Weekend Update – March 29, 2015

Fresh off of his estate’s victory in a copyright infringement suit, Marvin Gaye comes to my mind this week as I can’t help but wonder what’s going on.

With the Passover holiday approaching this week, I’m also reminded that much of the basis of re-telling the story of the exodus from Egypt is in response to the questions asked by children.

Among the classes of children traditionally described are the wise child, the evil child, the simple one and the one who doesn’t even know how to ask a question.

When it comes to trying to understand the past week I’m feeling a bit more like one of the latter two of those categories, although I still retain the option of holding onto my evil persona.

The week started with the Vice-Chair of the Federal Reserve, who coincidentally had been the Governor of the Bank of Israel many years after the exodus, getting some laughs with jokes that maybe only economists would appreciate. However, to his credit he was able to tone down his hawkish sentiments while still staying true to his tenets, but without frightening markets. That was nice to see, as it was his comments just 2 days after Janet Yellen’s congressional testimony that brought an end to the February rally and, perhaps coincidentally, set us on the path for March.

That hasn’t been a very good path for most investors and with only 2 days of trading remaining in the quarter has it threatening to be the first losing quarter in quite a while as we learned that the most recent quarterly corporate profits over the same time period fell for the first time since 2008.

Yet that news didn’t seem to bother markets this morning as they had a rare session ending with a higher close.

With Stanley Fischer putting everyone into a good mood from a dose of Federal Reserve humor all went pretty well to start the week, with Monday looking like it would mark the first time of having two consecutive days higher in over a month. That was the case until the final 15 minutes of trading and then the market just continued in that downward path throughout most of the rest of the week.

But why? Someone, somewhere had to be asking the obvious question that 3 out of 4 categories of children are capable of asking.

What’s going on?

Friday’s GDP data for the 4th Quarter of 2014 showed no change with the economy growing at an annual 2.2% rate. That’s considerably less than projections based upon lower energy prices fueling a resurgence of consumer activity in the coming year, even recognizing that those perceived benefits were theoretically in only their very nascent stages in late 2014.

While the GDP data is certainly backward looking there’s been nothing happening to support that consumer led growth that we’ve all believed was coming.

Corporate profits are falling, retail sales are flat and home sales aren’t exactly setting the economy on fire, all as energy prices are well off their earlier eye popping lows.

So you might think that would all add an arrow to the quiver of interest rate doves, but the market hasn’t been embracing the idea of continuing low interest rates as much as it’s been fearing the prospects of increasing interest rates.

But this week had nothing to fear. Even the most influential of the hawks seemed and sounded accommodating, but the market wasn’t buying it.

This past week, like recent weeks, has made little sense no matter how much you try to explain it. Just like it’s hard to explain how the defendant’s weren’t aware of the existence of Marvin Gaye’s “Got to Give It Up” or that somehow pestilence, boils and locusts rained down upon the Pharoahs.

No matter how you look at it reason is not reigning.

Even a child who doesn’t know how to ask knows when something is going on.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

I purchased some American Express (NYSE:AXP) shares a few weeks ago shortly after the news of their loss of Costco (NASDAQ:COST) as a co-branding partner. Coincidentally that decision came at the same time as both my wife and I had individual issues with American Express customer service.

With a combined history of more than 65 years of using American Express as our primary personal and business cards, we’ve done so largely for their customer service. My wife, after speaking to almost 15 representatives is ready to give her card the boot and she reminded me that she’s had that card longer than she’s had me, so I should be on notice.

Coming as no surprise, American Express just announced workforce cutbacks that will only serve to weaken what really distinguished them from the rest, but that may be what it takes to start making shares look attractive again as the company substitutes cost savings for revenues.

Fortunately, my shares from a few weeks ago were quickly assigned and now it looks as if another opportunity may be at hand as it has re-traced its bounce from the sizable drop it took when the Costco news was made known. It’s upcoming ex-dividend date this week adds to the attraction as the company is wasting no time in taking steps to offset what are now expected to be significant revenue losses beginning in 2016.

