Monthly Archives: August 2014

Daily Market Update – August 21, 2014 (Close)

After all of the talk last week about how it was going to be the best performing in the previous 6 weeks, all it took was a single murmuring of some armed conflict to derail that locomotive. Never mind that the reports were never verified.

In a world where there’s not video tape of absolutely everything that goes on, there’s nothing to have confirmed that market rattling news. Nor were there any denials from the other side, though, so above all, it was confusion that reigned and the market hates confusion.

When you’re on edge anything can set you off.

Still, the week acquitted itself very nicely, despite the sell-off to end the week.

Without any real confirmation of everything just escalating into Armageddon, this week, if it ended after just 3 days of trading would have left last week in the dust, even if Friday was excluded from the results.

Now that the fourth trading day is in the record books the dust is even thicker. Much thicker.

The market had started this morning up 1.6% for the week and added on another 0.3%. Now only the challenge of some mis-spoken words coming from anyone’s lips that may be attending the Kansas City Federal Reserve’s meeting in Jackson Hole is scheduled to get in the way. If all goes as hoped and no one pulls the rug out then this stands to be the best week in 4 months and again laying claim to even more new closing record highs..

After Bernanke skipping last year’s meeting the eyes are once again focused there as Janet Yellen will be in attendance and is scheduled to deliver prepared remarks tomorrow. I don’t know how long they have been holding that meeting, but I found myself in Jackson Hole some 32 and 33 years ago, both times  in August and don’t remember any Federal Reserve types hanging out in the campground or the Cowboy Bar, but we may have just missed each other. There’s also a chance that I wasn’t paying too much attention,  but it was at least a year later before I had any interest in anything at all.

With attention focusing on the annual event out west the market looks to continue some of the previous three days worth of gains.

What has made this week interesting is that all for but a few minutes after the FOMC statement the market hasn’t really made any attempt to reverse the gains or take any profits.

That’s in fairly sharp contrast to the way the market has very tentatively found its way getting to new high after new high. If you’re a bull you will take comfort in the fact that the climb came bit by bit and had some mild reversals along the way.

“Slow and steady wins the race,” is the basic tenet at play and it should inspire confidence.

Still, despite all of the reasons to remain long in the market, albeit with some cash on the sideline in the event there is an opportunity to capitalize on any mis-steps, it’s clear that there are lots of nerves as there are lots of tender spots around the globe.

For now, none of that matters until it does. Today, it certainly didn’t matter, as it was another day of precious metals and interest rates, the competition, both heading lower.

With only a minimal number of new positions opened this week now comes the critical time to begin planning for the coming week which depends on some assignments to help rejuvenate cash and rollovers to put some discretionary cash into the pile.

While watching the market climb higher and assets growing along with the market, the only really tangible evidence of good times is action and the ability to do the rollovers and sell those options.

Hopefully tomorrow will have its share of good and tangible news, but if not, there’s always a Cowboy Bar around the corner to drown those sorrows.

Daily Market Update – August 21, 2014 (9:00 AM)

After all of the talk last week about how it was going to be the best performing in the previous 6 weeks, all it took was a single murmuring of some armed conflict to derail that locomotive. Never mind that the reports were never verified.

In a world where there’s not video tape of absolutely everything that goes on, there’s nothing to have confirmed that market rattling news. Nor were there any denials from the other side, though, so above all, it was confusion that reigned and the market hates confusion.

When you’re on edge anything can set you off.

Still, the week acquitted itself very nicely, despite the sell-off to end the week.

Without any real confirmation of everything just escalating into Armageddon, this week, if it ended after just 3 days of trading would have left last week in the dust, even if Friday was excluded from the results.

So far, the market is up 1.6% for the week and has only the challenge of some mis-spoken words coming from anyone’s lips that may be attending the Kansas City Federal Reserve’s meeting in Jackson Hole. If all goes as hoped and no one pulls the rug out then this stands to be the best week in 4 months and again within a hair’s breadth of more new records.

After Bernanke skpping last year’s meeting the eyes are once again focused there as Janet Yellen will be in attendance and is scheduled to deliver prepared remarks tomorrow. I don’t know how long they have been holding that meeting, but I found myself in Jackson Hole some 32 and 33 years ago, both times  in August and don’t remember any Federal Reserve types hanging out in the campground or the Cowboy Bar, but we may have just missed each other. There’s also a chance that I wasn‘t paying too much attention,  but it was at least a year later before I had any interest in anything at all.

With attention focusing on the annual event out west the market looks to continue some of the previous three days worth of gains.

What has made this week interesting is that all for but a few minutes after the FOMC statement the market hasn’t really made any attempt to reverse the gains or take any profits.

That’s in fairly sharp contrast to the way the market has very tentatively found its way getting to new high after new high. If you’re a bull you will take comfort in the fact that the climb came bit by bit and had some mild reversals along the way.

“Slow and steady wins the race,” is the basic tenet at play and it should inspire confidence.

