Week in Review – October 27 – 31, 2014

 

Option to Profit Week in Review
October 27 – 31,  2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
2 / 2 4 4 1  / 0 2  / 0 0

    

Weekly Up to Date Performance

October 27 – 31, 2014

After two consecutive weeks of no new purchases it was nice to finally do something, but following two consecutive days of gains totaling nearly 400 points it was hard to keep up.

The two new purchases, both dividend plays, were ahead 2.2% for the week, but still lagged the S&P 500 which was 2.7% higher for the week and 2.6% higher on an adjusted basis, following a nearly 2% move higher in those same 2 days.

Unlike previous weeks that characterized the sharp upward climb coming after a ne
arly 9% drop, this time around there was news to account for the market’s movement, especially to end the week, with some very unexpected news coming from the Bank of Japan.

For the first time in 3 weeks there was an assignment, albeit just one. Closed positions finished 3.5% higher, as compared to 1.8% for the S&P 500 for the comparable holding periods. That 1.7% advantage represents a 93% difference in return.

 

It’s hard to know how to characterize this week.

It ended on a real surprise, although it was the good kind of surprise.

No one expected the Bank of Japan to do what everyone has been saying was need to be done by the European Central Bank.

Everyone agreed that the unexpected action is what sent markets soaring from the outset on Friday and as opposed to the market’s sharp climb on Thursday, the week ending surge was broad and not confined to a very small segment of the market and not so wholly reliant on the performance of a single stock.

As has been the case with the majority of hedge funds in 2014, when you have a week that climbs so strongly, hedgers are left in the dust. That happened this week, especially if you have some significant energy holdings which continue to lag the market and may also be responsible for some of the broad advances as low energy prices are good for most everyone other than those owning energy stocks.

This week, though, was one where there was at least some more trading activity in the past few weeks, in addition to the 2 new purchases to get the flow of income moving once again, especially after a very fallow week last week.

This week there was a decent combination of rollovers and sales of calls on uncovered positions, in addition to the single assignment.

Of course, I still want more of each of those categories.

Next week already has 6 positions set to expire and with a little bit of cash replenishment I may be interested in adding some additional positions, but would still be far more interested in making what already exists become more productive portfolio members.

With volatility back to its very low levels, with very little mention by the very people that were shouting from the rooftops about its climb, the option premiums, especially for out of the money strikes, such as are used in the DOH Trades aren’t very attractive and just don’t offer much in the way of enticement.

For those that look at the daily updated spreadsheet, you may have noticed an additional column to the far left. coded in “Red” and “Green.”  That column represents the break even price on positions that includes all realized premiums and dividends and can act as a guide as to what strike price, if assigned, can be sold without incurring a net loss on a position. The guide may be helpful in identifying opportunities to capitalize on achieving premiums even at strikes below the original purchase price and that would still result in a gain for the position.

I may come to rely on those more frequently in order to accomplish 3 things:

     a. generate more premium income

     b. generate more cash reserves through increased assignments

     c. reduce the total number of holdings and lots

As is usually the case, the ideal time to try to do such trades is during upward moves in shares, despite the declining premiums that ensue.

As opposed to DOH Trades, in which you generally would prefer not to have your shares assigned, as it would represent a net loss, the decision to rollover positions that have a “Green” strike price may be done on an individual basis, depending on needs, such as “do I want to generate cash reserves?”

I don’t usually speak about individual stocks in the week end wrap up, but Intel warrants some comment.

 

Next week, for those that own Intel, which goes ex-dividend on Wednesday, you’ve probably noticed its wild swings on Thursday and Friday. With its generous dividend and shares being currently deep in the money, I may look to roll the position in one of two ways. Either roll the November 7, 2014 $33 contract to a $34 November 14, 2014 contract or roll the existing contract to a November 7, 2014 $33.50.

With Intel currently being deep in the money, either of those trades, even if assigned early and very likely to be assigned early, would add, at the current prices for options, an additional
$0.12 in premiums, to offset the likely loss of the $0.22 in dividend, while allowing the funds to be re-invested in some other income producing position.