Who knew to ever ask just how important Costco was to American Express?

I purchased shares of Dow Chemical last week in order to capture the dividend. What I wasn’t expecting was the announcement coming Friday morning of their plans to merge a portion of the company with Olin Corporation (NYSE:OLN) while becoming a majority owner of Olin.

Fortunately that announcement waited until Friday morning so that I was able to retain the dividend. Had it come after Thursday’s close and based on the initial price reaction, those shares would have been assigned early.

While Dow Chemical has been somewhat phlegmatic lately as it tracks energy prices, the sale to Olin appears to be responsive to activist Dan Loeb’s desire to shed low margin businesses. This deal looks to be a great one for Dow Chemical and may also demonstrate that it is serious about improving margins.

GameStop (NYSE:GME) reported earnings this past Friday and recovered significantly from its preliminary decline. I was amazed that it did so after watching what appeared to be a very wooden and canned performance by its CFO during an interview before trading began that didn’t seem very convincing. However, shortly after trading did begin shares climbed significantly.

I like considering adding shares of GameStop after a decline, as there is a long history of people predicting its coming demise and offering very rational and compelling reasons of why they are correct, only to see shares have a mind of their own.

I had shares assigned just a week earlier and was happy to see that assignment come right after its ex-dividend date but before earnings. Now at a lower price it looks tempting again, although I would probably hold out for a little bit more of a decline, perhaps approaching Friday morning’s opening lows.

While GameStop has a reasonably low beta you wouldn’t know it if you owned shares, but fortunately the options market knows it and typically offers premiums that reflect the sudden moves shares are very capable of taking.

Up until about 30 minutes before Friday’s close it hadn’t been a very good week to be in the semiconductor business. That may have changed, at least for a moment or two, as it was announced that Intel (NASDAQ:INTC) was in talks to purchase Altera (NASDAQ:ALTR).

Among those stocks benefiting from that late news was Micron Technology (NASDAQ:MU), which has fallen even more than Intel in 2015.

Micron Technology reports earnings this week and is no stranger to large earnings related moves. The options market, however is implying only a 5.5% price move next week. While I normally look for a strike level that’s outside of the range defined by the implied move that offers at least a 1% ROI for the week, this coming week is a bit odd.

That’s because Micron Technology reports earnings after the market’s close on Thursday, yet the market will be closed for trading on Good Friday.

For that reason I would consider looking at the possibility of selling puts for the following week, but would like to see shares give up some of the gains made in response to the Intel news.

While Intel’s late news helped to rescue it from having sunk below $30 for the first time in 9 months, it did nothing for Oracle (NYSE:ORCL) nor Cisco (NASDAQ:CSCO). They, along with Intel had been significantly under-performing the S&P 500 this week and for the year to date.

Both Cisco and Oracle are ex-dividend this week and following their drops this past week both are beginning to have appeal once again.

With a holiday shortened week and also going ex-dividend the expectation is that option premiums would be noticeably lower, However, both Cisco and Oracle are offering a compelling combination of option premiums and dividends along with some chance of recovering some of their recent losses.

The real challenge for each may be related to currency exchange and how it will impact earnings. However, barring early earnings warnings, Cisco won’t report earnings for another 7 weeks and Oracle not for another 12 weeks, so hopefully that would allow plenty of time to extricate from a position before the added risk of earnings comes into play.

Finally, I came close to buying shares of SanDisk (NASDAQ:SNDK) just a couple of days ago, looking to replace shares that were assigned just 2 weeks earlier.

It’s not often that you see a company give earnings warnings twice within the space of about 2 months, but SanDisk now has that distinction and has plunged on both of those occasions.

What SanDisk may have discovered is what so many others have, in that being an Apple (NASDAQ:AAPL) supplier may be very much a mixed blessing or curse, depending on your perspective at the moment.

While its revenues are certainly being squeezed I’m reminded of a period about 10 years ago when SanDisk was essentially written off by just about everyone as flash memory was becoming to be considered as nothing more than a commodity.

