Monthly Archives: March 2015

Daily Market Update – March 11, 2015 (9:00 AM)

After yesterday’s 300 point loss, following a nearly similar loss last Friday which was only half recovered to open the week, this morning’s small gains in the pre-open futures trading is no where close to recovering what’s been lost.

It still astonishes me that people can keep a straight face and talk about how it’s the realization that currency exchange rates are now serious challenges to corporate earnings, that was responsible for yesterday’s decline.’

The S&P 500 is now about 3.5% below its high from less than 2 weeks ago, but the rise to that high occurred over a 4 week period. For the 6 weeks preceding that rise the market had been toying with 3-5% drops every 2 weeks. For the 2 1’2 years before that it was more like every 2 months that some sort of sell-off got our attention.

I’m not of the belief that there’s reason to believe that this time we’ll finally see the 10% kind of decline that everyone agrees is long overdue. While you can’t deny that it’s long overdue, it’s hard to point at any surprises that would be responsible for taking us there. However, based on yesterday’s market, apparently surprises aren’t a necessary component in the mix.

While all of this is going on with stocks the volatility in other markets is also striking. Precious metals, interest rates, currencies and oil continue to move in big ways and all of those have direct and indirect influences on US equity markets, as well.

Is all of what’s going on, including the initiation of European Quantitative Easing now constituting a “Perfect Storm” that conspires against stocks?

I don’t think so, but it is making things unnecessarily challenging right now.

With a couple of new purchases for the week and little indication of anything positive to come for the rest of the week, my guess is that I won’t be adding any new positions and instead will be focusing on trying to get rollovers or maybe get lucky and get an assignment, or two to end out the week.

It’s always tempting, however, to want to buy something after the kind of price drops that we’ve seen in the past few days. The problem is that as we begin to approach the next earnings season, which begins in just 4 weeks, we may start getting earnings warnings from companies before their official reports, that reflect the currency exchange rates of late.

It’s hard to want to get in front of that kind of news. At the very least you would want to see some kind of evidence that there’s some stability ahead sooner rather than later.

With only a paltry advance in the pre-open futures, that’s not the kind of advance that I’d be looking for to signal some kind of stability. At this point, you have to believe that there may be another 1.5-2% left in the current decline, so I might rather be content to be wrong about that while I’m on the sidelines watching existing positions recover.

Daily Market Update – March 10, 2015 (Close)

While yesterday was nice, the market increase that resulted in half of Friday’s irrational sell-off being erased, was only rational itself if it was a way of trying to make up for Friday’s transgression. Otherwise, there was no reason to see the market rise 160 points, but usually that sort of climb is just accepted at face value and enjoyed for whatever it is.

But that’s not a very good reason for anything, especially if only half of what was lost was made up. All of the good reasons in the world can’t make up for that kind of deficit on a regular basis. When there’s no real reason for a decline any bounce back can only be considered as a down payment from a less than credit-worthy client.

This morning, the futures were pointing to another large and irrational downward move.

This time, a nearly 200 point loss is being blamed on what must be a sudden realization that the strong US Dollar will be deflating corporate profits. Somehow, this morning, there seemed to be a belief that no one had recognized that exchange rates have been rapidly bringing the US Dollar and the Euro closer and closer to parity.

I don’t understand too much about currencies, nor interest rates, but I do understand the basics and I especially know that there’s not been a secret that the US Dollar had been strengthening and cutting into profits, even as it makes it much more enjoyable to be vacationing abroad.

Either the cause for the morning decline was true, in which case there would really be reason to worry about those in charge of such huge chunks of the world’s investment dollars or people just need to find an excuse and this just seemed to be the first available culprit.

Listening to the “Chief Global Investment Strategist” of Blackrock in referring to the impact of a stronger US Dollar say that “people are just beginning to realize… ” makes me wonder what people he’s talking about. The people that I know aren’t capable of moving markets if they had come to the same sudden realization, so he must be referring to some other people, who you would think wouldn’t be in a position of being surprised by something fairly easy to predict as part of a well established cycle seen over and over again.

I also know that the kind of people who I know wouldn’t just dump their stocks on the event of a light bulb going off in their heads, although they might be more inclined to do so if it was someone else’s money.

On the other hand this just may be the starting phase of another of these mini-corrections, the kind that had been occurring much more frequently during the end of 2014 early part of 2015. From the end of January 2015 until the end of February we had been in a consistent climb higher. During the previous 2+ years, we had been on an almost clockwork-like correction every two months until that period from about October 2014 to January 2015.

While there’s nothing encouraging about a 200 point decline facing you to start the morning, there may be some encouragement if the decline is part of just another in a series of periodic corrections. The lesson learned from those over the past couple of years has been that those corrections are either good times to add positions, or at the very least
bad times to sell and run away.

As with so many things, it’s just hard to get the timing done just right.

