Monthly Archives: March 2014

Daily Market Update – March 7, 2014 (9:00 AM)

The Week in Review will be posted by 6 PM and the Weekend Update will be posted by noon on Sunday.

Today’s possible outcomes include:

Assignments:  CHK, GE, HFC, IP, MET, MSFT, YUM

Rollovers:   APC, SBUX, VZ

Expirations: LULU, WFM

Trades, if any, will be attempted to be made prior to 3:30 PM (EST), where possible.

Daily Market Update – March 6, 2014 (Close)

The Jobless Claims number was already in and said nothing of real interest. Taken together with the seeming quiet coming from Crimea all pointed toward a quiet trading day today, or at least none with any known catalysts.

When it was all over the market was actually much more alive than anyone would have expected, but did so in a very sedate way.

Despite what looks like an inevitable further dissolution of the Ukraine, which will likely see the creation of an autonomous Crimea or one given to Russia as an EU prize of sorts, today may be nothing more than a conduit to tomorrow’s Employment Situation Report. Ultimately, no one really cares about the nature of an area that is rarely thought about due to its insignificance regarding world-wide stock markets. Who owns Crimea will be irrelevant to most people and traders as long as it’s not the nidus for armed confrontation.

The last time we were awaiting a report it seemed pretty clear that Richard Fisher, who is a fairly vocal Reserve Reserve Governor, and one of those described as being a “hawk,” seemed to strongly hint that the numbers would be on the low side, as he repeatedly emphasized the impact of weather, in an appearance prior to the numbers being released.

He was right, at least on the numbers being on the low side, although there is still debate over the exact role of the weather, which at some point can no longer be blamed for malaise and decreased economic activity.

Today, there are no fewer than three current Federal Reserve Governors speaking to various groups, although only one occurred after regular market hours. It seemed as if it might have been interesting to see whether the markets would take any cues from their cues.

But based on the blase kind of day either no one listened or nothing of real interest was said.

Given past history of the market’s reaction to the Employment numbers there’s little reason to fear their release, regardless of where they may come in or regardless of whether they are perceived in a positive or negative light.

If the European situation is taken off the table, as it seems only the threat of actual military confrontation is what will move the market in the short term, there’s also no reason to believe that as earnings season is coming to an end, that the market won’t find some reason to move higher.

It has been doing that for a long time, as we, coincidentally come up to the 5th anniversary of the market bottom, occurring 5 years ago. Within that remarkable 5 year period the past 20 months have been fairly memorable in their own right.

With even flat days today and tomorrow we should be left in good position to face the coming week, with a nice combination of available cash and covered positions. Of course, it’s never a really good idea to assume that will end up being the case, as the market does have that ability to surprise and take the wind out of you, but it really hasn’t done so very often of late.

So far this has been a quiet trading week after a couple of busy ones. While that may change over the coming two days and while I don’t usually add new positions near the end of the week, I still would consider doing so, particularly to get a head start of populating the list of positions that expire next week, which is a little on the light side at the moment.

But that too could change if the next two days stay on course and results in some assignments and rollovers, in which case there’s nothing wrong with looking forward to the end of the monthly option cycle for expiration dates, as long as the premiums aren’t dragged down by the low volatility.

While volatility has been down after a brief moment that it looked as if it would be heading to better premium enhancing levels, the current market, one that is gradually moving higher, is my second favorite kind of market and usually results in narrowing the variation in positions held, as the same positions are frequently re-purchased just about as soon as they are assigned.

There’s not too much shame in that and I can live with myself if that’s the case.

PS: I usually try to avoid trades in the final thirty minutes because I know that the alerts may catch people flat-footed and unable to make the suggested trade. I did send the AIG trade with just 10 minutes to go in an effort to ensure capturing the dividend, only as the price started coming down and making it a conceivably logical thing to do, when it wasn’t the case earlier in the afternoon. If you didn’t get the alert in time you will very likely be assigned early. However, the ROI would still amount to about 3.6% for the position, versus 1.8% for the S&P 500 during that period.

Daily Market Update – March 6, 2014 (9:30 AM)

The Jobless Claims number is already in and says nothing of real interest. Taken together with the seeming quiet coming from Crimea all points toward a quiet trading day today, or at least none with any known catalysts.

Despite what looks like an inevitable further dissolution of the Ukraine, which will likely see the creation of an autonomous Crimea or one given to Russia as an EU prize of sorts, today may be nothing more than a conduit to tomorrow’s Employment Situation Report. Ultimately, no one really cares about the nature of an area that is rarely thought about due to its insignificance regarding world-wide stock markets. Who owns Crimea will be irrelevant to most people and traders as long as it’s not the nidus for armed confrontation.

