Daily Market Update – February 19, 2015 (8:30 AM)

Yesterday’s FOMC Statement said essentially what I had written about yesterday and it confused stock traders and gave bond traders a reason to sell.

The 2 points that the FOMC raised were that low interest rates could have adverse effects and raising those rates too fast could also have adverse effects.

The net result of the comments was for many to believe that the once inveterate dovish FOMC was now leaning dovish after a brief dalliance with some more hawkish tones.

The release of their monthly statement did nothing to kindle optimism among stock traders, but for the moment, at least, caused bond traders to sell. While bond yields did go down about 4%, those yields are still well above where they were even 2 weeks ago.

With the FOMC Statement release now out of the way, there’s very little scheduled between now and the end of the February 2015 cycle.

Not that that means smooth sailing from here until Friday’s close, but even with events devolving in Europe, there doesn’t seem to be the kind of nervousness that would create a systemic retreat.

I nver feel comfortable counting those chickens before they’re hatched, as I’ve seen too many times when it doesn’t even take 2 full days to erase what should have been lots of rollovers and assignments.

Until tomorrow’s close I’m hoping that the market does still find time for some more increases.

Although most positions set to expire this week are within rollover or assignment range and I wouldn’t necessarily stand to benefit from the market going higher for the rest of the week, it could still offer some opportunity to sell more calls in an attempt to create some more income and enhance the week’s return.

While stocks haven’t moved very much this week, if you look around you’ll see that other asset classes, like bonds, precious metals and especially oil have been bouncing around wildly.

If you’ve owned the Gold Miners ETF or sold the puts you may be like me and wondering why all stocks couldn’t do that kind of frequent back and forth movement. Sometimes it is amazing at how those movements can give the opportunity to generate lots of accumulating premiums even when the net result of all of that movement is really minor.

It has been a while since stocks, other than some individual stocks, have done that sort of thing on a regular basis. Seeing what GDX has been doing
recently just adds to the reasons I’d love seeing a return of volatility to more than just individual stocks, but to the market as a whole.

As today unfolds, with the pre-open futures pointing just mildly lower, I don’t anticipate too much activity. For now, any rollovers that may be possible are still a little too expensive to buy back, relative to their forward week premiums.

With a few positions possibly in line to be assigned and with cash reserves moving higher, any rollovers would likely look at either next week’s or the following week’s expiration dates, as new purchases next week may do the same. With a small number of positions set to expire next week and currently in decent position either for assignment or rollover, that gives some leeway to consider the following week for contracts in an effort to keep March diversified throughout the month.

Those are the plans, anyway. We’ll see how all of that actually works out as plans and reality don’t always have great correlation.