Author Archives: TheAcsMan

Daily Market Update – August 6,  2015  (9:15 AM)

After attending last night’s Gordon Lightfoot concert I feel like a young man, again.

Not that the music was invigorating, but because the average age in the crowd must have been in the 70s and instead of smartphone charging stations, there were hearing aid and oxygen tank refill stations spread throughout the venue.

It was all a question of comparables.

By comparison I felt pretty young.

The concert, as expected, was about as invigorating as this market has been, which is to say, not all all.

It was disappointing to see yesterday’s early gains evaporate so quickly as it followed oil and energy prices down the drain.

It’s hard to understand why this market is taking a different path from other markets that have been the beneficiaries of lower energy prices. But, by the same token, it’s hard to understand why this economy hasn’t gotten a kick start from those same lower energy prices, so maybe the market is only reflecting what it sees and what it foresees.

Tomorrow brings the Employment SItuation Report and following yesterday’s early reaction to the ADP Report, which delivered some minor disappointment, as the loss of jobs in the energy sector lowered numbers, it’s probable that a similar disappointment tomorrow may also bring market gains.

Otherwise, it continues to be a typical summer where there is less news than is usually the case, especially once August rolls around and most of Europe closes down. While the data will continue coming in, there will either have to be a significant shift in the direction of the economy demonstrating some real growth, or the FOMC has to abandon its claim to being data dependent.

They may just have to say we know what’s best for the economy and we’re not going to wait for things to happen.

That might just be the best thing.

There’s not necessarily anything wrong with a beneficent dictator and at least a rise in interest rates would get us temporarily to stop playing mind games and instead focus on metrics that matter.

With two days of trading left to go there’s still some reason to be hopeful that the week may see either assignment or rollover of what few positions are set to expire. Who knows, maybe even another call sale on an uncovered position, as well.

That would be nice, but certainly not something worth predicting, because the market has been beyond predictable of late, other than it hasn’t been very forgiving.

Daily Market Update – August 5,  2015  (Close)

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.

The word “tend” has some leeway built into it and today all of that leeway was necessary, as that triple digit advance disappeared at 10:30 AM, immediately after the Oil and Gas reports were released.

This morning it was the ADP Employment Report that added to the already impressive gains seen in the futures trading. It did so by putting forward disappointing numbers reflecting 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.

Maybe the morning’s energy report brought the market back to a more normal way of thinking, although historically anything that drives down the price of oil and gas has been good for the stock market. It’s only been during this recent slide over the past 9 months that the market has reacted in such a strange sort of way.

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.

While the flurry of futures buying didn’t continue into the actual trading session today, it came within the context of DJIA component Disney down nearly 5%, which alone took away about 60 points from the DJIA. It also came with a continuing weak Apple, which is now officially in correction mode, despite having recovered from its additional 1% loss in the futures trading.

I’d would have l;ked to have seen those gains continue and hopefully leave expiring positions this week in better shape for either assignment or rollover, so I still can’t complain about the disappointment of losing the day’s gains. There was also an all too rare opportunity to sell some calls on an uncovered position, but it’s going to take some sustained gains to see more of 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 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.