Monthly Archives: February 2015

Daily Market Update – February 25, 2015 (Close)

Yesterday was a very quiet day in the market until Janet Yellen got going in front of her congressional questioners as part of her mandated bi-annual report to them.

Once she got started the overall impression she gave was that her more dovish side had re-taken center stage.after a few months of seemingly being somewhat coy about the timing of any interest rate increases that we all know have to come.

The most recent FOMC report even went to lengths to explain the adverse impact of prolonged low rates.

It doesn’t take a genius to figure out that when you hear that sort of thing you’re being set up to come to some sort of reluctant acceptance of something that you’re being told is good for you, even though it doesn’t feel very good.

But yesterday there was a sense that there was no real rush to get those rates moving higher which is something that typically makes stock people happy and bond people doing whatever they do to send rates lower.

Today was Day 2 of the testimony and we didn’t see her bring a repeat to yesterday’s new closing highs to both the DJIA and S&P 500. Those were the first since Monday or last Friday. I forget, as it’s been so long since that has happened. Today we just had to make do with a new closing high on the DJIA.

With now 2 days of trading still left for the week there’s plenty that can happen, especially with Friday being the release of the latest GDP data.

With yesterday’s 3 rollover trades, a little surprising having come so early in the week, that leaves only 4 positions that could potentially be rolled over or assigned this week and now the same number expiring next week.

That may result in looking at potential rollovers to the March 13, 2015 contract in an effort to get some more time diversification, as long as it doesn’t give up too much in premiums, as volatility is again very low for most positions, with the continuing notable exceptions in energy related stocks.

I made an after-hours trade yesterday, which is something that I very infrequently do, having purchased shares of Hewlett Packard after they tumbled once earnings were released and the conference call was near its conclusion.

Depending on its price behavior this morning and how the option premiums would begin to look I thought that I might make it an OTP trade as well, with its ex-dividend date conveniently and maybe coincidentally enough being on the Monday of the week of the March 13 contracts.

But that didn’t happen as shares traded down even further, which was surprising as shares had closed the previous evening’s after hours session well off the lows following the confere
nce call. However, Meg Whitman’s appearance on CNBC did nothing to inspire confidence, as her responses to questions really seemed muddled and she put far too much empasis on currency issues and future cists associted with the planned breakuo of HP near the end of the year.

Instead, Lexmark, which goes ex-dividend and which was assigned just a week and a half ago at $43 was now on sale, having plunged along with HP, even though Lexmark is no longer in the oprinter business. Somehow smart investors have forgotten that Lexmark has followed in the strategy of its one time parent, IBM, and gone the consulting route.

Other than that additional new position I don’t think there will be too much reason to consider any more new positions for the week, but then again, you never know what the day will hold once the bell rings and people start making believe that they are rational players with perfect vision of what the future will hold.

Daily Market Update – February 25, 2015 (8:30 AM)

Yesterday was a very quiet day in the market until Janet Yellen got going in front of her congressional questioners as part of her mandated bi-annual report to them.

Once she got started the overall impression she gave was that her more dovish side had re-taken center stage.after a few months of seemingly being somewhat coy about the timing of any interest rate increases that we all know have to come.

The most recent FOMC report even went to lengths to explain the adverse impact of prolonged low rates.

It doesn’t take a genius to figure out that when you hear that sort of thing you’re being set up to come to some sort of reluctant acceptance of something that you’re being told is good for you, even though it doesn’t feel very good.

But yesterday there was a sense that there was no real rush to get those rates moving higher which is something that typically makes stock people happy and bond people doing whatever they do to send rates lower.

Today is Day 2 of the testimony and we’ll see whether she can bring a repeat to yesterday’s new closing highs. Those were the first since Monday or last Friday. I forget, as it’s been so long since that has happened.

With 3 days of trading still left for the week there’s plenty that can happen, especially with more of today’s testimony to go and with Friday being the release of the latest GDP data.

With yesterday’s 3 rollover trades, a little surprising having come so early in the week, that leaves only 4 positions that could potentially be rolled over or assigned this week and now the same number expiring next week.

That may result in looking at potential rollovers to the March 13, 2015 contract in an effort to get some more time diversification, as long as it doesn;t give up too much in premiums, as volatility is again very low for most positions, with the continuing notable exceptions in energy related stocks.

I made an after-hours trade yesterday, which is something that I very infrequently do, having purchased shares of Hewlett Packard after they tumbled once earnings were released and the conference call was near its conclusion.

Depending on its price behavior this morning and how the option premiums will begin to look I may make it an OTP trade as well, with its ex-dividend date conveniently and maybe coincidentally enough being on the Monday of the week of the March 13 contracts.

Other than that I don’t think there will be too much reason to consider any more new positions for the week, but then again, you never know what the day will hold once the bell rings and people start making believe that they are rational players with perfect vision of what the future will hold.

