Monthly Archives: August 2015

Daily Market Update – August 27,  2015  (Close)

This has been a week of some really jaw dropping moves, but still, in percentage terms, nothing like some of the plunges, surges and then more plunges that we saw in 2008 and the early part of 2009.

Some people are mentioning that, but they treading very softly. They’re not saying the unsaid. That is that all of those incredibly stunning moves higher were more than offset by stunning moves lower, in addition to death by a thousand cuts.

In addition to the really large moves higher, back in 2008 and 2009, as well as late 2007, there were lots of smaller moves that simply added up to move markets significantly lower.

What was missing were the same kind of smaller moves strung together to bring the market higher.

I was happy to be able to get some trades in yesterday to take advantage of some of the strength, but the options market is still not fully participating in terms of volume and willingness to make trades.

While yesterday may have added a little more to the overall sense of confusion about which way things will move next, this morning’s strong open to the futures trading may bring some of those reluctant option buyers out from the woodwork.

Although two consecutive days don’t really make a trend, the bar is set pretty low and people are looking for any sign of stability in the market.

The overnight action by China to purchase stocks in the open market turned things around in Shanghai and may have helped today get off to a positive start as we awaited GDP numbers and any other comments that might come from the Federal Reserve party at Jackson Hole, that is not being attended by Janet Yellen.

Those GDP numbers were strong and may have given the very first suggestion that the economy is getting stronger.

What was fascinating today was that the mrket could close up more than 350 points after yesterday’s 600+ points on a day that could have made it easier for the FOMC to raise rates and on a day that oil surged.

Go figure,

So instead of hearing anything from Janet Yellen after today’s unusual combination of events, we may get to hear someting from her Vice-Chair, and nearly everyone’s mentor, Stanley Fischer. in her absence.

With no positions set to expire this week, but with some rollovers, new positions opened and an isolated call sale on an uncovered position, in addition to some ex-dividend positions, it has been a decent income week, but there’s still much more to be done.

Today’s action also mde it more appealing, on paper, anyway.

I don’t know how much of what remains undone will get done during the rest of the week, but I definitely would welcome the climb higher.

It would be much nicer, though to see that climb come in little bits and drabs. You may or may not believe in technical analysis, and by and large, I don’t, but there is something to be said for the unsustainability of real surges higher.

When there’s not a very good foundation underneath a stock’s price, it really is very easy to see those shares tumble. As much as everyone talks about a V-shaped recovery, they’re not necessarily the kind that you like to see for longer term stability.

On the other hand, if you established some positions before the climb higher, you can definitely take advantage of the higher premiums available even on out of the money strikes.

That’s what has really been missing for the longest time. In that kind of environment you find yourself not opening very many new positions, but rather trying to keep playing and re-playing the same ones, as even in the money
positions may make more sense to keep that to let be assigned.

We’re not quite at that stage yet, but if this back and forth does continue it could end up being a trader’s best friend. For now, though, it would really be good to create some base beneath these past two days and set up markets and portfolios to challenge resistance, now that it has challenged support.

Daily Market Update – August 27,  2015  (7:30 AM)

This has been a week of some really jaw dropping moves, but still, in percentage terms, nothing like some of the plunges, surges and then more plunges that we saw in 2008 and the early part of 2009.

Some people are mentioning that, but they treading very softly. They’re not saying the unsaid. That is that all of those incredibly stunning moves higher were more than offset by stunning moves lower, in addition to death by a thousand cuts.

Ib addition to the really large moves higher, back in 2008 and 2009, as well as late 2007, there were lots of smaller moves that simply added up to move markets significantly lower.

What was missing were the same kind of smaller moves strung together to bring the market higher.

I was happy to be able to get some trades in yesterday to take advantage of some of the strength, but the options market is still not fully participating in terms of volume and willingness to make trades.

While yesterday may have added a little more to the overall sense of confusion about which way things will move next, this morning’s strong open to the futures trading may bring some of those reluctant option buyers out from the woodwork.

Although two consecutive days don’t really make a trend, the bar is set pretty low and people are looking for any sign of stability in the market.

The overnight action by China to purchase stocks in the open market turned things around in Shanghai and may have helped today get off to a positive start as we await GDP numbers and any other comments that might come from the Federal Reserve party at Jackson Hole, that is not being attended by Janet Yellen.

Instead, everyone is waiting to hear what her Vice-Chair, and nearly everyone’s mentor, Stanley Fischer will say. in her absence.

With no positions set to expire this week, but with some rollovers, new positions opened and an isolated call sale on an uncovered position, in addition to some ex-dividend positions, it has been a decent income week, but there’s still much more to be done.

I don’t know how much of that will get done during the rest of the week, but I definitely would welcome the climb higher.

