Weekend Update – February 1, 2015

At first glance there’s not too much to celebrate so far, as the first month of 2015 is now sealed and inscribed in the annals of history.

It was another January that disappointed those who still believe in or talk about the magical “January Effect.”

I can’t deny it, but I was one of those who was hoping for a return to that predictable seasonal advance to start the new year. To come to a realization that it may not be true isn’t very different from other terribly sad rites of passage usually encountered in childhood, but you never want to give up hoping and wishing.

It was certainly a disappointment for all of those thinking that the market highs set at the end of December 2014 would keep moving higher, buoyed by a consumer led spending spree fueled by all of that money not being spent on oil and gas.

At least that was the theory that seemed to be perfectly logical at the time and still does, but so far is neither being borne out in reality nor in company guidance being offered in what is, thus far, a disappointing earnings season.

Who in their right mind would have predicted that people are actually saving some of that money and using it to pay down debt?

That’s not the sort of thing that sustains a party.

What started a little more than a month ago with a strongly revised upward projection for 2015 GDP came to an end with Friday’s release of fourth quarter 2014 GDP that was lower than expected and, at least in part validated the less than stellar Retail Sales statistics from a few weeks ago that many very quick to impugn at the time.

When the week was all said and done neither an FOMC Statement release nor the latest GDP data could rescue this January. Despite a 200 point gain heading into the end of the week in advance of the GDP data, and despite a momentary recovery from another 200 point loss heading into the close of trading for the week fueled by an inexplicable surge in oil prices, the market fell 2.7% for the week. In doing so it just added to the theme of a January that breaks the hearts of little children and investors alike and now leaves markets about 5% below the highs from just a month ago.

Like many, I thought that the January party would get started in earnest along with the start of the earnings season. While not expecting to see much tangible benefit from reduced energy costs reflected in the past quarter, my expectation was that the good news would be contained in forward guidance or in upward revisions.

Silly, right? But if you used common sense and caution think of all of the great things you would have missed out on.

While waiting for earnings to bring the party back to life the big surprise was something that shouldn’t have been a surprise at all for all those who take an expansive view of things. I don’t get paid to be that broad minded, but there are many who do and somehow no one seemed to have taken into consideration what we all refer to as “currency crosswinds.”

Hearing earnings report after earnings report mention the downside to the strong dollar reminded me that it would have been good to have been warned about that sort of thing earlier, although did we really need to be told?

Every asset class is currently in flux. It’s not just stocks going through a period of heightened volatility. Witness the moves seen in Treasury rates, currencies, precious metals and oil and it’s pretty clear that at the moment there is no real safe haven, but there is lots of uncertainty.

A quick glance at the S&P 500’s behavior over the past month certainly shows that uncertainty as reflected in the number of days with gap openings higher and lower, as well as the significant intra-day reversals seen throughout the month.

 I happen to like volatility, but it was really a party back in 2011 when there was tremendous volatility but at the end of the day there was virtually no net change in markets. In fact, for the year the S&P 500 was unchanged.

If you’re selling options in doesn’t get much better than that, but 2015 is letting the party slip away as it’s having difficulty maintaining prices as volatility seeks to assert itself as we have repeatedly found the market testing itself with repeated 3-5% declines over the past 6 weeks.

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

If you were watching markets this past Friday afternoon what was turning out to really be a terrible day was mitigated by the performance of the highest priced stock in the DJIA which added nearly 60 points to the index. That notwithstanding, the losses were temporarily reversed, as has been the case so often in the past month, by an unexplained surge in oil prices late in the trading session.

When it appeared as if that surge in oil prices was not related to a fundamental change in the supply and demand dynamic the market reversed once again and compounded its losses, leaving only that single DJIA component to buck the day’s trend.

So far, however, as this earnings season has progressed, the energy sector has not fared poorly as a result of earnings releases, even as they may have floundered as oil prices themselves fell.

Sometimes lowered expectations can have merit and may be acting as a cushion for the kind of further share drops that could reasonably be expected as revenues begin to see the impact of lower prices.

That may change this coming week as Exxon Mobil (NYSE:XOM) reports its earnings before the week begins its trading. By virtue of its sheer size it can create ripples for Anadarko (NYSE:APC) which reports earnings that same day, but after the close of trading.

Anadarko is already well off of the lows it experienced a month ago. While I generally don’t like establishing any kind of position ahead of earnings if the price trajectory has been higher, I would consider doing so if Exxon Mobil sets the tone with disappointing numbers and Anadarko follows in the weakness before announcing its own earnings.

While the put premiums aren’t compelling given the implied move of about 5%, I wouldn’t mind taking ownership of shares if in risk of assignment due to having sold puts within the strike range defined by the option market. As with some other recent purchases in the energy sector, if taking ownership of shares and selling calls, I would consider using strike prices that would also stand to benefit from some share appreciation.

