Monthly Archives: September 2015

Daily Market Update – September 10,  2015  (8:30 AM)

Yesterday was a really disappointing day, even if your portfolio ended up in relative out-performance.

The idea that we could put together consecutive large moves higher was taken off the table after a tease of an open and then a gradual decline that ended up picking up lots of speed into the close.

There really was no reason for the opening strength nor for the closing weakness.

This morning the futures are pointing to a flat open.

It’s hard to know what to make of that.

After our market’s decline yesterday, overseas markets, first in Asia and now in Europe went into sharp decline.

It’s hard to know whether they did so in reaction to our market or whether they are continuing in being the stick that stirs our markets.

For most of the summer we’ve been in an unusual position of having overseas markets tell us where to go and we haven’t been able to find any reason to return the relationship to the one that we used to know as being more normal.

Maybe the realization that our economy is in good shape and likely to get better while the rest of the world is floundering, and maybe the fact that our markets still offer the best combination of value and safety would be enough to get things back to normal.

But for now, it doesn’t look as if anything will serve as the catalyst to get more rational action going, unless of course the FOMC finally decides to do what they’ve been telegraphing for so long and finally raise interest rates against the advice of nearly everyone outside of the United States.

With only a single position set to expire this week and just 2 days remaining, I’m reasonably satisfied with the combination of new call sales, rollovers and dividends for the week and don’t expect to find any reason to spend any money on new positions this week.

With yesterday’s action only serving to introduce even more uncertainty I would like to continue a focus on trying to find a way to use volatility to squeeze out some more premium from existing positions and not think too much about adding new positions, even while they continue to look so bargain priced.

Neither of those goals are always so easy, but at least this and last week have offered some reasonable opportunities to take advantage of the market.

Hopefully, that volatility that we’ve been seeing will continue, but will do so in a way that there’s not much in the way of net change in the market. For now, as you often see in the early phase of a volatility spike is that the market declines. It’s in that period where the volatility stays at a relatively higher level and settles into a higher range that there begin to come good opportunities to find attractive premiums and enhanced income streams.

For now, I hope we fall into that narrow range and don’t have the kind of moves higher of the kind of large moves that we’ve seen. Those are just too prone to lead to tumbles and those are just too precipitous to be able to defend against and they leave you in a state of shell shock for far too long.

As is usually the case, there’s something good about consolidation in prices. Forming a base that gives the market someplace to return to and stay with some degree of confidence is a good thing. The same tends to be the case with volatility, as well. With volatility having spiked to the 50 level and come down by nearly 50%, a small further climb to the 30 level would be a nice place to settle in for a while. That may still take a small amount of market pain, but could end up being a very good place for a while.

Daily Market Update – September 9,  2015  (Close)

So China didn’t take the path lower after having had its financial markets closed for a total of 4 days and so our markets had no reason to continue on the strong path lower, having left off there before Labor Day.

Despite the Shanghai market actually being down sharply until the final hour of trading in its afternoon session, very likely the result of government buying, the US markets were sharply higher from the beginning of futures trading on Monday evening.

How long that disconnect may last is anyone’s guess, but this morning the US was poised to head higher in concert with China’s strong overnight market.

Not too many would have guessed that the market would end up squandering an early 177 point gain, only to end the day with nothing but disappointment and a loss that would turn out to be even larger than the early session gains.

It’s not often that we’ve been able to put a couple of consecutive days sharply higher together, but today looked as if it would be the second of that kind of a series, but the market just couldn’t continue in the same direction, although it did its best to keep to the same magnitude as the morning’s futures trading.

With little this week to keep markets back or to push them forward it might be hard to rationalize any kind of strong move that the market could possibly make. Heading strongly higher makes as much sense as heading sharply lower, only less.

No one even tried explaining yesterday’s nearly 400 point gain, because there really was no plausible reason for such enthusiastic buying. Especially as the past month has seen only tepid buying on the dip and the end result, unless you’re basically a day trader, has only been disappointing, as markets simply gave up those gains.

It was, therefore, easier to explain today’s loss. After all, what reason could there have been to keep going higher?

The past 6 weeks or so have seen a fair number of large moves higher, almost always following large moves lower, with the net result still being to the downside.

Why has the net result been lower?

Twofold.

For the most part the declines have been larger than the rebound gains that followed and then those rebounds were under-cut the following day.

Hard to get a warm and fuzzy feeling over that kind of action.

While still in the early phases, the current market is very reminiscent of the latter half of 2011 when the market ended precisely unchanged for the year and rocked back and forth with such large moves, while going nowhere and seeing volatility increase fairly sharply.

The volatility has now given back some of those gains, but there’s no reason to believe that it won’t get back on that path toward more historically normal levels, as there’s plenty of reason to feel uncertain about where the next stop may be.

We may get some idea of where that next stop may be soon enough as the FOMC meets and may finally put to rest all of the fear of a tiny interest rate increase that no one believes will be bad for the economy, yet those same people still run to the exits selling when professing how little such a rate increase matters.