In that time anyone with a little daring would have done very well in that time period with shares nearly doubling the S&P 500 performance.

With a nearly 25% drop over the past few days, even as a commodity or a revenue stressed company, SanDisk may have some opportunity as it approaches its 18 month lows.

As with many other stocks that have taken large falls, I would consider entering a new position through the sale of put options and if faced with the possibility of assignment would try to roll the position over to a forward week in an attempt to delay or preclude assignment while still collecting a premium.

Traditional Stocks: Dow Chemical

Momentum Stocks: GameStop, SanDisk

Double Dip Dividend: American Express (3/31), Cisco (3/31), Oracle (4/2)

Premiums Enhanced by Earnings: Micron Technology (4/2 PM)

Remember, these are just guidelines for the coming week. The above selections may become actionable, most often coupling a share purchase with call option sales or the sale of covered put contracts, in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week with reduction of trading risk.

Click here for reuse options!
Copyright 2015 TheAcsMan

Week in Review – March 23 – 27, 2015

 

 

Option to Profit Week in
Review –  March 23 – 27,  2015
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
3 / 3 0 1 1  /  0 2 / 0 0

    

Weekly Up to Date Performance

March 23 – 27,   2015

This was another in a series of familiar kind of weeks.

Despite very flat days to begin and end the week, what was in-between wasn’t very good.

There were 3 new positions opened this week and they were able to beat both the adjusted and unadjusted S&P 500. Those positions beat the adjusted S&P 500 by 1.5% and surpassed the unadjusted S&P 500 by 1.7% in a week that the market really had no stories to follow, as almost nothing of interest happened this week.

As with a number of previous weeks lately, while the new positions did out-perform the S&P 500 they were still lower. Those positions were 0.5% lower for the week, while the unadjusted S&P 500 finished 2.2% lower and the adjusted S&P 500 was 2.0% lower

Due to the strength in energy this week the existing positions performed quite a bit better than the overall market, ending the week 1.5% higher than the overall market. However, those positions were still 0.8% lower for the week.

Positions closed in 2015 continue to out-perform the market. They are an average of 5.5% higher, while the comparable time adjusted S&P 500 average performance has been 1.7% higher. That 3.8% difference represents a 224.2% performance differential. That remains unusually high and is associated with the longer period of holding of those closed positions than is more typically the case.

 

This week started and ended fairly flatly.

As far as bookends go, Monday and Friday were just fine, even though Monday gave up a nice gain in the final 30 minutes.

It was really what was in-between that was the real problem as the market finished the week with another very disappointing performance, even though there wasn’t much in the way of disappointing news.

In fact, almost nothing happened this week and what did happen was barely noticeable.

There was no news to fuel inflation fears and there was no news to fear deflation fears. Lately that has been what’s been worrying the market, so it’s hard to understand what caused the market to trade so poorly this week.

While we all know what the impact is of the strengthening dollar and how it will reduce corporate earnings, we still have another two weeks until the new earnings season begins. Besides, to a large degree that impact should already be discounted by analysts in their expectations.

So it remains a mystery, but at least the market didn’t flounder further today as the GDP data was released. That data gave no indication of anything, neither positive nor negative, and played no role in today’s trading.

With all of the negativity the market is barely 2.5% below its highest point from the first trading day of this month.

With just 2 more days left to the month it has been a repeat of what January was like and the antithesis to what February was like. Hopefully that pattern will find itself continuing in April, but the challenge of earnings starts all over again in less than 2 weeks. Those two days will also determine whether this ends up being the first negative quarter in quite a while, as the S&P 500 is up only 0.09% YTD.

Next week is a holiday shortened week although the Employment Situation Report does come out on Good Friday. Stock markets are closed, although bond markets will be open. That could create some catch up trading the following Monday morning if there’s a significant reason for the bond market to make a big move.

But that’s an issue for another week.

With just a single assignment this week  and another week with only a small number of expiring positions, I don’t expect the coming week to be a very busy one for opening new positions.

