Monthly Archives: June 2015

Daily Market Update – June 10, 2015  (Close)

Lately there haven’t been too many mornings that you would be waking up to the futures indicating a stronger opening.

This morning, however, that was the case. Even though the gains weren’t very strong at that time, at least there was a chance to see some gains from the opening bell for a change.

The recent direction of the market, however, would take a fairly significant gain to erase some of the weakness that has been the theme over those past few weeks as the S&P 500 is now about 3% lower.

And that’s exactly what the market did in reacting favorably to word that there might be an agreement regarding the mechanism by which Greece makes good on its debt obligations to the IMF and ECB.

We’ll see about that.

What may still concern some technicians is that after a 6 month period of seeing higher lows as the market has undulated from 1862 to 2036, we are now sitting at a relative low that is lower than the last low.

That’s pretty esoteric, but for some that’s very important and would indicate that the trend of 3 steps forward and 2 steps back is being broken.

Most people don’t really care about such esoteric things.

Of course, the other pattern that has already been broken is the one where we see a 5% mini-correction every few months.

Sitting at a 3% lower level to start this day may have simply been a mid-point for that expected decline, although over the past few years those declines have come fairly precipitously, while this most recent decline has come in very small doses, maybe the same way a frog doesn’t realize that it’s been swimming in a pot very slowly being brought to a boil.

It continues to be difficult, however, to understand what the next catalyst to propel markets higher, even to the point of simply approaching its previous high, would be. While the next earnings season could bring some better than expected earnings results as the currency exchange issues haven’t worsened, as had been expected, that’s still a month away.

While awaiting that next earnings season there is still the prospect of a continuing overhang coming from uncertainty over when the FOMC will finally raise interest rates. It may just be that the best catalyst to move higher would be to remove that overhang, but to remove it due to good economic news and not because the economy is shrinking.

That overhang can be eliminated if the market sees good news as being good news.

If this morning’s Mortgage Applications data is any indication, the concern that rates may be going higher could spur economic activity and most agree that housing is a great place to begin any real economic expansion.

While we could use some good news, between now and next Friday, which marks the end of the June 2015 option cycle, my hope is that there is just no bad news so that the relatively large number of positions set to expire next week can either be assigned or rolled over. Right now, the burden of the past few weeks has made that more difficult, so we could use a little bit of a respite from the erosion that has been going on since the June cycle began.

Hopefully today’s good start to taking another few steps forward will still have some staying power to take us through this week and next.

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Daily Market Update – June 10, 2015  (8:45 AM)

Lately there haven’t been too many mornings that you would be waking up to the futures indicating a stronger opening.

This morning, however, that’s the case. Even though the gains aren’t very strong, at least there’s a chance to see some gains from the opening bell for a change.

The recent direction of the market, however, would take a fairly significant gain to erase some of the weakness that has been the theme over those past few weeks as the S&P 500 is now about 3% lower.

What may concern some technicians is that after a 6 month period of seeing higher lows as the market has undulated from 1862 to 2036, we are now sitting at a relative low that is lower than the last low.

That’s pretty esoteric, but for some that’s very important and would indicate that the trend of 3 steps forward and 2 steps back is being broken.

Most people don’t really care about such esoteric things.

Of course, the other pattern that has already been broken is the one where we see a 5% mini-correction every few months.

Sitting at a 3% lower level may simply be a mid-point for that expected decline, although over the past few years those declines have come fairly precipitously, while this most recent decline has come in very small doses, maybe the same way a frog doesn’t realize that it’s been swimming in a pot very slowly being brought to a boil.

It continues to be difficult, however, to understand what the next catalyst to propel markets higher, even to the point of simply approaching its previous high, would be. While the next earnings season could bring some better than expected earnings results as the currency exchange issues haven’t worsened, as had been expected, that’s still a month away.

While awaiting that next earnings season there is still the prospect of a continuing overhang coming from uncertainty over when the FOMC will finally raise interest rates. It may just be that the best catalyst to move higher would be to remove that overhang, but to remove it due to good economic news and not because the economy is shrinking.

That overhang can be eliminated if the market sees good news as being good news.

If this morning’s Mortgage Applications data is any indication, the concern that rates may be going higher could spur economic activity and most agree that housing is a great place to begin any real economic expansion.