Until then, despite the temporary divergence of our market from CHina, any more bad news coming from there, including more dumping of foreign assets, especially US Treasuries, could give our stock market more reason for concern, until coming to the realization that there is no logical stock market investment alternative.

While bonds may become an alternative for some if selling continues and rates rise, it’s not too likely that China will continue to do the equivalent of burning money in an effort to defeat market f
orces. Even they would likely come to the conclusion that they can’t control everything.

I don’t think that I’ll be in the market for any new positions this week, as I don’t have much cash and I hate chasing prices.

Instead, I would welcome any other opportunities to get some rollovers, even if in forward weeks and, better yet, find some way to sell call options on uncovered positions.

While it may end up being a quiet week for trades, I wouldn’t complain if the only result of the week is to drive paper profits for a change.

Maybe tomorrow, but that’s what I thought yesterday, too.

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

So China didn’t take the path lower after having had its financial markets closed for a total of 4 days and so our markets had no reason to continue on the strong path lower, having left off there before Labor Day.

Despite the Shanghai market actually being down sharply until the final hour of trading in its afternoon session, very likely the result of government buying, the US markets were sharply higher from the beginning of futures trading on Monday evening.

How long that disconnect may last is anyone’s guess, but this morning the US is poised to head higher in concert with China’s strong overnight market.

It’s not often that we’ve been able to put a couple of consecutive days sharply higher together, but today may be the second of that kind of a series, if the market can continue in the same direction and magnitude as the morning’s futures trading.

With little this week to keep markets back or to push them forward it might be hard to rationalize any kind of strong move that the market could possibly make. Heading strongly higher makes as much sense as heading sharply lower, only less.

No one even tried explaining yesterday’s nearly 400 point gain, because there really was no plausible reason for such enthusiastic buying. Especially as the past month has seen only tepid buying on the dip and the end result, unless you’re basically a day trader, has only been disappointing, as markets simply gave up those gains.

The past 6 weeks or so have seen a fair number of large moves higher, almost always following large moves lower, with the net result still being to the downside.

While still in the early phases, the current market is very reminiscent of the latter half of 2011 when the market ended precisely unchanged for the year and rocked back and forth with such large moves, while going nowhere and seeing volatility increase fairly sharply.

The volatility has now given back some of those gains, but there’s no reason to believe that it won’t get back on that path toward more historically normal levels, as there’s plenty of reason to feel uncertain about where the next stop may be.

We may get some idea of where that next stop may be in a couple of week as the FOMC meets and may finally put to rest all of the fear of a tiny interest rate increase that no one believes will be bad for the economy, yet those dame people still run to the exits selling when professing how little such a rate increase matters.

Until then, despite the temporary divergence of our market from CHina, any more bad news coming from there, including more dumping of foreign assets, especially US Treasuries, could give our stock market more reason for concern, until coming to the realization that there is no logical stock market investment alternative.

While bonds may become an alternative for some if selling continues and rates rise, it’s not too likely that China will continue to do the equivalent of burning money in an effort to defeat market forces. Even they would likely come to the conclusion that they can’t control everything.

I don’t think that I’ll be in the market for any new positions this week, as I don’t have much cash and I hate chasing prices.

Instead, I would welcome any other opportunities to get some rollovers, even if in forward weeks and, better yet, find some way to sell call options on uncovered positions.

While it may end up being a quiet week for trades, I wouldn’t complain if the only result of the week is to drive paper profits for a change.

Daily Market Update – September 8,  2015  (Close)

I was awaiting this morning with a little bit of trepidation after seeing how China and Japan were trading last night.

After China having been closed for two trading sessions in commemoration of the end of World War II, anything was possible when their markets were ready to re-open. Added to that has been the Nikkei, which has been in the background, but has slowly been melting away, as China had undergone a loss of about 40% in its Shanghai market.

The last that I looked before heading off to bed the Shanghai market and the Nikkei market were both down sharply, but the US market was pointing nicely higher.

That seemed odd, but I also noticed that the Shanghai futures were looking very good.

Shanghai actually trades in two sessions each day. There is a morning and then an afternoon session. What I was seeing last night was another large loss on the morning session, but a sharp advance looming in the afternoon session.

This morning, we all wake up to a sharp move higher in Shanghai, all coming in the final hour, a sharp move lower in Japan and US futures getting stronger, getting closer to a 300 point gain in the DJIA.

That should be sufficiently confusing for most everyone.

The alteration in moves in China and then the divergences between the Nikkei and US markets from the Chinese markets means that we can have no sense at all of what today, tomorrow or the next day may bring.

WIth markets down sharply last week it is nice to at least see some stability come back into the market. But stability is not created by having these 200 and 300 point moves higher. Those kind of moves only add to the instability as there’s lots of impetus for people to think about selling in order to get a better price than they could have gotten the day before. In an environment where there are such large moves in both directions and the net result of all of those moves to send the market lower, selling may make sense.

