Monthly Archives: March 2015

Daily Market Update – March 20, 2015  (9:00 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:  GME, SBGI

Rollovers:  LXK

Expirations:  BAC, BP, DOW, EMC, GDX

The following were ex-dividend this week:  LVS (3/19 $0.65)

The following are ex-dividend next week:  DOW (3/27 $0.42)

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

Daily Market Update – March 19, 2015  (9:00 AM)

That was quite a gift that the FOMC gave to markets yesterday and it was also nice having Janet Yellen add to that gift.

The real gift, however, was the way in which markets reacted, because there really wasn’t very much contained in the FOMC Statement that should have given traders reason to believe that there was increased clarity.

In fact, it’s sort of amazing how the market reacted.

And not just the stock market which turned around over 300 points. But the precious metals, currencies and bond markets all rallied in a big way.

What was fascinating was that almost everyone had been arguing over whether the word “patience” would come out or not from the FOMC Statement. That word was thought to be the difference between getting an interest rate hike in June versus September.

While the word was removed, all that was said with regard to timing was that the rate hike would likely not come at the next FOMC meeting in April.

April? No one was expecting that, so what clarity was then added to justify the kind of response seen?

Hard to say, but it’s also hard to look a proverbial gift horse in the mouth.

The reality is and continues to be that the economy isn’t really showing much in the way of evidence to suggest that inflation is heating up. If you believe the FOMC as they continue to say that they are “data driven,” you have to believe that they don’t have the data to create the belief that the brakes have to be put on the economy as it was heating up too much.

No matter. It was nice seeing that turnaround, but I think it adds to the confusion that’s been seen in the market. Not only is it alternating once again between strong up and down days like it did in January, but there is a stealth bear market going on even as the S&P is less than 1% from its all time high.

That stealth bear market is seen in the large number of stocks that are actually below their 200 day moving averages and the increasing number where the 50 day moving average is approaching or dipping below the 200 day moving average.

In a bullish kind of market the pictures should be reversed.

That’s why you really don’t see or hear of too many people running around bragging about their performance.

Today the feel of the DJIA may be a little different as many are talking about how its volatility will increase now that APple has joined the index, as it is priced more than 3 times what AT&T had been. Since the index is price weighted and not market capitalization weighted, price matters. What’s been over-looked in that analysis is that a post-split Visa begins trading today and that has gone from about $268 to $68, so whatever volatility Apple may bring the split in Visa should be a tempering factor.

Daily Market Update – March 18, 2015  (Close)

Well, at the very least we were to find out today what was in the FOMC’s mind, although even after the Chairman’s press conference we may still not have any greater sense of where our own sentiments are going to be on where the next set of worries is going to come from.

Other than the Employment Situation Report from a few weeks ago there really hasn’t been very much reason to believe that the economy is firing up. Job numbers have been growing, but wage growth hasn’t exactly been spectacular and there hasn’t been evidence that the job market is tightening, which is what begins an upward and inflationary spiral.

In fact, with the strength of the US Dollar at such highs, there’s every reason to believe that consumer prices will head lower, as imports become much more competitive. Of course, as gas prices still stay well beneath last year, although not part of the inflationary calculation, you can be certain that a data driven FOMC takes that into consideration, as well, as they may also be wondering why retail sales have fallen all during the period that gas prices have been going down.

Add to that the fact that the bond market seems to be betting in the opposite direction and you wonder where the fear has been coming from and what has been driving the market in March to act the way it did in January. Neither of those months were very good, as far as performance goes, but that’s much easier to accept when there appears to be a good reason.

Or any kind of reason.

Lately, there just hasn’t been any reason behind this large moves up and down. The fact they have taken on an alternating basis isn’t something that inspires lots of confidence when it comes to making any kind of decision to spend money. But it also doesn’t inspire confidence if you’re looking to sell stocks, either.

I’d still like to think that there’s some chance of making a purchase or two this week, but there would have to be something very compelling to do so before the FOMC report.

