Monthly Archives: January 2015

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

It’s not too easy to understand why this morning’s futures were pointing so strongly higher.

Wait. That’s what I said yesterday.

This morning the futures are even higher than they were yesterday and there’s not much reason to account for it.

It would be easy to point to yesterday’s FOMC Statement release and say that was responsible, but the market was virtually unchanged in the aftermath of that release in the afternoon. The new confusion that was contained in the altered wording of the statement would have ordinarily caused gyrations in the market as it tried to figure out what the FOMC meant, was instead simply discussed and not the basis of any emotionally charged swings in trading.

That’s either adult-like or rational, neither of which are usually adjectives used when describing stock tradoing behavior among the masses.

What was really interesting was how last night’s futures, at a time when not much is happening, suddenly went nearly 100 points higher at about 8:30 PM. At that time of the night no major markets are open to lead the US futures in sentiment, so it was odd seeing that happen, but more odd seeing that high level sustained through the night.

With so much focus on yesterday’s tragic events in France you might have thought that the sudden surge reflected some kind of substantive development in the story. While initial rumors proved to be false, had those been the impetus for the sudden pop higher, they would also have been the reason for any bursting of that bubble, except that this morning the rally is even stronger.

If this morning’s strength continues and is able to add to yesterday’s strength, that would reduce the nearly 5%sudden decline in about half, in about as much time as it took to reach the bottom in that drop earlier this week.

If so, that means trying to do more of the same and keeping an eye on all of next week’s positions and taking advantage of any price strength by either rolling over into that strength or, even better, being fortunate enough to find the opportunities to sell new call positions on uncovered positions.

Regardless of how today will end up, there is still tomorrow’s Employment Situation Report.

There’s not too much reason to think that there will be anything in the report to spook or elate markets, although at some point there may be evidence of decreasing employment statistics related to the suddenly reduced energy prices and subsequent reduced drilling activities.

While the actual statistic may not have too much impact directly on how markets react, an overly strong number will get people playing the game of “what will the FOMC think?”

Too much good news could herald the kind of economic heating up that the FOMC will want to squash by increasing interest rates, although they too will have an eye on how those falling energy prices can increase GDP, while also adversely impacting employment statistics.

Hopefully, as earnings season starts next week some of the impact of lower oil prices will be seen in earnings, and maybe more importantly on future guidance. Those could be the fuel for the next level higher and could bring “The January Effect” back to life.

Daily Market Update – January 7, 2015 (Close)

It’s not too easy to understand why this morning’s futures were pointing so strongly higher.

Usually there has to be some kind of news for that kind of reaction prior to the markets open to account for the  strong commitment in either direction. While tepid futures moves don’t have much meaning for the market’s trading once the day begins, the strong kind of early mornings usually do have some staying power, although not necessarily for the entire session.

Today it stayed that way for the who session, even adding some on top of the already strong early advances.

What made it unusual this morning was that it came after a failed recovery attempt in the final hour of trading, which ended up adding another 130 points to the 330 point loss from the day before.

But even more unusual, while it dis come in the absence of any economic news, it also came hours before the FOMC Statement.release.

It can be a risky thing to commit too much in advance of the release as you never know how the slightest nuanced change in wording can set off programmed trading. For the past couple of months the FOMC Statement hasn’t really set off too much in the way of fireworks, even with last month’s wording change, but those days could easily return.

The double dip in markets seen over the last couple of weeks that had us returning toward than typical 2 month mini-correction level just a couple of weeks after the most recent one, is itself something that should be getting some attention, as that hasn’t happened in nearly 3 years and might make me reluctant to plow money into new positions, despite what appeared to be some bargain prices yesterday.

This morning, my primary thought was that if the early rally could  hold, I’d be more than happy to be able to sell calls on uncovered positions. However, the preceding drop of nearly 500 points in the two prior days meant that there’s lots of catching up to go making it challenging to get those sales done.

While I would have liked to see some of that recovery today put positions set to expire this week into better position to either be assigned or rolled over, I would especially like to see any advance over the next few days accomplish exactly that, but for the next week, which is the final week of the January 2015 option cycle.

Happily, today did offer some chance for early rollovers, both for this week and next.

With only 3 positions now set to expire this week, while it would be nice to see them contribute to the weekly income stream or to regenerate cash supplies, the 11 positions expiring next week could be more meaningful contributors, so it would be nice to see their prospects improved by some continuing market strength to offset the previous few days.

In the meantime, while awaiting this afternoon’s FOMC Statement, I was happy to see the market start to reclaim some of the substantial ground that it had lost over the past couple of days, especially as that resulted in something more than just paper gains for the day.

While I wasn’t expecting to make any new purchases yesterday, I would have been really stunned if I added more new positions today or for the rest of the week, for that matter. Fortunately, my heart didn’t have to be put to that test, as it was nice just having the chance to capitalize a little on the advance and be left in a better position to end the day than when the day started.

