Daily Market Update – Jul 2, 2014 (Close)

Yesterday was a great example of how you can make something from nothing at all and that it’s so much easier when there’s little volume to fight back against the move.

Today was justa great example of how the market can be open all day long and no one would even have known about it, as it traded in an even more narrow range than on Monday.

Yesterday was something totally different, though. There wasn’t much reason for yesterday’s rise, but it was the kind that could easily perpetuate itself as the DJIA was approaching 17000. Those kind of round numbers tend to attract buying. As much as professional traders profess that such numbers have no meaning to them, it’s clear that market dynamics do seem to care, for whatever reason.

The market did close at another new high, but that 17000 wasn’t breached today. The tendency is that when those big round numbers are breached, they are done so in a pretty convincing fashion.

I certainly have no complaints because yesterday did offer an opportunity for a number of rollovers, leaving only a handful left for this shortened trading week. As for the rest of the portfolio, sometimes it really is better letting the market do the heavy lifting and simply enjoying the ride. Yesterday was one of those days, just occasionally punctuated with some unexpected rollover opportunities.

I don’t have any complaints about today, either, but it was nothing like yesterday, at least on an activity basis.

With markets closing in the early afternoon on Thursday, just a few trading hours after the release of the Employment Situation Report, that didn’t leave too much time to recover in the event of a drop and certainly didn’t leave too much time to trade, so yesterday’s activity was very welcome.

It was nice seeing the opportunity to execute the rollovers, Ideally, it’s always best to sell calls into strength, just as it is to sell puts into weakness.

You just never know what tomorrow brings and the shares of JP Morgan were a perfect example of that.

With shares having been due to expire this week at $58 and being within easy reach of that on Tuesday, who would have known of the unfortunate news to come after the close reporting that Jamie Dimon had been diagnosed with throat cancer? Given that other major banks went nicely higher today, you would have to believe that JP Morgan’s drop was related to the bad news regarding its Chairman.

Yesterday was a rare opportunity of strong price strength coming early in the week that happened to have an early expiration to boot. It was a Tuesday, but effectively was like a Thursday when it came to  option premiums and beginning to look for rollover opportunities.

With only a few new purchases for yet another week it always feels a little better being able to generate weekly income streams from existing positions. Yesterday’s activity didn’t leave much else to rollover this week, but there is still the chance that some more buying opportunities may appear this week using next week or the monthly cycle’s ending week option contracts. Somewhat unusually, there aren’t very many positions yet scheduled to expire at the cycle’s end, so if premiums allow, I may be more interested in those expirations rather than for next week.

Added into the equation is the beginning of earnings season prior to the end of the cycle. Just one more thing to keep eyes on. The past few quarters were very punishing for any company earnings disappointments and price recoveries tended to be much longer than during other times in this bull cycle. By and large, analysts have thought that earnings were in line, but ignored the impact of massive stock re-purchases and their contribution to raising EPS statistics. With much of the corporate cost cutting having already been done in previous years, the only real mechanism to increase earnings is through revenue and most everyone understands that revenues have not been stellar, as it tends to take a robust workforce and economy to drive revenues.

Yet, the march higher continued.

What will be interesting to see is whether the second quarter will show any kind of bounce back from the numbers of the previous quarter that were widely attributed to weather. The expectation would be for considerable improvement, so there is an immediate environment being established for disappointment to be the theme.

The rest of the week is framed by this morning’s ADP Report and followed by tomorrow’s Employment Situation Report. The ADP number was much larger than expected and had no revisions. Considering that their statistics are based on their payroll processing business you would have to wonder why there would ever be revisions.

The pre-open trading greeted that number with a yawn and gave up a small piece of the early gains upon the news.

It’s hard to imagine much that could or more appropriately, should, have an impact on markets, there’s some anxiety over a disappointing number, even as expectations are for another 200,000+ new jobs statistic. That nervousness is based on GDP revisions and the knowledge that it is most likely going to be a very lightly traded day, again introducing the low volume wild card.

With all of that, I’m glad it’s a short week and opportunity came along when it did.

 

 

 

 

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