Although I may not be able to tell in a blinded taste test which was an Anadarko product and which was a Keurig Green Mountain Coffee (NASDAQ:GMCR) product, the latter does offer a more compelling reason to sell puts in advance of its earnings report this week.

Frequently a big mover after the event, there’s no doubt that under its new CEO significant credibility has been restored to the company. Its relationship with Coca Cola (NYSE:KO) has certainly been a big part of that credibility, just as a few years earlier its less substantive agreement with Starbucks (NASDAQ:SBUX) helped shares regain lost luster.

The option market is predicting a 9.3% price move next week and a 1.5% ROI can be attained at a strike price outside of that range, but if selling puts, it would be helpful to be prepared for a move much greater than the option market is predicting, as that has occurred many times over the past few years. That would mean being prepared to either rollover the put contracts or take assignment of shares in the event of a larger than expected adverse move.

While crowd sourcing may be a great thing, I’m always amused when reading some reviews found on Yelp (NYSE:YELP) for places that I know well, especially when I’m left wondering what I could have possibly repeatedly kept missing over the years. Perhaps my mistake was not maintaining my anonymity during repeated visits making it more difficult to truly enjoy a hideous experience.

Yet somehow the product and the service endures as it seeks to remove the unknown from experiences with local businesses. But it’s precisely that kind of unknown that makes Yelp a potentially interesting trade when earnings are ready to be announced.

The option market has implied a 12% price move in either direction and past earnings seasons have shown that those shares can easily move that much and more. For those willing to take the risk, which apparently is what is done whenever going to a new restaurant without availing yourself of Yelp reviews, a 1% ROI can be attained by selling weekly put contracts at a strike level 16% below Friday’s closing price.

While the market didn’t perform terribly well last week, technology was even worse, which has to bring International Business Machines (NYSE:IBM) to mind. As the worst performer in the DJIA over the past 2 years it already knows what it’s like to under-perform and it hasn’t flown beneath anyone’s critical radar in that time.

However, among big and old technology it actually out-performed them all last week and even beat the S&P 500. With more controversy certain for next week as details of the new compensation package of its beleaguered CEO were released after Friday’s close, in an attempt to fly beneath the radar, shares go ex-dividend.

While there may continue being questions regarding the relevance of IBM and how much of the company’s performance is now the result of financial engineering, that uncertainty is finally beginning to creep into the option premiums that can be commanded if seeking to sell calls or puts.

With shares trading at a 4 year low the combination of option premium, dividend and capital appreciation of shares is recapturing my attention after years of neglect. If CEO Ginny Rometty can return IBM shares to where they were just a year ago she will be deserving of every one of the very many additional pennies of compensation she will receive, but she had better do so quickly because lots of people will learn about the new compensation package as trading resumes on Monday.

Also going ex-dividend this week are 2 very different companies, Pfizer (NYSE:PFE) and Seagate Technology (NASDAQ:STX), that have little reason to be grouped together, otherwise.

After a recent 6% decline, Pfizer shares are now 6% below their 4 year high, but still above the level where I have purchased shares in the past.

The drug industry has heated up over the past few months with increasing consideration of mergers and buyouts, even as tax inversions are less likely to occur. Even those companies whose bottom lines can now only be driven by truly blockbuster drugs have heightened interest and heightened option premiums associated with their shares which are only likely to increase if overall volatility is able to maintain at increased levels, as well.

Following its recent price retreat, its upcoming dividend and improving option premiums, I’m willing to consider re-opening a position is Pfizer shares, even at its current level.

Seagate Technology, after a nearly 18% decline in the past month was one of those companies that reported a significant impact of currency in offering its guidance for the next quarter, while meeting expectations for the current quarter.

While I often like to sell puts in establishing a Seagate Technology position, with this week’s ex-dividend event, there is reason to consider doing so with the purchase of shares and the sale of calls, as the premium is rich and lots of bad news has already been digested.

I missed an opportunity to add eBay (NASDAQ:EBAY) shares a few weeks ago in advance of earnings, as eBay was one of the first to show some currency headwinds. However, as has been the case for nearly a year, the story hasn
‘t been the business it has been all about activists and the saga of its profitable PayPal unit.

After an initial move higher on announcement of a standstill agreement with Carl Icahn, the activist who pushed for the spin-off of PayPal, shares dropped over the succeeding days back to a level just below from where they had started the process and again in the price range that I like to consider adding shares.

