Daily Market Update – February 12, 2015

  

 

Daily Market Update – February 12, 2015 (8:30 AM)

This morning, based on the pre-opening futures, looks to have a similar opening to that seen on Tuesday.

The futures are pointing nicely higher, approaching a triple digit gain on the DJIA, and those kind of larger moves tend to have more staying power. At least they tend to give a little more direction to trading once the market actually opens.

That would be a welcome move, particularly as the week is coming to its end and the fate of those positions set to expire this week are being determined during the final hours of trading for the week.

The news that seems to be responsible for the move actually started shortly after yesterday’s market closed and the S&P 500 futures went up about 12 points and the DJIA went nearly 100 points higher.

That news was that there was some kind of an agreement between the the ECB, EU and Greece over its debt.

That gain disappeared in the late afternoon and early evening but then returned and seems to be holding as this morning’s session is set to begin. It is, however, being weakened a little by another weaker than expected “Retail Sales” report, that will hopefully be undone as the major retailers begin reporting earnings over the next two weeks and start focusing on the future, rather than the past, to look at the potential impact of lower energy prices, more people at work and more people receiving higher salaries.

With 5 positions set to expire this week and 8 the following week, I would much prefer seeing assignments this week rather than rolling over those positions. However, if rollovers are called for, or if there may be some other reason for a rollover, such as to capture Microsoft’s dividend, I would likely want to look at an expiration date sometime after next week.

The slightly elevated volatility makes that a little more palatable.

As it is  next week offers only 4 days of premium, due to the Presidents Day holiday and there are more than enough expiring positions than to add too many more and increase risk of a sudden market drop just before that expiration.

If this morning’s pre-opening gain does have staying power, it will hopefully position those expiring contracts to be more likely to be assigned and may even offer a miracle of selling some new call contracts on existing positions.

Anyway, that’s my dream and I’m sticking to it.

 

 

 

 

 

 

 

 

 

Daily Market Update – February 11, 2015 (Close)

 

  

 

Daily Market Update – February 11, 2015 (Close)

Yesterday was a nice surprise.This morning there wasn’t much reason to expect the same kind of upward movement and the pre-open futures weren’t showing any indication of continuing with yesterday’s gains.

However, those pre-open numbers were benign enough that anything would be reasonable when the opening bell rang, as there’s not much commitment one way or the other this morning.

It was a little surprising to see a nearly 100 point loss develop in the first hour, just as it was then a little surprising to see a nearly 100 point reversal within another hour, then another 100 point downturn by mid afternoon and yet another by the close. 

In a week where there’s very little economic news the Wednesday “Petroleum Status Report” was in a position to take on more importance than it usually does. It’s not a report that I typically pay attention to other than to watch the immediate reactions to the inventory news that are similar to the back and forth movements often seen when earnings are released in the after hours trading.

The reaction is often a combination of reacting to the news, reacting to the expectations and trying to figure out whether the news is good or bad and then applying some kind of reverse psychology analysis to all of it.

With some hint from the Saudi Oil Minister of expectations for demand increases in the next year more and more attention is going to be paid to inventory levels for as long as energy prices seem to be in play and right now those prices have been moving in big chunks in both directions.

But that’s also been the case for just about everything other than the US Dollar.

Stocks for certain have been gyrating, but so have interest rates and precious metals. Oil is now just another of those asset classes that is having a really hard time deciding where it should be going.

Today’s report will get plenty of scrutiny, but even then the next question is whether the market decides to re-couple or de-couple from energy prices. In a normal world it’s usually de-coupled, but over the past month or two it has spent more time joined at the hip with oil prices than behaving normally.

Today the market had many faces while the face of energy was singular and mostly strongly lower as there are indications that despite fewer rigs drilling for oil, the US is actually pumping even more oil at the moment and adding to supplies.

What does all of that mean?

Whatever it may have meant today it will be forgotten by tomorrow, or maybe mean something different altogether.

With 3 new positions opened this week I’m not anticipating doing much else that involves spending money, for the rest of the week, particularly as I don’t have much in the way of cash reserves. My hope i
s that the next few days can add to those cash reserves or at least position next Friday’s monthly option cycle ending contracts to be more likely to be assigned.

Or rolled over.

The idea is to generate income, but as the market may be poised for increasing volatility the preference is to  preserve cash and use existing assets to generate income, sometimes even rolling over positions that might otherwise be assigned.

That becomes more likely as forward week options show more volatility than the expiring week’s options and the differential in buy and sell premiums increases.

Right now, there’s not much in the way of added premium for selling in the money options and as long as near term volatility is higher than longer term, it is relatively more expensive to buy back those in the money positions.

However, if that forward week volatility starts showing more increases, that situation may change and could result in preferring rollovers to assignments.

That would be nice, except the wish for volatility to increase has been a long and ongoing one and I’ll believe it only when I see it.

 

 

 

 

Daily Market Update – February 11, 2015

 

  

 

Daily Market Update – February 11, 2015 (8:00 AM)

Yesterday was a nice surprise.This morning there’s not much reason to expect the same kind of upward movement and the pre-open futures aren’t showing any indication of continuing with yesterday’s gains.

However, those pre-open numbers are benign enough that anything is reasonable when the opening bell rings, as there’s not much commitment one way or the other this morning.

In a week where there’s very little economic news the Wednesday “Petroleum Status Report” may take on more importance than it usually does. It’s not a report that I typically pay attention to other than to watch the immediate reactions to the inventory news that are similar to the back and forth movements often seen when earnings are released in the after hours trading.

The reaction is often a combination of reacting to the news, reacting to the expectations and trying to figure out whether the news is good or bad and then applying some kind of reverse psychology analysis to all of it.

With some hint from the Saudi Oil Minister of expectations for demand increases in the next year more and more attention is going to be paid to inventory levels for as long as energy prices seem to be in play and right now those prices have been moving in big chunks in both directions.

But that’s also been the case for just about everything other than the US Dollar.

Stocks for certain have been gyrating, but so have interest rates and precious metals. Oil is now just another of those asset classes that is having a really hard time deciding where it should be going.

Today’s report will get plenty of scrutiny, but even then the next question is whether the market decides to re-couple or de-couple from energy prices. In a normal world it’s usually de-coupled, but over the past month or two it has spent more time joined at the hip with oil prices than behaving normally.

With 3 new positions opened this week I’m not anticipating doing much else that involves spending money, particularly as I don’t have much in the way of cash reserves. My hope is that the next few days can add to those cash reserves or at least position next Friday’s monthly option cycle ending contracts to be more likely to be assigned.

Or rolled over.

The idea is to generate income, but as the market may be poised for increasing volatility the preference is to  preserve cash and use existing assets to generate income, sometimes even rolling over positions that might otherwise be assigned.

That becomes more likely as forward week options show more volatility than the expiring week’s options and the differential in buy and sell premiums increases.

Right now, there’s not much in the way of added premium for selling in the money options and as long as near term volatility is higher than longer term, it is relatively mor
e expensive to buy back those in the money positions.

However, if that forward week volatility starts showing more increases, that situation may change and could result in preferring rollovers to assignments.

That would be nice, except the wish for volatility to increase has been a long and ongoing one and I’ll believe it only when I see it.

 

 

 

 

Daily Market Update – February 10, 2015 (Close)

 

  

 

Daily Market Update – February 10, 2015 (Close)

This morning there was the rare sight, at least for 2015, of the S&P 500 with a nice positive move in the pre-opening futures.

In general, the bigger the move the more staying power it has and the more likely it will set the tone for the day, but even then the unfolding events of the day will have their way.

Of course, sometimes there don’t have to be any events to cause significant reversals and that’s when everyone starts pointing to technical factors to explain the unexplainable.

Today there was no need for pointing toward anything in an attempt to get an explanation where none may have existed, but the market did stay true top its pre-opening trading, although it did take a little bit of a tortuous route to get there. It was in the final 2 hours that the market was able to reclaim some of the early advances that had been lost by mid-morning.

This morning the market was de-coupled from oil prices, which is really the way it should be and which is really the way logic would dictate that it would be. Logic, though, sometimes has no real place in things as the market fell or rose far more than it should have based on the size of the energy sector’s representation in the S&P 500.

While the market was showing a nice gain and with some more of those optimistic retail reports are coming in from smaller players like Aeropostale and The Gap, there is increasing reason to be hopeful that there will be some real dividend coming from the reduced cost of oil.

Whether that dividend does anything to move the stock market forward may be questionable, but at the very least it should push the economy forward and maybe some of that debate will come to an end. In the best of worlds the benefits top the economy would end up with better earnings data and stocks responding to profits, which is also the way it should be.

