Daily Market Update – September 23, 2014 (Close)

 

  

 

Daily Market Update – September 23, 2014 (Close)

Yesterday was just a really awful day.

It was another in a series of days that characterized last week’s 1.3% increase in the S&P 500 that on the surface seemed great but that actually along with the other major indices lagged the DJIA by quite a bit.

Last week the market was good, just not as good as you would have thought.

Yesterday was another day of lagging the Dow, but this time you couldn’t console yourself with the 1.3% gains, as the Dow itself was down triple digits and on a relative basis everything else was down even more.

Even Alibaba was down about 5%.

For those that boldly stated that the Alibaba IPO marked the beginning of the end yesterday’s trading is validation of their position.

There was a graphic making the rounds yesterday that showed market levels at the time of three previous “largest” IPOs that showed that they occurred at precisely the market’s top of the then current bull markets.

Unfortunately, they didn’t bother telling people that they cherry picked the data and omitted including other “largest” ever IPOs, such as for General Motors (the second time around), Facebook and others. They also conveniently overlooked IPOs on foreign markets that nonetheless traded in the U.S. as ADRs.

Having included any of those other IPOs would have made their graphic appear very different and would have invalidated their contention. In fact, this is what the more reflective graphic would have looked like and that’s whithout adjusting for such factors as Visa having sold about 80% of its shares at IPO, as opposed to Facebook, which only sold 25%.

 

Still, whenever you’re at market highs you do have to wonder whether you’re at the peak.

For those that remember the Reagan Administration, you may remember the one time director of the Office of Management and Budget. That was David Stockman, the architect of the “trickle down theory of economics.”

He just wrote a s
cathing review
of Alibaba that gets a little more frightening if you saw Jack Ma’s “trust me” response to questions regarding the ability of the business going forward, particularly within the context of functioning within China.

This morning things were looking better, but not looking good. Neither for the markets nor for Alibaba.

The market was again poised for a lower open and Alibaba was indicating another 2% lower on a morning that comes after Treasury has announced new regulations regarding tax inversions and the United States and its coalition allies have attacked ISIS targets inside of Syria.

Both of those represent the “unexpected” kind of news, even though most of us knew that each one would likely be coming sooner or later. It’s just that no one really thought that today would be that day.

With surprisingly more new purchases yesterday than I would have believed to have occurred, today was a day to largely be passive and hope that the events of yesterday’s market are not a prelude to a near term sell-off. At the very least today’s nearly triple point drop in the DJIA was worse than the S&P 500 performed, as today everyone was buzzing about another signal, the death cross,” that also has no validation, yet seems to have a significant following.

It’s already clear that Treasury’s decision is having an impact on some proposed inversions, as the new regulations take place immediately. However, what is not being discussed and what is very likely going to be an outgrowth of the Treasury decision is some upcoming modification to the corporate tax code, particularly regarding overseas funds and the tax rates, that would make the desire to execute an inversion less desirable in the first place.

But as far as today is concerned that possibility is irrelevant and won’t be guiding anyone’s investment decisions, much less acting as a catalyst pushing the market forward.

While there remains little that can be identified as a catalyst to help convincingly reach new record highs and do so in a broad fashion, I wouldn’t entirely dismiss the market’s resilience. Just as there is no easily discernable catalyst, there really is no compelling reason to believe that the rug is about to be pulled out as the market isn’t really trading at an historically high multiple, particularly when realizing how that multiple has been artificially elevated through massive stock buybacks.

So pessimism may reign after yesterday and today’s performance, but the signs, other than a gut feeling and a overtly biased graph, just aren’t really there.

 

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Daily Market Update – September 23, 2014

 

  

 

Daily Market Update – September 23, 2014 (9:15 AM)

Yesterday was just a really awful day.

It was another in a series of days that characterized last week’s 1.3% increase in the S&P 500 that on the surface seemed great but that actually along with the other major indices lagged the DJIA by quite a bit.

Last week the market was good, just not as good as you would have thought.

Yesterday was another day of lagging the Dow, but this time you couldn’t console yourself with the 1.3% gains, as the Dow itself was down triple digits and on a relative basis everything else was down even more.

Even Alibaba was down about 5%.

For those that boldly stated that the Alibaba IPO marked the beginning of the end yesterday’s trading is validation of their position.

There was a graphic making the rounds yesterday that showed market levels at the time of three previous “largest” IPOs that showed that they occurred at precisely the market’s top of the then current bull markets.

Unfortunately, they didn’t bother telling people that they cherry picked the data and omitted including other “largest” ever IPOs, such as for General Motors (the second time around), Facebook and others. They also conveniently overlooked IPOs on foreign markets that nonetheless traded in the U.S. as ADRs.