Still, despite all of the reasons to remain long in the market, albeit with some cash on the sideline in the event there is an opportunity to
capitalize on any mis-steps, it’s clear that there are lots of nerves as there are lots of tender spots around the globe.

For now, none of that matters until it does.

With only a minimal number of new positions opened this week now comes the critical time to begin planning for the coming week which depends on some assignments to help rejuvenate cash and rollovers to put some discretionary cash into the pile.

While watching the market climb higher and assets growing along with the market, the only really tangible evidence of good times is action and the ability to do the rollovers and sell those options.

Hopefully the next two days will have its share of good and tangible news, but if not, there’s always a Cowboy Bar around the corner to drown those sorrows.

Daily Market Update – August 20, 2014 (Close)

After two strong days that found the market reveling in the absence of any significant geo-political news, it appeared that this morning is going to get off to a flat start, but that didn’t last too long.

A flat start wouldn’t have been unusual on the morning of a scheduled FOMC statement release, especially one that’s expected to continue a year long string of fairly benign and inconsequential restatements of policy.

Where there may be some excitement is in Jackson Hole, where on Friday Federal Reserve Chairman Janet Yellen will be making some remarks at the annual retreat of the Kansas City Federal Reserve.

While she probably won’t say anything intended to excite anyone or catch anyone off guard, it’s usually a case of interpretation or sometimes an off the cuff remark or less than perfectly crafted answer to a question.

Sometimes, however, insights into a thought process can take people off guard or start speculation running wild as to the true beliefs that may underlie the public demonstration of idea s and beliefs.

While Janet Yellen is considered to be “dovish,” the new Vice-Chairman, the influential and highly regarded Stanley Fischer is considered to be a “hawk.” However, after some surprising dovish comments by Fischer in a recent speech in Sweden it should probably come as no surprise that  regardless of how any of these economists may be pigeon-holed they will still act based upon data, despite some potential for philosophical bias. However, our expectations have little flexibility for anything that deviates from those expectations.

Coming on Friday, those remarks may have some impact on a day that we can also reasonably expect something to happen on the Russia – Ukraine front. Either of those could move the markets which by now had started the morning within about 1% of their highs and finished the day brushing up right against those highs.

That’s an amazing turnaround from barely a week ago when suddenly everyone had discovered the concept of volatility and were all agog about the 30% and higher increase in volatility in the course of just a few days.

Looking at volatility now, which generally moves inversely with the market, you wonder where all of the noise has gone and why no one is pointing to the 30+% reduction in volatility in the past few days.

Over the next few days as we digest the FOMC and await the Jackson Hole meeting there isn’t much in the way of expectation for any significant activity. The first few days of this week have already seen the S&P 500 advance 1.3% on top of last week’s 1.2%. Add another 0.3% today and now we’re on track for the best week in 4 months. Up until last Friday’s sell-off that week was headed toward being the best in the previous 6 weeks, but ended up just missing that distinction.

But we’ll see.

Thus far, despite the strong advance higher the existing portfolio positions are still keeping pace, which gets to be very challenging once that advance gets to or exceeds the 1% level. That was certainly the case last week when existing positions badly trailed the index .

Any opportunity to generate additional portfolio income would help to keep pace with the market, but the low volatility is making it hard to justify the sale of calls on some positions, as the premiums are just so low that the offer such little income or protection in exchange for ceding some advance in share value.

As long as the market is moving higher and taking most positions along with it there’s little reason to accept a pittance and receive little in return, but as we’ve seen time and time again, all of the environment that you see around you can change in an instant.

All it takes is a mis-placed word here or there in a prepared text or a casual comment. Or maybe just another rumor of conflict or peace coming out of some corner of the world that most of us have never considered, but has suddenly set the world back into the glory days of  the cold war that we thought we had won.

In the meantime there’s no reason to not enjoy the move higher, although you might enjoy things even more if our collective expectations come under attack.

Daily Market Update – August 20, 2014 (8:00 AM)

After two strong days that found the market reveling in the absence of any significant geo-political news, it appears that this morning is going to get off to a flat start.

That itself isn’t unusual on the morning of a scheduled FOMC statement release, especially one that’s expected to continue a year long string of fairly benign and inconsequential restatements of policy.

Where there may be some excitement is in Jackson Hole, where on Friday Federal Reserve Chairman Janet Yellen will be making some remarks at the annual retreat of the Kansas City Federal Reserve.

While she probably won’t say anything intended to excite anyone or catch anyone off guard, it’s usually a case of interpretation or sometimes an off the cuff remark or less than perfectly crafted answer to a question.

Sometimes, however, insights into a thought process can take people off guard or start speculation running wild as to the true beliefs that may underlie the public demonstration of idea s and beliefs.