So if that Trading Alert comes your way, don’t scratch your head, too much. Given the extremely heavy put option activity on Thursday, some of which expired today, anything can still happen with those shares, as someone made a very, very big bet that Intel shares would be heading lower.

Quickly.

So far, they are wrong and the large block of $33.50 in the money puts that expired today lost about $0.90/share in the 2 day transaction, as there wasn’t any evidence of them being rolled forward. It was simply a very big bet that was allowed to die, although the bet is still on for the week of November 14th.

But that’s just a single stock.

So as hard as it is to characterize this past week, it’s even harder to understand what next week may bring. It’s never easy, but if anyone has any clue as to what next week may bring, let me know, because I’m not a big believer that Quantitative Easing in other countries is necessarily good for the US markets, as it would do what our QE did.

That is, siphon money from foreign markets into our own, except this time we’re the foreign market.

 

 

   

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:   F, INTC

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  F, LVS

Calls Rolled over, taking profits, into extended weekly cycle:  DOW (11/14), EMC (11/14)

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

Calls Rolled Over, taking profits, into a future monthly cyclenone

Calls Rolled Up, taking net profits into same cyclenone

New STO:  ANF (11/7), K (12/20), LO (11/7), TMUS (11/14)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls AssignedWFM

Calls Expired:  BX, GM

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 PositionsF (10/29 $0.12)

Ex-dividend Positions Next Week:  INTC (11/5 $0.22), WLT (11/6 $0.01)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, BX, CHK, CLF, COH, EBAY, FAST, FCX, GDX, GM, GPS, HAL, HFC, .JCP, JOY  LULU, LVS, MCP, MOS,  NEM, RIG, 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 – October 31, 2014

 

  

 

Daily Market Update – October 31, 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 trading outcomes include:

Assignments:  none

Rollovers:  DOW, EMC,  WFM

Expirations:   BX, GM

 

The following stocks were ex-dividend this week: Ford (10/29 $0.12)

The following stocks are ex-dividend next week: INTC (11/5 $0.22), WLT (11/6 $0.01)

 

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

 

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Daily Market Update – October 31, 2014 (Close)

 

  

 

Daily Market Update – October 30, 2014 (Closed)

I really did expect some kind of a big move yesterday to come in the aftermath of the FOMC meeting. Sometimes that big move is simply a knee-jerk, sometimes it is a sustained move to finish the day.

Sometimes it is the next day, but frequently that next day is in the opposite direction.

Thanks to Visa, which contributed about 150 points to the DJIA gain of 221 points. The rest of the market eventually turned positive, but looked like it had to be pulled kicking and screaming. Then, it looked like it enjoyed what Visa was having.

For the past year, every FOMC Statement release has been met in a positive manner, especially those alternate months when Janet Yellen held her post-FOMC press conference.

This time around the reaction was pretty muted, but it was negative and in the early morning the indication was of some continuing negative tone. Excluding Visa that tone continued for the first two hours of trading.

The surprise of not having seen a large movement yesterday came because for the first time in about a year or more, there was reason to believe that there’s a movement to the hawkish side on the Federal Reserve, which now may mean that interest rate hikes will come sooner rather than later.

Even though every one knows that hikes are coming sooner or later the stock market doesn’t like that sort of thing and at the first whiff of it occurring the market will react with shock, as if it was the first time anyone had heard of such a  thing.

Just days ago there were those saying that the original thought that those increases would come somewhere around the middle of 2015, would now be moved to early 2016. That was bullish for stocks.

Suddenly, however, there is talk that it will be early 2015.

The fact that the two previous dissenters, both hawks, were now in support of the statement and a dove was now a dissenter says something that should have caused market bulls to question how much longer the party would continue..

The FOMC Statement also clearly was not in alignment with the comments made by James Bullard, which many attributed to the sudden market recovery from a 9% drop.

So, putting it all together, the anticipated reaction should have been strongly negative.

But it wasn’t. Far from it, in
fact, even without Visa in the mix.

For now, I just want to end the week with some assignments. Those haven’t been very frequent lately and they could come in handy to either re-invest or store for some time in the future.

