Monthly Archives: May 2015

Daily Market Update – May 27, 2015  (Close)

It’s still hard to understand what exactly happened yesterday.

Sometimes on the first day back after a holiday weekend of the kind that’s not celebrated elsewhere in the world, our markets can have a gap up or gap down if there was some kind of large move in European or Asian markets.

But that wasn’t the case. It was a quiet 3 days all over the world and our own futures market was predicting more of the same.

With most major companies having already reported earnings, the price of oil stabilizing and the US Dollar getting a little less precious in foreign exchanges there really wasn’t much threatening in the air, other than the fact that we were right near all time highs and haven’t had a real correction in 3 years.

Maybe that’s enough.

Within minutes of the opening bell the market began telling a very different story from what the futures had portended. While those muted futures performances don’t necessarily have great predictive value, it is unusual to see the market diverge so strongly and so quickly from the futures.

The real emphasis on that last line goes on just how quickly the market turned negative and turned its back on the futures.

With most of my new position trades typically occurring on Mondays and Tuesdays and most rollovers usually on Thursdays and Fridays, this really has the makings for being a very unusual week.

While there have been two or three weeks over the past 3 years that have not had any new positions opened, there has never been a week without either a new position being opened or some position being rolled over.

This could be that week.

The only positive thing about yesterday was that volatility, which has been plummeting lately, at least got a little bit of a boost. Even so, it still has a long way to go to make things interesting again.

This morning’s futures were again looking as if it would be a quiet day, this time with a little bias to the upside.

Today simply proved to be another example of how those futures, especially when they’re muted in their expression, are pretty meaningless.

All they show is that the professional money, the kind that’s supposed to be smarter than the other kind of money, doesn’t really know what it’s doing on certain days.

For me, the relative calm before the market opened didn’t feel very inviting. As with previous weeks I would still like to see the cash reserve pile being bigger than it is at the moment, especially if there are some more days like yesterday ahead.

With the early assignment of Lexmark this morning to capture its dividend, I do feel a little better about having some more cash available, though, especially since it meant keeping the entire month’s option premium and still having another 3 weeks to put that money to work. But even then, I’d like to see some more cash in that pile.

Unless there’s an unexpected purchase opportunity with an expiration for this week, that’s not too likely, so without much to focus on for this week, as there’s only one position possibly up for assignment or rollover, the focus shifts to next week. Even with that in mind, I kept looking for anything that could be justified, but had a hard time talking myself into any trades.

At least there are already some positions set to expire next week and maybe between now and then there may be a little more clarity ahead and some more clear signal as to whether it makes sense to dip into cash.

Not to mix metaphors too much, but while that cash does burn a hole in my pocket, I’d rather feel that heat than see it go down the drain.

Daily Market Update – May 27, 2015  (8:00 AM)

It’s still hard to understand what exactly happened yesterday.

Sometimes on the first day back after a holiday weekend of the kind that’s not celebrated elsewhere in the world, our markets can have a gap up or gap down if there was some kind of large move in European or Asian markets.

But that wasn’t the case. It was a quiet 3 days all over the world and our own futures market was predicting more of the same.

With most major companies having already reported earnings, the price of oil stabilizing and the US Dollar getting a little less precious in foreign exchanges there really wasn’t much threatening in the air, other than the fact that we were right near all time highs and haven’t had a real correction in 3 years.

Maybe that’s enough.

Within minutes of the opening bell the market began telling a very different story from what the futures had portended. While those muted futures performances don’t necessarily have great predictive value, it is unusual to see the market diverge so strongly and so quickly from the futures.

The real emphasis on that last line goes on just how quickly the market turned negative and turned its back on the futures.

With most of my new position trades typically occurring on Mondays and Tuesdays and most rollovers usually on Thursdays and Fridays, this really has the makings for being a very unusual week.

While there have been two or three weeks over the past 3 years that have not had any new positions opened, there has never been a week without either a new position being opened or some position being rolled over.

This could be that week.

The only positive thing about yesterday was that volatility, which has been plummeting lately, at least got a little bit of a boost. Even so, it still has a long way to go to make things interesting again.

This morning’s futures were again looking as if it would be a quiet day, this time with a little bias to the upside, but the relative calm doesn’t feel very inviting. As with previous weeks I would still like to see the cash reserve pile being bigger than it is at the moment, especially if there are some more days like yesterday ahead.

With the early assignment of Lexmark this morning to capture its dividend, I do feel a little better about having some more cash available, though, especially since it meant keeping the entire month’s option premium and still having another 3 weeks to put that money to work. But even then, I’d like to see some more cash in that pile.

Unless there’s an unexpected purchase opportunity with an expiration for this week, that’s not too likely, so without much to focus on for this week, as there’s only one position possibly up for assignment or rollover, the focus shifts to next week.

AT least there are already some positions set to expire next week and maybe between now and then there may be a little more clarity ahead and some more clear signal as to whether it makes sense to dip into cash.

Not to mix metaphors too much, but while that cash does burn a hole in my pocket, I’d rather feel that heat than see it go down the drain.

Daily Market Update – May 26, 2015  (Close)

Well, today was certainly a surprise.

Looking at the pre-open futures every indication was that this holiday shortened week was going to get off on the same foot that reflected all of last week.

If that was going to be the case it was destined to be another very listless trading session.