Having included any of those other IPOs would have made their graphic appear very different and would have invalidated their contention.

Still, whenever you’re at market highs you do have to wonder whether you’re at the peak.

For those that remember the Reagan Administration, you may remember the one time director of the Office of Management and Budget. That was David Stockman, the architect of the “trickle down theory of economics.”

He just wrote a scathing review of Alibaba that gets a little more frightening if you saw Jack Ma’s “trust me” response to questions regarding the ability of the business going forward, particularly within the context of functioning within China.

This morning things are looking better, but not looking good. Neither for the markets nor for Alibaba.

The market is again poised for a lower open and Alibaba is indicating another 2% lower on a morning that comes after Treasury has announced new regulations regarding tax inversions and the United States and its coalition allies have attacked ISIS targets inside of Syria.

Both of those represent the “unexpected” kind of news, even though most of us knew that each one would likely be coming sooner or later. It’s just that no one really thought that today would be that day.

With surprisingly more new purchases yesterday than I would have believed to have occurred, today is a day to largely be passive and hope that the events of yesterday’s market are not a prelude to a near term sell-off.

It’s already clear that Treasury’s decision is having an impact on some proposed inversions, as the new regulations take place immediately. However, what is not being discussed and what is very likely going to be an outgrowth of the Treasury decision is some upcoming modification to the corporate tax code, particularly regarding overseas funds and the tax rates, that would make the desire to execute an inversion less desirable in the first place.

But as far as today is concerned that possibility is irrelevant and won’t be guiding anyone’s investment decisions, much less acting as a catalyst pushing the market forward.

While there remains little that can be identified as a catalyst to help convincingly reach new record highs and do so in a broad fashion, I wouldn’t entirely dismiss the market’s resilience. Just as there is no easily discernable catalyst, there really is no compelling reason to believe that the rug is about to be pulled out as the market isn’t really trading at an historically high multiple, particularly when realizing how that multiple has been artificially elevated through massive stock buybacks.

So pessimism may reign after yesterday’s performance and possibly today’s continuance, but the signs, other than a gut feeling and a overtly biased graph, just aren’t really there.

 

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Daily Market Update – September 22, 2014 (Close)

 

  

 

Daily Market Update – September 22, 2014 (Close)

After last week’s downpouring of anticipated news this week will be a snoozefest by comparison, but as we’ve seen over and over again, there isn’t necessarily a correlation between news and market movements.

Today, unfortunately turned out to be a great example of that little bit of truth.

A quiet week on the newsfront isn’t necessarily something that offers immunity from a market exploding higher or crumbling under its weight. There needn’t be a tangible reason for either of those occurrences, although we always look for the reasons as both a means of predicting and a means of explanation.

Too bad it never really seems to work that way. Even after all of the explanations in hindsight, they just don’t seem to have predictive value the next time around.

Certainly, the impact of news isn’t consistently a lasting one. We tend to forget and move on quickly, but are also subject to so many bits of news, each of which requires consideration, if not also action.

In a week such as last the news events were from such different directions, the FOMC and the Scotland independence referendum, and were so completely unrelated that it was entirely conceivable that their results could have whipsawed markets,

Instead, everything went as planned and their impacts were additive.

That has pretty much been the story of the past two years.

While there have been some disappointments, they’ve been very temporary in impact, while the greatest challenges have been the unpredicted and unpredictable, most often coming from geo-political issues around the world.

This week everything is quiet on the scheduled news front, other than for Friday’s GDP announcement and the world is relatively quiet, insofar as there’s little new expected to assault our humanity.

With markets at their familiar “new high” levels to begin this week, precious metals sinking even further and interest rates still under the  FOMC’s thumb of “considerable time,” it just makes perfect sense that money would stay at work in equity markets.

It’s hard to argue with that logic, but it’s also hard to accept it when there is a realization that such logic is what most everyone in the world is thinking will be the only path to follow.

Together with the performance spreads between the narrow DJIA and the more expansive NASDAQ 100, S&P 500 and Russell 2000, there was already some
reason to be concerned as last week came to its end.

Today that spread continued as the broader markets performed less well than the more high profile DJIA.

The early morning market was already giving tentative signals and as the day progressed there was nothing tentative about the sentiment and tone of the day’s trading.

With enough assignments from last week to fuel some buying this week I didn’t have any great plans to abandon some caution, as I would still have liked to be in a position to increase my cash reserves as this week comes to its end,  rather than spending it down and putting it at risk.

However, as is so often the case, sometimes it’s hard to resist, even when there is continued reason to resist..

