Monthly Archives: July 2014

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

The CEO of Wal-Mart made an observation yesterday that seemed to come as a surprise to most everyone.

He commented that despite increasing jobs numbers there hasn’t been any real improvement on the consumer spending level.

How could that possibly be the case if the economy was actually improving? The stock market has certainly been advancing in reflection of that belief, although it’s probably just a coincidence that the market had a decidedly negative day yesterday.

After all, why would they begin to focus on rational thought and reality now?

I’ve been asking that seemingly obvious question for at least the past two earnings seasons, wondering why retail sales, other than at the very high end, were continuing to disappoint everyone. It just doesn’t make sense if people are actually going back to work and increasing their ability to make discretionary purchases.

Somehow, there has been a disconnect and increasing employment statistics may not be translating into what it traditionally meant.

Add to that, or better yet, subtract from it the two revisions of GDP for the first quarter of 2014 and you really do have to wonder what economic expansion people are talking about. Ultimately any economic growth is only as good as the ability for it to improve the lives of everyday people who are given the opportunity to contribute to that expansion

The weakness in retail, insofar as it seems to have lagged increasing employment levels, preceded the winter’s horrible weather and succeeded it, as well. Still, there has been money to be made in the retail sector, despite the  continuing lack of good news.

Imagine what may await retail sales if and when the consumer does return, although then you have to deal with those who will sell on the news, in the belief that the market had already discounted sales growth.

No matter what happens and no matter what the issue, there’s always a ready answer and a ready opposing view.

While the Wal-Mart CEO’s question was digested yesterday, today seems to be ready to get off to a mildly positive start heading into the afternoon’s FOMC release.

Again, while it’s not likely that there will be anything surprising in the statement, you can ne
ver tell what the reaction will be, especially in the early days of summer. Following yesterday’s sell-off there may also be additional reason to see an exaggerated reaction to news or even the lack of news.

As with the last couple of days, I’ll be looking for any opportunity to do additional rollovers in an attempt to reduce exposure to any adverse market response to the FOMC prior to this week’s expiration. As a nice side effect that also creates some income without having to dip into cash reserves, as there’s enough uncertainty in the air to be hesitant about spending too much while the market is still so close to those all time highs of last week.

So far, the rollovers for the week have all bypassed next week’s monthly expiration and have used the July 25th contract date. I would like to populate next week’s list of expiring positions a little better, but the monthly contract doesn’t usually offer as wide of a selection of strike prices as do the weekly options, so that has limited the ability to create rollovers with strike prices delivering decent dividends.

That may change on Thursday when some new strike levels may be added for the coming week, but with the FOMC today, I’ll still be looking for the opportunities wherever they may end up.

So, it’s just another day of sitting back and seeing what may develop. While the money is available for new purchases I’m not expecting to add any new positions today, but if anything can change on a dime its the gap between expectations and actions.

Daily Market Update – Jul 8, 2014 (Close)

Yesterday was, what has seemed to be a rare day. The market not only traded lower, but the broad market was weaker than the major indices indicated.

For someone who may be in the market to buy stocks in a meaningful way, yesterday’s decline wasn’t enough. It also wasn’t enough to send any signals that perhaps there was more to come.

There’s still some talk of money on the sidelines from more than 5 years ago. It’s hard to believe that could possibly be the case, but it’s just as hard to believe that anyone who has been on the sidelines that long would pick this as the right time to re-enter the markets.

While I always like to keep some money on the sidelines for unexpected opportunities, in hindsight those opportunities have been nearly every day for the past two years. I don’t know how many people that are actively invested also have cash reserves that could come into play, but what would be the catalyst to get those who do to give up on their discipline and go all in?

Also with the competition between asset classes for investment dollars, such as between stocks, bonds and real estate, you have to wonder what money is left in bonds that could come over to stocks, as well as the fact that real estate isn’t facing an exodus of investment dollars.

So you do have to wonder where the new money will come from to push stocks even higher.

Overseas money? Possibly, but with the inter-connected nature of the world’s economies and markets and shift would likely cause market casualties at their source and ripple throughout the world.

Who needs that?

Again there’s lots of focus on the yield of the 10 year Treasury as it approaches 2.6%. The thinking is now that rather than 3%, which was what everyone was watching just a few months ago as that level that would begin to draw investment dollars out of stocks and into bonds, it is 2.6%.

That either represents lowered expectations for returns or just more of the same guessing games that seek to create significance out of that which may have no significance.

One thing that has lost its significance of late has been the release of the FOMC statement each month, as it has become very predictable and often the words spoken by the various Federal Reserve Governors or the Chairman have more sway on markets for that particular moment in time. With the FOMC statement release tomorrow there wasn’t great likelihood that today would have any kind of meaningful move higher and probably not much reason to think that it would move significantly lower, either.