Nothing really compelling came before the FOMC’s release, but the 300 point turnaround to take markets higher was really an eye-opener.

What’s really amazing is that most people were looking for an interest rate hike as soon as June and what the FOMC said was that no rate hike would come until after the April meeting.

So I’m not sure where all of that unbridled joy came from, but I’ll happily be a recipient going forward.

With this out of the way, at least until the next bit of data gets someone afraid of inflation, a central story continues to be energy as those prices are again testing those lows form a few weeks ago, but this time around the market isn’t finding a way to capitalize on what would logically be considered as good news on a net basis.

Like the stock market, oil and precious metals also had signicant reversals today and headed higher after today’s FOMC, just as the 10 Year Treasury rates plummetd, but we’ll see what tomorrow will bring.

At this point of the week, as we were getting ready to approach the FOMC Statement release, at what is the mid-pont of the week’s trading, I would have just been very happy to have a repeat of Monday and have the chance to sell some more calls on currently uncovered positions. I think I would prefer that to putting any additional money at risk, as we await the end of the monthly option cycle just 2 days later.

At least today’s surge saw some paper gains and a rollover of a position that I didn‘t think would get a chance for a rollover this week, so there’s a little less to think about as this week now is getting ready to come to its end.

With always an eye on future weeks I wouldn’t mind being able to start populating some advance weeks with options, but would still really like to see the volatility climb higher.

While the past couple of weeks have been volatile on a daily basis, they haven’t been very volatile on an intra-daily basis and the latter is the kind that really helps to move volatility levels higher. So with all of this back and forth the net change in that volatility level hasn’t been very large, which makes it somewhat less advantageous to commit to longer term contracts.

This morning’s pre-open futures didn’t appear as if there was going to be too much opportunity to do much with regard to selling new option contracts before the FOMC Statement release, as that trading continued yesterday’s senseless negativity which followed Monday’s senseless positivity.

The turnaround after the release may have been just as senseless, but we may have better idea about that at this time tomorrow.

Today, hopefully the dulcet and somewhat monotonous tones from Janet Yellen will put some at enough ease to get us prepared for an April that will be more like February, in the realization that the best part of this economic expansion still awaits.

Daily Market Update – March 18, 2015  (8:45 AM)

Well, at the very least we’ll find out today what is in the FOMC’s mind, although even after the Chairman’s press conference we may not have any greater sense of where our own sentiments are going to be on where the next set of worries is going to come from.

Other than the Employment Situation Report from a few weeks ago there really hasn’t been very much reason to believe that the economy is firing up. Job numbers have been growing, but wage growth hasn’t exactly been spectaular and there hasn’t been evidence that the job market is tightening, which is what begins an upward and inflationary spiral.

In fact, with the strength of the US Dollar at such highs, there’s every reason to believe that consumer prices will head lower, as imports become much more competitive. Of course, as gas prices still stay well beneath last year, although not part of the inflationary calculation, you can be certain that a data driven FOMC takes that into consideration, as well, as they may also be wondering why retail sales have fallen all during the period that gas prices have been going down.

Add to that the fact that the bond market seems to be betting in the opposite direction and you wonder where the fear has been coming from and what has been driving the market in March to act the way it did in January. Neither of those months were very good, as far as performance goes, but that’s much easier to accept when there appears to be a good reason.

Or any kind of reason.

Lately, there just hasn’t been any reason behind this large moves up and down. The fact they have taken on an alternating basis isn’t something that inspires lots of confidence when it comes to making any kind of decision to spend money. But it also doesn’t inspire confidence if you’re looking to sell stocks, either.

I’d still like to think that there’s some chance of making a purchase or two this week, but there would have to be something very compelling to do so before the FOMC report.

A central story continues to be energy as those prices are again testing those lows form a few weeks ago, but this time around the market isn’t finding a way to capitalize on what would logically be considered as good news on a net basis.