As the first week of the October 2014 cycle was set to begin and already having a number of positions set to expire this week, any new positions were initially considered with both weekly and expanded weekly options, in order to continue the process of attempting to develop some diversification in contract expiration dates. However the near term trades looked more appealing after the market began trading on a downward path.

While I would have especially liked to see some opportunities to sell contracts on those positions that just seemed to expensive to rollover last week and gotten those back to work, if you were looking for anything in green today there wasn’t very much to see.

The more of those opportunities the less is the need to create new positions to generate income for the week, so I would have welcomed those opportunities over buying opportunities, but you have to deal with the market you have and not the one you want.

 

 

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Daily Market Update – September 22, 2014

 

  

 

Daily Market Update – September 22, 2014 (8:00 AM)

After last week’s downpouring of anticipated news this week will be a snoozefest by comparison, but as we’ve seen over and over again, there isn’t necessarily a correlation between news and market movements.

A quiet week on the newsfront isn’t necessarily something that offers immunity from a market exploding higher or crumbling under its weight. There needn’t be a tangible reason for either of those occurrences, although we always look for the reasons as both a means of predicting and a means of explanation.

Too bad it never really seems to work that way. Even after all of the explanations in hindsight, they just don’t seem to have predictive value the next time around.

Certainly, the impact of news isn’t consistently a lasting one. We tend to forget and move on quickly, but are also subject to so many bits of news, each of which requires consideration, if not also action.

In a week such as last the news events were from such different directions, the FOMC and the Scotland independence referendum, and were so completely unrelated that it was entirely conceivable that their results could have whipsawed markets,

Instead, everything went as planned and their impacts were additive.

That has pretty much been the story of the past two years.

While there have been some disappointments, they’ve been very temporary in impact, while the greatest challenges have been the unpredicted and unpredictable, most often coming from geo-political issues around the world.

This week everything is quiet on the scheduled news front, other than for Friday’s GDP announcement and the world is relatively quiet, insofar as there’s little new expected to assault our humanity.

With markets at their familiar “new high” levels to begin this week, precious metals sinking even further and interest rates still under the  FOMC’s thumb of “considerable time,” it just makes perfect sense that money would stay at work in equity markets.

It’s hard to argue with that logic, but it’s also hard to accept it when there is a realization that such logic is what most everyone in the world is thinking will be the only path to follow.

This morning the market looks as if it will get off to a tentative start.

With enough assignments from last week to fuel some buying this week I don’t have any great plans to abandon some caution, as I would still like to increase my cash reserves as this week comes to its end.

As the first week of the October 2014 cycle is set to begin and already having a number of positions set to expire this week, any new positions will be considered with both weekly and expanded weekly options, in order to continue the process of attempting to develop some diversification in contract expiration dates.

I would especially like to see some opportunities to sell contracts on those positions that just seemed to expensive to rollover last week and get those back to work. The more of those opportunities the less is the need to create new positions to generate income for the week, so I would welcome those opportunities over buying opportunities for now.

 

 

 

 

 

 

 

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Dashboard – September 22 – 26, 2014

 

 

 

 

 

Selections

MONDAY:  Not too much news this week in follow-up to last week’s torrent that did little to alter the landscape. For those calling for an S&P 500 top marked by the Alibaba IPO today begins the countdown that has been nerly two years in the making

TUESDAY:     The market did begin the appeasement of those that believed the appearance of Alibaba would mark the top. This morning there appears to be some continuation as we sit less than 0.7% from the market’s high.

WEDNESDAY:  Two consecutive triple digit losses barely leaves us 1% below the closing highs. Following the familiar pattern it just looks like we’re due for another bimonthly drop in markets. Hopefully, if that’s the case the pattern continues with the obligatory rebound

THURSDAY:    Which market are you going to believe? The one yesterday or the one from earlier in the week? This morning the market itself doesn’t seem to know which way to go. Maybe it just will wait until tomorrow’s GDP

FRIDAY:  This will be one good week to see come to its end, especially as nothing of substance has occured to bring about the four preceding days of triple digit moves.

 



 

                                                                                                                                           

Today's TradesCash-o-Meter

 

 

 





 “SNEAK PEEK AT NEXT WEEK” APPEARS ON FRIDAYS

Sneak PeekPie Chart Distribution

 

 

 

 

 

 

 

Weekly Summary

  

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Weekend Update – September 21, 2014

Somewhere along the line most of us have tried the proven strategy of hanging out with people who were uglier or stupider than we perceived ourselves to be, in order to make ourselves look better by comparison.

There’s nothing really wrong in admitting that to be the case. It’s really the ultimate in victimless opportunism and can truly be a win-win for everyone involved.

The opportunist hopes to break away from that crowd and the crowd feels elevated by its association, or so goes the opportunist’s rationalization.

