Monthly Archives: November 2014

Daily Market Update – November 7, 2014 (8:00 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:  Ford, Whole Foods

Rollovers:  British Petroleum, Lorillard

Expirations: Abercrombie and Fitch, Las Vegas Sands, Twitter (puts)

The following stocks were ex-dividend this week:  British Petroleum (11/5 $0.60), Walter Energy (11/6 $0.01)

The following stocks will be ex-dividend next week: Cliffs Natural Resources (11/12 $0.15), International Paper (11/13 $0.40), Transocean (11/12 $0.75)

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

Daily Market Update – November 6, 2014 (Close)

Yesterday was one of those days that had some post-election spillover, but no real enthusiasm. Still the market hit more new highs.

Today the market awaited some word from the ECB as to whether, or when, it will take a walk down the same path as the Federal Reserve had taken the US.

If any suggestion of that would have come today, and there was no expectation of it, our markets would likely have gone significantly higher. There’s no expectation of it, however, because they had previously existed and went unanswered on a couple of occasions.

But it didn’t matter, because after some wavering it was another day of record highs.

The market had been in an early holding mode until some word would come from across the ocean. It was fairly widely expected that if there was nothing new, there wouldn’t likely be a negative reaction, with everyone instead probably preparing for tomorrow’s Employment Situation Report.

There shouldn’t be too much of a surprise in that either, but for well over a year the pattern has been that the market celebrates the entire week of the report and usually celebrates on the day of the report, as well.

So far, this week is living up to that pattern, but still has now just one potentially big tests ahead, having passed today’s test.

I wasn’t expecting much of anything to occur between this morning and the week’s end, but the momentum just kept carrying most everything along.

Earnings reports are now going to slow down, although retailers are still ahead and may give reasons to believe that the economy is moving forward on the basis of increased consumer spending. You would expect that at some point the fall in the unemployment rate would result in greater levels of discretionary spending and at some point that would have to translate to the bottom line.

The warning from Kohls a couple of weeks ago would seem to argue against the belief that the middle of the pack consumer is coming back, but there’s no accounting for what may make a single retailer lose or gain favor with consumers at any moment in time. It’s entirely possible that at the moment people may favor one retailer over another and could easily switch back.

As those numbers come in a final catalyst may exist to push markets even higher.

What is increasingly clear is that companies that don’t deliver on earnings or that give the slightest hesitancy in their guidance are being hit very, very hard and are not recovering in the same time frames as in past years. Most every day during earnings season there are so many large cap companies, that can’t be considered momentum kind of stock trades, that are feeling the wrath of disappointed investors. O
n the other hand, large jumps higher, in quantum leaps, aren’t as frequent as are the quantum leap plunges.

The new highs have come methodically, while the lows have come suddenly.

As has been the case for a while, I hoped today would offer some opportunity to sell something, but the indication wasn’t appearing in the morning’s futures trading, although some opportunities did present. What is still strikingly clear is that there are very few call option buyers around unless there is some anticipated news. The volume in everyday kind of trades is really drying up.

While the week may again see an assignment or two, any rollovers or call sales would be appreciated and I would look to add to the list of those expiring next week and at the end of the monthly option cycle.

For now, it’s just more of sitting back and seeing where things take us after tomorrow morning’s news.

Hopefully even higher.

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

Yesterday was one of those days that had some post-election spillover, but no real enthusiasm. Still the market hit more new highs.

Today the market awaits some word from the ECB as to whether, or when, it will take a walk down the same path as the Federal Reserve had taken the US.

If any suggestion of that comes today, and there is no expectation of it, our markets would likely go significantly higher. There’s no expectation of it, however, because they had previously existed and went unanswered on a couple of occasions.

But the market is in a holding mode until some word comes from across the ocean and then, if there is nothing new, won’t likely react negatively, instead will probably prepare itself for tomorrow’s Employment Situation Report.

There shouldn’t be too much of a surprise in that either, but for well over a year the pattern has been that the market celebrates the entire week of the report and usually celebrates on the day of the report, as well.

So far, this week is living up to that pattern, but still has potentially big tests ahead.

I’m not expecting much of anything to occur between now and the week’s end.