While we could use some good news, between now and next Friday, which marks the end of the June 2015 option cycle, my hope is that there is just no bad news so that the relatively large number of positions set to expire next week can either be assigned or rolled over. Right now, the burden of the past few weeks has made that more difficult, so we could use a little bit of a respite from the erosion that has been going on since the June cycle began.

Hopefully today will be a start to taking another few steps forward

.

Daily Market Update – June 9, 2015  (Close)

We are about a month away from the next earnings season and between now and then, other than the usual major economic reports or events, such as the Employment Situation Report or an FOMC Statement release, there isn’t too much to get anyone overly excited.

There’s still some drama in Europe, but mostly we’re in a holding pattern, although the market may simply become susceptible to technical factors. The latter is only likely to do one thing if it takes hold and that’s to pull markets lower.

With the weakness theme having taken hold over the last few weeks we are still only less than 3% below market highs as attrition has been gnawing at the market. It’s that slow attrition that could bring the technical traders back to life, as the S&P 500 approaches the 2041 level, which would require about another 2.5% decline and from there has only 2000 as a support level.

But even with all of those events taking place, that would only account for less than a 7% decline.

With this morning’s pre-opening futures trading looking as if it will be just another of the same days as we’ve been seeing over the past 3 weeks, there wasn’t too much telling how the day would proceed. Yesterday was one of slow erosion and attrition as buyers are just finding little reason to get excited about anything.

Today turned out to be a day of biding time as both sides of the unchanged level were tested and no one wanted to be on either side for very long.

Meanwhile, as interest rates are climbing, as they are now for the third time over the past few months, there’s renewed competition for investor’s dollars. What remains to be seen is whether these interest rate increases being seen in the market will persist. Previous attempts to predict the Federal Reserve’s actions proved to be too early and those interest rates fell back down giving some momentum back to stocks.

This time around the bond market may finally be getting it right. This week’s Retail Sales Report may give some further ammunition to the idea that the economy isn’t as weak as the GDP has been indicating.

That leads to next week and the FOMC Statement Release.

It’s probably not too likely that any policy change will occur by then, but all it takes is a change in the wording of the statement that might indicate a change in policy is coming soon. The initial impact of that will probably be to drive even more activity over to bonds and put further pressure on stocks.

Hopefully, though, that kind of pressure will be short lived, as it usually is and will be followed by an earnings season that ends up with better revenues and increased bottom lines, as the expected continuing dollar strength hasn’t materialized.

Right now, that’s still in the distant future.

In the immediate future, such as this week and next it’s all going to be about the FOMC and getting prepared to deal with that as the monthly option cycle will end just 2 days after the FOMC release.

While awaiting the news I have neith
er the available cash and am generally unwilling to use margin, nor the inclination to put much more at risk at a time when the bias is definitely on the side of sellers.

As with most cycles, whether up or down, it’s just a question of how long it will go on and whether the next leg of the cycle will atone for what preceded it.

For the remainder of this week I expect that I’ll be a spectator more than anything else while letting others figure out what the next step will be and let the stock and bond guys fight it out over who gets the marginal dollars that may be on the fence.

Right now, they won’t be my dollars.

.

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

We are about a month away from the next earnings season and between now and then, other than the usual major economic reports or events, such as the Employment Situation Report or an FOMC Statement release, there isn’t too much to get anyone overly excited.

There’s still some drama in Europe, but mostly we’re in a holding pattern, although the market may simply become susceptible to technical factors. The latter is only likely to do one thing if it takes hold and that’s to pull markets lower.

With the weakness theme having taken hold over the last few weeks we are still only less than 3% below market highs as attrition has been gnawing at the market. It’s that slow attrition that could bring the technical traders back to life, as the S&P 500 approaches the 2041 level, which would require about another 2.5% decline and from there has only 2000 as a support level.

But even with all of those events taking place, that would only account for less than a 7% decline.

With this morning’s pre-opening futures trading looking as if it will be just another of the same days as we’ve been seeing over the past 3 weeks, there’s not too much telling how the day will proceed. Yesterday was one of slow erosion and attrition as buyers are just finding little reason to get excited about anything.

