Monthly Archives: August 2015

Daily Market Update – August 5,  2015  (9:00 AM)

It was nice to wake up this morning and to see the futures heading nicely higher. They were nearly 100 points higher on the DJIA and those kinds of moves tend to have some staying power.

Then came the ADP Employment Report and it was a disappointing release as it reflected job decreases in the energy sector.

So what did the futures market do? It simply added about 50% to those earlier gains.

With that somewhat bad news the market reverted back to its “bad news is good news” mentality, as the initial thought must now be that those kinds of employment statistics would likely mean a further delay in an interest rate increase, even when Federal Reserve Governors are increasingly saying that it’s time for that increase.

It’s too bad that is still the way of interpreting news. At some point the market has to get to the more healthy way of accepting news for its real meaning and simply discounting the first order of events 6 months down the road.

Instead, the market is discounting second order events 6 months into the future. That’s a good way to discover disappointment and to realize that crystal balls get cloudy when you expect too much of them.

It is predicting that the bad news will delay an interest rate increase and then it is further predicting that such a delay in interest rates will be good for the stock market that’s just a bit too much of a stretch.

That’s just too much to try and predict.

It also forgets that there’s lots of data that is still going to be released between now and the September FOMC meeting and those scales can easily be tipped, especially if those FOMC members are getting anxious to finally do something after 9 years of not having had a rate increase.

That still leaves Friday’s Employment Situation Report and an expectation that if the numbers are light that the market may again exhibit some inappropriate rejoicing.

We’ll see if the futures buying will continue into the actual trading session today, but it comes within the context of DJIA component Disney down nearly 5%, which alone is taking away about 60 points from the DJIA. It also comes with a continuing weak Apple, which is now officially in correction mode, although it is only down about an additional 1% in the futures trading.

I’d like to see these gains continue and hopefully leave expiring positions this week in better shape for either assignment or rollover. In a perfect world it would also allow for the sale of some call options on uncovered positions. That would be nice, but it might take some sustained gains to see those happen and the staying power of advances hasn’t been very good of late.

We’ll see if bad news can end up being the new good news and take us to the new highs that we’ve started believing is our destiny, even if the masses are left behind.

Daily Market Update – August 4,  2015  (Close)

No matter what the appearances were yesterday as the pre-opening futures were trading, there was no indication that the day would deteriorate so quickly and decisively.

There wasn’t too much reason seen during the course of the day to account for the very broad negative tone, although some pointed to Chinese economic news.

That seemed plausible, except that Chinese economic news is released well before our own markets begin trading and typically, if they are going to have any impact at all, begin to have that impact on our futures market the evening before.

That definitely wasn’t the case on Sunday evening, nor was it the case at 9:29 AM on Monday.

Sometimes, we just have to realize that there aren’t necessarily easy answers to explain reality.

There weren’t any obvious technical triggers, although individual hedge funds, banks or other institutions may have their own internal sell and buy signals, but there was no real sudden drop on a relatively large volume spike. Instead, it was a slow grind lower over the course of 90 minutes. If there was anything representing a spike in volume it came on an uptick at the close that pulled the DJIA almost 30 points higher in the final 5 minutes.

This morning’s futures are again relatively quiet, although there is a negative bias. Earnings are continuing to come in, although other than Retail, which begins with JW Nordstrom next week and then goes into high gear the following week, most of the important companies have now reported their earnings.

What we’ve seen thus far has already been designated with the acronym “BEMR.”

Beat earnings, missed revenues.

So if you were wondering what the impact of all of those share buybacks have been, it has been to create an illusion of earnings and to make management look good.

They have done so by spending lots and lots of shareholder money and they very often do so when shares are not priced very attractively.

I’m not a huge fan of dividends, but if a company has a need to spend its cash, I’d much rather see either an increase in the regular dividend or a special dividend. The former, though, is far better at supporting or encouraging an increase in share price than is the latter.

The problem is that increasing the dividend does nothing for the metrics that analysts like to follow, such as EPS growth, but share buybacks do make it look as if all is well and improving.

With a couple of new positions opened yesterday, I’m hopeful that they will have a chance of being assigned at the end of the week in order to generate a little cash for the following week. Next week, although only having 2 expiring positions at least has 2 more than starting this week and gives some hope for either generating some additional revenue or raising cash. That’s more than can be said for the way this week started.

The nice bounce I had been hoping for yesterday, in order to have a chance of selling some calls on existing positions never did come, so today the holes were a little deeper and they ended the day today, still a little bit more deep. My minimal hope for today was that the market can at least maintain itself and create some sort of a base as we head into Friday’s Employment Situation Report.

At least that happened.

I’m hopeful that Friday’s report will show strong job growth and that the market will respond in an appropriate way, recognizing that to be good news.

At the moment, the only real impetus for a march higher is good economic news and maybe the same coming from China, for a change.

Daily Market Update – August 4,  2015  (8:45 AM)

No matter what the appearances were yesterday as the pre-opening futures were trading, there was no indication that the day would deteriorate so quickly and decisively.

There wasn’t too much reason seen during the course of the day to account for the very broad negative tone, although some pointed to Chinese economic news.

That seemed plausible, except that Chinese economic news is released well before our own markets begin trading and typically, if they are going to have any impact at all, begin to have that impact on our futures market the evening before.

That definitely wasn’t the case on Sunday evening, nor was it the case at 9:29 AM on Monday.

Sometimes, we just have to realize that there aren’t necessarily easy answers to explain reality.

There weren’t any obvious technical triggers, although individual hedge funds, banks or other institutions may have their own internal sell and buy signals, but there was no real sudden drop on a relatively large volume spike. Instead, it was a slow grind lower over the course of 90 minutes. If there was anything representing a spike in volume it came on an uptick at the close that pulled the DJIA almost 30 points higher in the final 5 minutes.

This morning’s futures are again relatively quiet, although there is a negative bias. Earnings are continuing to come in, although other than Retail, which begins with JW Nordstrom next week and then goes into high gear the following week, most of the important companies have now reported their earnings.

What we’ve seen thus far has already been designated with the acronym “BEMR.”

Beat earnings, missed revenues.

So if you were wondering what the impact of all of those share buybacks have been, it has been to create an illusion of earnings and to make management look good.

They have done so by spending lots and lots of shareholder money and they very often do so when shares are not priced very attractively.

I’m not a huge fan of dividends, but if a company has a need to spend its cash, I’d much rather see either an increase in the regular dividend or a special dividend. The former, though, is far better at supporting or encouraging an increase in share price than is the latter.

The problem is that increasing the dividend does nothing for the metrics that analysts like to follow, such as EPS growth, but share buybacks do make it look as if all is well and improving.

With a couple of new positions opened yesterday, I’m hopeful that they will have a chance of being assigned at the end of the week in order to generate a little cash for the following week. Next week, although only having 2 expiring positions at least has 2 more than starting this week and gives some hope for either generating some additional revenue or raising cash. That’s more than can be said for the way this week started.

The nice bounce I had been hoping for yesterday, in order to have a chance of selling some calls on existing positions never did come, so today the holes are a little deeper. Hopefully today the market can at least maintain itself and create some sort of a base as we head into Friday’s Employment Situation Report.

I’m hopeful that the report will show strong job growth and that the market will respond in an appropriate way, recognizing that to be good news.

At the moment, the only real impetus for a march higher is good economic news and maybe the same coming from China, for a change.

Daily Market Update – August 3,  2015  (Close)

With last week being another in a direction higher, the market has continued its back and forth character for a while, with occasional minimally sustained moves lower or higher.

Lately, we haven’t even been able to get a real mini-correction going, although we came close on an intra-day basis. Otherwise, it’s been 5 months since there has been a 5% drop on a closing basis. We used to talk in terms of a 10% drop, but for that you really have to go back in time.

What has been missing for a while has been any kind of sustained move and as we sit getting ready to begin the eighth month of the year, the market is essentially unchanged, owing most of whatever gains it has for the year on the past week.

This late in the year it’s somewhat unusual to keep hearing the phrase “and with today’s loss, the market has given up all of its gains for the year.”