Markets are no different and this past week was as good of an example of that tried and tested phenomenon as you might ever find. In this case, the opportunist was the US equity market, but it really can rarely be a win-win situation.

Bonds, currencies and precious metals?

Ugly and stupid.

There were three potentially market rocking stories this week that could have struck fear in stock investors, but neither an upcoming FOMC statement, a pending independence referendum in Scotland, nor history’s largest IPO could do what common sense said should occur, particularly with liquidity being threatened from multiple directions.

You can probably thank the less than attractive alternatives for making stocks look so good to investors.

U.S. equity markets just did what we’ve become so accustomed to, other than for brief moments over the past two years, as the week ended on yet another new record high with the DJIA moving higher each day of the week.

Last week was like a perfect storm, except that the winds blew from all different directions during the latter half of the week.

The week started a bit ominously, but after a while it was clear that selling was narrow in scope and appeared to be limited to profit taking in some of the year’s big gainers, ostensibly to raise cash for any hoped for Alibaba (BABA) allocation, that was unlikely to materialize for most retail investors.

But when the competition is weak, it doesn’t take much to shine and stand out from the crowd. With the week’s first challenge being whether the FOMC was going to accelerate their time table for raising interest rates, all it took was The Wall Street Journal’s Jon Hilsenrath expressing the belief that the phrase “considerable time,” would remain intact to allow stocks to stand out from the crowd.

Never mind that Hilsenrath had yet to demonstrate an inside track to the Yellen Federal Reserve, as he seemed to have had during the Bernanke era. Also forget about the fact that the FOMC has been using that phrase since March 2014 and sooner or later it has to give way to the relization that “considerable time” has already passed. That’s best left to deal with at some other time in the future.

Neither of those were important as all of the other options were looking worse.

With the outcome of the independence referendum being far from certain stocks had been smart enough not to have predicted the eventual outcome and put itself in jeopardy if independence was ratified. Instead the risk was borne by currencies and foreign stock markets.

Precious metals? Who in the world has been putting new money into precious metals of late?

So stocks looked great, but after getting a makeover last week, suddenly the crowd may not look so unappealing. Even precious metals may find some suitors because they just don’t want to chase after stocks and wind up getting disappointed.

Who knew that the high school experience could have taught so much about the behavior of stocks?

The behavior of stocks this week, was also similar to how high school “A-listers” may have acted when pulling in someone from the “losers.” The welcome isn’t always a full and complete embrace and somewhat circumspect or still maintaining an aura of superiority.

^SPX ChartIn this case the “A-list” DJIA greatly outperformed other major indexes this past week as the advance didn’t fully embrace a broader selection of stocks.

Despite last week’s nice gains against the odds, in this perfect storm, everything went right. Yet the embrace was with less conviction than it appeared.

That doesn’t mean that I want to go and join the losers, but I may be circumspect of the superficial appearance of those “A-listers” as next week is about to begin.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

By comparison, Yahoo (YHOO) looks even less appealing now that it has given up a portion of its stake in Alibaba.

I purchased a small Yahoo position late this past Thursday, when noticing that the in the money option premium was rising even as shares were declining.

The following day I closed those positions shortly after Alibaba started trading as the gain in shares wasn’t matched by a similar gain the premium, resulting in a net credit greater than allowing the position to be assigned.

The funny thing was that the position never would have been assigned as reportedly Yahoo shares were being used a proxy to shorting Alibaba and share price went substantially lower, as a result, even while the value of Yahoo’s remaining stake in Alibaba appreciated by about an additional 37% from the IPO price.

While that kind of short selling strategy may continue, Yahoo is also reportedly becoming the focus of attention from other sources, while it may still stand to benefit from its continuing Alibaba position.

With lots of attention being directed toward its still unproven CEO, Marissa Mayer, as to what she will do with the IPO proceeds, I expect that the Yahoo option premium will remain elevated as so many factors are now coming into play.

While I like those prospects and expect to re-purchase shares, I don’t think that I’ll be allocating too much to this position because of all of the uncertainty involved, but do like the evolving soap opera.

When it comes to comparisons, there’s little that Blackberry (BBRY) can do to make itself look appealing. Where exactly can it hang out to be able to stand out in the crowd and get the attention of those that vote on popularity? Still, under the leadership of John Chen, Blackberry has ended its slide toward oblivion and at least gives appearances of now having a s
trategy and the ability to execute.

Blackberry reports earnings this coming week and thanks to a lift provided by a Morgan Stanley (MS) analyst out-performed the NASDAQ 100 for the week. 

The option market has assigned an implied move of 9.7% for the coming week and at Friday’s closing price a 1% ROI could be obtained even if shares fell by 13.7%. That kind of comparison makes Blackberry look good to me.