Other than taking advantage of any short term market climb I expect that the rest of the week will be fairly passive and filled with lots of observation, even though there’s still plenty of economic and market moving news to come in the final 1 1/2 days of trading for the week.

More of what today brought would be a good way to get things started for next week.

Daily Market Update – January 7, 2015 (9:00 AM)

It’s not too easy to understand why this morning’s futures are pointing so strongly higher.

Usually there has to be some kind of news for that kind of reaction prior to the markets open to account for the  strong commitment in either direction. While tepid futures moves don’t have much meaning for the market’s trading once the day begins, the strong kind of early mornings usually do have some staying power, although not necessarily for the entire session.

What makes it unusual this morning is that it comes after a failed recovery attempt in the final hour of trading, which ended up adding another 130 points to the 330 point loss from the day before.

But even more unusual, while it does come in the absence of any economic news, it also comes hours before the FOMC Statement.release.

It can be a risky thing to commit too much in advance of the release as you never know how the slightest nuanced change in wording can set off programmed trading. For the past couple of months the FOMC Statement hasn’t really set off too much in the way of fireworks, even with last month’s wording change, but those days could easily return.

The double dip in markets seen over the last couple of weeks that had us returning toward than typical 2 month mini-correction level just a couple of weeks after the most recent one, is itself something that should be getting some attention, as that hasn’t happened in nearly 3 years and might make me reluctant to plow money into new positions, despite what appeared to be some bargain prices yesterday.

This morning, if the early rally holds, I’d be more than happy to be able to sell calls on uncovered positions, but the preceding drop of nearly 500 points in the two prior days means that there’s lots of catching up to go.

While I’d like to see some of that recovery today put positions set to expire this week into better position top either be assigned or rolled over, I’d especially like to see any advance over the next few days accomplish exactly that, but for the next week, which is the final week of the January 2015 option cycle.

With only 4 positions now set to expire this week, while it would be nice to see them contribute to the weekly income stream or to regenerate cash supplies, the 11 positions expiring next week could be more meaningful contributors.

In the meantime, while awaiting this afternoon’s FOMC Statement, I’d be happy to see the market start to reclaim some of the substantial ground that it has lost over the past couple of days, especially if that results in something more than just paper gains for the day.

While I wasn’t expecting to make any new purchases yesterday, I think that I’d really be stunned if I added more new positions today or for the rest of the week, for that matter.

Other than taking advantage of any short term market climb I expect that the rest of the week will be fairly passive and filled with lots of observation, even though there’s still plenty of economic and market moving news to come in the final 2 1/2 days of trading for the week.

Daily Market Update – January 6, 2015 (Close)

The initial reason given for yesterday’s market sell-off was rampant profit taking among people waiting to sell until after New Years, so that they could delay paying their capital gains taxes until 2016.

Yet somehow the same didn’t occur in January 2013, when there were far more gains from the previous year and if it happened in January 2014, it waited a couple of weeks for one of those standard mini-corrections to kick in.

The likelihood that yesterday’s 330+ sell-off was tax related was pretty small, as in the absence of any kind of panic or major news story, it’s not likely to see so many acting in concert for the same reason. Instead, it’s more likely that with oil getting below $50 the market again got dragged along, after having disengaged itself from that weakness with the realization that as long as demand exists, falling oil prices is an incredible gifts to most economies and to most companies.

While yesterday’s drop did begin to create some appealing price points for some stocks, there’s still a lot of uncertainty ahead this week and I wasn’t overly eager to commit to any new positions. There’s still the issue of falling oil, as the futures were pointing lower again this morning and the unknowns of the upcoming FOMC Statement release and the Employment Situation Report.

I don’t really expect either of the latter two to drag markets lower, as it’s unlikely that the FOMC would so quickly say anything to go counter to their declaration for “patience” before interest rate rises are considered. Their change to that wording was interpreting as meaning that they would have greater flexibility in responding to data, but the data is still scant.

The actual FOMC meeting started today and for the past few months markets have abandoned their caution in anticipation of the release and rallied in advance of the meeting. This morning’s stock futures indicated a mild rise, but after a 330 point decline, that rise barely even qualified as a bounce, much less an FOMC inspired rally.

Und=fortunately, the market didn’t take its lead from the futures. That’s often the case, especially when the futures aren’t very decisive, as they weren’t this morning.

By the same token, however, the market itself wasn’t very decisive, having dropped as much as another 230 points during the day, recovering to within about 30 points of a break even and then dropping another 100 points from that high point.

With no new positions opened yesterday there’s was still plenty of opportunity to do so, but I didn’t know if that opportunity would result in the probability of doing so.

At the moment, no one may be more surprised than me to have added two new positions today, but they both seemed to be far removed from the dangers of oil.

While oil continues to grab attention there has been almost no discussion of holiday retail sales and they have mostly gone under the radar, as the only thing we really know is that some declines in brick and mortar sales may have been offset by on-line activity. As earnings season begins next week and the major retailers begin to announce their earnings a couple of weeks into the season, we should begin seeing some of the data that the FOMC may begin to consider, as there’s likely to be some evidence of the consumer sector heating up.

