Daily Market Update – July 29,  2015  (Close)

 

Yesterday was a nice break from a series of days that could make one only pessimistic about what was to come next.

Possibly, the catalyst was that the Chinese market wasn’t down as much as it had been the previous day and may have looked as if it was beginning to moderate on this next wave of weakness, as the government again sought to control its behavior.

What would be really nice, unless all you care about is volatility, would be to see more than just a single day of gains,

Lately it has been very difficult to see stocks that aren’t in the news actually string together 2 or more days higher. It has also been a period in which stocks are taking longer and longer to recover from their declines. That is one of the things that makes the current levels of the DJIA and S&P 500 so deceiving.

It’s still on the backs of a few that the market looks to be healthy on the surface.

This morning the futures were pointing just a little bit higher, and that had to be taken as a cautious positive sign, but it turned out that no caution was required.

Overnight, the Chinese stock market reversed course and actually finished higher for the session and so that at least wasn’t going to be something to weigh on today’s market, although the situation in China isn’t going to be going away anytime soon.

Today was also to be the final FOMC Statement release until summer comes to its end in 2 months, but the market didn’t wait to start its party.

It’s wasn’t too likely that there would be anything contained in the release this afternoon that should either excite or spook markets, but it wouldn’t have been too surprising if some of the wording today in the statement gives people something to mull over for the next two months, as economic data will still be forthcoming between now and September.

With yesterday’s gain I wanted to see more of the same, even at the expense of volatility and premiums. Like some others, I’d especially like to see some moderation of the recent bear market in energy and materials. Although both sectors may represent oversold conditions, what they really need is not some sympathy from investors who are driven by technical factors, but rather some demand driven by economic activity.

With only a single new purchase so far this week and cash reserves down about as low as it can go, I’m not too likely to add any new positions this week. Having already rolled over 2 of the week’s expiring positions and the remaining 2 not looking as if they may be rollover candidates, this may be a very quiet few days ahead.

With regard to those rollovers, I decided that I wanted to try and keep the Texas Instruments dividend after seeing its price unexpectedly surge along with everything else yesterday.

The thinking was that there was still a possibility of early assignment with a rollover to the August 14th expiration, but at least that would have delivered the equivalent of about 85% of the dividend and then recycled the cash for further investment. Otherwise, there was a very high probability of assignment of the July 31st expiration contracts.

The other side of the coin is that in so doing it eliminated any possibility of being able to recycle the cash.

Twitter, on the other hand, was a rollover of puts in the face of significant strength heading into earnings. In that case the worst outcome of the rollover would be to delay being able to exit the position, while the advantage was being able to wring extra premium while awaiting some price recovery in the event that shares dropped.

For Twitter it was a real rollercoaster ride as shares went about $5 higher after earnings were announced. But then the dourness in the conference call ended up seeing shares drop $4, or a net change of about $9 from peak to trough, literally in the space of minutes in the after hours session.

Both of those early rollovers seemed warranted, but as always, time will tell, as I still had my Texas Instrument shares this morning and now another month to see whether Twitter can overcome itself.

Also, for a change, tomorrow we get to see whether we can string yet another day on to these gains and make the illusion of a healthy market become a reality.

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