While maybe not looking good in comparison to its chief competitor, CVS Health (CVS) on the basis of its self proclaimed status of the guardians of the nation’s health after belatedly eliminating the sale of cigarettes from its stores, Walgreen looks food to me. That’s especially the case now that it seems to be settling into a trading range after it, too, belatedly, decided against a tax inversion strategy.

Walgreen, as with many other stocks trading in a range, but occasionally punctuated by substantive price moves related to earnings or other events, offers a nice option premium that may exceed the current risk of share ownership.

Until recently the comparison to gold during the summer worked out well for Market Vectors Gold Miners ETF (GDX), having out-performed the SPDR Gold Trust (GLD). More recently, however, the Miners Index has had an abysmal month of September and is approaching a 2 year low. However, its beta is still quite low and shares are now trading below their yearly mid-point range, while offering a premium that may offset what I believe to be limited downside risk.

I don’t look at ETF vehicles very often, but this one may be right in terms of timing and price. The availability of expanded weekly options, strike prices in $0.50 increments and manageable bid-ask spreads makes this potentially a good candidate for serial rollover if it finds some support and begins trading in a range.

Fastenal (FAST) is one of those stocks that may not have much glamour and may not stand out sufficiently to get noticed. To me, though, it is a superstar in the world of covered options as it has traded reliably within a range and consistently returned to the mid-point of that range, where it currently resides.

Having rolled over shares this past Friday after a mid-session drop below the strike, I watched as it recovered enough to close above the strike. Had it been assigned, as originally thought would occur, I knew that at its current price I wanted to re-purchase shares. Instead, now I want to add shares, but being mindful that it will report earnings in just a few weeks.

Despite Alibaba’s successful IPO, it’s still difficult for me to have too much confidence in stocks that have either a heavy reliance on the Chinese economy or are Chinese companies. Fortunately or unfortunately, I do make exceptions for both situations, although far fewer for the latter.

Joy Global (JOY) has extensive interests in China and is very dependent on continued growth of the Chinese economy, which is difficult to measure with reliability. Of course with our own GDP being reported this coming Friday, we know all too well, based on the recent pattern of revisions, that data should always be viewed warily.

With some weakness in this sector, witness the recent drop in Caterpillar (CAT), Joy Global is approaching correction territory over the past month and is beginning to once again look appealing, not having owned shares in nearly a year. These shares can be volatile, but with patience and an inner sense of serenity, the option premiums can atone for moments of anxiety.

Despite still holding a very expensive lot of Coach (COH) shares for far too long, it is still one of my favorite stocks over the longer term time frame, having owned it on 21 occasions over 25 months.

Smarting from the pain of that lot I still hold, it took a while before finding the courage to purchase an additional lot, but that recent lot was assigned this past week and I’m ready to add another in its place, as it seems that Coach has found some support at its current level. In the past Coach has been an excellent covered option trade when it traded in a range. The reason for it offering attractive option premiums was due to its predictably large earnings related moves. However, in the past, it had a wonderful habit of its price reverting to the mean.

If so, I don’t mind executing serial trades, reaping premiums and the occasional premium to help offset the existing paper loss. As the luster from Kors (KORS) seems to be waning there is also less populist battering of Coach, which remains very popular internationally. It’s commitment to maintaining its dividend makes it easy to hold shares while awaiting what I hope is an inevitable, albeit, unusually slow recovery.

Whole Foods (WFM) is another of those companies that I own that is currently well below its purchase price. As with Coach, I eventually found the courage to purchase more shares and have done so 4 times in the past 3 months, as it appears to have also found some price support.

Recently its premiums have become more attractive as the company has become a topic of speculation regarding activist intervention. While I don’t think there’s too much to come of that speculation, I do believe that shares are poised to continue climbing and hopefully in a slow and sustained manner. It goes ex-dividend this week and while not the most generous of dividends it does supplement the potential return offered by also selling call options on shares sufficiently to make it an attractive consideration.

Finally, Oracle (ORCL) is back in the news and in the last couple of years that hasn’t really been a good thing. After a number of disappointing earnings reports over that time, its Chairman and CEO, Larry Ellison, blasted those around him, finding plenty of places to lay blame. His absence from last year’s earnings report and conference in order to attend Oracle Team USA’s effort in the Americas Cup race struck me as inappropriate.

Now the news of Ellison stepping down as CEO, while retaining the Chairmanship, preceded this most recent quarter’s disappointing earnings. It also  was a prelude to the announcement of a power sharing plan with the appointment of co-CEOs, because we all know how much high achievers like to share power and glory.

Yet, with this past Friday’s price decline in Oracle it is again becoming a potentially attractive purchase candidate, particularly with an upcoming, albeit modest dividend coming on October 6, 2014.