In all likelihood whatever new positions are opened will probably focus on using a weekly contract in order to have some opportunity to generate some more assignments in order to fund any trading for the following week. Those premiums, though, will be relatively small, as there are just 4 days of time value.

With this week being predominantly a negative one there was no opportunity to find new cover for existing positions. That still remains my top interest and right now, the best way to both conserve cash and still generate weekly income.

At the moment all of the positions expiring next week are in position to be assigned, but it doesn‘t take too much to change that possibility. At the very least, however, it would be nice to have those positions stay within the range of being rolled over.

I never ask for too much and try not to be unreasonable in those requests, but lately the market has been anything other than generous.

 

 

 



This week’s details may be seen in the Weekly Performance spreadsheet * or in the PDF file, as well as as in the summary.below

(Note: Duplicate mention of positions reflects different priced lots):



New Positions Opened:   ABBV, ATVI, DOW

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  MET

Calls Rolled over, taking profits, into extended weekly cycle:  none

Calls Rolled over, taking profits, into the monthly cycle: none

Calls Rolled Over, taking profits, into a future monthly cycle:  none

Calls Rolled Up, taking net profits into same cyclenone

New STO:  none

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: DOW

Calls Expired:  ABBV, BAC

Puts Assigned:  none

Stock positions Closed to take profits:  none

Stock positions Closed to take losses: none

Calls Closed to Take Profits: none

Ex-dividend PositionsATVI (3/26 $0.23), DOW (3/27 $0.42)

Ex-dividend Positions Next Week: EMC (3/30 $0.12)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   ABBV, AGQ, ANF, BAC, CHK, CLF, COH, DOW, FAST, FCX, GDX, HAL, HFC, .INTC, JCP, JOY, LVS, MAT, MCP, MOS,  NEM, RIG, WFM, WLT (See “Weekly Performance” spreadsheet or PDF file)



* If you don’t have a program to read or modify spreadshe
ets, you can download the OpenOffice Suite at no cost.




Click here for reuse options!
Copyright 2015 TheAcsMan

Daily Market Update – March 27, 2015

 

 

 

Daily Market Update – March 27, 2015  (8:30 AM)

The Week in Review will be posted by 6 PM and the Weekend Update will be posted by Noon on Sunday.

 

The following trade outcomes are possible today:

Assignments:  DOW

Rollovers:   MET

ExpirationsABBV, BAC

 

 

The following were ex-dividend this week:  ATVI (3/26 $0.23), DOW (3/27 $0.42)

The following will be ex-dividend next week: EMC (3/30 $0.12)

 

Trades, if any, will be attempted to be made by 3:30 PM EDT

.

Click here for reuse options!
Copyright 2015 TheAcsMan

Daily Market Update – March 26, 2015 (Close)

 

 

 

Daily Market Update – March 26, 2015  (Close)

Yesterday’s near 300 point sell-off was for no discernible reason and that can never leave you with a good feeling.

It was another example of the disconnect seen over the past month between the pre-open futures trading and the manner in which the day’s trading later on would unfold. Almost without exception the early morning indicators have indicated nothing. Jumping in at the market open hasn’t been a good strategy of late.

This morning may be a counter to that disconnect as the early pre-open futures trading is decidedly negative, approaching a triple digit loss to begin the day, although the gap has been slowly improving.

These days that’s just a moderately negative opening, but the more pronounced the futures trading, whether higher or lower, the more likely you’re going to see it replicated when the regular session opens.

If that’s the case this morning the trend began with Tuesday’s closing as a decent gain heading into the closing hour was all lost and that selling has just continued for now.

As always, just like when you’re a kid, it’s much easier to learn your lesson when there’s a clear explanation available.

But whatever it is that has accounted for the selling pressure the past few days hasn’t been clearly presented.

Based on what little economic data has been released this week it’s hard to make either a bullish or bearish case and it’s hard to adopt a good news is good news or good news is bad news kind of mentality.