Yet it moved with some commitment, nonetheless and followed yesterday’s lead, although there was still no real impetus for the drop today, either.

With pre-open indications of another mildly negative open I wasn’t expecting too much reason to abandon a little bit of purchasing caution and simply hoped to be able to continue looking for some rollover opportunities for some of the many positions that expire this Friday.

Fortunately, even with all of that negativity some of those opportunities did present in addition to what looked like a potential buying opportunity in an old friend, Chesapeake Energy.

While I do find it more exciting to enter into a new position and the initial ROI is generally greater with those, it is the rollover that really makes the returns accumulate. So I certainly wouldn’t mind seeing some more of those rollovers happen tomorrow while at the same time still being able to conserve cash in anticipation of a day when it could serve me much better, and perhaps with less risk, as well.

Today’s market decline, at least in the big picture is pretty meaningless and could easily have been an artifact of volume. Any continuation, however, after tomorrow’s FOMC release could be reason to wonder if there’s something to what is now just a mere blip in the chart, taking us back all the way to levels not seen since June 30th.

Daily Market Update – Jul 8, 2014 (8:00 AM)

Yesterday was, what has seemed to be a rare day. The market not only traded lower, but the broad market was weaker than the major indices indicated.

For someone who may be in the market to buy stocks in a meaningful way, yesterday’s decline wasn’t enough. It also wasn’t enough to send any signals that perhaps there was more to come.

There’s still some talk of money on the sidelines from more than 5 years ago. It’s hard to believe that could possibly be the case, but it’s just as hard to believe that anyone who has been on the sidelines that long would pick this as the right time to re-enter the markets.

While I always like to keep some money on the sidelines for unexpected opportunities, in hindsight those opportunities have been nearly every day for the past two years. I don’t know how many people that are actively invested also have cash reserves that could come into play, but what would be the catalyst to get those who do to give up on their discipline and go all in?

Also with the competition between asset classes for investment dollars, such as between stocks, bonds and real estate, you have to wonder what money is left in bonds that could come over to stocks, as well as the fact that real estate isn’t facing an exodus of investment dollars.

So you do have to wonder where the new money will come from to push stocks even higher.

Overseas money? Possibly, but with the inter-connected nature of the world’s economies and markets and shift would likely cause market casualties at their source and ripple throughout the world.

Who needs that?

Again there’s lots of focus on the yield of the 10 year Treasury as it approaches 2.6%. The thinking is now that rather than 3%, which was what everyone was watching just a few months ago as that level that would begin to draw investment dollars out of stocks and into bonds, it is 2.6%.

That either represents lowered expectations for returns or just more of the same guessing games that seek to create significance out of that which may have no significance.

One thing that has lost its significance of late has been the release of the FOMC statement each month, as it has become very predictable and often the words spoken by the various Federal Reserve Governors or the Chairman have more sway on markets
for that particular moment in time. With the FOMC statement release tomorrow there isn’t great likelihood that today will have any kind of meaningful move higher and probably not much reason to think that it would move significantly lower, either.

With pre-open indications of another mildly negative open I’m not expecting too much reason to abandon a little bit of purchasing caution and would continue looking for some rollover opportunities for some of the many positions that expire this Friday.

While I do find it more exciting to enter into a new position and the initial ROI is generally greater with those, it is the rollover that really makes the returns accumulate. So I certainly wouldn’t mind seeing those rollovers happen while at the same time still being able to conserve cash in anticipation of a day when it could serve me much better, and perhaps with less risk, as well.

Daily Market Update – Jul 7, 2014 (Close)

After a nice 3 1/2 days off from trading it looks as if there’s little memory of what got the markets to their new highs last week.

If you can recall back just a few weeks when the market got a nice boost from the FOMC and then Janet Yellen’s press conference remarks, that boost was very short lived, as well, never having any impact on the following week.

This past week’s boost, as opposed to the tiny steps that marked the large number of previous new highs en route to Dow 17000, was somewhat larger and more decisive. That alone should have created some momentum and optimism but in a world where short term memories are scant, maybe 3 1/2 days is just too long to sustain anything.

So it maybe it shouldn’t be a little surprising that the pre-open futures weren’t reflecting any of that optimism that ended last week’s trading, although with volume very likely to be light again this week, there’s no telling what kind of exaggerated moves may happen.

When the day finally settles the market had done as it did for the first half of last week and traded ina  narrow range, going lower, with the broad market weaker than the DJIA. There was really no news for today’s mild weakness and really no news for any kind of move.

Although there is an FOMC statement release this week, it’s an otherwise very quiet week on the news front.

