Monthly Archives: April 2015

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

Yesterday’s late sell-off prevented a repeat of two consecutive higher closes, so they continue to remain elusive in 2015, but at least this morning isn’t an assured loser, as the futures are trading flatly to begin the day.

Also on the bright side is that the close yesterday gives the market a chance to digest Monday’s unexpectedly large gains following the turnaround from the morning’s sell-off.

Otherwise, there isn’t too much news for the rest of the week, although the minutes from last month’s FOMC meeting will be released and you can be certain that each and every word will be dissected by lots of people with very different lenses.

There shouldn’t be anything shocking in there, although it could offer some insight into just how concerned the FOMC may be about the strengthening US Dollar and how that may be acting to slow the growth of the economy.

They may also be caught discussing how the drop in energy prices hasn’t yet seem to materialize into the kind of increased consumer activity that just about every economist projected and resulted in a significant upward change to the projected 2015 GDP.

All of that comes on the day that earnings season begins after today’s market close.

The only question as we head into the second quarter of earnings, the one in which we were all expecting to hear about increased consumer driven revenues and decreased energy related prices, is how much have we prepared ourselves for currency related issues.

For companies that have lots of exports it may be difficult to deal with the stronger dollar that ends up making those goods more expensive to overseas buyers. However, for those companies that make lots of sales from their direct activities abroad the strengthening US dollar’s impact may only be as much as their currency hedging activities failed to offset.

Companies like Apple, Microsoft and others likely will report decreased earnings from currency shifts, but likely to a much lesser degree because of their hedges, just as some airliines hedged the price of fuel for years to their advantage.

There will still be earnings surprises, but we may be better prepared for the upcoming quarter than expected, as the expectation for currency related charges has now been in the air for quite some time.

However the season begins this afternoon, it will be an interesting few weeks.

For a while it has been hard to identify a possible upside catalyst. Earnings, even if below analysts expectations, may end up being that surprise catalyst.

For the rest of the week I think it will just be a case of sitting back and waiting, while hoping for those opportunities to sell options, rollover or cash out of positions may come along.

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Daily Market Update – April 7, 2015  (Close)

Yesterday was as welcome of a reversal as you could have orchestrated.

While I mentioned yesterday morning that the gap between Friday’s futures trading and Monday’s open was the kind of day that could see a reversal once the filling in of the gap had been done, I didn’t expect it to happen so fast.

The reversal started almost immediately following the opening which had gapped down by more than 100 points and had returned the market to the flat line by 10 AM. That was the time that the ISM non-Manufacturing data was released and the market just kept climbing higher and higher. The ISM data got the credit, but the trend was already pretty clear before the data was released.

While the ISM could have added to the gain the likelihood is that some sane minds came to realize that the February job numbers, which were outrageously high and the March numbers, which were outrageously low, may not have been accurate reflections of what is really going on.

The market’s decline leading to an abysmal March all started with the February Employment Situation Report release and we were getting poised to do the same with the new report’s release of the March data.

Maybe not lost on anyone is that April tends to be a really good month and it would be a shame to let history down.

It looks like it was serendipitous that markets were closed for 3 days and had a chance to let things cool down enough to let rational thought take over, although we will likely never learn that even the best of data is subject to revisions that can paint an entirely different picture. The revisions to February’s employment data may have made a big difference if reported as part of the original data and could have avoided us going through a lost month in the market.

This morning the market was very mildly higher and there’s not too much this week to spook or elate markets, other than the release of the FOMC meeting minutes tomorrow, which could provide some insights into the thoughts going on behind closed doors.

Otherwise this morning had a JOLT Survey, which hasn’t gotten anywhere near the attention that Janet Yellen believed it deserved, other than when she first mentioned how she believed that it was an important measure of the health and vibrancy of the labor market.

With little evidence of upward wage pressure it’s not too likely that future JOLT Surveys will indicate the kind of optimism that Janet Yellen had referred to just a few months ago, when it seemed that people were willingly leaving their jobs to pursue better paying ones.

That was so yesterday.

With a single purchase yesterday and cash being at a bare minimum, I don’t anticipate adding many new positions this week. While I’d love to see a repeat of yesterday, the early indications weren’t looking as if that will be the magnitude of any climb higher. But I still am on the lookout for any opportunity to sell calls on any uncovered positions. Upcoming earnings may enhance some premiums, but they are still so very depressed by the low volatility that continues, despite the up and down climbs from day to day.