Unfortunately, good economic news in the US, fueled by lower oil and continuing good news on the employment front, may be tempered a bit by some renewed nervousness over what’s going on in the European Union, as the  fragility and dysfunction of the Greek economy is being replayed and the integrity of the Euro and the entire European Union is again being questioned.

There’s some reason to believe that yesterday’s weakness across Europe as a result of the building concern may have spilled over to our side. If that’s the case, the uncertainty may still have a few weeks to go. What is a little concerning is that the regularity of our mini-corrections every two months for the past 2 years is being disrupted, as we had one right on schedule in mid-December, but are now seeing a very uncharacteristic second wave of selling after the recovery that began in the middle of December.

Not only is that second wave of selling unusual, given the past couple of years, but it also disrupted what is usually a very good December and wiped out the Santa Claus Rally.

Each of those is usually as much of a “done deal” as you can find, but not this year.

So for today, I had been hoping that the pre-FOMC enthusiasm would take hold and would have gladly sold calls into strength, but I wasn‘t counting, so it was easy to avoid disappointment. But I also wasn’t counting on picking up shares of both Bank of Amwerica and Campell Soup, today either.

Hopefully they won’t be sources of disappointment, either.

Otherwise, my expectations for the week are low and I’m not especially counting on the subsequent major economic events of the week to propel us forward in any meaningful way this week.

If they did, however, I’d be grateful for anything that could put next week’s expiring positions into a better state. For now, that better state would be a slew of assignments, but the past few days have made that a bit harder of a reality down the road.

For now, all we can do is wait for tomorrow’s FOMC and see what kind of a rabbit we can pull out of the hat as the words are interpreted and then re-interpreted to fit whatever thesis prevails to explain the market’s reactions.

Daily Market Update – January 6, 2015 (8:30 AM)

The initial reason given for yesterday’s market sell-off was rampant profit taking among people waiting to sell until after New Years, so that they could delay paying their capital gains taxes until 2016.

Yet somehow the same didn’t occur in January 2013, when there were far more gains from the previous year and if it happened in January 2014, it waited a couple of weeks for one of those standard mini-corrections to kick in.

The likelihood that yesterday’s 330+ sell-off was tax related was pretty small, as in the absence of any kind of panic or major news story, it’s not likely to see so many acting in concertt for the same reason. Instead, it’s more likely that with oil getting below $50 the market again got dragged along, after having disengaged itself from that weakness with the realization that as long as demand exists, falling oil prices is an incredible gifts to most economies and to most companies.

While yesterday’s drop did begin to create some appealing price points for some stocks, there’s still a lot of uncertainty ahead this week and I wasn’t overly eager to commit to any new positions. There’s still the issue of falling oil, as the futures are pointing lower again this morning and the unknowns of the upcoming FOMC Statement release and the Employment Situation Report.

I don’t really expect either of the latter two to drag markets lower, as it’s unlikely that the FOMC would so quickly say anything to go counter to their declaration for “patience” before interest rate rises are considered. Their change to that wording was interpreting as meaning that they would have greater flexibility in responding to data, but the data is still scant.

The actual FOMC meeting starts today and for the past few months markets have abandoned their caution in anticipation of the release and rallied in advance of the meeting. This morning’s stock futures indicates a mild rise, but after a 330 point decline, that rise barely even qualifies as a bounce, much less an FOMC inspired rally.

With no new positions opened yesterday there’s still plenty of opportunity to do so, but I don’t know if that opportunity will result in the probability of doing so.

While oil continues to grab attention there has been almost no discussion of holiday retail sales and they have mostly gone under the radar, as the only thing we really know is that some declines in brick and mortar sales may have been offset by on-line activity. As earnings season begins next week and the major retailers begin to announce their earnings a couple of weeks into the season, we should begin seeing some of the data that the FOMC may begin to consider, as there’s likely to be some evidence of the consumer sector heating up.

Unfortunately, good economic news in the US, fueled by lower oil and continuing good news on the employment front, may be tempered a bit by some renewed nervousness over
what’s going on in the European Union, as the  fragility and dysfunction of the Greek economy is being replayed and the integrity of the Euro and the entire European Union is again being questioned.

There’s some reason to believe that yesterday’s weakness across Europe as a result of the building concern may have spilled over to our side. If that’s the case, the uncertainty may still have a few weeks to go. What is a little concerning is that the regularity of our mini-corrections every two months for the past 2 years is being disrupted, as we had one right on schedule in mid-December, but are now seeing a very uncharacteristic second wave of selling after the recovery that began in the middle of December.

Not only is that second wave of selling unusual, given the past couple of years, but it also disrupted what is usually a very good December and wiped out the Santa Claus Rally.

Each of those is usually as much of a “done deal” as you can find, but not this year.

So for today, I’m hoping that the pre-FOMC enthusiasm does take hold and would gladly sell calls into strength, but I’m not counting on it and not especially counting on the subsequent major economic events of the week to propel us forward in any meaningful way this week.