exhibited by retail makes it hard to see where improved earnings are coming from unless they are really the result of optics.The last couple of quarters the major money center banks reported nice earnings, but they really didn’t set the tone. Rather, they set investors up for disappointment.

But last year that didn’t really matter. No matter what was going on the market just kept going higher.

While it’s obviously too early to make any conclusions or projections, at least it’s clear that this January isn’t looking at all like the past two years. Looking at some of the really significant price drops among those that disappoint the market with either earnings or guidance the lack broad market strength, thus far, makes you wonder when the other shoe is about to hit.

I suppose first they actually have to be able to sell the shoes, so maybe we’re then safe. Even Family Dollar is struggling.

After a week of a lot of assignments and an end of the monthly cycle this week, I’m hoping for a repeat. Some good earnings reports from the banks this week would at least add some support to the market in a week that isn’t scheduled to have much in the way of market moving news, otherwise.

While the money is available this week, I’m still a little cautious and am not likely to bring cash reserves down as low as they went last week. This week I stand at 40% and am willing to get down to about 25%, which would be 5 to 7 new positions.

But as the market approached a loss of 200 points going into the final hour and the drops were across the board, I didn’t sense any bargains or anything that I was salivating to own. That was despite large drops in Starbucks, Conoco Phillips, Coach, Verizon, Lowes, YUM Brands and many, many others.

Given that even after today’s 1% fall we are only about 1.5% off the recent market top, I’m not in a real rush to go out and buy anything until the clarity appears. That could be further weakness or it could be price stability, but prices are not down enough to offer a reward that makes it worth trying to be ahead of the curve.

However, as nearing mid-week or Thursday, if it appears as if there may be a considerable number of assignments on Friday, and that became less likely as today’s trading proceeded, that may send a signal for a surge of buying. If the cash is likely to be there, I would rather get premiums reflecting 6 days of time by jumping the gun on the week, rather than waiting for next week’s holiday shortened trading to begin on Tuesday.

Lately, it seems that every day has a challenge.

Today in the pre-open it was LuLuLemon, although for the rest of the day, perversely enough, LuLuLemon out-performed the market.

LuLuLemon set the stage for disappointing earnings by reporting that store traffic was low in December. With options expiring next Friday that allows some time for price recovery, which I think will be forthcoming. With a new CEO it’s not unusual to load up on bad news so that their first “clean” quarterly earnings report will have had as much bad news eliminated. The strategy is to always accelerate the negatives and have them reflect on past leadership.

Clearly someone bet wrong on shares on Friday when it went nearly 4% higher on no news on an otherwise flat day in the market.

However, as retailers are getting the bad news out and taking their hits they are becoming more and more attractive, although if any are potential buys this week, as Bed Bath and Beyond, L Brands, Target, Lowes and even Sears are all possible purchases this week, individuals should make certain that retail isn’t too large of a sector in their portfolios.

Ultimately, I don’t understand how the market can not see the retail situation as reflecting an economy that isn’t as robust as it should be. Hopefully the last Employment Situation Report was an anomaly and not a foreteller of people’s inability to make discretionary purchases.

So it’s another weak of selective caution, but maybe more caution than selection

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 13, 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

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle