Monthly Archives: February 2015

Daily Market Update – February 5, 2015 (Close)

With only a single trade in the books through the first three days of this week, this is looking like it will be the slowest week in about 5 years.

And by today’s closing bell it was just more of the same, but if things have to be sort of on the boring side, I couldn’t ask for it to be any better.

So far, based on the week’s comparative results, I don’t mind the inaction and hope to see the broader advance continue to close out the week tomorrow, as I would really like to see some assignments and some more cash becoming available for next week and beyond.

The pre-open futures were pointing to another gain after yesterday’s very quixotic trading, but the eventual size of today’s gain was also quixotic, but more in line with the results of Monday and Tuesday.

Try as you may, there really wasn’t too much reason to see the market create another of these 200 point kind of gains. You can look at Europe and you can look at energy prices, but there isn’t very much consistency. Simply looking for an event and claiming it is the cause has become what analysts are now resorting to in an effort to explain what we’ve been seeing this week.

This morning there was a chance to ponder what the meaning of positive forward guidance from a handful of national retailers may mean.

When Macys, Kohls and L Brands think that this quarter will be better than expected, there’s reason to believe that the good news that has been accumulating will finally result in something tangible.

So it’s possible that could have been the root cause of today’s rally, except that it took quite a bit of time for the gains to get any traction and like yesterday they accelerated going into the close, similar to what was seen on Wednesday, except successfully done.

Increased job growth over a sustained period, wages finally increasing and much lower energy prices should reasonably be expected to translate into a growing consumer economy, but for the past month, as we’ve been waiting for some evidence of that to happen, we’ve been getting just the opposite.

Looking at it from the perspective of our expectations versus what is being reported as reality may explained the behavior of the markets over the past 6 weeks, as we have repeatedly bounced between DJIA 17000 and 18000.

In fact, since mid-October we’ve had 5 or 6 very noticeable declines when in a 2 1/2 year period before that they were coming only every 2 months.

But you really can’t blame traders for that kind of indecision given what logic dictates should have been happening in the economy and then what was being reported.by companies and by official government statistics.

Although there isn’t necessarily a direct correlation between the economy and the stock market, at least you would have expected that companies would have been reporting good news
or predicting some better news down the road, regardless of how traders and investors may react to that news.

With stock buybacks slowing down and so many having been executed at such high prices, you do have to wonder a little where the next impetus for increasing stock prices may come from.

But when it happens, as it has been happening this week, you don’t really take the time to look a gifthorse in the mouth.

While positive or revised forward guidance is always helpful and while the top and bottom lines may improve, the impact of continuing decreasing share floats will likely be reduced and that artificially induced elevation in EPS will be less of a factor going forward.

But that’s an issue that may not begin to unfold until the next earnings season is set to begin.

For now, we can hope that what Macys, Kohls and maybe others are seeing in their top and bottom lines will translate into reasons to be optimistic over where the stock markets will be heading in the near future, even as energy prices may be looking for a higher level.

Daily Market Update – February 5, 2015 (8:00 AM)

With only a single trade in the books through the first three days of this week, this is looking like it will be the slowest week in about 5 years.

So far, based on the comparative results, I don’t mind the inaction and hope to see the broader advance continue to close out the week as I would really like to see some assignments and some more cash becoming available for next week and beyond.

The pre-open futures are already pointing to another gain after yesterday’s very quixotic trading.

This morning there’s a chance to ponder what the meaning of positive forward guidance from a handful of national retailers may mean.

When Macys, Kohls and L Brands think that this quarter will be better than expected, there’s reason to believe that the good news that has been accumulating will finally result in something tangible.

Increased job growth over a sustained period, wages finally increasing and much lower energy prices should reasonably be expected to translate into a growing consumer economy, but for the past month, as we’ve been waiting for some evidence of that to happen, we’ve been getting just the opposite.

Looking at it from the perspective of our expectations versus what is being reported as reality may explained the behavior of the markets over the past 6 weeks, as we have repeatedly bounced between DJIA 17000 and 18000.

In fact, since mid-October we’ve had 5 or 6 very noticeable declines when in a 2 1/2 year period before that they were coming only every 2 months.

But you really can’t blame traders for that kind of indecision given what logic dictates should have been happening in the economy and then what was being reported.by companies and by official government statistics.

Although there isn’t necessarily a direct correlation between the economy and the stock market, at least you would have expected that companies would have been reporting good news or predicting some better news down the road, regardless of how traders and investors may react to that news.

With stock buybacks slowing down and so many having been executed at such high prices, you do have to wonder a little where the next impetus for increasing stock prices may come from.

While positive or revised forward guidance is always helpful and while the top and bottom lines may improve, the impact of continuing decreasing share floats will likely be reduced and that artificially induced elevation in EPS will be less of a factor going forward.

But that’s an issue that may not begin to unfold until the next earnings season is set to begin.

For now, we can hope that what Macys, Kohls and maybe others are seeing in their top and bottom lines will translate into reasons to be optimistic over where the stock markets will be heading in the near future, even as energy prices may be looking for a higher level.

Daily Market Update – February 4, 2015 (Close)

Another day without a single trade, at least not for any new positions.That makes three in a row to start the week.

That’s no way to make money.

Given the choice, I’d rather not be making any trades in the face of a market showing a great advance than sitting around and being paralyzed into inaction during a tremendous decline, as long as my positions aren’t already in the money.

Today, I got my wish, at least for a very short while as it was a really strange day in the markets and an especially strange final hour.

For that brief time that the market was up another triple digits I got that part of my preferences.

Why the market went from a day of complete boredom with the DJIA positive only because of strong performances by Disney and Visa, adding about 80 points, to a day where the broad market turned reasonably positive to one where even the DJIA was underwater until the final moment, all in the space of 60 minutes, is a mystery.

At least for part of the day we were able to see some green and at least they didn’t take off so much that positions ended up being deep in the money and unable to participate.

I think that’s actually my worst case scenario. There’s not much worse than seeing a slew of positions already in the money being unable to celebrate in a broad and sustained market rally.

On the other hand, if your positions are well covered there’s a strange sense of comfort, maybe even satisfaction if a large decline suddenly hits.

As the past 2 days 500 point advance served to bring positions closer to assignment or easier to rollover, that two day move was much welcomed, especially as there was some further catch-up by the energy sector, which is now helping to continue the string of relative out-performance, just as it led to under-performance late in 2014, as it was in the throes of its decline.

Today began the 3 days of employment related data that will be streaming in.

As I wrote this morning’s update the ADP data has already been released and it was a little weaker than expected. Tomorrow’s Jobless Claims and Friday’s Employment Situation Report complete the story, but just as this morning’s ADP report, shouldn’t have too much influence on where the market will be going.

Later this morning came the release of the counterpart to the ISM Manufacturing Index. The Non-manufacturing Index measures changes in the services sector.

Lately, despite logic telling us that both manufacturing and services should be growing, and perhaps even growing at a greater rate, that hasn’t really been the case and the continuing increase in employment and the extra money in people’s pockets from higher wages, growing employment and from their energy dividend, hasn’t been finding its way back into the economy in any measurable way.

But in a nice surprise, the non-manufacturing numbers were actually better than expected and coupled with some better than expected guidance from Kohls and Macys in advance of their earnings reports in 2 weeks, came some reason to be optimistic.

While Wednesdays are usually quiet days and I don’t often make any new purchases during the latter half of the week, this week may be a little different, seeing as there haven’t been any so far this week. Although I knew that there wouldn’t be much activity as I wanted to conserve cash and hopefully add to it from week ending assignments, the hunt never ends.

While I do want to see my cash reserve grow right now and would be more interested in generating weekly income from existing positions, I’m not completely adverse to adding new positions. The big concern that I have right now, however, is related to the same thing that makes for some joy.

That is, the past 2 days.

While it’s great seeing the past 500 points get added, there’s till no escaping the reality that those kinds of moves, especially coming on the heels of some equally large declines, are not the sort of thing that you see in bullish runs.

Today’s 100 point gain that was methodically built upon the scaffolding provided by Disney and Visa was nice, but its quick collapse was not.

Taking a wide angle look at things those large moves higher are typically seen as a part of a developing bear market and create a bull trap fr those getting in just to share in what they think will be the party to come.

“FOMO,” or the “fear of missing out,” can be just as deadly as greed and panic, as the final 30 minutes of trading could have illustrated.

While I’ll be content to let things ride that can benefit from the ride, having seen a series of reversals over the past 6 weeks makes it hard to believe that the past two days are the real thing.

I have no idea what today’s trading means. It certainly wasn’t very real and it would be really hard to draw any conclusions from the changes in direction and sentiment.

Instead, if the market can continue this sort of back and forth and do so with big moves in both directions, the beneficiaries will be those that can take advantage of the volatility.

If that volatility does rise and stay at elevated levels, you don’t have to create as many new positions to generate your income. All you have to do is try and trade your existing positions and rolling over as often as possible, taking advantage of the better and better premiums.

Daily Market Update – February 4, 2015 (8:45 AM)

Another day without a single trade, at least not for any new positions.

Given the choice, I’d rather not be making any trades in the face of a market showing a great advance than sitting around and being paralyzed into inaction during a tremendous decline, as long as my positions aren’t already in the money.

I think that’s actually my worst case scenario. There’s not much worse than seeing a slew of positions already in the money being unable to participate in a broad and sustained market rally.

On the other hand, if your positions are well covered there’s a strange sense of comfort, maybe even satisfaction if a large decline suddenly hits.

As the past 2 days 500 point advance served to bring positions closer to assignment or easier to rollover, that two day move was much welcomed, especially as there was some further catch-up by the energy sector, which is now helping to continue the string of relative out-performance, just as it led to under-performance late in 2014, as it was in the throes of its decline.

Today begins the 3 days of employment related data that will be streaming in.