I started this morning still hopeful that the last two days of this week would offer some opportunity to generate income, but those opportunities have been somewhat more difficult lately, but for an unexpected reason.

There have been just too few call options buyers to be found with so many positions not even having a single bid. In such cases you can’t really close a bid – ask gap through compromising on price. You need to have an able body on the other end to compromise with to make the sale. Fortunately, there were some of those able bodies around for Las Vegas Sands and T-Mobile today, but they weren’t there for those, either, earlier in the week.

That seems like an odd situation as the market is recovering from that 9% drop and did so in very convincing and rapid fashion. Past history would have suggested plenty of people betting on further market moves through their options market activity. Options buyers usually go on hunches or follow momentum. Either they have no hunches or don’t believe the momentum.

Overall, the Put/Call ratio over the past 2 weeks is higher than in the last 8 years, so it looks as if the the skew may be toward expecting declines, but that skew is probably enhanced by the increased used in portfolio protection, especially at low pricing.

If you really want to see the imbalance of put action, look no further than Intel, which had absolutely incredible put volume today both for this week’s expiring option and November 14th. In this case the complete absence of news pointed solely to speculative action in markets with great expectations for even more abrupt drops ahead, although the weekly put trade today was an in the money variety at $33.50. The week of November 14th expiry puts, however, were focused on the $31.50 and $32 strike and came at various times during the trading session, but also in very large quantity.

Since the option market usually gets it wrong, my hope is that the paucity in call activity and the skew toward puts is a sign of some further market advance.

Again, I don’t mind going along for the ride right now and will take gains in any way they may come.

 

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Daily Market Update – October 30, 2014

 

  

 

Daily Market Update – October 30, 2014 (9:00 AM)

I really did expect some kind of a big move yesterday to come in the aftermath of the FOMC meeting. Sometimes that big move is simply a knee-jerk, sometimes it is a sustained move to finish the day.

Sometimes it is the next day, but frequently that next day is in the opposite direction.

For the past year, every FOMC Statement release has been met in a positive manner, especially those alternate months when Janet Yellen held her post-FOMC press conference.

This time around the reaction was pretty muted, but it was negative and so far this morning the early indication is of some continuing negative tone.

The surprise of not having seen a large movement comes in because for the first time in about a year or more, there is reason to believe that there’s a movement to the hawkish side on the Federal Reserve, which now may mean that interest rate hikes will come sooner rather than later.

Even though every one knows that hikes are coming sooner or later the stock market doesn’t like that sort of thing and at the first whiff of it occurring the market will react with shock, as if it was the first time anyone had heard of such a  thing.

Just days ago there were those saying that the original thought that those increases would come somewhere around the middle of 2015, would now be moved to early 2016. That was bullish for stocks.

Suddenly, however, there is talk that it will be early 2015.

The fact that the two previous dissenters, both hawks, were now in support of the statement and a dove was now a dissenter says something that should have caused market bulls to question how much longer the party would continue..

The FOMC Statement also clearly was not in alignment with the comments made by James Bullard, which many attributed to the sudden market recovery from a 9% drop.

So, putting it all together, the anticipated reaction should have been strongly negative.

But it wasn’t.

FOr now, I just want to end the week with some assignments. Those haven’t been very frequent lately and they could come in handy to either re-invest or store for some time in the future.

I’m still hopeful that the last two days of this week will offer some opportunity to generate some income, but those opportunities have been somewhat more difficult lately, but for an unexpected reason.

There have been just too few call options buyers to be found with so many positions not even having a single bid. In such cases you can’t really close a bid – ask gap through compromising on price. You need to have an able body on the other end to compromise with to make the sale.

That seems like an odd situation as the market is recovering from that 9% drop and did so in very convincing and rapid fashion. Past history would have suggested plenty of people betting on further market moves through their options market activity. Options buyers usually go on hunches or follow momentum. Either they have no hunches or don’t believe the momentum.

Overall, the Put/Call ratio over the past 2 weeks is higher than in the last 8 years, so it looks as if the the skew may be toward expecting declines, but that skew is probably enhanced by the increased used in portfolio protection, especially at low pricing.