From now until that time that the PayPal spin-off occurs or is purchased by another entity, that’s where the opportunity exists if using eBay as part of a covered call strategy, rather than on the prospects of the underlying business. However, after more than a month of not owning any shares of a company that has been an almost consistent presence in my portfolio, it’s time to bring it back in and hopefully continue serially trading it for as long as possible until the fate of PayPal is determined.

Finally, Yahoo (NASDAQ:YHOO) reported earnings this past week, but took a page out of eBay’s playbook from earlier in the year and used the occasion to announce significant news unrelated to earnings that served to move shares higher and more importantly deflected attention from the actual business.

With a proposed tax free spin off of its remaining shares of Alibaba (NYSE:BABA) many were happy enough to ignore the basic business or wonder what of value would be left in Yahoo after such a spin-off.

The continuing Yahoo – Alibaba umbilical cord works in reverse in this case as the child pumps life into the parent, although this past week as Alibaba reported earnings and was admonished by its real parent, the Chinese government, Yahoo suffered and saw its shares slide on the week.

The good news is that the downward pressure from Alibaba may go on hiatus, at least until the next lock-up expiration when more shares will hit the market than were sold at the IPO. However, until then, Yahoo option premiums are reflecting the uncertainty and offer enough liquidity for a nimble trader to respond to short term adverse movements, whether through a covered call position or through the sale of put options.

Traditional Stocks: eBay

Momentum Stocks: Yahoo

Double Dip Dividend: International Business Machines (2/5), Pfizer (2/4), Seagate Technology (2/5)

Premiums Enhanced by Earnings: Anadarko (APC 2/2 PM), Keurig Green Mountain (2/4 PM), Yelp (2/5 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 – January 26 – 30, 2015

 

 

Option to Profit Week in
Review –  January 26 – 30,  2015
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
2 / 2 0 6 0  /  0 1  / 0 1

    

Weekly Up to Date Performance

January 26 – 30, 2015

After a respite from decidedly negative weeks last week, we were back to the 2015 new normal this week.

The two new positions opened this week, which were the same as opened the week before, badly trailed even a very weak market as technology and interest rate sensitive stocks were pariahs, even though that was pretty much the case for all sectors.

Those new positions ended the week 4.3% lower. Despite the overall market being 2.7% lower, they still trailed by 1.6% on both adjusted and unadjusted bases.

However, as was the case for all of the weeks in January except for last week in which the market rose, existing positions again outperformed the market by 1.4%, but were still 1.4% lower for the week.

That’s a small consolation, but is one of the things that you’re supposed to see. That is, in a down market, the losses aren’t as great, just as in an up market the gains may not be as great.

With one closed position for the week, thus far the positions closed in 2015 were 4.5% higher, while the comparable time adjusted S&P 500 performance was 1.9% higher. That 2.5% difference represents a 135.3% performance differential that is very unlikely to be maintained through the year and is skewed by having closed some longer term positions, such as LuLuLemon and Blackstone.

 

If you were among those waiting for the fabled “January Effect” that many of us were brought up on believing was sacrosanct, you can wait another year, as this January was like those of the recent past few years and did little to provide a sense of optimism going forward.

What this January did present was a glimpse of what volatility is like, especially if looking at market moves since hitting its highs at the very end of 2014.

Since that time we have had a quadruple bottom. There have been lots of days with gap up and gap down moves and lots of days with large intra-day reversals.

The preponderance of those moves has been to bring the market about 4% lower, despite the substantial trimming of losses late in the day on Friday.

Oh wait.

That substantial trimming of losses was itself reversed in the final hour of trading.

But that volatility isn’t being restricted to the stock market. Treasuries, precious metals and currencies are all bouncing around all over the place.

You can add oil into that mix, as well, as it was a strong move higher late in the day on Friday, for no yet known reason that took the market on its reverse course, as it had been propped up earlier in the day only through the performance of Visa in the DJIA, which is a uniquely weighted index such that a given percentage move in a high priced stock like VIsa has a greater impact on the index than an identical percentage move in something priced much lower, such as General Electric.

In fact, a 4% rise in shares of Visa would add about 65 points to the DJIA, while the same percentage move in GE would add only 6 points, despite GE having a market capitalization that is almost 70% greater than that of Visa.

Go figure.

But as bad as the DJIA looked today, it would have been much worse without Visa today, but even with its help the DJIA lagged the S&P 500 as the latter is more heavily weighted by energy stocks, which did well in the final 90 minutes of trading.

Just not well enough.

This was a week that I was optimistic enough to think that all of the positions set to expire on Friday had a chance of being assigned.

How quickly that changed.

Luckily, there were opportunities to get some rollovers done and to close out the Blackstone position, as there was little to be gained by hanging around for its earnings report and waiting another 3 weeks for expiration.

On the positive side closing out the Blackstone position added some money to cash reserves, but on the negative side, that was it for the week.

