Daily Market Update – July 29, 2015

 

 

 

Daily Market Update – July 29,  2015  (9:00 AM)

 

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 are pointing just a little bit higher, but for now that has to be taken as a positive.

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 will be the final FOMC Statement release until summer comes to its end in 2 months.

It’s not too likely that there will be anything contained in the release this afternoon that should either excite or spook markets, but it wouldn’t be 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’d like 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 ro
llovers seemed warranted, but as always, time will tell, as I still have my Texas Instrument shares this morning and now another month to see whether Twitter can overcome itself.

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Daily Market Update – July 28, 2015 (Close)

 

 

 

Daily Market Update – July 28,  2015  (Close)

 

Yesterday was another in a series of down days and deteriorating internal metrics. 

That latter part refers to the mix of up and down stocks and the relative number of new lows to new highs, as well as other indicators that are all pointing to a loss of optimism.

But you definitiely wouldn’t have known any of that by today’s action, although it was hard to understand what lit the fire and especially what can keep it going.

If earnings can’t help the market seek newer heights, there really isn’t much that will push the market higher at the moment other than these unforeseen daily oddities.

Even the upcoming FOMC Announcement has little that it can offer to make the markets feel optimistic, especially as the situation in China is weighing so heavily on our own markets. It’s not so much that there’s really contagion that’s the risk, but rather, in the event of a cash crisis in China or a significant need for capital, there’s always the chance the the government will sell their US Treasury holdings.

That wouldn’t be very good.

But for now, even though this morning’s decline in Shanghai was 2%, that’s a moderation from what happened over the weekend and may show that at least in the short term, China is beginning to control some of those forces that would take their markets even lower.

One question to be asked is just how long the government can continue to stop or slow down the natural direction of the market, but anopther important question is always “How low will it go?” and that applies just as well to energy and commodity prices here in the US, as it does to stocks in those sectors.

Of course, to some degree those are both also related to Chinese prosperity and increasing economic activity.

Regardless, today looked as if it was the day that traders began to ask that “How low can you go?” question.

This morning the futures were moving higher, although moderating a little as the opening bell neared. After 5 consecutive days of losses, it would be nice to have some kind of an end to that string occur, but as we had seen with previous turnarounds to the upside, the best turnaround is one that seems insidious. The ones that are done 200 points at a time to the upside seem to have very little lasting power.

But at least we’ll have a chance to see if that’s true tomorrow, as the market finished the day nearly 200 points higher, more than erasing yesterday’s loss.

Just as “death by a thousand cuts,” the more sure way to work back from technical support and overwhelm technical resistance is to do so by small pieces, especially as nearing that resistance level, but I wouldn’t mind some quantum kind of leaps forward.

So for now, I’d still be happy to see some small gains and wouldn’t mind if those triple digit moves, usually coming after triple digit losses, just went on a break for a while.



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Daily Market Update – July 28, 2015

 

 

 

Daily Market Update – July 28,  2015  (9:15 AM)

 

Yesterday was another in a series of down days and deteriorating internal metrics.

That latter part refers to the mix of up and down stocks and the relative number of new lows to new highs, as well as other indicators that are all pointing to a loss of optimism.

If earnings can’t help the market seek newer heights, there really isn’t much that will push the market higher at the moment.

Even the upcoming FOMC Announcement has little that it can offer to make the markets feel optimistic, especially as the situation in China is weighing so heavily on our own markets. It’s not so much that there’s really contagion that’s the risk, but rather, in the event of a cash crisis in China or a significant need for capital, there’s always the chance the the government will sell their US Treasury holdings.

That wouldn’t be very good.

But for now, even though this morning’s decline in Shanghai was 2%, that’s a moderation from what happened over the weekend and may show that at least in the short term, China is beginning to control some of those forces that would take their markets even lower.

One question to be asked is just how long the government can continue to stop or slow down the natural direction of the market, but anopther important question is always “How low will it go?” and that applies just as well to energy and commodity prices here in the US, as it does to stocks in those sectors.

Of course, to some degree those are both also related to Chinese prosperity and increasing economic activity.

This morning the futures are moving higher, although moderating a little as the opening bell nears. After 5 consecutive days of losses, it would be nice to have some kind of an end to that string occur, but as we had seen with previous turnarounds to the upside, the best turnaround is one that seems insidious. The ones that are done 200 points at a time to the upside seem to have very little lasting power.

Just as “death by a thousand cuts,” the more sure way to work back from technical support and overwhelm technical resistance is to do so by small pieces, especially as nearing that resistance level.

So for now, I’d be happy to see some small gains and wouldn’t mind if those triple digit moves, usually coming after triple digit losses, just went on a break for a while.



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Daily Market Update – July 27, 2015

 

 

 

Daily Market Update – July 27,  2015  (Close)

 

Last week was one of revelation.

There came the realization that despite the markets having hovering near new highs the indexes were portraying a picture of market health that was largely illusory.

All it took to realize that was to see the consistent deviations that the major indexes had from one another and then to dissect out some of the biggest winners whose equally big market capitalizations moved their respective indexes while leaving so many other index members behind.