The last time we were awaiting a report it seemed pretty clear that Richard Fisher, who is a fairly vocal Reserve Reserve Governor, and one of those described as being a “hawk,” seemed to strongly hint that the numbers would be on the low side, as he repeatedly emphasized the impact of weather, in an appearance prior to the numbers being released.

He was right, at least on the numbers being on the low side, although there is still debate over the exact role of the weather, which at some point can no longer be blamed for malaise and decreased economic activity.

Today, there are no fewer than three current Federal Reserve Governors speaking to various groups, although only one is occurring after regular market hours. It may be interesting to see whether the markets take any cues from their cues.

Given past history of the market’s reaction to the Employment numbers there’s little reason to fear their release, regardless of where they may come in or regardless of whether they are perceived in a positive or negative light.

If the European situation is taken off the table, as it seems only the threat of actual military confrontation is what will move the market in the short term, there’s also no reason to believe that as earnings season is coming to an end, that the market won’t find some reason to move higher.

It has been doing that for a long time, as we, coincidentally come up to the 5th anniversary of the market bottom, occurring 5 years ago. Within that remarkable 5 year period the past 20 months have been fairly memorable in their own right.

With even flat days today and tomorrow we should be left in good position to face the coming week, with a nice combination of available cash and covered positions. Of course, it’s never a really good idea to assume that will end up being the case, as the market does have that ability to surprise and take the wind out of you, but it really hasn’t done so very often of late.

So far this has been a quiet trading week after a couple of busy ones. While that may change over the coming two days and while I don’t usually add new positions near the end of the week, I still would consider doing so, particularly to get a head start of populating the list of positions that expire next week, which is a little on the light side at the moment.

But that too could change if the next two days stay on course and results in some assignments and rollovers, in which case there’s nothing wrong with looking forward to the end of the monthly option cycle for expiration dates, as long as the premiums aren’t dragged down by the low volatility.

While volatility has been down after a brief moment that it looked as if it would be heading to better premium enhancing levels, the current market, one that is gradually moving higher, is my second favorite kind of market and usually results in narrowing the variation in positions held, as the same positions are frequently re-purchased just about as soon as they are assigned.

There’s not too much shame in that and I can live with myself if that’s the case.

Daily Market Update – March 5, 2014 (Close)

With no news to wake up to from Crimea this morning and no blaring headlines, it’s back to a normal post-earnings season kind of stock market.

As much as I don’t like boring days of there’s going to be one, it may as well be on a Wednesday, which is generally a low activity day for me.

So today really didn’t disappoint.

This morning’s news was a completely uninteresting, maybe slightly disappointing ADP Employment report that normally serves as a prelude to Friday’s Employment Situation Report, regardless of whether it actually is able to accurately reflect non-farm payroll statistics.

After two successive disappointing months that were nonetheless greeted with enthusiasm by the markets, this month everyone has toned down their employment estimates as weather is still the easy culprit.

Yet despite mediocre earnings and an extraordinarily slow recovery the market reached another new high yesterday, completely erasing the Crimea induced loss from Monday and then some.

There was no new high today, but there was certainly no reason to believe that tomorrow won’t bring another one.

While it wasn’t too unusual to see a snapback rally on the interpretation of good news, the most surprising thing so far this week is how muted the decline was on Monday and how tentative the fear was on the preceding Friday.

By all rights the responses should have been much more pronounced.

That Friday offered a great excuse for a sell off of a market that had been strongly higher, as rumors of a confrontation were making the rounds. While the early part of the final trading hour saw the entire gain being lost lost, a meaningful portion was recovered before the close, allowing the market to end the day with a gain. Doing so going into the weekend and especially a weekend of international uncertainty is not the sort of thing that frightened markets do.

Monday’s losses on the news of the reality on the ground were also muted, especially considering the stock market’s level and its quick ascent from its recent 7% correction. That sort of rise higher is the sort of thing that could easily have been deflated and in a big way.

But it wasn’t. The market saw a decline, but by any post-2007 standard, that decline was really very small and then subsequently erased on the flimsiest of news.

The difference between a market that’s giddy and a market that is simply optimistic may not be easy to define. Yesterday seemed giddy insofar as performance, but not insofar as volume. Importantly, there wasn’t a “blow off top,” which would have seen everyone piling aboard a market perceived to be rocketing higher.

This morning’s flat market is far more healthy than any alternative following two entirely different days.The way in which the market simply went on its business as the day progressed, with not a single meaningful individual stock story was surprising, but even that was welcome.