With cash reserves very low I don’t anticipate much in the way of opening new positions next week, although lately there haven’t been many more than two or three new positions, anyway.

With some positions set to expire next week, if any new positions are opened they will be done trying to gauge the likelihood of seeing those existing positions get assigned. If they look as if they could get assigned then I would probably try to open new positions and sell expanded weekly options on them, expiring February 13, rather than next Friday.

However, if those positions look out of reach I would likely consider selling weekly contracts on any new positions.

Again, as last week, I’d love to be able to sell some new call contracts on existing positions but hope that I have better luck with that this coming week than was the case this past week.

Hopefully, with the psychological performance pressure of January now a thing of the past, February will be able to get on with just being a normal month, but it would be great to see this volatility continue, as long as the net result wasn’t the same as in January.

 

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:   INTC, MET

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  GDX ($20), GPS, HAL

Calls Rolled over, taking profits, into extended weekly cycle:  GDX ($20)

Calls Rolled over, taking profits, into the monthly cycle: MET

Calls Rolled Over, taking profits, into a future monthly cycleGDX (March 2015, $22.50)

Calls Rolled Up, taking net profits into same cyclenone

New STO:  none

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: none

Calls Expired:  INTC, MET

Puts Assigned:  none

Stock positions Closed to take profits:  BX

Stock positions Closed to take losses: none

Calls Closed to Take Profits: none

Ex-dividend Positions: FAST (1/28 $0.28)

Ex-dividend Positions Next WeekINTC (2/4 $0.22), MET (2/4 $0.35)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, ANF, BAC, BP, CHK, CLF, COH, DOW, FCX, HAL, HFC, .INTC, JCP, JOY, LVS, MAT, MCP, MOS,  NEM, RIG, SBGI, 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 – January 30, 2015

 

  

 

Daily Market Update – January 30, 2015 (8:15 AM)

The Week in Review will be posted by 6:00 PM and the Weekend Update will be posted by Noon on Sunday.

The following trade outcomes are possible today:

Assignments:  none

Rollovers:  GPS, HAL

ExpirationsINTC, MET

The following were ex-dividend this week: FAST (1/28 $0.28)

The following will be ex-dividend next week: INTC (2/4 $0.24), MET (2/4 $0.35)

 

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

 

 

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Daily Market Update – January 29, 2015 (Close)

 

  

 

Daily Market Update – January 29, 2015 (Close)

Yesterday was another example of how the pre-opening futures, if they’re not trading with a large move, don’t have much ability to predict what will happen during the real trading session.

Today was another.

Granted that yesterday was an FOMC Statement release day, but lately that too has stopped having much in the way of predictive capability, just as the day before an FOMC has stopped being a profoundly positive day.

For some reason, the market eventually decided that the eventual FOMC Statement was negative and people were talking about how Janet Yellen’s honeymoon was now over.

I’m not certain who they’re referring to, as I don’t know if the stock market has ever had that kind of relationship with a Federal Reserve Chairman, but after a period of not moving very much after yesterday’s release, the market eventually decided something was really rotten and the sell-off really accelerated having taken the DJIA from a nearly 100 point gain at the time of the announcement to a nearly 200 point loss.

That’s volatility and after a brief respite for a day or two, it’s asserting itself again, although still far below fun levels.

While I don’t trade or buy bonds of any kind, it was also hard to not notice how the Treasury market has been reacting lately, as volatility has definitely found its way into there, as well.

While most fears are related to an increase in interest rates and wondering when that would happen, the 10 Year Treasury fell to about 1.72% and the 30 Year hit all time low rate levels.

Considering that many believe that bond traders are the smart ones in the room you would then have to wonder what the stock market is worried about, as history does show that the bond market is pretty good at predicting Federal Reserve  actions and right now they’re not seeing any kind of imminent rate hike.

This morning, maybe helped by some decent earnings from Dow Chemical and others, the market was showing a little bit of a bounce in the pre-market trading, but after the past 2 days of losses, that so far has the S&P 500 down 2.4% for the week, a little bounce isn’t very much, but it turned into much more than that by the time it was all done for the day.

Why it did so is a little bit of a mystery, but as far as mysteries go, it was a good one.

Now, there’s only 1 day to go this week, so I’m still hopeful that there will be some more opportunity to see some assignments. While I was hoping to see all positions set to expire this week, at this point I wouldn’t mind some rollovers as the alternative and looked for any opportunity to do so today, although in general the longer you can wait to do so, the better, as long as the stock price doesn
‘t move too strongly against you.

Again, it’s a telling sign when precious metal stocks are the ones seeing the greatest back and forth moves and accounting for so many of the trades lately. High levels of volatility in precious metals isn’t generally something that should create lots of comfort or security unless you’re over-weighted in those.