It would be much nicer, though to see that climb come in little bits and drabs. You may or may not believe in technical analysis, and by and large, I don’t, but there is something to be said for the unsustainability of real surges higher.

When there’s not a very good foundation underneath a stock’s price, it really is very easy to see those shares tumble. As much as everyone talks about a V-shaped recovery, they’re not necessarily the kind that you like to see for longer term stability.

On the other hand, if you established some positions before the climb higher, you can definitely take advantage of the higher premiums available even on out of the money strikes.

That’s what has really been missing for the longest time. In that kind of environment you find yourself not opening very many new positions, but rather trying to keep playing and re-playing the same ones, as even in the money positions may make more sense to keep that to let be assigned.

We’re not quite at that stage yet, but if this back and forth does continue it could end up being a trader’s best friend.

Daily Market Update – August 26,  2015  (Close)

It’s hard to describe the disappointment that accompanied yesterday’s trading, but being entirely surprised should probably not have been one of the things felt during the course of the day.

The final hour, though, was surprising, as you did have to wonder where the selling originated.

The “why” part of the question isn’t too hard to understand, as some may have seen the gain as an opportunity to get just a little more before getting out.

Deep down I thought that there still might be a wave of selling related to the need for mutual funds and ETFs to honor redemption orders. There’s no stated rule that says that they have to do that by flooding the order desks with those market depressing orders all at once and first thing in the morning.

This morning the Chinese stock market, the one that really matters, in Shanghai was again lower, but this time by less than 2%. That’s the same as a rally.

I’ve definitely lost track of how much that market has lost in the past 2 weeks or so, but after looking it up, it’s an astonishing 28%, while our own S&P 500 is down about 8% in the same time period heading into today’s session.

I guess in a world where everything is relative that should leave you feeling warm and fuzzy, but it didn’t really feel like that this morning, even as the futures were suggesting that they may just go and erase yesterday’s loss.

Even though last week we finished higher than the averages and even though this week is on that same path for now, it’s one of those mixed blessings, as overall performance for these two weeks past is still showing a loss. While comparative results are important, it’s still the bottom line that really matters.

When you look at today’s performance, would you ever think that you would see a day that the S&P rose 4%, yet the index was still down 1.4% for the week and with still 2 days to go?

It’s still hard to believe that we can talk about yesterday as having been a loss, even though there’s plenty of precedence for this sort of thing after very large losses and early reversals the following morning.

With no positions set to expire this week, partially by design, I’m still looking at any opportunities to roll over any contracts expiring in subsequent weeks, but despite some increases in volatility, the volume has been exceptionally light on both calls and puts.

That just shows that there is absolutely no sense of confidence about what may come next. Not by speculators, not by portfolio hedgers.

It didn’t change too much even as the bulls started to stampede in the latter half of the afternoon.

With some surprisingly good earnings from beaten down retailers Abercrombie and Fitch, both of which also go ex-dividend very soon, there was some opportunity to get rollovers done into price strength.

Yesterday’s early trading would have been a nice time to try and sell some new option contracts or even consider doing some rollovers, but the liquidity just wasn’t there, as the market’s decline has just been to sudden to get very many to re-align their strategies and implement them.

The sell-off during yesterday’s final hour should do very much to bolster option trader’s confidence today, even as the market was pointing higher. In fact, that early move higher may just send more confusion through the system.

As expected, the options market wasn’t very busy today, either as by mid-morning the big gains were cut by nearly 75%f and gave little reason to feel assured of anything other than continuing confusion and the very real possibility of re-testing lows.

With those kind of expectations the next wave of confusion hit as the mar
ket found a way to bounce right back from that mid-day slide and started approaching and then exceeding its highs for the day as the final hour began its countdown.

I hope that the Federal Reserve Governors who convene their meeting in Jackson Hole are less confused that we deserve to be as the week is coming to its end.

I don’t expect to be doing much for the rest of the week other than to see what else the Chinese government and the People’s Bank of China will attempt to do to calm their markets and control their currency.

For now, whatever they do, we are going to be held captive, although maybe tomorrow’s GDP Report and Jobless Claims will give us reason to focus within for a few brief moments and remember that there’s nothing in our economy that remotely warrants the kind of reaction we have seen in our markets, even though they’ve been comparatively muted compared to a half world away.

Daily Market Update – August 26,  2015  (7:15 AM)

It’s hard to describe the disappointment that accompanied yesterday’s trading, but being entirely surprised should probably not have been one of the things felt during the course of the day.

The final hour, though, was surprising, as you did have to wonder where the selling originated.

The “why” part of the question isn’t too hard to understand, as some may have seen the gain as an opportunity to get just a little more before getting out.

Deep down I thought that there still might be a wave of selling related to the need for mutual funds and ETFs to honor redemption orders. There’s no stated rule that says that they have to do that by flooding the order desks with those market depressing orders all at once and first thing in the morning.