That happens to be a Monday, and I wish there were more such Monday opportunities for those stocks that I follow. Those are often the best of the “Double Dip Dividend” selections, as early assignment to capture the dividend must occur on the preceding Friday and typically means receiving an entire week’s option premium, while being able to reinvest the exercise proceeds to generate even more income.

 

Traditional Stocks: Fastenal, Market Vectors Gold Miners ETF, Oracle, Walgreen

Momentum: Coach, Joy Global, Yahoo

Double Dip Dividend: Whole Foods (9/24 $0.12)

Premiums Enhanced by Earnings: Blackberry (9/23 PM)

Remember, these are just guidelines for the coming week. The above selections may become actionable, most often coupling a share purchase with call option sales or the sale of covered put contracts, in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week with reduction of trading risk.

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Week in Review – September 15 – 19, 2014

 

Option to Profit Week in Review
September 15 – 19,  2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
3 / 3 3 2 4  / 0 8  / 0 0

    

Weekly Up to Date Performance

September 15 – 19, 2014

New purchases for the week beat the unadjusted S&P 500 by 0.4% and the adjusted index by 0.6% during a week that had much more potentially critical news events than is meant to be digested over such a short time period.

It was a week of major unknowns and a market that did not really go according to script, other than to start the week off with some efforts to raise cash for Alibaba’s IPO by selling stocks, especially momentum stocks that had performed well year to date.

With all of the uncertainty and all of the potential factors that could have sent the markets much lower, and quickly so, instead it just went right on setting more new closing records.

New positions ended the week 1.7% higher, while the unadjusted S&P 500 was 1.3% higher and the adjusted S&P 500 lagged a little, but still rose 1.0% for the time period.

Performance of closed positions continued to out-perform the S&P 500 performance by 1.7%. They were up 3.6% out-performing the market by 88.1%. 

This was a week that brought surprises every day, when you consider the various potential obstacles that arose during the latter half of the week. The first surprise was the kind of strength that was shown in the early part of the week, especially after Monday’s sell off in momentum names that had compiled lots of gains that could be used for an Alibaba IPO allocation.

Otherwise, the first two challenges provided nothing at all and certainly not any challenges.

Nothing was provided in the FOMC statement, as its wording went unchanged. It was that change, that would have portended interest rate increases sooner than hoped, that worried so many..

All it took was the suggestion by someone who really shouldn’t have any basis to know other than an educated guess that the wording would remain unchanged for the market to run with it.

Then, the Scotland referendum proved to be a non-issue and had no influence on the market at all, as there was so much division over which way the decision would go that the market had been at a stalemate in discounting the result. The only likely result would have been if the referendum approved an independent Scotland. That wasn’t at all factored into the market’s level and could have caused quite a drop, but it wasn’t to be.

Finally, it was time for Alibaba to come to market and despite the nearly 3 hour wait for its first trade and an nearly 50% pop at its trading high, it really did nothing for the markets and it ended up being a really weak day, despite the closing DJIA at another new high.

In fact, while the S&P 500 did gains nicely for the week, not only did it lag the DJIA quite a bit, but the NASDAQ and Russell 2000 really trailed behind.

There were a number of people that boldly predicted that the S&P 500 would top out at the time of the Alibaba IPO and the trading to end the week did nothing to call those predictions into question. Certainly the IPO didn’t propel the market higher, nor did the suggestion that all of the selling on Monday that created cash held back for the IPO find itself going anywhere, other than perhaps Alibaba on the secondary market. 

All in all, this was a very disappointing week, despite the fact that the market could have easily tumbled. Yet, instead it set new records, but you just didn’t hear very many people cheering.

I think that the lack of cheering was due to the realization that for this week, at least, equities were the safest of all worlds, given the concerns over interest rates, currency fluctuations related to Scotland and plummeting precious metal and commodity prices.

Where else are you going to go with your money when everything else appears so shaky?

For me, the disappointment was due to the lack of many trading opportunities, especially rollovers.

However, as Wednesday and Thursday were survived without seeing prices tumble and rollover opportunities lost, the broad weakness on Friday didn’t too anything to help the rollover process along.

A number of the positions expiring were just too expensive to buy back as they were quoted in $0.05 increments. With relatively low premiums in forward weeks that $0.05 required to be paid to buy back those contracts was just too expensive relative to the potential premium received.

That has been a trend lately and while I hate adding to the list of uncovered positions it would be nice to actually have some profit to show for the trouble of a rollover.

Next week doesn’t have anywhere near the amount and intensity of news events on the calendar. But as much as I dislike really quiet news weeks, this past one was just too much with not only the amount of news but its character and how the news came at the markets from all different angles.