Today may have seen some earnings related trading going on as there were some big movers this morning on their news, both good and bad, but it’s probably tomorrow’s GDP that many are waiting for to either confirm or invalidate the belief that the economy will heat up thanks to falling energy prices.

Because of that uncertainty, and so far there hasn’t been too much indication of what seemed to be so obvious, there was some added reason to want to jump the gun and consider rollovers today rather than waiting until tomorrow when those opportunities may end up being more remote, but it was just a good day to see some recovery from the previous two, instead.

Hopefully tomorrow will bring some more of the same.

 

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Daily Market Update – January 29, 2015

 

  

 

Daily Market Update – January 29, 2015 (8:30 AM)

Yesterday was another example of how the pre-opening futures, if they’re not trading with a large move, don’t have much ability to predict what will happen during the real trading session.

Granted that yesterday was an FOMC Statement release day, but lately that too has stopped having much in the way of predictive capability, just as the day before an FOMC has stopped being a profoundly positive day.

For some reason, the market eventually decided that the eventual FOMC Statement was negative and people were talking about how Janet Yellen’s honeymoon was now over.

I’m not certain who they’re referring to, as I don’t know if the stock market has ever had that kind of relationship with a Federal Reserve Chairman, but after a period of not moving very much after yesterday’s release, the market eventually decided something was really rotten and the sell-off really accelerated having taken the DJIA from a nearly 100 point gain at the time of the announcement to a nearly 200 point loss.

That’s volatility and after a brief respite for a day or two, it’s asserting itself again, although still far below fun levels.

While I don’t trade or buy bonds of any kind, it was also hard to not notice how the Treasury market has been reacting lately, as volatility has definitely found its way into there, as well.

While most fears are related to an increase in interest rates and wondering when that would happen, the 10 Year Treasury fell to about 1.72% and the 30 Year hit all time low rate levels.

Considering that many believe that bond traders are the smart ones in the room you would then have to wonder what the stock market is worried about, as history does show that the bond market is pretty good at predicting Federal Reserve  actions and right now they’re not seeing any kind of imminent rate hike.

This morning, maybe helped by some decent earnings from Dow Chemical and others, the market is showing a little bit of a bounce in the pre-market trading, but after the past 2 days of losses, that so far has the S&P 500 down 2.4% for the week, a little bounce isn’t very much.

There are still 2 days to go this week, so I’m still hopeful that there will be some opportunity to see some assignments. While I was hoping to see all positions set to expire this week, at this point I wouldn’t mind some rollovers as the alternative and might look for any opportunity to do so today, although in general the longer you can wait to do so, the better, as long as the stock price doesn’t move too strongly against you.

Today may see some earnings related trading going on as there are some big movers this morning on their news, both good and bad, but it’s probably tomorrow’s GDP that many are waiting for to either confirm or invalidate the belief that the economy will heat up thanks to falli
ng energy prices.

Because of that uncertainty, and so far there hasn’t been too much indication of what seemed to be so obvious, there may be added reason to want to jump the gun and consider rollovers today rather than waiting until tomorrow when those opportunities may end up being more remote.

 

 

 

 

 

 

 

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Daily Market Update – January 28, 2015 (Close)

  

 

Daily Market Update – January 28, 2015 (Close)

Yesterday wasn’t very good and it all seemed to start with some disappointing earnings numbers that showed the negative side of lower oil prices and a stronger dollar.

Then came data that not only showed less durable goods purchases than would have been expected with the economy growing and with energy price declines fueling new spending, but also revised past months downward.

This morning we started after getting some good news from Apple and Boeing. Along with their sales, revenues and profit news came no real currency news to detract from the feeling that things are looking up on the consumer end of things and with global sales of airplanes.

So this morning, while not really showing much of a bounce from yesterday’s terrible trading, is was at least pointing higher in advance of today’s FOMC Statement release.

Too bad you can’t just turn it off when it suits your needs.

With Morgan Stanley now believing that any interest rate hike from the FOMC won’t come until sometime in 2016 and with the bond market confirming that belief lately, there would be lots of angst if the FOMC were to do otherwise. However, with the latest statistics, including Retail Sales and now Durable Goods, the real surprise is that there doesn’t seem to be the upward pressure on prices that we’ve all thought was coming.

That has to raise the question of where that upward pressure is hiding and why we aren’t seeing any.

While today’s FOMC Statement probably wasn’t likely to provide too much additional information, it wasn’t very wel received after about an hour of mulling it over first.

With no help from the FOMC, Friday’s GDP data might begin to give us some idea of whether these decreasing oil prices are somehow finding their way into the economy. At the very least there’s no currency consideration to offset things. Either people have more money to spend and are spending it, they have more money and aren’t spending it or they really don’t have much more money after spending it on their cellphone, streaming and cable plans.