Most of the time you don’t really pay too much attention to what the pre-open futures are indicating. Last week was a perfect example of the lack of correlation between those early trades and the rest of the day, especially when the early trades are showing only mild or moderate changes from the previous day’s close.

Where the association is high, however, is on mornings like the one today. When the movement is a large one it does tend to perpetuate itself as normal people wake up and either make their calls in to their brokers or automatic signals hit their managed accounts. Those usually sell when the market is sharply lower or buy when the market jumps higher.

Neither of those are especially good examples of good timing.

So this morning was simply one of watching, as yesterday’s close had us barely 2% below the high on the S&P 500, leaving about another 3% before the current declines become part of a typical 5% retreat. That’s about another 60 points on the S&P 500, with only about 18 of those being represented in the morning’s early trading. By the time the dust settled we were don 3.5% from those February highs, leaving only about another 30 points to go if 5% continues to be the key to understanding history.

Who knows? Maybe those brilliant people that just came to a realization that currency exchange matters may also brilliantly conclude that there are bargains to be had.

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

While yesterday was nice, the market increase that resulted in half of Friday’s irrational sell-off being erased, was only rational itself if it was a way of trying to make up for Friday’s transgression. Otherwise, there was no reason to see the market rise 160 points, but usually that sort of climb is just accepted at face value and enjoyed for whatever it is.

But that’s not a very good reason for anything, especially if only half of what was lost was made up. All of the good reasons in the world can’t make up for that kind of deficit on a regular basis. When there’s no real reason for a decline any bounce back can only be considered as a down payment from a less than credit-worthy client.

This morning, the futures are pointing to another large and irrational downward move.

This time, a nearly 200 point loss is being blamed on what must be a sudden realization that the strong US Dollar will be deflating corporate profits. Somehow, this morning, there seems to be a belief that no one had recognized that exchange rates have been rapidly bringing the US Dollar and the Euro closer and closer to parity.

I don’t understand too much about currencies, nor interest rates, but I do understand the basics and I especially know that there’s not been a secret that the US Dollar had been strengthening and cutting into profits, even as it makes it much more enjoyable to be vacationing abroad.

Either the cause for the morning decline is true, in which case there is reason to worry about those in charge of such huge chunks of the world’s investment dollars or people just need to find an excuse and this just seemed to be the first available culprit.

Listening to the “Chief Global Investment Strategist” of Blackrock in referring to the impact of a stronger US Dollar say that “people are just beginning to realize… ” makes me wonder what people he’s talking about. The people that I know aren’t capable of moving markets if they had come to the same sudden realization, so he must be referring to some other people, who you would think wouldn’t be in a position of being surprised by something fairly easy to predict as part of a well established cycle seen over and over again.

On the other hand this just may be the starting phase of another of these mini-corrections, the kind that had been occurring much more frequently during the end of 2014 early part of 2015. From the end of January 2015 until the end of February we had been in a consistent climb higher. During the previous 2+ years, we had been on an almost clockwork-like correction every two months until that period from about October 2014 to January 2015.

While there’s nothing encouraging about a 200 point decline facing you to start the morning, there may be some encouragement if the decline is part of just another in a series of periodic corrections. The lesson learned from those over the past couple of years has been that those corrections are either good times to add positions, or at the very least bad times to sell and run away.

Most of the time you d
on’t really pay too much attention to what the pre-open futures are indicating. Last week was a perfect example of the lack of correlation between those early trades and the rest of the day, especially when the early trades are showing only mild or moderate changes from the previous day’s close.

Where the association is high, however, is on mornings like this. When the movement is a large one it does tend to perpetuate itself as normal people wake up and either make their calls in to their brokers or automatic signals hit their managed accounts. Those usually sell when the market is sharply lower or buy when the market jumps higher.

So this morning will simply be one of watching, as yesterday’s close had us barely 2% below the high on the S&P 500, leaving about another 3% before the current declines become part of a typical 5% retreat. That’s about another 60 points on the S&P 500, with only about 18 of those being represented in the morning’s early trading.

Who knows? Maybe those brilliant people that just came to a realization that currency exchange matters may also brilliantly conclude that there are bargains to be had.

Daily Market Update – March 9, 2015 (Close)

There was only a single day last week that the market made any sense.

That was on Thursday when shares were little moved on a day when there was very little news. The previous days also had no news, but markets moved strongly higher and lower and were volatile on an intra-day basis, as well.

Friday, of course, was a story unto itself, as I still have a hard time understanding why those who should have ice in their veins and who should have discounted future interest rate hikes, could have responded with the kind of sell off that we saw. That’s especially true when you consider that all  that occurred was the release of some Employment data, that also has a habit of being adjusted in subsequent months.

Even more intriguing is that historically the period of the initiation of interest rate hikes tends to be associated with markets that continue to climb higher.

