Daily Market Update – October 17, 2014

 

  

 

Daily Market Update – October 17, 2014 (8:00 AM)

The Weekend in Review will be posted by Saturday 10 AM and the Weekend Update will be posted by 8 AM on Monday. The usual schedule will resume next week, as this weekend we celebrate my oldest son’s wedding.

The following outcomes are possible during this week’s final trading day:

Assignments:   none

Rollovers:        none

Expirations:    CPB, CY, FAST, TMUS

The following positions were ex-dividend this week: none

The following position will be ex-dividend next week:

 

While no rollovers are expected this week, particularly as three of the positions are monthly contracts and are too expensive to buy back, hopefully there will be some continued opportunity to make some call sales on uncovered positions and continue to diversify the dates of expiration among holdings

 

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

Daily Market Update – October 16, 2014 (Close)

 

  

 

Daily Market Update – October 16, 2014 (Close)

Yesterday morning began with these words:

“Despite yesterday’s decent closing action and despite somewhat positive results from Intel, the market is back to its recent ways and is headed sharply lower this morning.”

This morning you could say almost the exact same thing:

“Despite yesterday’s decent closing action and despite positive results from Goldman Sachs, the market is back to its recent ways and is headed sharply lower this morning.”

At some point that has to get discouraging, but the discouragement should be delayed until there is reason to believe that this correction will go beyond the 10% that was once a fairly common and not overly frightening phenomenon.

Once you get beyond that 10% level the natural concern becomes where the floor will be. Right now, if looking at a chart of the S&P 500 you would look for support levels, which exist at 1816, 1792 and 1742.

At that 1742 level we would be looking at a 13% decline, while the 1816 level is just about a 10% decline from the S&P 500 high point.

The 7% decline in the S&P 500 heading into this morning was just about near the mid-way point between what we’ve become accustomed to and what we used to be accustomed to. What’s strange is seeing interest rates, oil and gold all so low at the same time, as if there are no viable alternatives for people to invest their money.

Yesterday was a really wild ride and today my early thought was that today might be the same as the futures had already shown quite a bit of movement, but paled compared to the movement in the 10 Year Treasury Note yesterday, which actually sank below a 2% level before bouncing about 5% higher by the close of its trading.

As it would turn out there was quite a bit of movement today, but at least the bad part of the movement didn’t last very long. It turned out to be a day with lots of volatility but without real price erosion.

As the day was getting ready to begin it didn’t seem as if there would really be much to do for the morning and perhaps for the rest of the week. Fortunately, that changed and some DOH trades could finally be made.

Even with today’s reasonably steady performance it’s certainly becoming easier to ignore what at first have appeared to be bargains as they took on a different appearance with just a little bit of time passage. That has been a consistent theme for nearly 4 weeks. What looks appealing has consistently been a place where money goes to die.

With only 4 positions set to expire this Friday and at their current pricing, there’s not too much likelihood of rollovers, particularly since 3 of those are monthly contracts and are generally too expensive to buy back if denominated in $0.05 increments.

As the morning was getting ready to start there was even less likelihood of adding any new positions this week, but I continued to hold out hope of being able to sell call contracts on existing positions, despite having been thwarted a number of times earlier in the week as there had been very little call buying activity, as the options market hasn’t been a hotbed of speculation regarding prices moving higher and there has been a much wider than usual gap between bid and ask prices on positions that normally don’t have wide bids.

In those cases that’s a reflection of a seller who is looking at a realistic selling price and a buyer who feels that the realistic is unrealistic and there has been very little effort to bridge their positions.

As a seller I understand the reluctance to give in to the buyer right now particularly since you can easily have a large surge higher at a moment’s notice. Even if that surge is reversed the next trading day, it may be a day too late if your expiration date was the day of the surge.

While “DOH” trades may make sense in an environment of increasing volatility, it may not make sense when there may be reason to suspect that the volatility will move against you.

So while this morning it seemed as if it was right back to that usual pattern of sitting and watching and hoping for some opportunity to sell something on any sign of market strength or individual stock strength, it actually lived up to that hope.

