Monthly Archives: February 2014

Daily Market Update – February 11, 2014 (Close)

As frustrating as it is not making very made trades, especially during the first two days of the week, which tend to be the busiest for opening new positions, I guess I didn’t really mind too much watching the markets run with reinforcement of what most everyone already knew.

Yesterday was a very subdued day as the conventional wisdom held that most everyone was awaiting to hear Janet Yellen’s congressional testimony.

It’s wasn’t too likely that there would be any surprises coming from the prepared text which was distributed prior to the planned testimony. It also seemed unlikely that anyone would be surprised by the lack of surprise, but you can never really predict human behavior, which includes the buying or selling response to news or even the lack of news.

Today the response was unbridled buying and even the sounds of people yelling “risk on,” again.

It’s was also equally unlikely that the ensuing questions from elected officials would elicit much in the way of deviation from the planned course, of which Yellen was an active architect. Whether she says anything that may be over-interpreted is a different manner, but like her predecessor, she seems to value the meaning of every word ands speaks slowly enough that she’s not trying to slip anything through.

What is somewhat interesting and different is that a response panel has been invited to also present and be questioned by the congressional panels after Yellen’s testimony, similar to how the opposition gets to respond to the State of the Union Message. While that may have happened in the past, I just can’t remember that to be the case. But as most would agree, what’s really missing is more politicization of the Federal Reserve.

I think that the upcoming testimony may have played a role in Monday’s quiet trading, but not to be overlooked is the roller coaster of the week before and the lack of indication of which end of the week was the one that foretells where we are headed next.

While Charles Dickens just had his 202nd birthday celebrated, it might be appropriate to think that last week was “the best of times and the worst of times.” Dickens didn’t really focus on an analysis of the net result of the times, but last week the net result was a positive one, especially when you consider the growing negative sentiment that had come from the background and into the foreground.

So far this morning the futures also seem to be muted, just as they were to open the week. They did, however, improve as the opening bell rang and the initial comments had their embargo lifted.

Again, probably not a surprise, but given the previous couple of weeks and the nervousness that pervaded the trading floors, it’s also not surprising that there’s still caution abounding.

With only a single new position it was the quietest Monday in over 2 years and I thought that low level of activity was likely to continue today, although my focus was on a couple of positions that go ex-dividend tomorrow, looking for an opportunity to justify their purchase. Other than those I didn’t see many prospects unless something breaks in either direction.

In the meantime I didn’t mind watching prices move higher and getting closer to the point that they can get cover. Granted, while they do so it’s just a paper exercise, but getting cover is tangible and justifies sitting around all day.

The market  at the beginning of the day was less than 3% below its current peak having recovered about half of the loss that sent even brave traders quivering into retreat. It’s precisely that kind of ambivalence, straddling that mid-point that makes it difficult to establish positions that commit assets.

With the equally sudden retreat of volatility the reward for taking the risk has also fallen and without reward the mattress begins to look appealing, but we all know, that’s never the right way to go.

As the market exploded higher the drop from the peak was cut in another half.

Whether warranted or not, unless stocks are already deep in the money, these kinds of moves are always welcome, so I thank Janet Yellen. Despite not having done or said anything differently, those in a position to create market moods saw her calming voice as just the tonic for getting back to where 2013 had left off.

Maybe even the GOP leadership is due some thanks for possibly putting forward a
debt ceiling expansion bill without any strings attached.

PS: Of you purchased Microsoft today, it goes ex-dividend on Tuesday, February 18th. However, because Monday is a stock market holiday, if it is to be assigned early, it will happen after Friday’s close.

 

Daily Market Update – February 11, 2014 (10:00 AM)

Yesterday was a very subdued day as the conventional wisdom held that most everyone was awaiting to hear Janet Yellen’s congressional testimony.

It’s not too likely that there will be any surprises coming from the prepared text which was distributed prior to the planned testimony. It also seems unlikely that anyone would be surprised by the lack of surprise, but you can never really predict human behavior, which includes the buying or selling response to news or even the lack of news.