Given that the news received on Friday was a single point in time, represents a trend that we have all come to recognize as the prevailing direction of employment statistics and doesn’t appear to be accompanied by wage inflation, it really doesn’t make too much sense why the market fell nearly 300 points.

With the weekend intervening maybe there was an opportunity for cooler heads to prevail once the week’s pre-open futures started trading, as they are suggesting a very quiet open.

Of course, last week the pre-open futures meant absolutely nothing, other than on that single trading day.

Today they ended up not meaning too much, but the market still did the right thing.

It bounced back to erase more than half of Friday’s loss.

There was no news to justify that moive, it was just the right thing to do.

With last week being another in which the number of chickens produced was less than expected, my anticipated buying spree is likely to take another week off as it may be another good week to exercise some caution, as there’s absolutely no indication of market sentiment or direction to begin the week.

WIth a number of positions set to expire this week and double that number the following week when the monthly option cycle comes to its end, the likelihood is that any new positions will probably look at expirations this Friday, while rollovers may look to any premium opportunities that may be found in the first week of the April 2015 option cycle, although low volatility continues to keep forward week premiums lower than I would like to tie myself down in exchange.

That was certainly the mindset behind the day’s 2 new purchases, although it’s hard to refer to UAL as a new purchase, when it was the third time in less than a month doing so.

With a quiet news week ahead, there isn’t too much scheduled to upset things, but the past few weeks have been very quiet on international fronts. Even when there has been some news, our own markets haven’t really cared.

What may get increasing attention is the US Dollar slowly, maybe not so slowly, approaching parity with the Euro and resulting in more and more companies beginning to experience lower earnings due to foreign exchange issues and starting the process of issuing earnings warnings before the next earnings season starts in just 4 weeks.

But there, too, you have to wonder why those who manage large portfolios and funds and are principally the ones who create or destroy demand for stocks, wouldn’t have already factored such events into their expectations. It’s not as if this would be the first time in history that the US Dollar has strengthened, thereby resulting in weakened earnings and more competition from foreign consumer goods.

I know that I slept my way through most of my high school history classes, but for those who love to look at stock charts, looking at historical performance is a must. Too bad it isn’t necessarily coupled with trying to gain an understanding of the past in an effort to avoid the mistakes of the past.

Daily Market Update – March 9, 2015 (8:30 AM)

There was only a single day last week that the market made any sense.

That was on Thursday when shares were little moved on a day when there was very little news. The previous days also had no news, but markets moved strongly higher and lower and were volatile on an intra-day basis, as well.

Friday, of course, was a story unto itself, as I still have a hard time understanding why those who should have ice in their veins and who should have discounted future interest rate hikes, could have responded with the kind of sell off that we saw. That’s especially true when you consider that all  that occurred was the release of some Employment data, that also has a habit of being adjusted in subsequent months.

Even more intriguing is that historically the period of the initiation of interest rate hikes tends to be associated with markets that continue to climb higher.

Given that the news received on Friday was a single point in time, represents a trend that we have all come to recognize as the prevailing direction of employment statistics and doesn’t appear to be accompanied by wage inflation, it really doesn’t make too much sense why the market fell nearly 300 points.

With the weekend intervening maybe there was an opportunity for cooler heads to prevail once the week’s pre-open futures started trading, as they are suggesting a very quiet open.

Of course, last week the pre-open futures meant absolutely nothing, other than on that single trading day.

With last week being another in which the number of chickens produced was less than expected, my anticipated buying spree is likely to take another week off as it may be another good week to exercise some caution, as there’s absolutely no indication of market sentiment or direction to begin the week.

WIth a number of positions set to expire this week and double that number the following week when the monthly option cycle comes to its end, the likelihood is that any new positions will probably look at expirations this Friday, while rollovers may look to any premium opportunities that may be found in the first week of the April 2015 option cycle, although low volatility continues to keep forward week premiums lower than I would like to tie myself down in exchange.

With a quiet news week ahead, there isn’t too much scheduled to upset things, but the past few weeks have been very quiet on international fronts. Even when there has been some news, our own markets haven’t really cared.

What may get increasing attention is the US Dollar slowly, maybe not so slowly, approaching parity with the Euro and resulting in more and more companies beginning to experience lower earnings due to foreign exchange issues and starting the process of issuing earnings warnings before the next earnings season starts in just 4 weeks.

But there, too, you have to wonder why those who manage large portfolios and funds and are principally
the ones who create or destroy demand for stocks, wouldn’t have already factored such events into their expectations. It’s not as if this would be the first time in history that the US Dollar has strengthened, thereby resulting in weakened earnings and more competition from foreign consumer goods.

I know that I slept my way through most of my high school history classes, but for those who love to look at stock charts, looking at historical performance is a must. Too bad it isn’t necessarily coupled with trying to gain an understanding of the past in an effort to avoid the mistakes of the past.