Tomorrow still holds the GDP release, but it’s hard to imagine what it would hold that hasn’t already shown up in some other form in such things as Retail Sales Reports, Durable Goods, Home Sales and other measures of the economy.

With the losses of the past few days the prospects of assignments this Friday become more distant so the hope is for rollovers, but even those become increasingly unlikely as the market continues lower.

The one shining light, just as it previously was a beacon of darkness, has been the energy sector this week. If you hold shares in those companies, then your performance this week is better than the averaged are indicating, but those still have a long way to go to start earning some respectability again.

For today, there wasn’t likely to be too much to do as looking at the early numbers.

Despite a very impressive turnaround of about 160 points at the extremes, it still ended up a day of not much to do.

It’s rarely a good idea to get too much ahead of momentum when there’s an entire market behind that move. While I often like to get ahead of momentum on an individual stock those are often easier to halt than when the whole market is on the move.

Any other day and I might want to take a look at a stock like SanDisk, which is again taking a dive due to changing guidance, just as it did prior to its earnings report. But with a weakening market in the background, despite the turnaround and what may be over-done reactions it may be only the beginning, so we sit and watch and may find
ourselves ending up asking “what if?”

Hopefully tomorrow’s GDP and maybe some encouraging words from Stanley Fischer, who’s on center stage again, may at least give investors some reason to believe that a better economy awaits and will be the kind that can sustain moderate growth for a while to come.

 

 

Click here for reuse options!
Copyright 2015 TheAcsMan

Daily Market Update – March 26, 2015

 

 

 

Daily Market Update – March 26, 2015  (8:00 AM)

Yesterday’s near 300 point sell-off was for no discernible reason and that can never leave you with a good feeling.

It was another example of the disconnect seen over the past month between the pre-open futures trading and the manner in which the day’s trading later on would unfold. Almost without exception the early morning indicators have indicated nothing. Jumping in at the market open hasn’t been a good strategy of late.

This morning may be a counter to that disconnect as the early pre-open futures trading is decidedly negative, approaching a triple digit loss to begin the day, although the gap has been slowly improving.

These days that’s just a moderately negative opening, but the more pronounced the futures trading, whether higher or lower, the more likely you’re going to see it replicated when the regular session opens.

If that’s the case this morning the trend began with Tuesday’s closing as a decent gain heading into the closing hour was all lost and that selling has just continued for now.

As always, just like when you’re a kid, it’s much easier to learn your lesson when there’s a clear explanation available.

But whatever it is that has accounted for the selling pressure the past few days hasn‘t been clearly presented.

Based on what little economic data has been released this week it’s hard to make either a bullish or bearish case and it’s hard to adopt a good news is good news or good news is bad news kind of mentality.

Tomorrow still holds the GDP release, but it’s hard to imagine what it would hold that hasn’t already shown up in some other form in such things as Retail Sales Reports, Durable Goods, Home Sales and other measures of the economy.

With the losses of the past few days the prospects of assignments this Friday become more distant so the hope is for rollovers, but even those become increasingly unlikely as the market continues lower.

The one shining light, just as it previously was a beacon of darkness, has been the energy sector this week. If you hold shares in those companies, then your performance this week is better than the averaged are indicating, but those still have a long way to go to start earning some respectability again.

For today, there’s not likely to be too much to do as it’s rarely a good idea to get too much ahead of momentum when there’s an entire market behind that move. While I often like to get ahead of momentum on an individual stock those are often easier to halt than when the whole market is on the move.

Any other day and I might want to take a look at a stock like SanDisk, which is again taking a dive due to changing guidance, just as it did prior to its earnings report. But with a weakening market in the background, even what look like over-done reactions may be only the beginning, so we sit and watch and may find ourselves ending up asking “what if?”

Hopefully tomorrow’s GDP and maybe some encouraging words from Stanley Fischer, who’s on center stage again, may at least give investors some reason to believe that a better economy awaits an
d will be the kind that can sustain moderate growth for a while to come.

 

 

Click here for reuse options!
Copyright 2015 TheAcsMan