Daily Market Update – February 24, 2015 (Close)

Yesterday was a very quiet day in the market as it traded in a very narrow range. Today looked as if it wouldn’t start much differently, but everyone knew that there could be some surprises along the way, as Janet Yellen began her 2 days of mandated congressional testimony.

Based on the way the markets have reacted lately to anything coming from the Federal Reserve, there wasn’t necessarily a likely response, at least not in the stock markets.

The real action lately has been in the bond markets and then maybe secondarily flowing over to stocks.

Even if you’re a day trader the actual dynamic isn’t very important, it’s just that the stock market hasn’t had any kind of theme for a while and has been trading aimlessly while bond markets are focused on what seems to be the certainty of rate increases, questioning only whether they are coming soon or very soon.

Instead, both markets received a little bit of a surprise today as Janet Yellen sounded a little more dovish than she has sounded for a while, making it seem as if interest rates may not be ready to go higher as soon as many believed. That sent stocks higher and interest rates much lower, with the 10 Year Treasury Bond breaking 2% for the first time in a couple of weeks.

While Greece and oil prices are basically the only external stories of interest outside of any surprises that may be delivered over the next two days of testimony, the basic internal stories are recurring ones. Those are earnings reports and this week marks the end of the final important period of earnings as the major national retailers speak up.

This morning Home Depot gave reasons to be optimistic, not just for their own business but for the consumer’s ability and willingness to spend and for the health of all of those smaller contractors whose spending activity at Home Depot reflects on overall optimism. As far as the economy goes, there are worse problems to have than companies reporting having to battle with currency headwinds.

This morning also came Macys, which just a couple of weeks ago gave some positive forward guidance, but now reported a miss on top line revenue. We’ll just have to see how that gets spun and whether or not the recent extremes in weather in the Northeast corridor change their sunny predictions from just a couple of weeks ago. Later this week come Target, Kohls, JC Penney and Sears. They will have something to say about consumer optimism and willingness, too and won’t be spending too much time on those pesky headwinds.

Otherwise, over the next couple of weeks are some stragglers reporting their earnings with an occasionally important company doing so in the company of much lesser ones, until it starts all over again in about 7 weeks.

With 3 new purchases yesterday I don’t know how interested I’ll be in adding any more, although there is stil
l enough cash reserves to do so. I would feel better about dipping into those reserves if I had a greater sense of confidence that positions set to expire this week are likely to be assigned, although some are in decent enough position for that to be the case and the others appear to be positioned for rollovers, but those can all change even on the basis of a simple unintentional comment during congressional testimony.

The more likely would be those assignments the more likely I would be inclined to spend the money in anticipation. However, if rollovers appear to be more likely then there isn’t too much reason to deplete cash if existing positions can be used to generate next week’s income stream.

The problem that I’d rather not face, but it does occur, is when there is dwindling cash and decreased likelihood of assignments and rollovers, so there’s some hope that there won’t be any unfortunate slips of the tongue by Yellen over the  two day of testimony.

During today’s first day her performance was admirable..

Other than her very first press conference that hasn’t been an issue and for the most part when she speaks markets react positively. However, when you speak for hours on end, unless there’s something of a blockbuster in those comments the reactions are mixed and often appear as if they’re just biding time until some blockbuster might come along.

I may be biding my time for the rest of the week, as well, hoping that Yellen gives the markets something more to be happy about, as today’s comments helped reach even more record highs.

Daily Market Update – February 24, 2015 (8:15 AM)

Yesterday was a very quiet day in the market as it traded in a very narrow range. Today looks as if it won’t start much differently, but there could be some surprises along the way, as Janet Yellen begins her 2 days of mandated congressional testimony.

Based on the way the markets have reacted lately to anything coming from the Federal Reserve, there may not be too much of a response, at least not in the stock markets.

The real action may be in the bond markets and then maybe secondarily flowing over to stocks.

Even if you’re a day trader the actual dynamic isn’t very important, it’s just that the stock market hasn’t had any kind of theme for a while and has been trading aimlessly while bond markets are focused on what seems to be the certainty of rate increases, questioning only whether they are coming soon or very soon.

While Greece and oil prices are basically the only external stories of interest outside of any surprises that may be delivered over the next two days of testimony, the basic internal stories are recurring ones. Those are earnings reports and this week marks the end of the final important period of earnings as the major national retailers speak up.

This morning Home Depot gave reasons to be optimistic, not just for their own business but for the consumer’s ability and willingness to spend and for the health of all of those smaller contractors whose spending activity at Home Depot reflects on overall optimism. As far as the economy goes, there are worse problems to have than companies reporting having to battle with currency headwinds.