As last week came to its end, with the entire week having taken a strong turn downward as the second full week of earnings started uncovering some disappointments among the few gems, the expectation was that this week would be guided by more earnings reports and the FOMC Statement release.

While some good earnings could help to bring the market higher, it’s not too likely that the FOMC will have anything to say that would be interpreted in a positive way by the markets in the immediate day or two of its release.

For the most part, there wasn’t too much reason to believe that this week would be very active, but that was the case last week, too, as there was very little in the way of scheduled economic news, other than earnings and the rest of the world seemed to be quiet.

It was a little different than expected this morning, however. There’s not very much scheduled economic news this week, but the week looked as if it would be getting off to a negative start as the unexpected comes into play.

While China’s overnight sharp sell-off took about 8% off the Shanghai market, it probably shouldn’t have been too unexpected.

What may have been more unexpected is that their attempt to manipulate the market and keep natural forces from doing what they need to do, had worked for the 2 weeks that it did. That’s a very long time to be able to hold markets back from what they find as their natural course.

As the futures were trading this morning in the aftermath of the sharp sell-off in China, they were relatively muted in response, although we had seen that last week as well, with the market taking mild to moderate negative trading in the futures market and then exploding it in a bad way once trading started.

That’s what ended up happening today, but not in anything resembling an explosive way.

WIth a small number of positions set to expire this week and with cash reserves still at much lower levels than I would like to see, despite the possibility of another lower opening this morning, my expectation was to keep my personal activity low, but it was still hard to resist, although I didn’t go after one of last week’s really big losers – and there plenty of those.

Last week there was a prevailing belief that bargains were being formed, but with each day they became better and better bargains. While there may seem to be compelling reason to step in and buy something, at this point it really takes a fair amount of faith to do so.

The bounce higher from the lows of a few weeks ago that erased the 5% decline so quickly was a good sign, but the rapidity in which that gain has eroded is definitely not a good sign. As the week sets to begin in continuation of last week’s decline that erased all of the previous week’s really nice advance, there’s not too much reason to want to “buy on the dip,” at least not yet.

With the market having tested its support at about the 2045 level on the S&P 500, but failing to surpass its resistance level at about 2037, it looks as if the market wants to re-test its support and I will likely be testing the support of my La-Z-Boy as the week progresses, while watching to see how the market reacts to an overnight return of natural forces and wondering how those forces may take control and then what actions the Chinese government takes next, particularly with its own portfolio of bond holdings.


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Daily Market Update – July 27, 2015

 

 

 

Daily Market Update – July 27,  2015  (8:30 AM)

 

Last week was one of revelation.

There came the realization that despite the markets having hovering near new highs the indexes were portraying a picture of market health that was largely illusory.

All it took to realize that was to see the consistent deviations that the major indexes had from one another and then to dissect out some of the biggest winners whose equally big market capitalizations moved their respective indexes while leaving so many other index members behind.

As last week came to its end, with the entire week having taken a strong turn downward as the second full week of earnings started uncovering some disappointments among the few gems, the expectation was that this week would be guided by more earnings reports and the FOMC Statement release.

While some good earnings could help to bring the market higher, it’s not too likely that the FOMC will have anything to say that would be interpreted in a positive way by the markets in the immediate day or two of its release.

For the most part, there wasn’t too much reason to believe that this week would be very active, but that was the case last week, too, as there was very little in the way of scheduled economic news, other than earnings and the rest of the world seemed to be quiet.

It’s a little different than expected this morning, however. There’s not very much scheduled economic news this week, but the week looks as if it will be getting off to a negative start as the unexpected comes into play.

While China’s overnight sharp sell-off took about 8% off the Shanghai market, it probably shouldn’t have been too unexpected.

What may have been more unexpected is that their attempt to manipulate the market and keep natural forces from doing what they need to do, had worked for the 2 weeks that it did. That’s a very long time to be able to hold markets back from what they find as their natural course.

As the futures are trading this morning in the aftermath of the sharp sell-off in China, they are relatively muted in response, although we had seen that last week as well, with the market taking mild to moderate negative trading in the futures market and then exploding it in a bad way once trading started.

WIth a small number of positions set to expire this week and with cash reserves still at much lower levels than I would like to see, despite the possibility of another lower opening this morning, my expectation is to keep my personal activity low.

Last week there was a prevailing belief that bargains were being formed, but with each day they became better and better bargains. While there may seem to be compelling reason to step in and buy something, at this point it really takes a fair amount of faith to do so.

The bounce higher from the lows of a few weeks ago that erased the 5% decline so quickly was a good sign, but the rapidity in which that gain has eroded is definitely not a good sign. As the week sets to begin in continuation of last week’s decline that erased all of the previous week’s really nice advance, there’s not too much reason to want to “buy on the dip,” at least not yet.

With the market having tested its support at about the 2045 level on the S&P 500, but failing to surpass its resistance level at about 2037, it looks as if the market wants to re-test its support and I will likely be testing the support of my La-Z-Boy, while watching to see how the market reacts to an overnight return of natural forces and wondering how those forces may take control and then what actions the Chinese government takes next, particularly with its own portfolio of bond holdings.


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