Daily Market Update – April 14, 2014 (9:15 AM)

There was lots of nervousness over the weekend as concerns centered on Russian intentions over eastern Ukraine.

Since that was clearly an identified risk factor during Friday’s trading no one would have blamed traders for really accelerating the selling that was already a follow through to Thursday’s sell-off.

But it didn’t happen that way despite a very large order imbalance that should have driven the market even lower at the close of trading.

I suppose that could be taken as some sort of positive sign, but I’m more focused on personal issues.

Because what also didn’t happen was assignments of shares to help re-supply cash reserves.

When assignments occur I feel emboldened and anxious to recycle that cash and put it to work making more cash. While emboldened on the one hand, I’m also cautious about dipping deeper into reserves when the assignments are fewer than expected.

They couldn’t possibly have been any fewer than this past week, thanks to about a 400 point drop to end the week.

Maybe this week will be different?

While Citigroup, which shamefully couldn’t pass the regulator’s stress tests just a couple of weeks ago has started the pre-market off on a positive note, with what appear to be genuinely good earnings, it will be a matter of wait and see.

I want the market to be able to prove itself worthy of opening new positions, but I think that if it does, I would be much happier being able to sell calls on existing positions. I would rather generate the week’s income stream in that manner instead of by buying new positions, even if there appear to be some bargains after last week’s indiscriminate and somewhat irrational rise and then fall.

As the market does open it will be interesting to see where the volatility moves and whether there is any enhancement of forward week option premiums. If I had the opportunity to find cover for existing positions my preference would be to go out into forward weeks, but a beggar shouldn’t be a chooser. I would happily take what I could get.

As with past weeks I’ll likely watch during the first hour to see whether the Citigroup bump has any legs, as early optimism has frequently given way to an excuse to sell and close positions.

For those who believe that the selling was related to raising money from last year’s capital gains in order to meet tax payments, the expectation would be that markets would begin climbing higher as those money raising sales are completed. Of course, it really has to be new money that drives a market higher. It can’t simply be recycling. So if people had to sell stocks to pay their taxes it’s not too likely that on the day after those taxes are paid that they would suddenly have new funds to infuse into the markets.

If the markets do reverse this quick 4% drop it will simply be because the drop itself had neither rational, technical, nor a fundamental basis. It wasn’t even based on fear or uncertainty, so there’s every bit as much reason for it to return to advancing as there is for it continuing to go lower.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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