Daily Market Update – August 18, 2014 (8:00 AM)

The world was reasonably quiet over the weekend despite some suggestion that events might begin to ratchet higher in the Ukraine – Russia conflict.

While there’s plenty of reason to believe that the quiet could easily dissolve, that’s tomorrow’s problem and not one for today, at least as far as the S&P futures seem to be concerned.

There is an FOMC statement on the calendar this week, but as many parts of the country return to school next week, this week is an understandably extraordinarily quiet one, otherwise.

In fact, there is absolutely nothing on the calendar for Friday, which is extremely unusual other than on a holiday. But even federal bureaucrats and traders have families.

With it becoming increasingly clear that the market is very nervous and very willing to give up some gains I’m not terribly anxious to add too many new positions this week. What complicates the decision, though, is that it’s also equally clear that the market really does want to go higher. Every attempt at a pullback is shallow and brief.

The fact that each pullback has been met with the market setting a series of new high shows just how emboldened investors and traders have become, gaining confidence with each battle.

Although by now you would think that we would all be getting use to this teflon kind of market, it still remains odd and uncharted kind of territory, despite all of the experience over the past two years. Somewhere, maybe deep in the recesses of our awareness is the thought that there might be unforeseen land mines out there.

That may be the case, but I’m less concerned about the unseen than I am about the disregarded.

Last week did see a few assignments, but fewer than I would have expected, thanks to the sudden decline when word was released of an attack on some kind of Russian convoy. nearly 60 hours later, in this age of 24/7 news and video documentation at everyone’s fingertips, it seems odd that there hasn’t been much in the way of confirmation of that attack.

So no one really knows what may be the next logical step, neither in response, nor as part of a natural follow-up to the original action, since the very existence of that original action is becoming more and more suspect.

None of this really inspires too much confidence, but as opposed to wanting to see the week get off to a slow or weak start, as I usually do, I would be happy to see some strength and the possibility of being pulled along for the ride, especially since I missed it last week.

Despite having had a few weeks of really strong out-performance in prior weeks, I tend to focus on things the way most people do. I tend to ask “what have you done for me, lately.”

With last
week being one of relative under-performance that’s where my focus begins this week, so I would like to see some strength to begin the week and some opportunity to simply sell calls on positions now laying fallow.

What would be especially nice is some indication that the early strength in the market has some staying power.

In the past few months these kind of early indications had a way of quickly running their course, so there’s not too much reason to chase anything until there’s a sense that it is for real, this time.

Ultimately, I expect this week to be relatively slow as it comes to new positions being opened.

The cash generation has to come from somewhere, though.

Part of it will come from losers such as Target and Transocean, which both go ex-dividend this week and have reasonably generous dividends, but dividends are really illusory, as far as net assets go. It is cash, but it comes at a tangible price.

With a number of positions already set for expiration this week there will hopefully be some combination of rollover and assignment opportunities to create real income and re-supply cash reserves, respectively, while waiting for the right opportunities to spend cash reserves down.