At this point of the week, as we approach the FOMC Statement release, at what is the mid-pont of the week’s trading, I’d just be very happy to have a repeat of Monday and have the chance to sell some more calls on currently uncovered positions. I think I would prefer that to putting any additional money at risk, as we await the end of the monthly option cycle just 2 days later.

With always an eye on future weeks I wouldn’t mind being able to start populating some advance weeks with options, but would still really like to see the volatility climb higher.

While the past couple of weeks have been volatile on a daily basis, they haven’t been very volatile on an intra-daily basis and the latter is the kind that really helps to move volatility levels higher. So with all of this back and forth the net change in that volatility level hasn’t been very large, which makes it somewhat less advantageous to commit to longer term contracts.

This morning’s pre-open futures don’t appear as if there’s going to be too much opportunity to do much with regard to selling new option contracts before the FOMC Statement release, as that trading is continuing yesterday’s senseless negativity which followed Monday’s senseless positivity.

Today, hopefully the dulcet and somewhat monotonous tones from Janet Yellen will put some at enough ease to get us prepared for an April that will be more like February, in the realization that the best part of this economic expansion still awaits.

Daily Market Update – March 17, 2015  (Close)

Yesterday was really a surprise and a reminder that sometimes those surprises can be good.

Today was another surprise and a reminder that sometimes they’re not so good.

Lately, at least for the last 2 or 3 months the trading in the days right before the FOMC Statement release have been really cautious, whereas in the months prior it tended to be very strongly bullish.

Yesterday was a throwback to those longer ago days, probably reflecting some optimism that whatever will be the decision of the FOMC regarding how they signal their interest rate intentions, it will be more clear than is currently the case.

Today was a much more reasonable way to be trading ahead of a day of uncertainty, except that there shouldn’t be too much uncertainty about the meaning of whatever decision the FOMC will make.

Last week I believed that no matter the outcome of the FOMC Statement, whether the wording was changed or not, it would be a positive for equity markets. While that may or may not be true these alternating moves of sufficient magnitude may be good for volatility, but they’re not very good for markets.

When markets can consistently have such large moves and be entirely directionless that generally indicates lots of nervousness.

At the moment, given where we really are in an economic cycle, there’s not too much reason for that kind of nervousness. This most current cycle has been one of very measured growth and without any of the usual fires that accompany the thing that we’re usually rightfully afraid of.

That’s inflation. But right now, a little bit of inflation would likely be a good thing as it would represent continuing growth and prospects for profits.

The fact that the US Dollar is much stronger than anyone expected is a diversion and interest rates, even if headed higher are still bargains. Besides, in an age of multinational corporations, companies in the need of capital can now easily turn to overseas markets where the rates are heading lower as our may be teetering higher.

This morning the market was looking to return to that more recent form of normal before tomorrow’s FOMC Statement release and looked like it would  be giving back some of yesterday’s gains.

That appearance never changed, as there was never really any attempt to beat back the bears today.

I was happy to have had some opportunity to create some income from the sale of options on uncovered positions yesterday, but will still likely continue to hold some resistance toward spending down any of the available cash, as I would like to see some more assurance of some assignments at the end of this week that could replenish anything spent.

Since yesterday was really a surprise and was another in a string of days that didn’t really follow the pre-opening futures, it was still anyone’s guess how today would have progressed, so I wasn’t entirely closed to the idea of any new purchases. However, despite the broad price declines there was nothing appealing enough to  spend any of the pile down.

Interestingly, housing starts were just reported and they were down this month, likely due to weather, but that’s still another piece of data just in time for today’s FOMC meeting and can be part of the equation as to whether the economy is heating up sufficiently to warrant some gentle braking.

My guess is that we’re going to see another market rally sometime after Janet Yellen gives her press conference and I don’t mind sitting it out with new purchases in mind, as long as there continues to be some opportunity to sell new call positions, get those rollovers as the monthly cycle ends this Friday or see some assignments.

Sometimes passively awaiting is the only way to go when you seem to have a fifty – fifty proposition awaiting you.