This morning the Chinese stock market, the one that really matters, in Shanghai is again lower, but this time by less than 2%.

I’ve definitely lost track of how much that market has lost in the past 2 weeks or so, but after looking it up, it’s an astonishing 28%, while our own S&P 500 is down about 8% in the same time period.

I guess in a world where everything is relative that should leave you feeling warm and fuzzy, but it doesn’t really feel like that this morning, even as the futures are suggesting that they may just go and erase yesterday’s loss.

It’s still hard to believe that we can talk about yesterday as having been a loss, even though there’s plenty of precedence for this sort of thing after very large losses and early reversals the following morning.

With no positions set to expire this week, partially by design, I’m still looking at any opportunities to roll over any contracts expiring in subsequent weeks, but despite some increases in volatility, the volume has been exceptionally light on both calls and puts.

That just shows that there is absolutely no sense of confidence about what may come next. Not by speculators, not by portfolio hedgers.

Yesterday’s early trading would have been a nice time to try and sell some new option contracts or even consider doing some rollovers, but the liquidity just wasn’t there, as the market’s decline has just been to sudden to get very many to re-align their strategies and implement them.

The sell-off during yesterday’s final hour should do very much to bolster option trader’s confidence today, even as the market is pointing higher. In fact, that early move higher may just send more confusion through the system.

I don’t expect to be doing much for the rest of the week other than to see what else the Chinese government and the People’s Bank of China will attempt to do to calm their markets and control their currency.

For now, whatever they do, we are going to be held captive, although maybe tomorrow’s GDP Report and Jobless Claims will give us reason to focus within for a few brief moments and remember that there’s nothing in our economy that remotely warrants the kind of reaction we have seen in our markets, even though they’ve been comparatively muted compared to a half world away.

Daily Market Update – August 25,  2015  (Close)

WHat do you say about today except to shake your head and wonder why the day couldn’t have ended an hour earlier?

It’s probably senseless to try and describe yesterday’s action and now today may be equally as senseless of a thing to attempt to do.

Whatever it was that caused the 1000 point decline in the first 10 minutes yesterday, somehow it didn’t really frighten away some brave people. 

Lots of those people came out of the woodwork today but may be left wondering what exactly happened.

No one was more surprised than me to be among those adding new positions yesterday morning, but in hindsight it may have seemed premature to have done so as the market ended up the day having done just as badly as it ended the previous week.

Today was probably a good day not to have chased the market unless you were really a very short term trader.

The conventional wisdom is that these kind of plunges, as seen on Monday, are necessary in order to flush sellers out of the system and then you often see a significant bounce higher.

The late Mark Haines of CNBC used to be very calm in the face of these kind of early morning sell-offs that followed a similarly large sell off the previous day because his experience was that was the first step of the climb higher.

That seemed to be the case yesterday, but what was missing yesterday was any sense of frenzied selling, despite the fact that there was a 1000 point decline in those first 10 minutes.

Given how quickly the recovery set in, there had to be the realization that the decline was not something truly based on market forces, but rather the result of sell orders hitting mutual funds on Friday and perhaps some hedge funds calling it quits, in addition to forced margin selling.

Later, another reversal of the initial reversal, something that we may need to get used to, was fairly orderly.

So if you were waiting for a real blow off kind of moment, also called “capitulation,” it hasn’t really shown up yet. What we have been seeing, and this morning’s futures were consistent with that, is the typical kind of out-sized moves in alternating directions that you see in a bear market.

Those moves actually started more than 2 months ago. In fact, people who study this sort of thing will tell you that you don’t even need the alternating component. Simply seeing out-sized moves higher is emblematic of being in a bear market.

Who knows.

This morning came as China’s Shanghai exchange was down another 7%.

I went to bed last night seeing the Shanghai futures trading much lower, but the US futures were picking up strength, which came as a surprise.

The extent of that divergence when waking up this morning was a real surprise, that was widened when the People’s Bank of China announced an easing on its lending and bank reserve requirements.

We’ll see.

So far the attempts to control China’s markets, currency and economy haven’t fared terribly well, but these things are like trying to stop a steaming locomotive. If you remember your basic physics, there’s that concept of “momentum” at play. It takes lots and lots of energy to put the brakes on something with momentum.

That’s exactly what economies have. Lots of momentum and typically very slow to respond to external forces.

With a couple of new positions opened yesterday and the market moving higher for most of the day,I would have loved any opportunity to sell more calls, but with the move higher comes a drop in volatility. Yesterday, in looking for call sales opportunities the prevailing picture was that of a dumb struck options market. The moves were so sudden and pronounced that there were very, very few bids, so sellers were there to sell, but no one was there to buy. Not even offering a ceremonial bid that could offer some room for negotiation.

Now we’ll see how or if that changes tomorrow, because it sure didn’t change today..