That’s been very commonly uttered the past few months, yet somehow the market has resisted staying down or getting up.

Looking at this morning’s futures, it seemed to be a perfect reflection of that kind of indecision, as the futures were perfectly flat for the morning. It would turn out to be anything but a flat kind of trading day, as the market was decidedly lower, but without any obvious reason for taking the sharp downturn.

If China stays calm for the week, there’s very little international news that should have an impact on markets this week, but today was an example of how news isn’t necessary.

For the rest of the week there are still earnings to come, but the next important wave of earnings begins sometime next week as Retail begins to report and will continue in the week following.

There is an Employment Situation Report this week, but with no Federal Reserve meeting for nearly 2 months, any incoming data today can be old and stale by the time the FOMC gets together to make an interest rate decision, which is increasingly not looking as if it will result in a September rate increase.

So it’s not too likely that Friday’s report would have any impact, but the guess is that if it is outside of the expected range, a bad number would move markets down, while a really good number might send the market higher. That’s the way economic news is supposed to work when people aren’t trying to over-analyze everything.

The one thing that should be noted by now is that for the past year, markets, pundits and analysts have all been wrong about when that first rate increase would come and fears of that increase have perennially depressed the market, as the fears simply got stretched out over time.

This may still end up being a quiet week for the market, despite today’s dour trading. While I was expecting it to be a very quiet week for me, I surprised myself with 2 new positions and have exhausted cash. With limited cash and no positions set to expire this week, the best bet for activity would now be if the market could somehow find a way to add some real gains and perhaps create an opportunity to sell some calls on uncovered positions. WIth having spent the day digging a hole, it’s going to take more to climb out.

I won’t hold my breath for that, but as we’ve been seeing over and over again, the morning’s futures trading doesn’t necessarily mean anything for the trading day to come.

I had hoped that would have been the case this morning. We’ll see what tomorrow will bring.

Daily Market Update – August 3,  2015  (8:30 AM)

With last week being another in a direction higher, the market has continued its back and forth character for a while, with occasional minimally sustained moves lower or higher.

Lately, we havent even been able to get a real mini-correction going, although we came close on an intra-day basis. Otherwise, it’s been 5 months since there has been a 5% drop on a closing basis. We used to talk in terms of a 10% drop, but for that you really have to go back in time.

What has been missing for a while has been any kind of sustained move and as we sit getting ready to begin the eighth month of the year, the market is essentially unchanged, owing most of whatever gains it has for the year on the past week.

This late in the year it’s somewhat unusual to keep hearing the phrase “and with today’s loss, the market has given up all of its gains for the year.”

That’s been very commonly uttered the past few months, yet somehow the market has resisted staying down or getting up.

Looking at this morning’s futures, it seems to be a perfect reflection of that kind of indecision, as the futures are perfectly flat for the morning.

If China stays calm for the week, there’s very little international news that should have an impact on markets this week. There are still earnings to come, but the next important wave of earnings begins sometime next week as Retail begins to report and will continue in the week following.

There is an Employment Situation Report this week, but with no Federal Reserve meeting for nearly 2 months, any incoming data today can be old and stale by the time the FOMC gets together to make an interest rate decision, which is increasingly not looking as if it will result in a September rate increase.

So it’s not too likely that Friday’s report would have any impact, but the guess is that if it is outside of the expected range, a bad number would move markets down, while a really good number might send the market higher. That’s the way economic news is supposed to work when people aren’t trying to over-analyze everything.

The one thing that should be noted by now is that for the past year, markets, pundits and analysts have all been wrong about when that first rate increase would come and fears of that increase have perenially depressed the market, as the fears simply got stretched out over time.

This may end up being a quiet week for the market and will definitely be a quiet week for me. With limited cash and no positions set to expirte this week, the best bet for activity would be if the market could somehow find a way to add some real gains and perhaps create an opportunity to sell some calls on uncovered positions.

I won’t hold my breath, but as we’ve been seeing over and over again, the morning’s futures trading doesn’t necesseraily mean anything for the trading day to come.

I hope that’s going to be the case this morning.