It’s equally unlikely that the ensuing questions from elected officials will elicit much in the way of deviation from the planned course, of which she was an active architect. Whether she says anything that may be over-interpreted is a different manner, but like her predecessor, she seems to value the meaning of every word ands speaks slowly enough that she’s not trying to slip anything through.

What is somewhat interesting and different is that a response panel has been invited to also present and be questioned by the congressional panels after Yellen’s testimony, similar to how the opposition gets to respond to the State of the Union Message. While that may have happened in the past, I just can’t remember that to be the case. But as most would agree, what’s really missing is more politicization of the Federal Reserve.

I think that the upcoming testimony may have played a role in Monday’s quiet trading, but not to be overlooked is the roller coaster of the week before and the lack of indication of which end of the week was the one that foretells where we are headed next.

While Charles Dickens just had his 202nd birthday celebrated, it might be appropriate to think that last week was “the best of times and the worst of times.” Dickens didn’t really focus on an analysis of the net result of the times, but last week the net result was a positive one, especially when you consider the growing negative sentiment that had come from the background and into the foreground.

So far this morning the futures also seem to be muted, just as they were to open the week. They did, however, improve as the opening bell rang and the initial comments had their embargo lifted.

Again, probably not a surprise, but given the previous couple of weeks and the nervousness that pervaded the trading floors, it’s also not surprising that there’s still caution abounding.

With only a single new position it was the quietest Monday in over 2 years and I think that low level of activity is likely to continue today, although my focus will be on a couple of positions that go ex-dividend tomorrow, looking for an opportunity to justify their purchase. Other than those I don’t see many prospects unless something breaks in either direction.

In the meantime I don’t mind watching prices move higher and get closer to the point that they can get cover. Granted, while they do so it’s just a paper exercise, but getting cover is tangible and justifies sitting around all day.

The market is currently less than 3% below its current peak having recovered about half of the loss that sent even brave traders quivering into retreat. It’s precisely that kind of ambivalence, straddling that mid-point that makes it difficult to establish positions that commit assets.

With the equally sudden retreat of volatility the reward for taking the risk has also fallen and without reward the mattress begins to look appealing, but we all know, that’s never the right way to go.

Daily Market Update – February 10, 2014 (Close)

After least week’s bookend, but opposite triple digit moves to open and close the week we’re left feeling a bit more optimistic than just a week ago.

It just didn’t rally show today, although you can spin today’s flat performance with the perspective of a bull or a bear, as you like.

Whether or not that optimism was justified is hard to say, but we’re now slowly moving away from the real market movers reporting their earnings and may once again fall prey to speculating about what every little nuance or event means.

This week, for example, Janet Yellen will give Congressional testimony on Tuesday and five other Federal Reserve Governors will be giving addresses. Any of those can slip in a phrase, make a joke or simply use a single word with perceived emphasis that will send traders into fits and take the market with them.

No doubt everyone will want to know how Janet Yellen feels about the past two months of employment statistics, particularly since she seems interested in pursuing a lower unemployment threshold than previously was the case. For traders it also means having to decide whether her intent means that the course of the tapering to Quantitative Easing will be altered.

While we don’t know what she will say when faced with questions we do know that there is always some layer of obfuscation in the answers. With Yellen, we just don’t know how much there will be. Maybe she’ll continue the example set by her predecessor and be more decipherable than was his predecessor.

Of course, if there is even the slightest suggestion that the path may be altered that then brings the question as to whether altering that path is good or bad as regards the economy and then whether what’s good or bad for the economy is bad or good for the stock market.

For individual traders it makes absolutely no sense trying to understand that which can’t be understood. Trying to apply logical processes to understand the unpredictable or the illogical is itself illogical.

Given their performance last week, it’s only logical that in hindsight I wish that I had opened more new positions. I don’t think, however, I’m going to be interested in over-compensating this week. While for now it appears that the market is fairly resistant to anything more than a 5% decline in the S&P, the previous pattern has been to erase that loss and go even further on the upside. I think that I will look for a little more evidence that we’ll be on that path rather than assuming we already are on our way.

I would rather miss a percent on the upside than be first on line to capture a few percent on the downside.