Since the option market usually gets it wrong, my hope is that the paucity in call activity and the skew toward puts is a sign of some further market advance.

Again, I don’t mind going along for the ride right now and will take gains in any way they may come.

 

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Daily Market Update – October 29, 2014 (Close)

 

  

 

Daily Market Update – October 29, 2014 (Close)

Other than the fact that recent months have seen rallies on the day before an FOMC Statement release, there really wasn’t any reason to have expected yesterday’s nearly 200 point climb.

Although there was a gap higher to start the day, a larger move higher started at about 1 PM, with no real news to account for that optimism.

It really is very confusing to understand what is going on, particularly if you believe that the recent abrupt bounce higher of the nearly past two weeks has been due to the suggestion that the Federal Reserve wouldn’t be exiting its Quantitative Easing policies this month, as scheduled.

It would seem then that it is a binary bet that is on the table. Either QE ends or it doesn’t and that was a fairly big bet being made yesterday.

Of course, there were those who believed that yesterday’s market was an expression of confidence that the market could continue to thrive without QE continuing and then there were those who believed that the 200 points tacked on was an expression of the FOMC’s decision to continue some form of QE.

At least we would finally get to have some idea this afternoon, but I don’t think anything was really cleared up, despite the fact that we now know that QE has come to its end.

If the past few months have been any indication, in fact, if Janet Yellen’s tenure as the Federal Reserve Chairman is any indication, the market would interpret whatever is contained in the statement as another reason to move higher. But that wasn’t what happened today as there were some really mixed signals that left you wondering whether the FOMC was beginning to take on a more hawkish posture.

While the recent strength has essentially eroded all of the gains in volatility, at this point I wouldn’t have minded seeing the gains continue, as I would like to see some assignments getting made and the opportunity to replenish my cash reserves, which are at a 5 year or more low point.

Today’s market never really offered that opportunity and got moderately weaker after the FOMC release, before recovering somewhat.

Yesterday’s really unexpected rally was simply a good opportunity to take a break and let the momentum carry you along, but in the right direction. Today did nothing other than to create a need to beware of tomorrow as people have a chance to digest what things mean and to position themselves, accordingly.

I would think that for those that were encouraged by James Bullard there has to be a sense of becoming deflated.

Yesterday,
the trade in Ford, in order to capture the dividend, was one of those that also got taken along for the ride. I really didn’t expect it to breech the $14.12 level, which would have made it susceptible for early assignment. After having gotten to about $14.15 it reversed course and fell to about $14.07 with a bit more than an hour to go in trading. But that final hour carried everything along and Ford shares went back up to $14.16 so it was time to do that rollover, although the one day return wouldn’t have been too bad, particularly if enough shares were held, but the potential 2 week return was even better.

As it would turn out, no one reported having had their unrolled shares assigned early, anyway. Although it was questionable whether those shares would be assigned early, because the closing price was only a few pennies above that $14.12 threshold and there were still 3 days left on the contract, I look at the lack of assignments as a sign of bearishness, at least in shares of Ford, if not in the market in general.

Today was going to be a “wait and see” kind of day anyway. from the onset, but with the exception of a single DOH trade in Abercrombie and Fitch, that’s how it remained. Since Wednesday’s are usually the slowest trading day of my week, even when trading frequently, as has been the case up until the past couple of weeks, there was plenty of reason to sit and wait until the 2 PM release, but as it turned out no reason to do anything otherwise after 2 PM.

While I would have liked the opportunity to take advantage of any pop up in the market before that FOMC release  to sell some options, it never came, just as the futures trading predicted would have been the likely case. I would have  jumped at that opportunity.

Unfortunately, neither yesterday nor today were there many buyers of options and very large bid – ask spreads existed couldn’t really be bridged, as I tried to get option sales made in a number of positions yesterday, but without much luck, other than for Kellogg and Ford. Today I didn’t really even try very much, as there were so many stocks with absolutely no bids to buy at all.

That difficulty indicated to me a less optimistic option market, at least on the call side of the equation. Few are betting on a continued climb.