On the events front it is the start of earnings season again, although it does get difficult to know where one season begins and the previous one ends.

With a large number of positions set to expire this week I do get a little concerned about potential fallout from the FOMC release even though there’s very little reason to suspect that it will contain anything surprising in nature.

Over the past two weeks the market has been spurred ahead by comments from Janet Yellen that should be reflected in the language used and the selection of words in the FOMC statement. With the belief that interest rates will be kept low until 2015 and news that the employment rate is dropping, equity markets shouldn’t find themselves spooked by anything that may be conta
ined in Wednesday’s release.

However, given that next week is the end of the July cycle that means that every position with a contract expiring this week could potentially be rolled over on Wednesday, without having had to wait for the appearance of the weekly option on Thursday, as is normally the case.

At least that gives some greater flexibility in dealing with existing positions and any concerns for a surprise coming on Wednesday afternoon.

For the coming week with adequate cash there is certainly opportunity to add new positions, but the possibility of rolling over some of those existing positions may create ample cash streams to reduce the reliance on new positions to do so.

That would actually suit me just fine, as I wouldn’t mind a relatively quiet week for new positions. I would like to maintain cash near its current level so I don’t expect to be terribly aggressive with adding new positions.

However, the greatest likelihood is that with all of those positions set for this Friday’s expiration there’s reason to want to look at the July 19 contracts or beyond for any new positions in some attempt to diversify just a little.

As has been the case lately, there’s probably good reason to sit back and see how the market actually opens once the trading starts for the rest of us. This week, I would love to see some additional strength, if only to have the opportunity to rollover or see assignments on a wide scale. At the moment I find that more appealing than being able to pick up a broad selection of newly created bargains.

As the day took shape there wasn’t much reason to consider adding anything to the portfolio as there wasn’t really any movement in prices from the early established declines and there was absolutely no indication of any trend or direction other than the disappointment of not following through on last week’s good news.

For some, that’s reason enough to refrain, but at least there was some opportunity to do some of those early rollovers and even get coverage for one existing position to start the week.

Those may have been baby steps, too, but they may still get us to the hoped for destination if enough of them can be put together by Friday.

Daily Market Update – Jul 7, 2014 (9:30 AM)

After a nice 3 1/2 days off from trading it looks as if there’s little memory of what got the markets to their new highs last week.

If you can recall back just a few weeks when the market got a nice boost from the FOMC and then Janet Yellen’s press conference remarks, that boost was very short lived, as well, never having any impact on the following week.

This past week’s boost, as opposed to the tiny steps that marked the large number of previous new highs en route to Dow 17000, was somewhat larger and more decisive. That alone should have created some momentum and optimism but in a world where short term memories are scant, maybe 3 1/2 days is just too long to sustain anything.

So it maybe it shouldn’t be a little surprising that the pre-open futures weren’t reflecting any of that optimism that ended last week’s trading, although with volume very likely to be light again this week, there’s no telling what kind of exaggerated moves may happen.

Although there is an FOMC statement release this week, it’s an otherwise very quiet week on the news front.

On the events front it is the start of earnings season again, although it does get difficult to know where one season begins and the previous one ends.

With a large number of positions set to expire this week I do get a little concerned about potential fallout from the FOMC release even though there’s very little reason to suspect that it will contain anything surprising in nature.

Over the past two weeks the market has been spurred ahead by comments from Janet Yellen that should be reflected in the language used and the selection of words in the FOMC statement. With the belief that interest rates will be kept low until 2015 and news that the employment rate is dropping, equity markets shouldn’t find themselves spooked by anything that may be contained in Wednesday’s release.

However, given that next week is the end of the July cycle that means that every position with a contract expiring this week could potentially be rolled over on Wednesday, without having had to wait for the appearance of the weekly option on Thursday, as is normally the case.

At least that gives some greater flexibility in dealing with existing positions and any concerns for a surprise coming on Wednesday afternoon.

For the coming week with adequate cash there is certainly opportunity to add new positions, but the possibility of rolling over some of those existing positions may create ample cash streams to reduce the reliance on new positions to do so.

That would actually suit me just fine, as I wouldn’t mind a relatively quiet week for new positions. I would like to maintain cash near its current level so I don’t expect to be terribly aggressive with adding new positions.

However, the greatest likelihood is that with all of those positions set for this Friday’s expiration there’s reason to want to look at the July 19 contracts for any new positions in some attempt to diversify just a little.

As has been the case lately, there’s probably good reason to sit back and see how the market actually opens once the trading starts for the rest of us. This week, I would love to see some additional strength, if only to have the opportunity to rollover or see assignments on a wide scale. At the moment I find that more appealing than being able to pick up a broad selection of newly created bargains.