As things appear to be, at least temporaril
y quieting down on the news front and perhaps making way for diplomatic efforts, any kind of negotiated outcome in that regard can only be positive for the markets, even if negative for either of the directly involved nations.

At the moment, with cash still in hand, and the prospects of potentially having a number of assignments at the end of this week if all goes quietly, I continue to have an optimistic near tern outlook.

While I have no hesitancy in spending down cash reserves going forward, there still remains that pesky matter of finding positions that either haven’t benefited as much from the recent market strength or are in their own peculiar price cycles, awaiting a chance to move higher.

Additionally, while that optimism is still there, I’m not particularly interested in tempting fate and looking to higher beta names to offset the low option premiums. Where possible, dividends still hold greater appeal, which is why I decided to rollover the Coach position yesterday, so as to retain the dividend.

As next week’s weekly options will be opened up for many stocks that don’t have expanded weekly options I may also look to initiate new positions, despite it being the end of the week, which is usually a time for considering rollovers.

Part of that possibility is the very fact that this Friday is an Employment Situation Report. If you were geeky enough to have been interested in the statistics behind an analysis of the market’s response to the monthly Employment Situation Report you know that there’s an increased likelihood of a higher moving market on Friday, regardless of what the report says.

So if the opportunities are there, why think change is coming and miss the chance to be a participant?

Daily Market Update – March 5, 2014 (9:15 AM)

With no news to wake up to from Crimea this morning and no blaring headlines, it’s back to a normal post-earnings season kind of stock market.

This morning’s news was a completely uninteresting ADP Employment report that normally serves as a prelude to Friday’s Employment Situation Report, regardless of whether it actually is able to accurately reflect non-farm payroll statistics.

After two successive disappointing months that were nonetheless greeted with enthusiasm by the markets, this month everyone has toned down their employment estimates as weather is still the easy culprit.

Yet despite mediocre earnings and an extraordinarily slow recovery the market reached another new high yesterday, completely erasing the Crimea induced loss from Monday and then some.

While it wasn’t too unusual to see a snapback rally on the interpretation of good news, the most surprising thing so far this week is how muted the decline was on Monday and how tentative the fear was on the preceding Friday.

That Friday offered a great excuse for a sell off of a market that had been strongly higher, as rumors of a confrontation were making the rounds. While the early part of the final trading hour saw the entire gain being lost lost, a meaningful portion was recovered before the close, allowing the market to end the day with a gain. Doing so going into the weekend and especially a weekend of international uncertainty is not the sort of thing that frightened markets do.

Monday’s losses on the news of the reality on the ground were also muted, especially considering the stock market’s level and its quick ascent from its recent 7% correction. That sort of rise higher is the sort of thing that could easily have been deflated and in a big way.

But it wasn’t. The market saw a decline, but by any post-2007 standard, that decline was really very small and then subsequently erased on the flimsiest of news.

The difference between a market that’s giddy and a market that is simply optimistic may not be easy to define. Yesterday seemed giddy insofar as performance, but not insofar as volume. Importantly, there wasn’t a “blow off top,” which would have seen everyone piling aboard a market perceived to be rocketing higher.

This morning’s flat market is far more healthy than any alternative following two entirely different days.

As things appear to be, at least temporarily quieting down and perhaps making way for diplomatic efforts, any kind of negotiated outcome in that regard can only be positive for the markets, even if negative for either of the directly involved nations.

At the moment, with cash still in hand, and the prospects of potentially having a number of assignments at the end of this week if all goes quietly, I continue to have an optimistic near tern outlook.

While I have no hesitancy in spending down cash reserves going forward, there still remains that pesky matter of finding positions that either haven’t benefited as much from the recent market strength or are in their own peculiar price cycles, awaiting a chance to move higher.

Additionally, while that optimism is still there, I’m not particularly interested i
n tempting fate and looking to higher beta names to offset the low option premiums. Where possible, dividends still hold greater appeal, which is why I decided to rollover the Coach position yesterday, so as to retain the dividend.

As next week’s weekly options will be opened up for many stocks that don’t have expanded weekly options I may also look to initiate new positions, despite it being the end of the week, which is usually a time for considering rollovers.

Part of that possibility is the very fact that this Friday is an Employment Situation Report. If you were geeky enough to have been interested in the statistics behind an analysis of the market’s response to the monthly Employment Situation Report you know that there’s an increased likelihood of a higher moving market on Friday, regardless of what the report says.

So if the opportunities are there, why think change is coming?