This morning, just about everything was higher, including precious metals and Brent Oil.

What’s also higher were interest rates on the 10 Year Treasury.

That may not be too much of a surprise as there’s confirmation that the People’s Bank of China had been burning through their foreign reserves. Specifically, it appears that they had sold nearly $100 Billion in Treasury notes in efforts to defend their currency. Since those kind of efforts don’t usually work, it really is as if the money was just burned away and there may be more upward pressure on rates as they consider even more sales.

That’s  not very good for stocks as they have to compete with higher yields, which may get a boost from the FOMC when it meets next week.

But you wouldn’t know that by the way today progressed. There was never even a second of weakness throughout the session and it closed right near the highs of the day, just shy of 400 points higher on the DJIA.

For this week, with little cash and only a single position set to expire, I didn’t expect very much activity. There certainly wasn’t much reason to believe that this morning’s futures were pointing toward a move that would have some ability to sustain itself, so I wasn’t not too likely to extend myself.

Now the burden of proof is in the other direction.

With lots of ex-dividend positions last week and with a fair number again this week, I’m a little more at ease with income generation, but would very seriously look at any opportunity to roll over next week’s expiring positions, of which there are quite a few, if that means being able to take advantage of market strength.

As long as volatility remains relatively high, the best returns can
be achieved by keeping individual stocks in play, almost like a beach ball at a concert.

As long as those forward week premiums are stronger than the near week premiums and time reflects increased uncertainty, even rolling over positions that might otherwise expire can make sense.

For now, keeping positions alive, such as with Best Buy, which had its two lots rolled over in an attempt to keep this week’s dividend or at least get a substitute for it from additional premium and early assignment, may be the principal activity.

That suits me just fine, as long as we can make some money. At least today offered some of those opportunities in tangible ways and on paper.

Daily Market Update – September 8,  2015  (9:15 AM)

I was awaiting this morning with a little bit of trepidation after seeing how China and Japan were trading last night.

After China having been closed for two trading sessions in commemoration of the end of World War II, anything was possible when their markets were ready to re-open. Added to that has been the Nikkei, which has been in the background, but has slowly been melting away, as China had undergone a loss of about 40% in its Shanghai market.

The last that I looked before heading off to bed the Shanghai market and the Nikkei market were both down sharply, but the US market was pointing nicely higher.

That seemed odd, but I also noticed that the SHanghai futures were looking very good.

Shanghai actually trades in two sessions each day. There is a morning and then an afternoon session. WHat I was seeing last night was another large loss on the morning session, but a sharp advance in the afternoon session.

This morning, we all wake up to a sharp move higher in Shanghai, a sharp move lower in China and US futures getting stronger, getting closer to a 300 point gain in the DJIA.

That should be sufficiently confusing for most everyone.

The alteration in moves in China and then the divergences between the Nikkei and US markets from the CHinese markets means that we can have no sense at all of what today, tomorrow or the next day may bring.

WIth markets down sharply last week it is nice to at least see some stability come back into the market. But stability is not created by having these 200 and 300 point moves higher. Those kind of moves only add to the instability as there’s lots of impetus for people to think about selling in order to get a better price than they could have gotten the day before. In an environment where there are such large moves in both directions and the net result of all of those moves to send the market lower, selling may make sense.

This morning, just about everything is higher, including precious metals and Brent Oil.

What’s also higher are interest rates on the 10 Year Treasury.

That may not be too much of a surprise as there’s confirmation that the People’s Bank of China had been burning through their foreign reserves. Specifically, it appears that they had sold nearly $100 Billion in Treasury notes in efforts to defend their currency. Since those kind of efforts don’t usually work, it really is as if the money was just burned away and there may be more upward pressure on rates as they consider even more sales.

That’s  not very good for stocks as they have to compete with higher yields, which may get a boost from the FOMC when it meets next week.

For this week, with little cash and only a single position set to expire, I don’t expect very much activity. There certainly isn’t much reason to believe that this morning’s futures are pointing toward a move that will have some ability to sustain itself, so I’m not too likely to extend myself.

With lots of ex-dividend positions last week and with a fair number again this week, I’m a little more at ease with income generation, but would very seriously look at any opportunity to roll over next week’s expiring positions, of which there are quite a few, if that means being able to take advantage of market strength.

As long as volatility remains relatively high, the best returns can be achieved by keeping individual stocks in play, almost like a beach ball at a concert.

As long as those forward week premiums are stronger than the near week premiums and time reflects increased uncertainty, even rolling over positions that might otherwise expire can make sense.

For now, keeping positions
alive, such as with Best Buy, which had its two lots rolled over in an attempt to keep this week’s dividend or at least get a substitute for it from additional premium and early assignment, may be the principal activity.

That suits me just fine, as long as we can make some money.