Meanwhile, this still remains a very quiet news week, but this morning brought the JOLT Survey which has, for the past few months been showing a trend that is one reflecting a positive shift in the workplace.

It has been showing that people with jobs have been willing to leave their jobs to look for, or take other jobs. More importantly those other jobs have been higher paying.

That paints a real picture of optimism. Rather than staying at a job someone doesn’t want due to the fear of how difficult it would be to find a new job, people are willing to take that chance in the recognition that there are more and better jobs out there.

The morning’s report continued that feeling of optimism among people in the workforce. Basically the boots on the ground have a better feeling about the future than do some indicators that may just need some time to catch up.

With a couple of new positions added yesterday, I still have room for a little more, but again would be much happier figuring out a different way to gen
erate this week’s revenue stream. A nice move higher today could bring some of the opportunities to sell calls on uncovered positions, but yesterday’s weakness just moved the needle a little further away.

While I generally like the market moving back and forth, because it helps to create higher option premiums, the downside is that it’s harder to find sustained moves to bring some positions that are in need of finding cover back into a range where even a “DOH Trade” is a reasonable thing to do.

In the meantime, however, there could be a powerful catalyst one – two punch in the week or two ahead as the major retailers begin to report their earnings and hopefully shower us with good guidance. The second part of that punch would be some continuing stability in energy prices, especially if there’s any sign of demand picking up and not just as the result of decreasing supply.

For now, there are at least a few positions set to expire this week and a fair number for the week after to end the monthly cycle. That gives me something to do and think about, which is a nice change from last week.

Hopefully this week will restore some of the activity that can make even down days profitable and sometimes fun.

Despite not being able to make those new call sales today, it was still enjoyable letting the excess energy in the market spread itself in a broad way.

I’m not shy about going along for the ride.

 

Daily Market Update – February 10, 2015

 

  

 

Daily Market Update – February 10, 2015 (9:00 AM)

This morning there was the rare sight, at least for 2015, of the S&P 500 with a nice positive move in the pre-opening futures.

In general, the bigger the move the more staying power it has and the more likely it will set the tone for the day, but even then the unfolding events of the day will have their way.

Of course, sometimes there don’t have to be any events to cause significant reversals and that’s when everyone starts pointing to technical factors to explain the unexplainable.

This morning the market is decoupled from oil prices, which is really the way it should be and which is really the way logic would dictate that it would be. Logic, though, sometimes has no real place in things as the market fell or rose far more than it should have based on the size of the energy sector’s representation in the S&P 500.

While the market is showing a nice gain and with some more of those optimistic retail reports are coming in from smaller players like Aeropostale and The Gap, there is increasing reason to be hopeful that there will be some real dividend coming from the reduced cost of oil.

Whether that dividend does anything to move the stock market forward may be questionable, but at the very least it should push the economy forward and maybe some of that debate will come to an end. In the best of worlds the benefits top the economy would end up with better earnings data and stocks responding to profits, which is also the way it should be.

Meanwhile, this still remains a very quiet news week, but this morning brings the JOLT Survey which has, for the past few months been showing a trend that is one reflecting a positive shift in the workplace.

It has been showing that people with jobs have been willing to leave their jobs to look for, or take other jobs. More importantly those other jobs have been higher paying.

That paints a real picture of optimism. Rather than staying at a job someone doesn’t want due to the fear of how difficult it would be to find a new job, people are willing to take that chance in the recognition that there are more and better jobs out there.

With a couple of new positions added yesterday, I still have room for a little more, but again would be much happier figuring out a different way to generate this week’s revenue stream. A nice move higher today could bring some of the opportunities to sell calls on uncovered positions, but yesterday’s weakness just moved the needle a little further away.

While I generally like the market moving back and forth, because it helps to create higher option premiums, the downside is that it’s harder to find sustained moves to bring some positions that are in need of finding cover back into a range where even a “DOH Trade” is a reasonable thing to do.

In the meantime, however, there could be a powerful catalyst one – two punch in the week or two ahead as the major retailers begin to report their earnings and hopefully shower us with good guidance. The second part of that punch would be some continuing stability in energy prices, especially if there’s any sign of demand picking up and not just as the result of decreasing supply.

For now, there are at least a few positions set to expire this week and a fair number for the week after to end the monthly cycle. That gives me something to do and think about, which is a nice change from last week.

Hopefully this week will restore some of the activity that can make even down days profitable and sometimes fun.