Another strong move higher today could have changed that and might have brought more call buyers back into the market. For today the FOMC offered nothing to entice people into becoming optimistic ready to drive prices even higher.

But there’s always tomorrow.

 

 

 

 

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Daily Market Update – October 29, 2014

 

  

 

Daily Market Update – October 29, 2014 (9:00 AM)

Other than the fact that recent months have seen rallies on the day before an FOMC Statement release, there really wasn’t any reason to have expected yesterday’s nearly 200 point climb.

Although there was a gap higher to start the day, a larger move higher started at about 1 PM, with no real news to account for that optimism.

It really is very confusing to understand what is going on, particularly if you believe that the recent abrupt bounce higher of the nearly past two weeks has been due to the suggestion that the Federal Reserve wouldn’t be exiting its Quantitative Easing policies this month, as scheduled.

It would seem then that it is a binary bet that is on the table. Either QE ends or it doesn’t and that was a fairly big bet being made yesterday.

Of course, there were those who believed that yesterday’s market was an expression of confidence that the market could continue to thrive without QE continuing and then there were those who believed that the 200 points tacked on was an expression of the FOMC’s decision to continue some form of QE.

At least we’ll have some idea this afternoon.

If the past few months have been any indication, in fact, if Janet Yellen’s tenure as the Federal Reserve Chairman is any indication, the market will interpret whatever is contained in the statement as another reason to move higher.

While the recent strength has essentially eroded all of the gains in volatility, at this point I wouldn’t mind seeing the gains continue, as I would like to see some assignments getting made and the opportunity to replenish my cash reserves, which are at a 5 year or more low point.

Yesterday’s really unexpected rally was simply a good opportunity to take a break and let the momentum carry you along, but in the right direction.

The trade in Ford, in order to capture the dividend, was one of those that also got taken along for the ride. I really didn’t expect it to breech the $14.12 level, which would have made it susceptible for early assignment. After having gotten to about $14.15 it reversed course and fell to about $14.07 with a bit more than an hour to go in trading. But that final hour carried everything along and Ford shares went back up to $14.16 so it was time to do that rollover, although the one day return wouldn’t have been too bad, particularly if enough shares were held, but the potential 2 week return was even better.

Today will probably be a “wait and see” kind of day. SInce Wednesday’s are usually the slowest trading day of my week, even when trading frequently, as has been the case up until the past couple of weeks, there’s even better reason to sit and wait until 2 PM.

Of course, if any strength pops up in the market before that FOMC release and the opportunity presents to sell some options, I would jump at that opportunity. Unfortunately, yesterday there were very few buyers of options and very large bid – ask spreads that couldn’t really be bridged, as I tried to get option sales made in a number of positions, but without much luck, other than for Kellogg and Ford.

That difficulty indicated to me a less optimistic option market, at least on the call side of the equation.

Another strong move higher today could change that and might bring more call buyers back into the market, so I hope that whatever the FOMC offers today there will be fewer disappointed people than there will be optimistic people ready to drive prices even higher.

 

 

 

 

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Daily Market Update – October 28, 2014 (Close)

 

  

 

Daily Market Update – October 28, 2014 (Close)

For those that actually look at the “Economic Calendar” there’s so little on it this week other than the FOMC Statement release on Wednesday.

If this wasn’t a busy week for earnings releases it would truly be like the last week of summer all over again.

Lately, even with a few moments of Ebola related fear, and despite all of the unresolved stories around the world, it has been very quiet. That may explain some of the market’s recent volatility. It’s like leaving a child alone, but with no source of stimulation, so they have to create their own inside of the vacuum they’re in.

Instead of focusing on the varying bits of economic information that is usually released in any given week, this week the mind is free to wander and speculate about so many things. Just like leaving a child with any structure or guidance, that kind of vacuum facing investors can be a dangerous thing.

Maybe that’s what explains today’s odd 187 point higher. There was no other reason that I could see, although the past few days before an FOMC Statement release have also been inexplicably positive, so maybe that’s the simple explanation.

