Monthly Archives: August 2014

Daily Market Update – August 7, 2014 (8:30 AM)

Following yesterday’s flat trading and flat finish, the morning was awaiting word regarding the ECB’s refinance rate.

With that remaining unchanged, which came as no surprise, the market just continued along the same flat line as it then awaited some word from the ECB president.

In the past he has had a way of moving markets, exactly the same way that the Chairman of the Federal Reserve can move markets, so while the futures were continuing to go no where special after the rate announcement, they could easily have quickly changed direction about 30 minutes later as Draghi began to speak.

The difference has been that when Draghi has spoken his words have largely been the kind that have reassured and rallied markets.

Even though we’re not even down 4% from the S&P 500’s high levels, we could use some of that kind of rally, especially heading into the close of the week when it would especially nice to see some likely assignments.

Unlike the past few weeks in which trading started fairly slowly and then picked up steam in the final two days resulting in a nice combination of rollovers, new covers and assignments, I just don’t see a repeat of that pattern this week.

While flat and down markets are still my favorite environment, it’s a lot better when the rollovers and new covered positions can be established. Even if the stocks are going no where themselves, at least their derivative cousins can do something of value.

So far, this week?

Not so much.

Although there aren’t too many positions set to expire this week, as compared to some recent weeks past, there is still at least some opportunity to see some assigned and some rolled over, as long as the last two days don’t really do anything terribly stupid.

While the past few weeks were able to withstand some week trading days to end the weeks and still see those revenue producing trades accomplished, this week doesn’t have very much of a cushion, so it would be nice to see just a quiet end to a week of headless wandering and then have the chance to start anew next week.

However, despite that apparently sounding negativity, and certainly without wanting to jinx anything, as the market does trade in a flat manner or even trading downward, the portfolio path is again trending toward out-performance as compared to the S&P 500.

That’s not unusual as the premiums are typically the factor that provides the additional performance,

However, while out-performance is always the goal, it’s nice to also couple that with actual increasing portfolio value, as well.

Hopefully those will both continue for the next two days although some opportunity to make the trades would really help and make hope unnecessary.

Daily Market Update – August 6, 2014 (Close)

With another morning getting ready to get off to a negative start, there were some significant events that could have been causes for concern today.

The first two were really pretty unusual. Both 21st Century Fox and Sprint had withdrawn their buyout bids for Time Warner and T-Mobile, respectively.

There can certainly be a myriad of reasons for having done so, but it just doesn’t happen that often. Pfizer did so recently, but that was very complex, including a reluctant target, British regulatory factors and potential backlash from its planned tax inversion.

Usually once a company sets its sights on another company there’s a battle ahead if the target expresses reluctance. You don’t often see the suitor just walking away.

In the case of the Time Warner deal it’s entirely possible that Rupert Murdoch isn’t interested in what could have been a prolonged battle. After all, how much longer would it then take for him to even see benefits from such a deal? All the money in the world may not buy you time when “natural causes” is staring at you.

In the case of T-Mobile, Sprint may have realized that while with a merger they would have gotten the talents of John Legere, on the negative side they would have gotten John Legere.

That may have been enough.

Much more ominous would be the realization by both potential suitors that their targets were already fully priced. It can’t be entirely lost on people that Murdoch’s previous large acquisitions have come at precise market tops.

Then there’s the matter of Italy slipping into recession. Although it’s not as if they have had the most dynamically growing economy over the past 25 years,  a recession is good for no one.

Meanwhile, Germany has announced a cancelation of a defense deal with Russia and Russia has blocked sales of some Brown-Forman products, such as “Jack Daniels,” due to “sub-standard quality.”

So that was the backdrop for this morning, as we came off another large loss that followed what may have been some illusory gains on Monday.

Yesterday’s decline saw some disagreement over the root cause.

There were those that said the decline was due to comments from the Polish Prime Minister regarding the prospects for an imminent Russian invasion of Ukraine.

Others believed that the decline was due to technical factors with the S&P 500 breaching support at 1926 and immediately dropping 6 points as algorithms started selling programs.

Of course, no one thought that maybe the interplay of the two was at hand, because that would be giving credence to others and other ideas.

The hope was that today might ignore the early signs that pointed toward a negative day  and look at the bright side of lower prices as it has done on so many previous occasions over the past 20 months.

Well, one for two isn’t bad.

At least the early drop was largely ignored, although there were some really large droppers, today. But as far as taking advantage of some of the even further depressed prices, neither I, nor anyone else seemed to be in that sort of mood.

Tomorrow? Maybe, but first we have to see what the ECB does and we will likely take some cue from them at least to start the morning.

Daily Market Update – August 6, 2014 (8:30 AM)

With another morning getting ready to get off to a negative start, there are some significant events that may be cause for concern today.

The first two are really pretty unusual. Both 21st Century Fox and Sprint have withdrawn their buyout bids for Time Warner and T-Mobile, respectively.

There can certainly be a myriad of reasons for having done so, but it just doesn’t happen that often. Pfizer did so recently, but that was very complex, including a reluctant target, British regulatory factors and potential backlash from its planned tax inversion.

Usually once a company sets its sights on another company there’s a battle ahead if the target expresses reluctance. You don’t often see the suitor just walking away.

In the case of the Time Warner deal it’s entirely possible that Rupert Murdoch isn’t interested in what could have been a prolonged battle. After all, how much longer would it then take for him to even see benefits from such a deal? All the money in the world may not buy you time when “natural causes” is staring at you.

In the case of T-Mobile, Sprint may have realized that while with a merger they would have gotten the talents of John Legere, on the negative side they would have gotten John Legere.

That may have been enough.

Much more ominous would be the realization by both potential suitors that their targets were already fully priced. It can’t be entirely lost on people that Murdoch’s previous large acquisitions have come at precise market tops.