Meanwhile, as interest rates are climbing, as they are now for the third time over the past few months, there’s renewed competition for investor’s dollars. What remains to be seen is whether these interest rate increases being seen in the market will persist. Previous attempts to predict the Federal Reserve’s actions proved to be too early and those interest rates fell back down giving some momentum back to stocks.

This time around the bond market may finally be getting it right. This week’s Retail Sales Report may give some further ammunition to the idea that the economy isn’t as weak as the GDP has been indicating.

That leads to next week and the FOMC Statement Release.

It’s probably not too likely that any policy change will occur by then, but all it takes is a change in the wording of the statement that might indicate a change in policy is coming soon. The initial impact of that will probably be to drive even more activity over to bonds and put further pressure on stocks.

Hopefully, though, that kind of pressure will be short lived, as it usually is and will be followed by an earnings season that ends up with better revenues and increased bottom lines, as the expected continuing dollar strength hasn’t materialized.

Right now, that’s still in the distant future.

In the immediate future, such as this week and next it’s all going to be about the FOMC and getting prepared to deal with that as the monthly option cycle will end just 2 days after the FOMC release.

While awaiting the news I have neither the available cash and am generally unwilling to use margin, nor the inclination to put much more at risk at a time when the bias is definitely on the side of sellers.

As with most cycles, whether up or down, it’s just a question of how long it will go on and whether the next leg of the cycle will atone for what preceded it.

For the remainder of this week I expect that I’ll be a spectator more than anything else while letting others figure out what the next step will be and let the stock and bond guys fight it out over who gets the marginal dollars that may be on the fence.

Right now, they won’t be my dollars.

.

Daily Market Update – June 8, 2015  (Close)

There isn’t too much economic news scheduled for this week and that should mean that teh markets will be relatively calm.

That would be a comforting thought, if it also wasn’t so unlikely to be the case. 

The past few weeks haven’t had too much news other than for the final day of the trading week, but the propensity to move lower has been pretty clear.

Even though if you squinted really hard you may have been able to see some positive signs coming from some of those trading days of the past two weeks, the reality has become that the market really can’t find much reason to try and go past those recent highs.

What has really been striking is the resurgence of the bond market as it has decided that rates are going higher sooner than anyone had come to recently expect. It is making its third recent assault on the ceiling on interest rates in the past few months and this time it may have it right.

The past week’s strong Employment Situation Report coupled with the idea that what we thought was a weaker than expected economy based on faulty data has suddenly created the idea that interest rate increases could even come as early as in 2 weeks.

This week’s Retail Sales Report could open some eyes if it gives reason to believe that consumers are finally coming alive.

When you look back just a week earlier and remember that people had started suggesting that a data driven Federal Reserve could possibly wait until 2016 to begin their rate increases, the idea of it now happening in two weeks can be pretty unsettling.

And that’s exactly what the markets have become.

They’re unsettled because their notions of where we the economy is standing may not be very valid and that could lead to sudden shifts in monetary policy.

No one likes that sort of thing.

The pre-opening futures to begin this week were pointing to a very quiet open. Whether that was going to stay the case as the day, much less the week unfolded was going to be anyone’s guess, but with my cash reserves much lower than I would like, I wasn‘t expecting to be opening many new positions for the week. The general uncertainty also added to the reluctance to make much in the way of a commitment.

Like last week, this one will have a nice number of existing positions going ex-dividend and that offers some solace. However, with only a small number of positions scheduled to expire this week, there may not be very much trading activity or opportunity to generate new income, unless an unexpectedly strong move higher creates the chance to sell calls on uncovered positions.

Of greater concern, however, are the large number of positions set to expire next week, just 2 days after the FOMC Statement release.

The concern, although still based on a small likelihood, is that if the FOMC does announce an interest rate increase, that will send markets sharply lower in the short term.

With just 2 days of recovery time until expiration that would put those positions set to expire at risk, so there may have to be some additional thought put to rolling those positions over this week, where possible or feasible.

For now, it’s just a question of sitting back and seeing where the momentum may take the market. At the moment, what looked to be a quiet opening simply deteriorated as the day went on, keeping in line with the theme of the past 2 weeks. as there has been
nothing to give reason to bid prices higher.

Hopefully the bond market will take a little break this week and offer less competition to the stock market as we await any news that could create optimism and count down until the start of the next earnings season next month, which could offer those reasons.