With the market pointing tentatively higher in the morning it would have been nice to see some opportunity to sell some calls or roll over something other than the Gold Miners ETF, which has been a regular trade lately, as precious metals have taken on some life, as they go about a step and a half forward for every step backward, but that’s a very profitable path to take.

But that wasn’t meant to be, although I did think about doing some more trades in that very same Gold Miners ETF.

At least there was a chance to raise some cash and close the Blackstone position as it reports earnings tomorrow morning. The pure impetus for doing so was the fact that while it was currently $3 in the money and with a bit more than 3 weeks until option expiration, there was really no benefit to keep holding it going into earnings. There was certainly no upside if shares went higher and only potentially a downside.

What helped was that the options market was willing to close the trade at only a few cents cost below the strike. In essence, the time value was only $0.04 for 3 weeks. Think of what you could otherwise do with the money freed up from closing the position and putting it to use over the next 3 weeks.

Too bad there was nothing else to do today.

With a few positions set to expire this week I wouldn’t have minded if the market made some recovery from yesterday’s loss and would have actually liked to see all 4 remaining positions get assigned this week so that some more cash can be piled up, as there isn’t too much doubt that the market is taking on a very different tone and has become directionless.

That seems a lot less likely after the late day’s sell-off, yet another in a string of outside the ordinary kind of trading days in 2015.

Next to having more positions covered, during that kind of directionless and unpredictable trading and sentiment, my favorite position is to have cash to spend, or at least have the option of spending it, as may look warranted.

Today was likely to be a  probably be a day of watching, so at least in that regard I wasn’t too disappointed. While I was still open to making a new position purchase it’s probably not too likely for the rest of the week as there are still too many unknowns in even the last 2 days left of trading that could take stocks in either direction and in a big way.

Just loike today, when there really wasn’t anything well out of the ordinary and yet you see what can happen to stocks and bonds.

Although I wasn’t really expecting too much movement to come from the FOMC news today, the GDP may yet be the wild card. Sooner or later the thesis that had everyone optimistic about plunging oil prices has to either be validated or repudiated.

I’m still hoping to see it validated and the market embracing it as good news.

We could use some

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Daily Market Update – January 28, 2014

  

 

Daily Market Update – January 28, 2015 (8:45 AM)

Yesterday wasn’t very good and it all seemed to start with some disappointing earnings numbers that showed the negative side of lower oil prices and a stronger dollar.

Then came data that not only showed less durable goods purchases than would have been expected with the economy growing and with energy price declines fueling new spending, but also revised past months downward.

This morning we start after getting some good news from Apple and Boeing. Along with their sales, revenues and profit news came no real currency news to detract from the feeling that things are looking up on the consumer end of things and with global sales of airplanes.

So this morning, while not really showing much of a bounce from yesterday’s terrible trading, is at least pointing higher in advance of today’s FOMC Statement release.

With Morgan Stanley now believing that any interest rate hike from the FOMC won’t come until sometime in 2016 and with the bond market confirming that belief lately, there would be lots of angst if the FOMC were to do otherwise. However, with the latest statistics, including Retail Sales and now Durable Goods, the real surprise is that there doesn’t seem to be the upward pressure on prices that we’ve all thought was coming.

That has to raise the question of where that upward pressure is hiding and why we aren’t seeing any.

While today’s FOMC Statement probably won’t provide too much additional information, Friday’s GDP data should begin to give us some idea of whether these decreasing oil prices are somehow findingtheir way into the economy. At the very least there’s no currency consideration to offset things. Either people have more money to spend and are spending it, they have more money and aren’t spending it or they really don’t have much more money after spending it on their cellphone, streaming and cable plans.

With the market pointing tentatively higher this morning it would be nice to see some opportunity to sell some calls or roll over something other than the Gold Miners ETF, which has been a regular trade lately, as precious metals have taken on some life, as they go about a step and a half forward for every step backward, but that’s a very profitable path to take.

With a few positions set to expire this week I wouldn’t mind if the market made some recovery from yesterday’s loss and would actually like to see all 4 remaining positions get assigned this week so that some more cash can be piled up, as there isn’t too much doubt that the market is taking on a very different tone and has become directionless.

Next to having more positions covered, during that kind of directionless trading and sentiment, my favorite position is to have cash to spend, or at least have the option of spending it, as may look warranted.

Today will probably be a day of watching. While I’m still open to making a new position purchase it’s probably not too likely for the rest of the week as there are still too many unknowns in just the last 2 1/2 days left of trading that could take stocks in either direction and in a big way.