It all started with Chesapeake Energy, as it announced the sale of some assets.

That is a good example, though of the surges that can take place, as I had tried to get a weekly DOH trade for Chesapeake earlier in the week at a $19.50 strike when shares were at their weekly high of $18.22 for an $0.11 premium.

As Chesapeake was trading in the pre-open at $19.55, up $1.78 it is testament to how quickly things can move and necessitate offsetting action under a ticking clock, as contracts expire tomorrow.

On the other hand, how much higher will Chesapeake go on the basis of an asset sale? There’s not too much reason to think that the sale would propel it too much more, so there may still be a quick opportunity there, but even then, too few, far too few of those opportunities this week.

But don’t get me wrong. I was grateful for each and every one.

Daily Market Update – October 16, 2014

 

  

 

Daily Market Update – October 16, 2014 (8:45 AM)

Yesterday morning began with these words:

“Despite yesterday’s decent closing action and despite somewhat positive results from Intel, the market is back to its recent ways and is headed sharply lower this morning.”

This morning you could say almost the exact same thing:

“Despite yesterday’s decent closing action and despite positive results from Goldman Sachs, the market is back to its recent ways and is headed sharply lower this morning.”

At some point that has to get discouraging, but the discouragement should be delayed until there is reason to believe that this correction will go beyond the 10% that was once a fairly common and not overly frightening phenomenon.

Once you get beyond that 10% level the natural concern becomes where the floor will be. Right now, if looking at a chart of the S&P 500 you would look for support levels, which exist at 1816, 1792 and 1742.

At that 1742 level we would be looking at a 13% decline, while the 1816 level is just about a 10% decline from the S&P 500 high point.

The 7% decline in the S&P 500 heading into this morning is just about near the mid-way point between what we’ve become accustomed to and what we used to be accustomed to. What’s strange is seeing interest rates, oil and gold all so low at the same time, as if there are no viable alternatives for people to invest their money.

Yesterday was a really wild ride and today may be the same as the futures had already shown quite a bit of movement, but paled compared to the movement in the 10 Year Treasury Note yesterday, which actually sank below a 2% level before bouncing about 5% higher by the close of its trading.

There’s really not much to do this morning and perhaps for the rest of the week.

It’s certainly becoming easier to ignore what at first appeared to be bargains as they took on a different appearance with just a little bit of time passage. That has been a consistent theme for nearly 4 weeks.

With only 4 positions set to expire this Friday and at their current pricing, there’s not too much likelihood of rollovers, particula
rly since 3 of those are monthly contracts and are generally too expensive to buy back if denominated in $0.05 increments.

At the moment, there’s even less likelihood of adding any new positions this week, but I continue to hold out hope of being able to sell call contracts on existing positions. There have been a couple of opportunities this week to have put in trade offers but there has been very little call buying activity, as the options market hasn’t been a hotbed of speculation regarding prices moving higher and there has been a much wider than usual gap between bid and ask prices on positions that normally don’t have wide bids.

In those cases that’s a reflection of a seller who is looking at a realistic selling price and a buyer who feels that the realistic is unrealistic and there has been very little effort to bridge their positions.

As a seller I understand the reluctance to give in to the buyer right now particularly since you can easily have a large surge higher at a moment’s notice. Even if that surge is reversed the next trading day, it may be a day too late if your expiration date was the day of the surge.

While “DOH” trades may make sense in an environment of increasing volatility, it may not make sense when there may be reason to suspect that the volatility will move against you.

So this morning it’s right back to that usual pattern of sitting and watching and hoping for some opportunity to sell something on any sign of market strength or individual stock strength, such as with Chesapeake Energy this morning, as it announced the sale of some assets.

That is a good example, though of the surges that can take place, as I had tried to get a weekly DOH trade for Chesapeake earlier in the week at a $19.50 strike when shares were at their weekly high of $18.22 for an $0.11 premium.