For the moment all is quiet in and around Russia, Hong Kong seems to have abated, the ECB is gaining irrelevance, ISIS may be stalling and Ebola still remains other people’s problem for the most part.

In the meantime oil is at a low point that could scarcely have been imagined not too long ago and corporate earnings have, for the most part been pretty good. With the exception of energy companies those low prices have got to be good news for economic growth and corporate profits in quarters ahead.

By most measures that should mean a soaring market and maybe that constellation of factors is what helped create such a rapid reversal of the 9% decline from just a few weeks ago.

Whether those are enough to continue that climb may get some answer tomorrow as the FOMC chimes in and may give some insight on whether James Bullard’s opinions are more than just opinions and may in fact be upcoming policy.

That might be a short term tonic, but may raise more questions and uncertainty as the need for Federal Reserve intervention takes on the appearance of a medication for a chronic ailment.

Lately there has been some talk that interest rates, originally thought to be poised for a rise sometime in the first half of 2015, may now not occur until 2016. In the meantime, however, interest rates on the 10 Year Treasury Note increased by about 15%, although still far below where so many smart people thought it would be just 6 months ago.

So the question
“What comes next?” is a fair one, as there are so many mixed signals at the moment and fairly few inputs to help paint any kind of picture.

This morning I heard one analysts say that the morning’s higher futures meant that it was an indication of investors saying that the world would not end if Quantitative Easing came to an end.

I suppose that one could equally be correct to say that the morning’s rise in futures was an indication that the world was embracing the idea of a continuation of Quantitative Easing.

The strength that the market showed all throughout the day was certainly an indication of something and for some reason.

The more you follow things the more you realize that the diversity of opinion is really the only thing that allows markets to function. This morning, for example, Twitter was upgraded from “sell” to :”hold” at one firm and downgraded to “sell” from “hold” at another. No matter how those ratings may be nuanced a few weeks from now in an effort to protect reputations, there’s not too much debate over the diametric differences coming from two esteemed sources, presumably with access to all of the same input information.

Imagine if it is so difficult to come to an agreement over a single company how difficult it must be to understand where markets and world economies are heading, especially when the inputs aren’t necessarily the most accurate or the books may be cooked, as may occasionally be the case in China.

So at the moment I continue to be in a “watch and wait” mode. If the market does move higher I’m more than happy to be a beneficiary of that move, but I’m not terribly enthused about betting on those prospects for now.

Based on the trades that I tried to execute today, selling new calls on shares of Chesapeake Energy, Holly Frontier, T-Mobile and Joy Global, despite their strength, all of which well out-performed the S&P 500 on the day, there was no such enthusiasm among buyers in the option market.

They weren’t biting.

I don’t know what that means.

If you’re a contrarian it means that those stocks, or maybe the market as a whole, is going higher.

If you look at things on the basis of their superficial appearances, that just means that those particular investors don’t see further upside, but as they say, that’s what makes a market.

 

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Daily Market Update – October 28, 2014

 

  

 

Daily Market Update – October 28, 2014 (8:30 AM)

For those that actually look at the “Economic Calendar” there’s so little on it this week other than the FOMC Statement release on Wednesday.

If this wasn’t a busy week for earnings releases it would truly be like the last week of summer all over again.

Lately, even with a few moments of Ebola related fear, and despite all of the unresolved stories around the world, it has been very quiet. That may explain some of the market’s recent volatility. It’s like leaving a child alone, but with no source of stimulation, so they have to create their own inside of the vacuum they’re in.

Instead of focusing on the varying bits of economic information that is usually released in any given week, this week the mind is free to wander and speculate about so many things. Just like leaving a child with any structure or guidance, that kind of vacuum facing investors can be a dangerous thing.

For the moment all is quiet in and around Russia, Hong Kong seems to have abated, the ECB is gaining irrelevance, ISIS may be stalling and Ebola still remains other people’s problem for the most part.

In the meantime oil is at a low point that could scarcely have been imagined not too long ago and corporate earnings have, for the most part been pretty good. With the exception of energy companies those low prices have got to be good news for economic growth and corporate profits in quarters ahead.

