Daily Market Update – March 17, 2014 (Close)

It was nice seeing the market pointing toward a higher open in the early trading to start the week, despite the fact that I usually like to see a weak start so that there is some opportunity to pick up early bargains.

It was even nicer see it add to that early move higher and never even give the slightest hint of faltering.

In this case, however, after 5 straight losing days, as with any stock that you’re interested in buying after a sustained fall, it’s always nice to see some stability return before making your commitment.

The stability that is appearing this morning is reportedly due to quiet over the weekend from Crimea after the referendum and then no real further news as the day wore on, despite the announcement of some very limited sanctions.

But none of what has transpired over the past couple of days and the US response should have come as a surprise. The result was fully expected as should have been the realization that the Ukrainian people and Army had enough discipline to not so anything stupid while there is a Russian Army looking for the slightest pretext to unleash some force.

In all likelihood the only wild card in the equation is whether there are further unilateral acts by the Russian Army, especially within the borders that are universally recognized as being part of Ukraine, even by Russia.

While the appearance of stability brings with it some comfort, it’s not enough to immediately start with a personal “buy program.” As has been the case the past month the first hour of trading hasn’t necessarily reflected where the rest of the day will go, especially if that first hour has been a move higher.

As may be appropriate at a time when we’re all looking to the East to see what kind of a pall may be cast over the markets, before I’m ready to dip into cash there’s a need to “trust, but verify.”

While there’s no real way to verify that the market means what it appears to be doing, there’s good reason to discount initial appearances for now.

With cash standing at about 36% I am, however, more optimistic than in the past few weeks and am willing to get down to a 20% level.

I doubt that will be the case, but I am looking for volatility to stop its upward movement and along with that there is the expectation that the market itself will equilibrate while events play themselves out.

For today, at least, volatility was stopped dead in its tracks, but I couldn’t justify just chasing anything, although there was enough reason to consider a few purchases as well as some personal put sale trades for the day.

At this point the script still calls for the Russian Parliament to make some decision regarding the fate of Crimea, whether to annex it or have it as an autonomous region. Then comes any further reaction from the United States and, perhaps Europe. With those reactions and counter-reactions may come trickle down to the markets, but I don’t expect that there will be anything of substance. In fact, there is reason to believe that last week’s weakness may already have been the result of selling by Russian nationals looking to remove money from the United States in advance of any potential freeze in the assets.

What I don’t understand is the belief that Europe will not express it’s disapproval in concrete ways because it is beholden to Russia for energy sales. Aafter all, who else is Russia then going to sell to? They need the currency as much as Europe needs the energy. At this time of the year, maybe even more than Europe needs it and China, if it is slowing down, doesn’t need to stock pile energy just to help Russia.

With international events put to the side this week’s FOMC isn’t likely to lead to anything of great substance either, although as we’ve seen in the past the way the market reacts doesn’t necessarily have to be tied to substance.

Those particular series of events in the making don’t have a particular chilling effect on me this week and I plan to use the level of attractiveness of premiums, especially in the outer week as a guide for this week’s purchases, as there are already a fair number of positions expiring this week as the March 2014 cycle comes to its conclusion.

If outer week premiums look promising and provide additional value then there is reason to look for longer time frames. Otherwise, there will be additional positions added to this week’s list of expiring names.

Hopefully this will be a better week than the last even though the overall portfolio outperformed the market. While it’s always nice to beat the competitor, it’s even better when you don’t come out of the match totally battered.

For those who believe that hope isn’t a strategy, it couldn’t hurt.

 

 

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