As Chesapeake is trading in the pre-open at $19.55, up $1.78 it is testament to how quickly things can move and necessitate offsetting action under a ticking clock, as contracts expire tomorrow.

On the other hand, how much hire will Chesapeake go on the basis of an asset sale? There’s not too much reason to think that the sale would propel it too much more, so there may still be a quick opportunity tehre, but even then, too few, far too few this week.

Daily Market Update – October 15, 2014

 

  

 

Daily Market Update – October 15, 2014 (Close)

Despite yesterday’s decent closing action and despite somewhat positive results from Intel, the market is back to its recent ways and is headed sharply lower this morning.

What those futures didn’t foretell is what a wild ride today would turn out to be.

It has probably been 5 years or more that I’ve entered a week and got to a Wednesday not having made any trades. Today didn’t look as if it was going to offer any change from that path as there was still no reason to believe that a floor was being made.

In response to some questions today, this didn’t have the feeling of a capitulation even as we were at the depths approaching a 500 point drop, because it was still fairly orderly and you didn’t see rapidly changing declining numbers.

There were really a fair number of credible attempts to claw back through the day.

While yesterday’s strength looked promising and while the market did at least finish in the positive, it wasn’t the kind of day that offered good news or any opportunities.

Instead, all it did was to not offer any bad news. Today was a bad news day, but it really didn’t offer bad news for tomorrow.

But why is all of this happening now? What caused us to get to about a 9% drop on an intra-day basis?

With oil going sharply lower, there are concerns that it may be demand driven, just as much as from increasing supply. Everything we thought to be true is sudden;y not the case. Interest rates aren’t going higher and lower oil prices are not fueling anything that would otherwise grow an economy.

With continuing uncertainty in the world, now fueled by Ebola, rather than geo-political concerns, there are worries of a SARS like impact on global economies and stock markets that have to be quelled before markets can return to business as usual.

With the market down about 6.8% from its high as it was getting ready to start this morning looked as if it would take it that much closer to the 10% figure that represents the correction that we’ve been waiting for and have done so for more than 2 years, so the ensuing trading didn’t really disappoint in that regard.

It’s just not clear where anything stops or what causes it to stop.

But just as the 200 dma may have been a catalysts for some program selling at the 1905 level, so too may technical factors play a role in any buying as support points always get people’s attention.

The next level of support seems to be at about 1816 on the S&P 500 and we definitely showed an ability to bounce as we started approaching that level, which coincidentally is 10% below the rec
ord high.

I imagined that today would just be a continuation of the beginning of the week, as there was little anticipation of doing anything other than to watch and wait for an end to uncertainty and for some brave souls to make a statement that prices have just gotten too low.

Unfortunately, today was the third successive day in being unable to even get DOH trades made, although I didn’t put in any new ones today, having failed at attempts to get trades on CHK, HAL,JOY, LVS and TMUS done on Monday and Tuesday during the market’s uptrend periods.

For the remainder of the week there’s still lots of earnings news that could conceivably lead the way, but the Intel news was already unable to do so, although its results do suggest that certain key components of the economy are better than we may have believed.

For now, it’s just a battle between uncertainty and the fear it creates and the confidence that economic growth is occurring as we wait for calmer heads to prevail.

 

 

 

 

Daily Market Update – October 15, 2014

 

 

 

 

 

SELECTIONS

MONDAY:  A generally quiet week, but lately words have been mopre meaningful than actual data. Strong earnings reports starting this week with banks could be the thing the markets need.

TUESDAY:     A very disappointing market day yesterday and, as a result, not a single trade to show for the effort. The effort to move higher lasted about 20 minutes and quickly gave way to uncertainty, before completely falling apart in the final hour. This morning seems tentative, at best.

WEDNESDAY: Despite yesterday’s decent finish to trading and Intel’s decent earning’s report, the market looks to be back to the path it had established nearly 4 weeks ago and is headed toward another triple digit down day, based on the opening futures.

THURSDAY:

FRIDAY

 



 

                                                                                                                                           

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