With cash at about 34% to start the week but only 6 positions set to expire this week I’m likely to be conservative with cash and will also likely look at weekly options or those that may be able to bypass the February 22, 2014 monthly expiration.

With a number of potentially good dividend plays this week I may also preferentially look in their direction, particularly as volatility has again died down and the premiums are reflecting that to be the case.

In previous weeks the first hour, if the market was moving higher, turned out to be very unreliable in predicting direction for the rest of the day as many investors took the opportunity to secure some profits whenever they could in anticipation of further market declines.

For that reason I will probably be an observer early in the sessions this week and see where this week’s sentiment takes us.

Watching the pre-open market it appears that no one has an idea of where we’re going to start the week. When there’s that little resolve it’s often easier to have an event get blown out of proportion and trigger a mood. Other than potentially being prompted by this week’s scheduled events or something unexpected on the international front, the mood would do well to just stay flat.

And that’s exactly what it did today as it was very hard to justify doing much of anything as the market seems to be in a state of suspended animation awaiting the beginning of the congressional testimony.

It’s not very likely that much news will be made tomorrow, but that alone may lead to a relief rally, as that has been a pattern in the past. Since the testimony will be released before the hearing we’ll already have the early tone set, but anything goes once questioning starts.

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(see all trades this option cycle)

Daily Market Update – February 10, 2014 (9:30 AM)

After least week’s bookend, but opposite triple digit moves to open and close the week we’re left feeling a bit more optimistic than just a week ago.

Whether or not that’s justified is hard to say, but we’re now slowly moving away from the real market movers reporting their earnings and may once again fall prey to speculating about what every little nuance or event means.

This week, for example, Janet Yellen will give Congressional testimony on Tuesday and five other Federal Reserve Governors will be giving addresses. Any of those can slip in a phrase, make a joke or simply use a single word with perceived emphasis that will send traders into fits and take the market with them.

No doubt everyone will want to know how Janet Yellen feels about the past two months of employment statistics, particularly since she seems interested in pursuing a lower unemployment threshold than previously was the case. For traders it also means having to decide whether her intent means that the course of the tapering to Quantitative Easing will be altered.

While we don’t know what she will say when faced with questions we do know that there is alwys some layer of obfuscation in the answers. With Yellen, we just don’t know how much there will be. Maybe she’ll continue the example set by her predecessor and be more decipherable than was his predecessor.

Of course, if there is even the slightest suggestion that the path may be altered that then brings the question as to whether altering that path is good or bad as regards the economy and then whether what’s good or bad for the economy is bad or good for the stock market.

For individual traders it makes absolutely no sense trying to understand that which can’t be understood. Trying to apply logical processes to understand the unpredictable or the illogical is itself illogical.

Given their performance last week, it’s only logical that in hindsight I wish that I had opened more new positions. I don’t think, however, I’m going to be interested in over-compensating this week. While for now it appears that the market is fairly resistant to anything more than a 5% decline in the S&P, the previous pattern has been to erase that loss and go even further on the upside. I think that I will look for a little more evidence that we’ll be on that path rather than assuming we already are on our way.

I would rather miss a percent on the upside than be first on line to capture a few percent on the downside.

With cash at about 34% to start the week but only 6 positions set to expire this week I’m likely to be conservative with cash and will also likely look at weekly options or those that may be able to bypass the February 22, 2014 monthly expiration.

With a number of potentially good dividend plays this week I may also preferentially look in their direction, particularly as volatility has again died down and the premiums are reflecting that to be the case.

In previous weeks the first hour, if the market was moving higher, turned out to be very unreliable in predicting direction for the rest of the day as many investors took the opportunity to secure some profits whenever they could in anticipation of further market declines.

For that reason I will probably be an observer early in the sessions this week and see where this week’s sentiment takes us.

Watching the pre-open market it appears that no one has an idea of where we’re going to start the week. When there’s that little resolve it’s often easier to have an event get blown out of proportion and trigger a mood. Other than potentially being prompted by this week’s scheduled events or something unexpected on the international front, the mood would do well to just stay flat.