Although I’m not really expecting too much movement to come from the FOMC news today, the GDP may be the wild card. Sooner or later the thesis that had everyone optimistic about plunging oil prices has to either be validated or repudiated.

I’m still hoping to see it validated and the market embracing it as good news..

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Daily Market Update – January 27, 2015 (Close)

 

  

 

Daily Market Update – January 27, 2015 (Close)

Most mornings the pre-open futures don’t really mean too much as far as predicting how the day’s trading will go.

The late Mark Haines of CNBC used to say that all the time and always wondered why people got so excited about those numbers.

Certainly, the past week has been testament to just how irrelevant those early trading actions can be in predicting where the rest of the day will go as for most of those days the early indications were quickly reversed within the first hour of trading.

The exception to that general rule is when the pre-open futures moves very strongly in either direction and that was the story that was developing this morning and remained the story all throughout the day.

The main driver for the large drop was the bad earnings that came from DJIA components Microsoft, Caterpillar and United Technologies. That was already worth about 80 points of the 200 point early drop and represented both oil and currency factors and they were taking other innocent victims down along with them.

Somehow, even though the dollar has been gaining strength for a while, it seems strange that people whose job is to factor in all of the tangibles when coming up with earnings estimates somehow overlooked the impact of currency rates.

About another 50% of the pre-open loss was then added with the release of the “Durable Goods” data and the large downward revisions to the previous month. The powerful combination of disappointing earnings from imporatnt DJIA components and a sense that the economy wasn’t doing those sort of things that a robust and growing economy has to do was enough to see to it that the opening market followed the lead of the futures.

Heading into that opening bell there was plenty of reason to believe that the morning’s early indications would have some legs as the market was getting ready to begin trading for the day.

Lately, and for no good reason at all, the day before an FOMC Statement release day has been one that has seen some strong moves higher, in a show of investor confidence that the FOMC would continue being accommodative and that no substantive changes were going to get in the way of the market continuing to move higher.

That could easily have been the case today, but those earnings earnings disappointments and the very large moves seen in some key DJIA components going across sectors gave plenty of reason for the market to begin reclaiming gains this morning, despite would could be waiting ahead in terms of employment growth, wage growth and more discretionary income.

So today, as expected, ended up being a day of just watching and hoping for some kind of a bright spot.

The only thing is that briught spot never came, other than yet another chance to rollover some of the Dold mining ETF as precious metals also continue to ramp up their volatility and unpredictability.

Although most everyone loves the idea of buying stocks on weakness, there’s a limit to what kind of weakness most are willing to test and when. That’s true for individual stocks just as it is for the broader market.

I certainly like buying after declines in particular stocks when there is defined news and it seems to be overdone, but drops like the one that was developing this morning that aren’t very well defined aren’t very enticing. It’s hard to know what’s over done and what isn’t, so it may be best to stay away from the lures that keep popping up and they certainly did so today.

How often can you get a 10% discount on Microsoft and Caterpillar? Not often, but if the rest of the market is going to get infected over currency and growth related earnings, just as Microsoft and Caterpillar took the market lower, the market can then go and take Microsoft and Caterpillar lower, as well.

With expectations for a more sustained large drop in markets being validated with the sudden increase in large falls and rises and the lack of any upward momentum, it seems premature to want to jump in when a large decline characterizes the day. That’s especially true when even considering the pre-open futures decline the market would be barely 3% below its recent high.

Is that over done?

Time will tell and today it didn‘t give any indication that it was over done..

Just as the historically massive snowstorm that was supposed to hit New York City hasn’t really materialized as such, maybe this morning’s decline and the very dour guidances provided by a number of important companies won’t materialize either, but for now you have to believe that they will.

The difference is that the latter will take longer to figure out, but it’s the initial news that really gets our attention and we were all listening this morning.and will do the same again tomorrow.

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Daily Market Update – January 27, 2015

 

  

 

Daily Market Update – January 27, 2015 (8:45 AM)

Most mornings the pre-open futures don’t really mean too much as far as predicting how the day’s trading will go.

The late Mark Haines of CNBC used to say that all the time and always wondered why people got so excited about those numbers.

Certainly, the past week has been testament to just how irrelevant those early trading actions can be in predicting where the rest of the day will go as for most of those days the early indications were quickly reversed within the first hour of trading.

The exception to that general rule is when the pre-open futures moves very strongly in either direction and that is the story that’s developing this morning.

The main driver for the large drop was the bad earnings that came from DJIA components Microsoft, Caterpillar and United Technologies. That was already worth about 80 points of the 200 point early drop and represented both oil and currency factors and they were taking other innocent victimes down along with them.