By most measures that should mean a soaring market and maybe that constellation of factors is what helped create such a rapid reversal of the 9% decline from just a few weeks ago.

Whether those are enough to continue that climb may get some answer tomorrow as the FOMC chimes in and may give some insight on whether James Bullard’s opinions are more than just opinions and may in fact be upcoming policy.

That might be a short term tonic, but may raise more questions and uncertainty as the need for Federal Reserve intervention takes on the appearance of a medication for a chronic ailment.

Lately there has been some talk that interest rates, originally thought to be poised for a rise sometime in the first half of 2015, may now not occur until 2016. In the meantime, however, interest rates on the 10 Year Treasury Note increased by about 15%, although still far below where so many smart people thought it would be just 6 months ago.

So the question “What comes next?” is a fair one, as there are so many mixed signals at the moment and fairly few inputs to help paint any kind of picture.

This morning I heard one analysts say that the morning’s higher futures meant that it was an indication of investors saying that the world would not end if Quantitat
ive Easing came to an end.

I suppose that one could equally be correct to say that the morning’s rise in futures was an indication that the world was embracing the idea of a continuation of Quantitative Easing.

The more you follow things the more you realize that the diversity of opinion is really the only thing that allows markets to function. This morning, for example, Twitter was upgraded from “sell” to :”hold” at one firm and downgraded to “sell” from “hold” at another. No matter how those ratings may be nuanced a few weeks from now in an effort to protect reputations, there’s not too much debate over the diametric differences coming from two esteemed sources, presumably with access to all of the same input information.

Imagine if it is so difficult to come to an agreement over a single company how difficult it must be to understand where markets and world economies are heading, especially when the inputs aren’t necessarily the most accurate or the books may be cooked, as may occasionally be the case in China.

So at the moment I continue to be in a “watch and wait” mode. If the market does move higher I’m more than happy to be a beneficiary of that move, but I’m not terribly enthused about betting on those prospects for now.

 

 

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Daily Market Update – October 27, 2014 (Close)

 

  

 

Daily Market Update – October 27, 2014 (Close)

There is very little scheduled news this week and not too much anticipated on the unscheduled side, unless the New York City Ebola patient suffers a downturn.

Otherwise the world is pretty quiet as this week starts. Even the Brazilian market’s meltdown in the morning’s future’s trading, dropping about 8% on news of the incumbent winning the presidential election seemingly barely got a notice by the US markets. When trading closed for the day you never would have known that the US cared about anything in Brazil, at all.

The only real story this week and it may be more important than usual, will be Wednesday’s release of the FOMC Statement.

Any alteration in the wording that we’ve become accustomed to that might support Federal Reserve Governor James Bullard’s belief that the Federal Reserve should delay exiting Quantitative Easing will have some kind of an impact

Although it could be coincidental it appears that the market’s sudden bounce higher from its 9% decline was triggered by Bullard’s comments. What’s never known is when those who are typically non-dissenting FOMC voting Governors say something whether it’s their opinion or reflective of what be the majority opinion.

But even if that’s not known the second unknown is how the market would react to news that the FOMC didn’t believe that the economy could withstand a complete exit by the Federal Reserve.

When Bullard made his comments the market embraced the idea and ran with it, but if it becomes reality it could easily be otherwise, as just another example of how the market reacts to rumors and to news. Once that specific reality hits the likely question would become “Seriously, the economy is that bad?” and that kind of forward looking doubt leads to selling.

After two weeks of not having made a single new purchase I was beyond anxious to do something but don’t have the confidence that there will be much reason to stick any necks out until Wednesday or Thursday.

Although there was finally an opportunity to execute a new purchase today, I expect and hope, that the Intel shares, which go ex-dividend next week, get assigned early. At this point I would trade off the dividend for the two weeks worth of premium and the ability to redeploy that cash.

Lately, however, even what may have looked like relatively sure things have been anything but.

For now I’d be content to see a repeat of the past week, even though there were very few trades to show for it and even while watching volatility drop and taking premiums along with it. At least there was some recovery of share prices. Of course, that’s only true if they were something other than energy and metals shares.