While I wasn’t too happy about the trading activity level I was happy to see some assignments occur and the chance to add a little to the cash pile. Getting a few uncovered positions back to work was nice, as well, but the premiums are still far too low and there is some reluctance to  put them at risk for assignment for relatively little in return.

With some recycled cash in hand for next week, which begins the October 2014 cycle, there are already a number of positions set to expire next week and the beginnings of some time diversification as other positions are peppered throughout the coming month. As much as possible I’d like to continue that diversification, but again the primary limiting factor are the very low premiums in forward weeks.

With all of this week’s events out of the way there is now a chance to take a deep breath. It will be especially interesting to see where the market picks up next week, which by comparison would be expected to be a boring one.

Once again, I don’t envision adding too many new positions as trading begins anew. My priority continues to be to find cover for uncovered positions, but that has been an elusive goal and has come in frustratingly low numbers as there has been very little in the way of sustained and broad strength even as the market goes higher.

For now, it’s just good to have survived the events of the past week and to be able to think about what’s still to come.

      

This week’s details may be seen in the Weekly Performance spreadsheet * or in the PDF file, as well as as in the summary.below

(Note: Duplicate mention of positions reflects different priced lots):



New Positions Opened:   CPB, EBAY, TMUS

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  none

Calls Rolled over, taking profits, into extended weekly cycle:  none

Calls Rolled over, taking profits, into the monthly cycle: none

Calls Rolled Over, taking profits, into a future monthly cycle: FAST, PBR

Calls Rolled Up, taking net profits into same cyclenone

New STO:  BMY (10/10), BX (10/31), GM (10/3)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned:  C, CCL, COH, PFE

Calls Expired:  CHK, EBAY, FAST, GM, HFC, K, SBGI, SBGI

Puts Assigned:  none

Stock positions Closed to take profits:  none

Stock positions Closed to take losses: none

Calls Closed to Take Profits: none

Ex-dividend PositionsLVS (9/18 $0.50
)

Ex-dividend Positions Next Week:  CY (9/23 $0.11), WFM (9/24 $0.12)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, CHK, CLF, COH, EBAY, FCX, GM, HFC, JCP, K,  LULU, LVS, MCP, MOS,  NEM, PFE, RIG, SBGI, TGT, WFM, WLT (See “Weekly Performance” spreadsheet or PDF file)



* If you don’t have a program to read or modify spreadsheets, you can download the OpenOffice Suite at no cost.



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Daily Market Update – September 19, 2014

 

  

 

Daily Market Update – September 19, 2014 (8:30 AM)

The Week in Review will be posted by 6 PM and the Weekend Update will be posted by noon on Sunday.

Today’s possible outcomes include:

 

Assignments:  C, CCL, PFE

Rollovers: COH, FAST

Expirations: CHK,  EBAY, GM, HFC, K, SBGI ($29), SBGI ($31)

Some of the expiring positions are simply too costly to rollover due to bids in $0.05 increments

 

This week Las Vegas Sands (9/18 $0.50) was ex-dividend

Next week Whole Foods will be ex-dividend (9/24 $0.12) and Cypress Semiconductor (9/23 $0.11), but both may be subject to early assignment.

 

Trades, if any, will be attempted to be made by 3:30 PM EDT

 

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Daily Market Update – September 18, 2014 (Close)

 

  

 

Daily Market Update – September 18, 2014 (Close)

The initial response to yesterday’s FOMC statement was confusion.

While there’s usually some kind of knee-jerk reaction, this time traders really didn’t know what to do as the wording, just as Jon Hilsenrath of the Wall Street Journal had said would be the case, remained unchanged.

The market went back and forth with the release but ultimately found reason to be positive during Janet Yellen’s press conference, which was longer than most, having had an unusually long prepared statement portion read before questioning began.

Some may have come to the realization that the dissenting votes in this month’s statement came from those who will no longer have a vote in just four months.

What was clear during the follow-up to the statement’s release was that the more Janet Yellen spoke the more comfortable the market became. Almost immediately as the press conference ended the market started coming down from its highs and ended up closing the day with only a mediocre gain.

But still a gain.

Getting past the FOMC eliminates one of the hurdles for the week.

Today’s hurdle, which really has its impact tomorrow, will be the results of Scotland’s independence referendum, in which 16 and 17 year olds have been newly enfranchised to vote. While they can get married and serve in the military at those ages, they cannot vote in general elections, but will be able to do so today.

Reportedly, that group is overwhelmingly for Scotland’s independence, which probably shouldn’t come as too much of a surprise. What is surprising is that their support is  said to be as a result of their concern that under continued British rule the social safety net, including health care, that they have come to view as an entitlement may be put into private hands or eliminated.

