Daily Market Update – July 2, 2014

 

 

 

Daily Market Update – Jul 2, 2014 (8:30 AM)

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.

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.

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 occassionaly punctuated with some unexpected rollover opportunities.

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.

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.

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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Daily Market Update – July 1, 2014 (Close)

 

 

 

Daily Market Update – Jul 1, 2014 (Close)

Yesterday was a little busier than I had expected, but it was certainly a quiet and uneventful day as the market stayed in a tight range all through the trading session.

This morning the pre-open futures are pointing toward a mildly positive opening.

I didn’t think that was going to result in much as far as opening new positions, but I had hoped and it turned out to be especially nice to see that opening spill over into the regular session and take on some life. That gave some opportunity to wring additional income out of existing positions, although lately you do have to wring harder to squeeze much premium out. To some degree that’s offset if dividends become part of the equation or become sought after, but there is a limit to those opportunities and they are far fewer than the universe of optionable stocks.

In the absence of any news or any obvious catalysts those kinds of large moves are possible when there’s not too much trading going on. If that’s the case, any moves are usually not very well sustained and return back to where they had started in fairly short order.

Today you certainly would have been hard pressed to have identified a reason for the day long and sustained strong gain.

I suppose that with cash still in reserve and the willingness to spend some of that reserve down, I also wouldn’t necessarily mind a sharp, light volume kind of sell-off this week, especially after today’s gains. That would give enhanced buying opportunity and also lead to some increased option premiums.

It’s always strange to suggest that you wouldn’t mind some sort of a sell-off, even if highly qualifying what type would be acceptable, but there are definitely advantages, especially if there’s cash in reserve.

Unfortunately, like so many things in life, what you wish for and what you get can be very different, so even while thinking that a sell-off might be nice, that’s only if rational heads prevail.

When it comes to money rational thinking is often in short supply, whether its greed or fear that’s at fault.

This week the only known challenge will be Thursday’s Employment Situation Report. With three and a half days of markets being closed after the report any unforeseen news, such as might corroborate the revised GDP statistics, could lead to weakness, especially if other events, such as in Iraq, pile on to the nervousness.

We’ll get a little bit of a hint tomorrow as the AD
P statistics are released and any deterioration in those numbers could serve as a precursor for Thursday.

It has been a while since the Employment Situation report really mattered, but this could be one of those times that it does, perhaps exacerbated by the nervousness of staying long through an exceptionally long week-end.

Recent history, meaning for the past two years, however, indicates that traders haven’t really cared too much about weekend exposure, even when there were clear threats, so  the likelihood still has to remain that the event will be another non-event.

I’m still content to watch and wait as the rest of the week unwinds. In the event of any weakness I would likely not be of the belief that there would be anything sustained, so would probably be in the market to add new positions.

As it is, it turned out to be a nice day to watch and to actually pull off some rollovers, on a Tuesday no less, as there’s no better time to sell new options than into the face of a rally. That’s especially true when dealing with such a short week as this one that sees much faster erosion of premiums for this week’s options than for next weeks.

Of course, that doesn’t leave too much left to do for the rest of the week, now with most positions already rolled over, but you still will never know what awaits around the corner and where there may be opportunity to wring those premiums.

 

 

 

 

 

 

 

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Daily Market Update – July 1, 2014

 

 

 

Daily Market Update – Jul 1, 2014 (9:15 AM)

Yesterday was a little busier than I had expected, but it was certainly a quiet and uneventful day as the market stayed in a tight range all through the trading session.

This morning the pre-open futures are pointing toward a mildly positive opening.

I don’t think that’s going to result in much as far as opening new positions, but it would be especially nice to see that opening spill over into the regular session and take on some life. Maybe that would give some opportunity to wring some income out of existing positions, although lately you do have to wring harder to squeeze much premium out. To some degree that’s offset if dividends become part of the equation or become sought after, but there is a limit to those opportunities and they are far fewer than the universe of optionable stocks.

In the absence of any news or any obvious catalysts those kinds of large moves are possible when there’s not too much trading going on. If that’s the case, any moves are usually not very well sustained and return back to where they had started in fairly short order.

I suppose that with cash still in reserve and the willingness to spend some of that reserve down, I also wouldn’t necessarily mind a sharp, light volume kind of sell-off this week. That would give enhanced buying opportunity and also lead to some increased option premiums.

It’s always strange to suggest that you wouldn’t mind some sort of a sell-off, even if highly qualifying what type would be acceptable, but there are definitely advantages, especially if there’s cash in reserve.

Unfortunately, like so many things in life, what you wish for and what you get can be very different, so even while thinking that a sell-off might be nice, that’s only if rational heads prevail.

When it comes to money rational thinking is often in short supply, whether its greed or fear that’s at fault.

This week the only known challenge will be Thursday’s Employment Situation Report. With three and a half days of markets being closed after the report any unforeseen news, such as might corroborate the revised GDP statistics, could lead to weakness, especially if other events, such as in Iraq, pile on to the nervousness.

We’ll get a little bit of a hint tomorrow as the ADP statistics are released and any deterioration in those numbers could serve as a precursor for Thursday.

It has been a while since the Employment Situation report really mattered, but t
his could be one of those times that it does, perhaps exacerbated by the nervousness of staying long through an exceptionally long week-end.

Recent history, meaning for the past two years, however, indicates that traders haven’t really cared too much about weekend exposure, even when there were clear threats, so  the likelihood still has to remain that the event will be another non-event.

I’m still content to watch and wait as the rest of the week unwinds. In the event of any weakness I would likely not be of the belief that there would be anything sustained, so would probably be in the market to add new positions.

 

 

 

 

 

 

 

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Copyright 2014 TheAcsMan