About another 50% was then added to the loss with the release of the “Durable Goods” data and the large downward revisions to the previous month, so there’s reason to believe that this morning’s early indications will have some legs as the market gets set to begin its trading for the day.

Lately, and for no good reason at all, the day before an FOMC Statement release day has been one that has seen some strong moves higher, in a show of investor confidence that the FOMC would continue being accommodative and that no substantive changes were going to get in the way of the market continuing to move higher.

That may still be the case but the very disappointing earnings and the very large moves seen in some key DJIA components going across sectors gives plenty of reason for the market to begin reclaiming gains this morning, despite would should be waiting ahead in terms of employment growth, wage growth and more discretionary income.

So today will likely end up being a day of just watching and hoping for some kind of a bright spot.

Although most everyone loves the idea of buying stocks on weakness, there;s a limit to what kind of weakness most are willing to test and when. That’s true for individual stocks just as it is for the broader market.

I certainly like buying after declines in particular stocks when there is defined news and it seems to be overdone, but drops like the one that is developing this morning aren’t very well defined and it’s hard to know what’s over done and what isn’t.

With expectations for a more sustained large drop in markets being validated with the sudden increase in large falls and rises and the lack of any upward momentum,
it seems premature to want to jump in when a large decline characterizes the day. That’s especially true when even considering the pre-open futures decline the market would be barely 3% below its recent high.

Is that over done?

Time will tell this morning.

Just as the historically massive snowstorm that was supposed to hit New York City hasn’t really materialized as such, maybe this morning’s decline and the very dour guidances provided by a number of important companies won’t materialize either.

The difference is that the latter will take longer to figure out, but it’s the initial news that really gets our attention and we’re all listening this morning.

 

 

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Daily Market Update – January 26, 2015 (Close)

 

  

 

Daily Market Update – January 26, 2015 (Close)

The morning, although appearing to be ready to get off to a lower start was far better than the overnight futures were indicating, after the larger than expected victory of the opposition party in Greece’s election.

After last week’s trading though, the pre-open futures should have meant nothing for the way the rest of the day would go, as 3 of the 4 trading days last week had very significant turnarounds from the early numbers in less than an hour after the opening bell.

Today was no different, except that there was no decisive character to the day, despite the turnaround from the early losses, as the market just meandered around the unchanged line for most of the day.

While the Greek election results may be a big story, even despite the ECB actions of last week that temporarily lifted the markets, the European economy may largely become irrelevant for us, other than the fact that it helps to prop up the strength of the US dollar.

For now, as opposed to a couple of years ago when the very existence of the EU was being threatened by a possible chain reaction of defaults among some members along its southern frontier, it doesn’t seem as if anyone is really worried about the spread of market contagion to our shores.

As with most things our crystal ball is always very cloudy and even the obvious is often far from assured, so we just wait and watch things unfold as the stronger states in the European Union figure out how to deal with the weaker ones and see their joint currency get devalued in the process, which may be the best solution to get the cycle moving back in their favor again.

This week, after the Greek news, there is actually very little scheduled economic news, but what there is could be of real importance.

The 2 big events are the FOMC Statement release and another set of GDP figures.

The latter may give us an idea of whether the logical increase in consumer spending that we all believed would come from the severely declining energy prices has actually started to happen yet. After the surprise of the Retail Sales report f a couple of weeks ago that showed no such increase, but was widely questioned by many, the GDP report could let us know whether the economy is heating up.

It’s that heating up that could be the cause of the FOMC beginning the process of raising interest rates, as we all have come to expect will happen sooner rather than later.

Those interest rates, especially in the past 2 weeks have been really volatile.

That combination of increasing interest rates, devaluation of the Euro and the ECB pumping lots of liquidity into their bond markets shouldn’t be good for US equity markets, but that’s also an example of trying to apply logic.

This week, with a little replenishment of cash, I was looking forward to spending some of it on new positions. However, because there are only 3 positions set to expire this week, despite all 3 being in a position to be assigned, thereby creating new funds for the following week, the likelihood is that I’ll be looking first at new positions with options to expire this week.

As it turned out, today started exactly like last week did, except that I didn’t add shares of Best Buy again, but did find reason to go the Intel and MetLife route again, at slightly lower prices than last week. It has been a long time since being able to do that and it felt good. Hopefully, it will continue feeling good about this time on Friday, too.

After a brief buying spree, very brief and not much f a spree, I’m content to just watch, as long as that’s watching things move higher,

As has frustratingly been the case for far too long, this week, again my preference is to be able to sell calls on existing positions in order to generate the cash stream for the week and hopefully there will be some good news coming on Wednesday from the FOMC and then again on Friday.

More importantly, if there is good news coming, we won’t revert back to that annoying “good news is bad news” kind of thinking that has been happily absent for a while.

 

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