As with last week, while I’d love to see some assignments in order to free up some cash, I wouldn’t mind if the alternative was to be able to rollover whatever was otherwise scheduled for expiration this week.

I don’t really care how I generate t
he income objectives for the week, as long as it’s legal, but it’s always nice to have a mix of assignments, new calls and rollovers. As long as we can stay away from any of those sharp daily declines, as we’ve had for much of 2015, this could be one of those overdue weeks.

At least today’s market didn’t set things back a step to make Friday’s goals less attainable.

Daily Market Update – April 7, 2015  (8:45 AM)

Yesterday was as welcome of a reversal as you could have orchestrated.

While I mentioned yesterday morning that the gap between Friday’s futures trading and Monday’s open was the kind of day that could see a reversal once the filling in of the gap had been done, I didn’t expect it to happen so fast.

The reversal started almost immediately following the opening which had gapped down by more than 100 points and had returned the market to the flat line by 10 AM. That was the time that the ISM non-Manufacturing data was released and the market just kept climbing higher and higher. The ISM data got the credit, but the trend was already pretty clear before the data was released.

While the ISM could have added to the gain the likelihood is that some sane minds came to realize that the February job numbers, which were outrageously high and the March numbers, which were outrageously low, may not have been accurate reflections of what is really going on.

The market’s decline leading to an abysmal March all started with the February Employment Situation Report release and we were getting poised to do the same with the new report’s release of the March data.

It looks like it was serendipitous that markets were closed for 3 days and had a chance to let things cool down enough to let rational thought take over, although we will likely never learn that even the best of data is subject to revisions that can paint an entirely different picture. The revisions to February’s employment data may have made a big difference if reported as part of the original data and could have avoided us going through a lost month in the market.

This morning the market is very mildly higher and there’s not too much this week to spook or elate markets, other than the release of the FOMC meeting minutes tomorrow, which could provide some insights into the thoughts going on behind closed doors.

Otherwise this morning has a JOLT Survey, which hasn’t gotten anywhere near the attention that Janet Yellen believed it deserved, other than when she first mentioned how she believed that it was an important measure of the health and vibrancy of the labor market.

With little evidence of upward wage pressure it’s not too likely that the JOLT Survey will indicate the kind of optimism that Janet Yellen had referred to just a few months ago, when it seemed that people were willingly leaving their jobs to pursue better paying ones.

That was so yesterday.

With a single purchase yesterday and cash being at a bare minimum, I don’t anticipate adding many new positions this week. While I’d love to see a repeat of yesterday, the early indications aren’t looking as if that will be the magnitude of any climb higher. But I still am on the lookout for any opportunity to sell calls on any uncovered positions. Upcoming earnings may enhance some premiums, but they are still so very depressed by the low volatility that continues, despite the up and down climbs from day to day.

As with last week, while I’d love to see some assignments in order to free up some cash, I wouldn’t mind if the alternative was to be able to rollover whatever was otherwise scheduled for expiration this week.

I don’t really care how I generate the income objectives for the week, as long as it’s legal, but it’s always nice to have a mix of assignments, new calls and rollovers. As long as we can stay away from any of those sharp
daily declines, as we’ve had for much of 2015, this could be one of those overdue weeks.

Daily Market Update – April 6, 2015  (Close)

This morning looked as if it would do what it has to do to make up for lost time when it wasn’t able to react to Friday’s Employment Situation Report.

With the very disappointing numbers, that can still be subject to revision, as they always are, the bond markets and futures markets were open and did what you would probably have expected them to do in light of a very weak report.

Maybe a year ago or even just 6 months ago, the very same kind of weak job growth report would have been met enthusiastically because it would have meant a continuation of Quantitative Easing.

Now, a decline from what’s expected only means that growth is decelerating and that’s not a good thing when you realize how flat the trajectory has been over the past 6 years. It’s not as if there’s been explosive growth that could just as easily fall off of a cliff. The gains in employment and the economic growth have all been hard won, but have only been incremental victories. Even a small step backward may seem overly large or significant.

In the best of the worlds the market will come to the realization that the numbers released on Friday may either be an aberration, perhaps weather related, or be in line for their own revisions. Doing so would require some rational thought regarding the logic or reacting so strongly to data that is subject to revision. In fact Friday’s data included a downward revision to the previous month which had exceptionally strong numbers that started the recent decline seen all through the month of March.