As I write this the ADP data has already been released and it is a little weaker than expected. Tomorrow’s Jobless Claims and Friday’s Employment Situation Report complete the story, but just as this morning’s ADP report, shouldn’t have too much influence on where the market will be going.

Later this morning will be the release of the counterpart to the ISM Manufacturing Index. The Non-manufacturing Index measures changes in the services sector.

Lately, despite logic telling us that both manufacturing and services should be growing, and perhaps even growing at a greater rate, that hasn’t really been the case and the continuing increase in employment and the extra money in people’s pockets from higher wages, growing employment and from their energy dividend, hasn’t been finding its way back into the economy in any measurable way.

While Wednesdays are usually quiet days and I don’t often make any new purchases during the latter half of the week, this week may be a little different, seeing as there haven’t been any so far this week. Although I knew that there wouldn’t be much activity as I wanted to conserve cash and hopefully add to it from week ending assignments, the hunt never ends.

While I do want to see my cash reserve grow right now and would be more interested in generating weekly income from existing positions, I’m not completely adverse to adding new positions. The big concern that I have right now, however, is related to the same thing that makes for some joy.

That is, the past 2 days.

While i
t’s great seeing the past 500 points get added, there’s till no escaping the reality that those kinds of moves, especially coming on the heels of some equally large declines, are not the sort of thing that you see in bullish runs.

Taking a wide angle look at things those large moves higher are typically seen as a part of a developing bear market and create a bull trap fr those getting in just to share in what they think will be the party to come.

“FOMO,” or the “fear of missing out,” can be just as deadly as greed and panic.

While I’ll be content to let things ride that can benefit from the ride, having seen a series of reversals over the past 6 weeks makes it hard to believe that the past two days are the real thing.

Instead, if the market can continue this sort of back and forth and do so with big moves in both directions, the beneficiaries will be those that can take advantage of the volatility.

If that volatility does rise and stay at elevated levels, you don’t have to create as many new positions to generate your income. All you have to do is try and trade your existing positions and rolling over as often as possible, taking advantage of the better and better premiums.

Daily Market Update – February 3, 2015 (Close)

Not a single trade yesterday, but at least there was some good news with the market’s turnaround after nearly a 200 point decline early in trading.

While the size of these gains, seeing multiple 200 point advances in the last 6 weeks, and not really seeing the market move any higher, should be good if you like volatility, the problem is the sheer size of those moves.

Granted that 200 points don’t mean as much at these record levels as it would have meant 5 years ago, but unusually large advances are typically seen during bear markets or leading up to them.

That’s part of the reason that I’m not overly anxious to add any new positions and would especially like to add to cash, instead.

Along with that I’d also especially like to simply add the protection that cover gives, as that protection also gets more rewarding as this kind of volatility continues or even increases.

Whether those 200+ point moves are indicative of a bear market around the corner is, however, irrelevant when enjoying the advance. By that measure, today’s advance was about 50% more enjoyable than yesterday’s, which is generally infinitely more enjoyable than a 200 point loss.

Today made two days of enjoyment in a row, as the market went above and beyond yesterday’s gains, but there still wasn’t too much opportunity to make trades.

This morning the pre-open futures was indicating some follow-up to yesterday’s large late day gain. That gain was one that just kept picking up steam in the final hour similar to that seen in the mid-afternoon on Friday, except that one ended up waving the white flag when no real reason for the advance in oil prices, which led the market’s advance, could be figured out and seemed to be either rumor driven or hedging driven.

There was no real reason for Monday’s turnaround either, although the good news for the day was that the news continues to not be so bad from the energy sector as they report earnings and the disappointment that’s being provided in forward guidance already seems to be factored in.

This morning the only real economic news of any importance was one that isn’t generally so important. After the morning’s trades begin Factory Orders are reported and oddly, given that we’re supposed to be in an expanding economy, those factory orders have been down for the past 4 months. Going down for a fifth consecutive month doesn’t really send a signal that the economy is humming along on all cylinders.

But as it turned out it didn’t really matter that it did show a fifth consecutive month of declines. Instead, what mattered was that oil prices continued to strengthen.

After two nice days, essentially the rest of the week focuses on jobs, with ADP statistics coming on Wednesday, Jobless Claims on Thursday and the big Employment Situation Report on Friday.

None of those should really have much of an impact on markets unless they contain some really big surprises.

If the numbers are too big, then the fear of the FOMC increasing interest rates sooner rather than later creeps in, but the bond market, which usually gets things right, was going in the opposite direction. That is until today when it rocketed higher.

Much higher.

As far as the Employment Situation numbers go If the number is too small, or if there are big adjustments downward, there comes the doubts about the story we’ve been all believing and investing in.

So while I would, at least theoretically, like to be participating in whatever rally may come our way this week, if yesterday and today’s good graces can continue, I’d rather be in a position to take advantage of any moves higher, regardless of for how long they may turn out to last.

At least while sitting and doing nothing I won’t find reason to complain if some catch up in the bottom line starts occurring, whether there’s a good reason for energy sector positions to be moving higher or not.