Monthly Archives: January 2015

 

 

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

 

 

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..

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.

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.

.

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.