Then there’s the matter of Italy slipping into recession. Although it’s not as if they have had the most dynamically growing economy over the past 25 years,  a recession is good for no one.

Meanwhile, Germany has announced a cancelation of a defense deal with Russia and Russia has blocked sales of some Brown-Forman products, such as “Jack Daniels,” due to “sub-standard quality.”

So that’s the backdrop for this morning, as we come off another large loss that followed what may have been some illusory gains on Monday.

Yesterday’s decline saw some disagreement over the root cause.

There were those that said the decline was due to comments from the Polish Prime Minister regarding the prospects for an imminent Russian invasion of Ukraine.

Others believed that the decline was due to technical factors with the S&P 500 breaching support at 1926 and imme
diately dropping 6 points as algorithms started selling programs.

Of course, no one thought that maybe the interplay of the two was at hand, because that would be giving credence to others and other ideas.

Hopefully today will ignore the early signs that point toward a negative day  and look at the bright side of lower prices as it has done on so many previous occasions over the past 20 months.

Daily Market Update – August 5, 2014 (Close)

This is possibly going to be the slowest news week of the year, at least as far as planned economic news goes.

That may be a nice change from the previous week when along with all of the unscheduled news we hit the peak in earnings reports and had an FOMC statement and Employment Situation Report to round things out.

I’m tired from even typing all of that out.

As the week will come to its close hopefully I’ll be in a position to also say that it was nice, for a change, to have started a week as was done this week. Coming off last Thursday and Friday’s sell-offs it was relatively easy to not be very hesitant in establishing some new positions to begin the week.

It seems like an eternity ago, but that used to be a fairly regular pattern with some weeks having as many as 10 new purchases and often little else for the rest of the week until Thursday or Friday.

Lately, though, the dynamic has been changed as bargains are harder to find. But the dynamic has also been changed by the increasing availability of expanded weekly options. That has meant that while a stock with a weekly option might not look so appealing for purchase and call sale on a Wednesday, the same stock with an expanded weekly option might look good with an expanded option.

Too bad that the forward week premiums have been so low, though.

While part of me would love to see that volatility continue rising, especially since it does so at a multiple to the market, there is also the realization that the generation of increased premium income comes at a cost. That is the fact that the market generally has to be in a decline in order to drive up the volatility.

Today turned out to be another good example of that as the market more than erased yesterday’s bounce back and more than erased the drop in the Volatility Index, as well.

I guess that’s what they mean by “bittersweet,” but if you’re not the kind that frets too much about the illusory bottom line then the reality of the income offsets the illusory decreases that typically work their way back.

Watching this morning’s market deteriorate somewhat from a mildly lower level in the early futures trading I don’t mind seeing some trading days that will help to form some kind of a resting phase for the market, even if that phase is lower. However, today was a bit too much,

With a number of trades already made for the week I wouldn’t have said “no” to any other potential new position opportunities, but would have been happy with those already made, especially if those other income producing trades could be made during the rest of the week. As it would turn out there were more opportunities today, but just as suddenly I wasn’t so happy now about the trades yesterday and the appearance of new opportunities may themselves be illusory as the market isn’t necessarily on firm ground.

Since my hope had been for some chance to make some opening call position trades that would have required some market stability or strength, or at least strength in individual positions going against the market grain. So in addition to the bittersweet feeling, there was also a hope for conflicting outcomes and that certainly wasn’t the case today.

Or you could just take it one trade at a time and let the other stuff work itself out.

I think that’s what I’ll be doing this week and take a break from trying to over-think that which can’t even really be understood in hindsight.

Daily Market Update – August 5, 2014 (8:30 AM)

This is possibly going to be the slowest news week of the year, at least as far as planned economic news goes.

That may be a nice change from the previous week when along with all of the unscheduled news we hit the peak in earnings reports and had an FOMC statement and Employment Situation Report to round things out.

I’m tired from even typing all of that out.

AS the week will come to its close hopefully I’ll be in a position to also say that it was nice, for a change, to have started a week as was done this week. Coming off last Thursday and Friday’s sell-offs it was relatively easy to not be very hesitant in establishing some new positions to begin the week.

It seems like an eternity ago, but that used to be a fairly regular pattern with some weeks having as many as 10 new purchases and often little else for the rest of the week until Thursday or Friday.

Lately, though, the dynamic has been changed as bargains are harder to find. But the dynamic has also been changed by the increasing availability of expanded weekly options. That has meant that while a stock with a weekly option might not look so appealing for purchase and call sale on a Wednesday, the same stock with an expanded weekly option might look good with an expanded option.

Too bad that the forward week premiums have been so low, though.

While part of me would love to see that volatility continue rising, especially since it does so at a multiple to the market, there is also the realization that the generation of increased premium income comes at a cost. That is the fact that the market generally has to be in a decline in order to drive up the volatility.

I guess that’s what they mean by “bittersweet,” but if you’re not the kind that frets too much about the illusory bottom line then the reality of the income offsets the illusory decreases that typically work their way back.

Watching this morning’s market deteriorate somewhat from a mildly lower level in the early futures trading I don’t mind seeing some trading days that will help to form some kind of a resting phase for the market, even if that phase is lower.

With a number of trades already made for the week I wouldn’t say “no” to any other potential new position opportunities, but would be happy with those already made, especially if those other income producing trades could be made during the rest of the week.

Of course, that requires some market stability or strength, or at least strength in individual positions going against the market grain. So in addition to the bittersweet feeling, there is also a hope for conflicting outcomes.

Or you could just take it one trade at a time.

I think that’s what I’ll be doing this week and take a break from trying to over-think that which can’t even really be understood in hindsight.