But that’s not likely to happen based on the past. We will still go from number to number. Reacting first and rarely thinking over the logic of the action other than to have an equally illogical reaction.

Yet, it did happen today, as suggested this morning that it might once the need to do something about that gap was requited.

After what turned out to be a really nice day today, tomorrow we start all over again with eyes firmly set on Wednesday.

This week brings another FOMC Statement release and there’s not too much reason to suspect that it will contain anything to move markets. There’s no expectation for a rate increase, nor for change in the language unless there is an acknowledgement that the economy is not growing as much as would have been expected.

The language used, especially if expressing any disappointment at the slower than expected pace of economic expansion, especially in the face of declining energy prices could be one of those things that sends the market higher, as there will be an expectation of  some more time with free and easy money courtesy of the Federal Reserve.

With only a single assignment last week it was at least good to get all expiring positions rolled over. That added to the positions now set to expire this week and next, which marks the end of the monthly cycle.

With volatility so low, despite what seems like a very volatile environment, there’s not much inducement to think about looking very far into the future when it comes to selecting expiration dates. The caveat to that is that earnings season starts this week and for select positions there may be some enhancement of premium due to an upcoming earnings report.

With minimal in cash reserves I still don’t expect very much action this week and find myself again preferring to gene
rate whatever weekly income possible either through rollovers or the sale of calls on existing uncovered positions. There was some limited opportunity today, just not enough.

With the large decline expected this morning it wasn’t too likely that the latter of those preferences would be borne out today, but this kind of day, with the market needing to do some filling in for what was missed on Friday was also the kind of day that has seen a turnaround once that filling in has come to its end.

Luckily, that’s exactly the way the script played itself out and did so quickly. Hopefully the rest of the week will also allow some nice constructive tardes to be made in preparation for the end of the cycle next week.

Daily Market Update – April 6, 2015  (8:30 AM)

This morning looks as if it will do what it has to do to make up for lost time when it wasn’t able to react to Friday’s Employment Situation Report.

With the very disappointing numbers, that can still be subject to revision, as they always are, the bond markets and futures markets were open and did what you would probably have expected them to do in light of a very weak report.

Maybe a year ago or even just 6 months ago, the very same kind of weak job growth report would have been met enthusiastically because it would have meant a continuation of Quantitative Easing.

Now, a decline from what’s expected only means that growth is decelerating and that’s not a good thing when you realize how flat the trajectory has been over the past 6 years. It’s not as if there’s been explosive growth that could just as easily fall off of a cliff. The gains in employment and the economic growth have all been hard won, but have only been incremental victories. Even a small step backward may seem overly large or significant.

In the best of the worlds the market will come to the realization that the numbers released on Friday may either be an aberration, perhaps weather related, or be in line for their own revisions. Doing so would require some rational thought regarding the logic or reacting so strongly to data that is subject to revision. In fact Friday’s data included a downward revision to the previous month which had exceptionally strong numbers that started the recent decline seen all through the month of March.

But that’s not likely to happen. We will still go from number to number. Reacting first and rarely thinking over the logic of the action other than to have an equally illogical reaction.

This week brings another FOMC Statement release and there’s not too much reason to suspect that it will contain anything to move markets. There’s no expectation for a rate increase, nor for change in the language unless there is an acknowledgement that the economy is not growing as much as would have been expected.

The language used, especially if expressing any disappointment at the slower than expected pace of economic expansion, especially in the face of declining energy prices could be one of those things that sends the market higher, as there will be an expectation of  some more time with free and easy money courtesy of the Federal Reserve.

With only a single assignment last week it was at least good to get all expiring positions rolled over. That added to the positions now set to expire this week and next, which marks the end of the monthly cycle.

With volatility so low, despite what seems like a very volatile environment, there’s not much inducement to think about looking very far into the future when it comes to selecting expiration dates. The caveat to that is that earnings season starts this wek and for select positions there may be some enhancement of premium due to an upcoming earnings report.

With minimal in cash reserves I don’t expect very much action this week and find myself again preferring to generate whatever weekly income possible either through rollovers or the sale of calls on existing uncovered positions.

With the large decline expected this morning it’s not too likely that the latter of those preferences will be borne out today, but this kind of day, with the market needing to do some filling in for what was misse
d on Friday is also the kind of day that can see a turnaround once that filling in has come to its end.

Hopefully that turnaround will be quick in the making as after 3 days off I’m anxious to get something constructive done