While Janet Yellen is considered to be “dovish,” the new Vice-Chairman, the influential and highly regarded Stanley Fischer is considered to be a “hawk.” However, after some surprising dovish comments by Fischer in a recent speech in Sweden it should probably come as no surprise that  regardless of how any of these economists may be pigeon-holed they will still act based upon data, despite some potential for philosophical bias. However, our expectations have little flexibility for anything that deviates from those expectations.

Coming on Friday, those remarks may have some impact on a day that we can also reasonably expect something to happen on the Russia – Ukraine front. Either of those could move the markets which by now are within about 1% of their highs.

That’s an amazing turnaround from barely a week ago when suddenly everyone had discovered the concept of volatility and were all agog about the 30% and higher increase in volatility in the course of just a few days.

Looking at volatility now, which generally moves inversely with the market, you wonder where all of the noise has gone and why no one is pointing to the 30% reduction in volatility in the past few days.

Over the next few days as we await both the FOMC and the Jackson Hole meeting there isn’t much in the way of expectation for any significant activity. The first few days of this week have already seen the S&P 500 advance 1.3% on top of last week’s 1.2%. Up until last Friday’s sell-off that week was headed to wrd being the best in the previous 6 weeks, but ended up just missing that distinction. At the moment, as we get ready to begin the third day of trading this week, we are already poised to proclaim this as being the best performance in the past 7 weeks.

But we’ll see.

Thus far, despite the strong advance higher the existing portfolio positions are still keeping pace, which gets to be very challenging once that advance gets to or exceeds the 1% level. That was certainly the case last week when existing positions badly trailed the index .

Any opportunity to generate additional portfolio income would help to keep pace with the market, but the low volatility is making it hard to justify the sale of calls on some positions, as the premiums are just so low that the offer such little income or protection in exchange for ceding some advance in share value.

As long as the market is moving higher and taking most positions along with it there’s little reason to accept a pittance and receive little in return, but as we’ve seen time and time again, all of the environment that you see around you can change in an instant.

All it takes is a mis-placed word here or there in a prepared text or a casual comment. Or maybe just another rumor of conflict or peace coming out of some corner of the world that most of us have never considered, but has suddenly set the world back into the glory days of  the cold war that we thought we had won.

In the meantime there’s no reason to not enjoy the move higher, although you might enjoy things even more if our collective expectations come under attack.

Daily Market Update – August 19, 2014 (Close)

Well, yesterday was a surprise, but it does seem to go along with the recent pattern that the market basically hates getting news and loves existing in either ignorance or denial.

The reaction last Friday to news or at least what was passed off as news contrasted sharply to the reaction yesterday to nothing.

It’s hard to understand how the market could be so fragile as to flee on any bad geo-political news, but then to flock back when there is no news. It doesn’t even take good news, it just takes no news.

That’s especially confusing when you realize that the story is far from being done and any day, especially any Friday the way the pattern seems to be going, can bring a new series of investor rattling bits of news.

While every one still believes that the market looks out into the future by a 6 month period, that’s increasingly hard to accept, given the way daily events or non-events rock the markets and can change the entire tone in an instant.

After seeing yesterday’s gain it’s hard to not want to be part of the revelry and today looks like it may add to those gains.

The one bit of good news coming from the market before the opening was Home Depot.

It reported earnings the way any company would like to see itself report. It beat on every single metric and it guided even stronger for the next quarter.

If looking for good economic news, or at least any news that doesn’t have the word “geo-political” attached to it, the news from Home Depot  seems to be just the right kind. Of course, it will be put into better context tomorrow when Lowes reports. There was some contagion, though, as Lowes went up sharply in advance of their release.

But at least then we will know whether Home Depot’s good fortunes have come at the expense of its competition or whether the pie just got larger.

Ultimately, good news from both of those companies has to be good news for the economy as a whole. While there may be various theories about what strength at Home Depot and Lowes means for the home builders, which are often thought of as the real measures of the economy,those theories are just that and not necessarily having much in the way of validity.

Too often mutual exclusivity is believed to be a rule in so many aspects in life. Home Depot can thrive even as home builders do, as well. So I think that if the pie is expanding that is more likely to be good news for all.

While the market’s early morning gain wasn’t a guarantee to extend yesterday’s rally I planned to still practice the “prove it to me” approach. As it would turn out today was not only an extension but was able to stand tall on its own. I was still content to mostly watch and wasn’t expecting to make any new purchases, but was taken in by Carnival going ex-dividend tomorrow.

Where there was no content was in seeing just how ridiculously low premiums are now as volatility has plunged. While a number of positions climbed higher today, just as they did yesterday, the premiums are sop low that they offer very little reward in exchange for the risk taken of not sharing in any further upside. That’s especially true of forward week premiums that are reflecting little anticipation of increasing volatility at the moment..

I hate that.

On a very positive note, after last week’s inability to keep up with the market, even with yesterday’s 1% gain existing positions kept pace. However, the more those market gains continue the harder it will be to keep up, as a number of positions are currently now in the money and not sharing in the good times.

Sometimes the tide is good, but I’d much rather swim free and see the market tread water for  a bit.