Whether an independent Scotland can continue to provide the same kind of social services isn’t part of the equation, at least for some and could help the “Yes” vote predominate.

That could make Friday a very interesting day. WHat it did do, for another one of those inexplicable reasons, was to make today an unusually strong day in advance of tomorrow’s joint events.

With the independence vote seeming to be so close there’s not too much likelihood that any outcome has already been reflected in the market’s pricing. Currency traders know of the impact of the uncertainty, but thus far, our own equity markets have been standing by and awaiting an outcome and then an understanding of what either outcome can really mean in the short and long terms.

I have no clue, other than to know that uncertainty is almost always a bad thing and the only outcome that really brings uncertainty is very possibly in the hands of 16 and 17 year olds.

Having once been at that stage in life that doesn’t give me too much confidence.

This morning the market appeared to have some confidence as it awaitsedScotland’s decision and then the manner in which the Alibaba IPO would be executed, as well as its reception.

With yesterday’s challenge having been met today’s challenge was to decide whether to roll over any positions that still have a chance to be assigned, in order to eliminate the chance that they might get taken down by any untoward market response tomorrow.

As the morning began I was disinclined to do so but hoped to get some opportunity to rollover those positions that have a lower likelihood of being assigned. That didn’t happen, although a couple of new covered positions were created and used some forward weeks in a feeble attempt to get some diversification in time.

At any rate, waking up tomorrow morning will be interesting and the futures trading tomorrow may be the kind that has follow through for the rest of the day, as opposed to the mundane kind of daily trading that we normally see.

Hopefully the close of the September option cycle won’t be marred by the constellation of events colliding in the next 24 hours or so and then further marred by our imperfect interpretations of what goes on around us.

 

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Daily Market Update – September 18, 2014

 

  

 

Daily Market Update – September 18, 2014 (8:45 AM)

The initial response to yesterday’s FOMC statement was confusion,

While there’s usually some kind of kneejerk reaction, this time traders really didn’t know what to do as the wording, just as Jon Hilsenrath of the Wall Street Journal had said would be the case, remained unchanged.

The market went back and forth with the release but ultimately found reason to be positive during Janet Yellen’s press conference, which was longer than most, having had an unusually long prepared statement portion read before questioning began.

Some may have come to the realization that the dissenting votes in this month’s statement came from those who will no longer have a vote in just four months.

What was clear during the follow-up to the statement’s release was that the more Janet Yellen spoke the more comfortable the market became. Almost immediately as the press conference ended the market started coming down from its highs and ended up closing the day with only a mediocre gain.

But still a gain.

Getting past the FOMC eliminates one of the hurdles for the week.

Today’s hurdle, which really has its impact tomorrow, will be the results of Scotland’s independence referendum, in which 16 and 17 year olds have been newly enfranchised to vote. While they can get married and serve in the military at those ages, they cannot vote in general elections, but will be able to do so today.

Reportedly, that group is overwhelmingly for Scotland’s independence, which probably shouldn’t come as too much of a surprise. What is surprising is that their support is  said to be as a result of their concern that under continued British rule the social safety net, including health care, that they have come to view as an entitlement may be put into private hands or eliminated.

Whether an independent Scotland can continue to provide the same kind of social services isn’t part of the equation, at least for some and could help the “Yes” vote predominate.

That could make Friday a very interesting day.

With the vote seeming to be so close there’s not too much likelihood that any outcome has already been reflected in the market’s pricing. Currency traders know of the impact of the uncertainty, but thus far, our own equity markets have been standing by and awaiting an outcome and then an understanding of what either outcome can really mean in the short and long terms.

I have no clue, other than to know that uncertainty is almost always a bad thing and the only outcome that really brings uncertainty is very possibly in the hands of 16 and 17 year olds.

Having once been at that stage in life that doesn’t give me too much confidence.

This morning the market appears to have some confidence as it awaits Scotland’s decision and then the manner in which the Alibaba IPO is executed, as well as its reception.

With yesterday’s challenge having been met today’s challenge is to decide whether to roll over any positions that still have a chance to be assigned, in order to eliminate the chance that they might get taken down by any untoward market response tomorrow.

At the moment I’m disinclined to do so but would hope to get some opportunity to rollover those positions that have a lower likelihood of being assigned.

At any rate, waking up tomorrow morning will be interesting and the futures trading tomorrow may be the kind that has follow through for the rest of the day, as opposed to the mundane kind of daily trading that we normally see.

Hopefully the close of the September option cycle won’t be marred by the constellation of events colliding in the next 24 hours or so and then further marred by our imperfect interpretations of what goes on around us.

 

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