Sooner or later those have to jump out of their correction mode.

Today’s drop in energy was the result of a call by a Goldman Sachs analyst for $70 oil. That came from the same analyst who last called for $150 oil.

Never mind.

But other than the call about 9 months ago for falling precious metal prices, Goldman Sachs, as great as it is at everything else, has had a really rough past 10 years when it comes to predicting commodity price trends.

I think today’s call for $70 oil may be a sign of having reached or being very near the bottom.

For the time leading up to Wednesday’s FOMC Statement release there will be plenty of more earnings reports being released, including the always exciting Facebook and Twitter, but the companies that have the greatest likelihood of being able to move whole markets have already reported.

This morning the US futures market was just very mildly lower which lead you to believe that the drop in Brazil is considered to likely be a blip and to have limited consequence. Of course, the slightest suggestion by the incumbent that recognizes the need for some economic reforms would do wonders for their market, but there is precedent for victors believing that they have a mandate even when barely crossing the 50% support vote.

But we still probably don’t care very much, regardless of what direction Brazil takes, especially as their oil reserves and output mean less and less for the United States.

So today was likely to be another day to sit back and see where events would take us in what should have been a quiet day and did turn out to be a quiet day.

Whether tomorrow will do as expected, and also remain quiet is another question as those have been very rare in the past month as triple digit move days have become the new norm for now. Two such days in a row may be asking for too much.

 

 

 

 

 

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Daily Market Update – October 27, 2014

 

  

 

Daily Market Update – October 27, 2014 (8:30 AM)

There is very little scheduled news this week and not too much anticipated on the unscheduled side, unless the New York City Ebola patient suffers a downturn.

Otherwise the world is pretty quiet as this week starts. Even the Brazilian market’s meltdown in the morning’s future’s trading, dropping about 8% on news of the incumbent winning the presidential election is seemingly barely getting a notice by the US markets.

The only real story this week and it may be more important than usual, will be Wednesday’s release of the FOMC Statement.

Any alteration in the wording that we’ve become accustomed to that might support Federal Reserve Governor James Bullard’s belief that the Federal Reserve should delay exiting Quantitative Easing will have some kind of an impact

Although it could be coincidental it appears that the market’s sudden bounce higher from its 9% decline was triggered by Bullard’s comments. What’s never known is when those who are typically non-dissenting FOMC voting Governors say something whether it’s their opinion or reflective of what be the majority opinion.

But even if that’s not known the second unknown is how the market would react to news that the FOMC didn’t believe that the economy could withstand a complete exit by the Federal Reserve.

When Bullard made his comments the market embraced the idea and ran with it, but if it becomes reality it could easily be otherwise, as just another example of how the market reacts to rumors and to news. Once that specific reality hits the likely question would become “Seriously, the economy is that bad?” and that kind of forward looking doubt leads to selling.

After two weeks of not having made a single new purchase I’m beyond anxious to do something but don’t have the confidence that there will be much reason to stick any necks out until Wednesday or Thursday.

I’d be content to see a repeat of the past week, even though there were very few trades to show for it and even while watching volatility drop and taking premiums along with it. At least there was some recovery of share prices.

For the time leading up to Wednesday’s FOMC Statement release there will be plenty of more earnings reports being released, including the always exciting Facebook and Twitter, but the companies that have the greatest likelihood of being able to move whole markets have already reported.

This morning the US futures market is just very mildly lower which leads you to believe that the drop in Brazil is considered to likely be a blip and to have limited consequence. Of course, the slightest suggestion by the incumbent that recognizes the need for some economic reforms would do wonders for their market, but there is precedent for victors believing that they have
a mandate even when barely crossing the 50% support vote.

But we still probably don’t care very much, regardless of what direction Brazil takes, especially as their oil reserves and output mean less and less for the United States.

So today is likely to be another day to sit back and see where events take us in what should be a quiet day.

Whether it will be so is another question as those have been very rare in the past month as triple digit move days have become the new norm for now.

 

 

 

 

 

Click here for reuse options!
Copyright 2014 TheAcsMan