But it didn’t take long for things to deteriorate. Within about 10 minutes the market was already down 100 points and with no real reason to account neither for it nor for the additional 100 points that was tacked on.

The question, at some point, and maybe that point started this morning, was just how long the market can essentially do nothing as it sits right at all time highs. That’s basically like trying to balance an 8 foot length piece of plywood on the head of a pin. For a split second there may be an equilibrium, but you just know that it can’t last.

The only difference is that the plywood can only drop and the market doesn’t necessarily need a reason, such as the suspension of gravity and the laws of nature, to go higher.

There’s not too much economic news this week, although there are a few that can give the FOMC some reason to begin the interest rate hiking process.

This week there are Durable Goods, New Home Sales, Jobless Claims and perhaps, most importantly, Friday’s GDP.

This morning none of those were really on anyone’s mind. Maybe only the weight of the precarious piece of plywood was dangling over investor’s heads enough to stir some nerves.

With today finally out of the way, there is still some things to consider as the week progresses, most notably as it comes to its close.

With all of the controversy surrounding the accuracy of the previous winter months GDP reports, this Friday’s release may cause a re-set in thinking. That’s because the rate of change may now take on a very different character as the results of those winter months are more closely re-scrutinized.

The FOMC probably doesn’t care where the economy has been, but they do care about where it’s going and how fast it’s getting there. With what may have been faulty Q1 data, it’s really difficult to then assess the velocity or acceleration rate of change.

But that’s their problem and I’m sure that they’ll deal with it in a measured and rational way.

Not too many people are still thinking that a rate hike might be announced at the June meeting, but all it may take is a couple of corroborating reports to suggest that things are heating up after the winter and there could still easily be room for a small interest rate increase in the coming month.

That would cast a near term pall on markets, as the debate had shifted to whether the rate hike would be coming in September or maybe even waiting until 2016.

But that leaves the rest of us to wonder whether much of the foundation of the market’s recent strengt
h, that is the expectation that higher interest rates weren’t coming too soon, may prove to have been a misguided expectation.

As the market does started the morning right below all time closing highs and with cash still lower than I would like, I’m probably not going on a spending spree this week. However, if I’m going to meet the weekly goal of generating an income stream, that’s going to require some new purchases.

I’m not a big fan of having competing interests in life, but this is one of those time when the desire to conserve cash is in conflict with the need to generate cash.

That’s because what I mentioned a few weeks ago as a possibility has become the reality. As I mentioned a few weeks ago this Friday’s expiration could have ended up being one with no expiring positions and that’s almost the case, with only the Market Vectors Gold Miners ETF set to expire this week.

With virtually no positions to rollover there are no income producing positions unless new ones are added.

With only 4 days of time reflected in this week’s option premiums there may be reason to look at extended weekly expirations for any new positions that may be opened and simply adding to the small handful that are already set to expire next week.

Daily Market Update – May 26, 2015  (8:45 AM)

Looking at the pre-open futures every indication is that this holiday shortened week is going to get off on the same foot that reflected all of last week.

If that’s going to be the case it’s going to be another very listless trading session.

The question, at some point, becomes just how long the market can essentially do nothing as it sits right at all time highs. That’s basically like trying to balance an 8 foot length piece of plywood on the head of a pin. For a split second there may be an equilibrium, but you just know that it can’t last.

The only difference is that the plywood can only drop and the market doesn’t necessarily need a reason, such as the suspension of gravity and the laws of nature, to go higher.

There’s not too much economic news this week, although there are a few that can give the FOMC some reason to begin the interest rate hiking process.

This week there are Durable Goods, New Home Sales, Jobless Claims and perhaps, most importantly, Friday’s GDP.

With all of the controversy surrounding the accuracy of the previous winter months GDP reports, this Friday’s release may cause a re-set in thinking. That’s because the rate of change may now take on a very different character as the results of those winter months are more closely re-scrutinized.

The FOMC probably doesn’t care where the economy has been, but they do care about where it’s going and how fast it’s getting there. With what may have been faulty Q1 data, it’s really difficult to then assess the velocity or acceleration rate of change.

But that’s their problem and I’m sure that they’ll deal with it in a measured and rational way.

Not too many people are still thinking that a rate hike might be announced at the June meeting, but all it may take is a couple of corroborating reports to suggest that things are heating up after the winter and there could still easily be room for a small interest rate increase in the coming month.

That would cast a near term pall on markets, as the debate had shifted to whether the rate hike would be coming in September or maybe even waiting until 2016.

But that leaves the rest of us to wonder whether much of the foundation of the market’s recent strength, that is the expectation that higher interest rates weren’t coming too soon, may prove to have been a misguided expectation.

As the market does sit right below all time closing highs and with cash still lower than I would like, I’m probably not going on a spending spree this week. However, if I’m going to meet the weekly goal of generating an income stream, that’s going to require some new purchases.

I’m not a big fan of having competing interests in life, but this is one of those time when the desire to conserve cash is in conflict with the need to generate cash.

That’s because what I mentioned a few weeks ago as a
possibility has become the reality. As I mentioned a few weeks ago this Friday’s expiration could have ended up being one with no expiring positions and that’s almost the case, with only the Market Vectors Gold Miners ETF set to expire this week.

With virtually no positions to rollover there are no income producing positions unless new ones are added.

With only 4 days of time reflected in this week’s option premiums there may be reason to look at extended weekly expirations for any new positions that may be opened and simply adding to the small handful that are already set to expire next week.