Earnings reports are now going to slow down, although retailers are still ahead and may give reasons to believe that the economy is moving forward on the basis of increased consumer spending. You would expect that at some point the fall in the unemployment rate would result in greater levels of discretionary spending and at some point that would have to translate to the bottom line.

The warning from Kohls a couple of weeks ago would seem to argue against the belief that the middle of the pack consumer is coming back, but there’s no accounting for what may make a single retailer lose or gain favor with consumers at any moment in time. It’s entirely possible that at the moment people may favor one retailer over another and could easily switch back.

As those numbers come in a final catalyst may exist to push markets even higher.

What is increasingly clear is that companies that don’t deliver on earnings or that give the slightest hesitancy in their guidance are being hit very, very hard and are not recovering in the same time frames as in past years. Most every day during earnings season there are so many large cap companies, that can’t be considered momentum kind of stock trades, that are feeling the wrath of disappointed investors. On the other hand, large jumps higher, in quantum leaps, aren’t as frequent as are the quantum leap plunges.

The new highs have come methodically, while the lows have come suddenly.

As has been the case for a while, I hope today offers some opportunity to sell something, but the indication isn’t appearing in the morning’s futures trading.

While the week may again see an assignment or two, any rollovers or call sales would be appreciated and I would look to add to the list of those expiring next week and at the end of the monthly option cycle.

For now, it’s just more of sitting back and seeing where things take us.

Daily Market Update – November 5, 2014 (Close)

The election results are in and the futures were headed higher despite the reasonable certainty that this would have been the election outcome, as power shifted from one party to another and they stayed there mostly all day long.

Presumably the optimism was because the feeling is that Republican dominance is better for the economy, although history rejects that hypothesis. Besides, the economy is such a slow and lumbering entity, that no one really notices when it turns some kind of corner. It usually happens a couple of years before anyone has noticed or a couple of years after some particular measures have been taken. It may only be coincidental that those turns may be associated with a change in the political landscape that happen with great regularity.

More often than not it’s just a question of being at the right place and at the right time, just as its opposite is true.

On the other hand, maybe the optimism is tied to the belief that the split in power will lead to more adult-like behavior and the passage of more laws rather than the gridlock of the past 15 years.

Presumptive Senate Majority Leader Mitch McConnell sounded like a reasonable person, but as he will know, it’s easier to be an opponent than it is to be a leader.

On paper more adult-like behavior should be in our futures, but most elected officials are already plotting what they or their party need to do for 2016 and cooperation with the opposing party isn’t going to make them look any better or their opponents any worse, so it’s not clear why there would be optimism. After all, job one, isn’t getting the job that you were elected to do, done. It’s getting yourself re-elected.

Maybe that’s why the only politicians that sound reasonable are the ones that have the word “former” as part of their introduction.

In a few days we will have likely forgotten about these election results other than for what will likely be some significant chest pounding and comments about how things are now going to be different.

So with lots of time to debate the merits of the election outcome, that just brings us to what’s in store for the rest of the week. It’s a question of jobs and whether the European Central Bank will follow the  Federal Reserve and now the Bank of Japan and inject money into the economy.

That means there are any number of catalysts for this week after the election and probably not too many surprises in store. It wouldn’t at all, for example, be unusual to see the largest employment gains come after a rebuke of the existing party in power. If not this week, give it a month or two.

Going back 6 years the first increases in employment after more than a year of declines started after the 2008 election, but no one gave credit retroactively and those in power were more than willing to take credi
t. Again, the beauty of the stealth movements of the economy. Temporal proximity is a powerful convincer of association that may not really exist.

That’s not a uniquely Republican nor a Democrat characteristic. It’s just the way it is and we simply believe the associations as they are presented to us. That may be the answer to why, in a 2013 poll in Louisiana, a majority of the respondents blamed President Obama for the Federal government’s response to Hurricane Katrina. Are you really going to place blame on someone who is ancient history or the one who is right there and already taking blame for lots of other things?

So for the next few months there will be lots of jockeying and probably very little getting done, but then that’s no different from the past few years and the markets simply went higher and higher.

I have no problem with that, at all, as long as it begins today and it did. So here’s to tomorrow and the same belief that adults will now be in charge.