This morning also came Macys, which just a couple of weeks ago gave some positive forward guidance, but now reported a miss on top line revenue. We’ll just have to see how that gets spun and whether or not the recent extremes in weather in the Hortheast corridor change their sunny predictions from just a couple of weeks ago. Later this week come Target, Kohls, JC Penney and Sears. They will have something to say about consumer optimism and willingness, too and won’t be spending too much time on those pesky headwinds.

Otherwise, over the next couple of weeks are some stragglers reporting their earnings with an occasionally important company doing so in the company of much lesser ones, until it starts all over again in about 7 weeks.

With 3 new purchases yesterday I don’t know how interested I’ll be in adding any more, although there is still enough cash reserves to do so. I would feel better about dipping into those reserves if I had a greater sense of confidence that positions set to expire this week are likely to be assigned, although some are in decent enough position for that to be the case and the others appear to be positioned for rollovers, but those can all change even on the basis of a simple unintentional comment during congressional testimony.

The more likely would be those assignments the more likely I would be inclined to spend the money in anticipation. However, if rollovers appear to be more likely then there isn’t too much reason to deplete cash if existing positions can be used to generate next week’s income stream.

The problem that I’d rather not face, but it does occur, is when there is dwindling cash and decreased likelihood of assignments and rollovers, so there’s some hope that there won’t be any unfortunate slips of the tongue by Yellen over the next two days.

Other than her very first press conference that hasn’t been an issue and for the most part when she speaks markets react positively. However, when you speak for hours on end, unless there’s something of a blockbuster in those comments the reactions are mixed and often appear as if they’re just biding time until some blockbuster might come along.

I may be biding my time today, as well, hoping that she gives the markets something to be happy about.

Daily Market Update – February 23, 2015 (Close)

Although the pre-opening futures this morning didn’t look as if the week was going to get off to the kind of start that takes us to more record high closes, there will still be plenty of opportunities this week.

With most of the major retailers reporting earnings this week, and more importantly providing some  future guidance, we may finally get to know whether lower energy costs can translate into an expanding economy.

The week then ends with another GDP report which a number of months ago was predicted to greatly expand due to decreasing energy costs, as about 70% of the GDP is dependent on consumer spending.

Also during the week will be 2 days of congressional testimony by Janet Yellen and there is always the possibility of disclosing something, especially regarding the timing of any interest rate increases, that hasn’t been made public previously.

With Bernanke and Yellen the market rarely moved as much when they provided testimony as it did during the Greenspan years.

The real difference, though, was that when Bernanke or Yellen responded to questions posed to them the answers were generally understood. If there was something truly newsworthy, the market generally knew how to react. Instead, when Greenspan spoke, the market was never sure of what he meant and they would alternate between large drops and surges, often within minutes of one another.

That, at least isn’t likely to happen.

As another monthly option cycle gets ready to begin, it’s nice closing the previous month with a fair number of assignments and the cash to play along, if warranted.

Today there seemed to be some reason to add new positions, but the market stayed as tentative through the entire trading day as it did in the pre-open.

Last Friday’s very unexpected response to a temporary solution to the Greek crisis isn’t likely to have much impact on things going forward until approaching that 4 month date down the road when the crisis could start all over again.

Because Friday’s events were really a “one-off” kind of thing there’s not too much reason to believe that those new closing highs will be the starting point for even more due to some technical set of factors or newly discovered optimism.

Instead, this week will likely stand on its own merits based on the major events planned for the week.

With a few positions et to expire this week and with volatility once again falling, the emphasis will be on finding short term option expiration opportunities and trying to populate this week and perhaps next week, as well, with expiring contract positions. Actually, that’s probably a secondary emphasis. I would stil
l rather generate the week’s income stream from finding some chance to sell calls on existing uncovered positions.

Today, though, it was the secondary emphasis that took center stage as trading was pretty listless and very little moved in a meaningful way.

While retail sales and Yellen’s two days on Capital Hill will be the next center stage there is still plenty of reason to still reserve some focus for oil prices and interest rates.

It’s not always about stocks.

As long as those continue to bounce wildly it’s hard to envision any particular direction for the stock market. You can also add precious metals to that short list, too.

Among asset classes there is often a flow of money from major players as one opportunity looks better than the next. With the constant back and forth seen in some of those markets there’s reason not to be fully committed to any of the markets, even the ones that seem to be reasonably stable, as a collapse in the other markets could result in a quick outflow even from the relatively healthy market, such as to meet margin obligations in other markets.

It’s too bad that we’re not seeing some of the same back and forth in the broader stock market, as that would really drive premiums much higher, as is the case for many energy positions, right now. In the best case scenario even with all of that volatility prices would remain basically unchanged as they have recently been in the energy and precious metals markets.

For now, it’s an issue of waiting to see what character the market assumes this week and not being too reckless with what is left of this week’s newfound cash.