Daily Market Update – May 14, 2014 (Close)

With Macys and Deere now out of the way, having reported earnings this morning, there’s wasn’t much left until the entire process starts all over again in July. While there will still be some more earnings reports ahead next week and until about the end of June, most of the consequential companies will have reported by this week. Wal-Mart and Cisco are among the important ones still left to come this week and though they represent disparate parts of the economy they are both important indicators.

It’s difficult to put a positive spin on this earnings season, although the previous two quarters somehow were spun that way. This time, however, optimistic guidance isn’t broadly being provided to help shares after disappointing earnings. In the past two quarters there was a general practice of providing positive guidance which offset the actual earnings and helped to propel stocks higher, often reversing initial earnings related drops.

This earnings season is notable for its relatively little forward looking optimism. There’s not been a sense of good things ahead, neither in retail nor in manufacturing despite reports of increasing employment and low interest rates, which would generally be considered as a formula for economic expansion and spending.

Whatever improvements in EPS data may have be seen would have to be adjusted for the number of shares in float, which has widely been decreasing owing to all of those buy backs.

The good news stories and the positive moves higher have been relatively few these past weeks even though common sense would seem to suggest that higher profits should be resulting at least in part from higher revenues and not just from cost cutting.

Still, it’s new record after new record.

It’s hard to fight the tape and no one wants to be left out, but I’ve had a hard time justifying much in the way of new purchases this week as the party has moved on, although you do have to admit that there hasn’t been much conviction in the process, despite Monday’s strong move.

This morning seemed to be ready to open with a less effusive market, but everyone may now be waiting for another Janet Yellen bump, as she is scheduled to speak tomorrow evening and may set the tone to end the May 2014 cycle, hopefully on an up note.

As always, whenever the end of the monthly option cycle is at hand I just want to see as many as possible positions get assigned or rolled over and be in a good position to start the next cycle. The rollovers get you on the ground running and the assignments give you the luxury of being able to act when it feels appropriate.

While the week’s expiring contracts appear to be reasonably well positioned the prospects of even a single misinterpreted word on Thursday evening could be enough to cause a market seizure, especially since it is a monthly expiration day the next morning.

Of course, when today’s trading finally settled we could now use a Yellen bump, a
s it turns out that wanting another new record to be set doesn’t mean that it will happen.

Because of that further possibility of a single mis-spoken word on Thursday night there may be reason to consider some action on Thursday, particularly with regard to rollovers. In general, it’s better to roll something over that may otherwise have been assigned, than it is to wait and lose the opportunity and then which the contract expire after some sort of sell-off.

Today being a Wednesday, which is usually a slow day for me, in general and then compounded by an ambivalence to participate in making new purchases, I didn’t expect to be doing much today, either. Other than a single rollover there wasn’t much to do other than watch the weeds growing in the vegetable garden.

As in the past few days, any opportunity to sell new cover would have been greatly appreciated, but I think the week will start tomorrow and come to its crescendo on Friday.

Since it’s been reasonably profitable just sitting and passively watching the market do its thing, I haven’t got too much to complain about, but I’d much rather be an active participant and be able to take some of the credit.

Today, despite the broad market weakness wasn’t that bad of a day and thus far this has been an acceptable week, but it all comes down to Thursday and Friday, as so often seems to be the case.

 

 

 

 

 

 

 

 

 

 

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