Dashboard – April 6 – 10, 2015

 

 

 

 

 

SELECTIONS

MONDAY:   .The week looks as if it needs to fill in the gap from Friday’s Employment Situation Report when interest rates fell sharply and futures did as well. Maybe Wednesday’s FOMC minutes release will do something to instill confidence.

TUESDAY:    Yesterday was a nice day and one where a reversal was really welcome. WHile the ISM non-manufacturing number had some good news, the illogic of a futures sell off on Friday based on possibly outlier numbers may have become apparent

WEDNESDAY: A flat day may await, although some insights may come from the release of FOMC minutes later today. Whatever does come shouldn’t have any impact on today’s trading, although they may make some comment about the dollars growing strength and how that may impact our expected economic growth

THURSDAY:   Another failed rally yesterday and this morning appears to be another flat opening for a weak that has had almost nothing to offer anyone

FRIDAY: Luckily, Monday gave this week something to be proud about, but today could add to rally, as more buybacks can still add fuel

 

 

 


 



 

                                                                                                                                           

Today's TradesCash-o-Meter

 

 

 





 “SNEAK PEEK AT NEXT WEEK” APPEARS ON FRIDAYS

Sneak PeekPie Chart Distribution

 

 

 

 

 

 

 

Weekly Summary

  

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Weekend Update – April 5, 2015

It was a little odd having the Employment Situation Report released on a day that stock markets were closed yet bond markets and equity futures were trading on an abbreviated schedule.

It reminds me of the frustrations that I sometimes experience when being unable to react to news that moves a stock’s price after the market has closed on the Friday of option expiration. The option holder has the advantage of being able to exercise or not until nearly 90 minutes after the market has closed while as the seller of an option I can do nothing to respond to the news.

In trading circles that is something referred to as “a case of the blue calls.”

Not that I would know, but I would imagine that’s something like being in the old Times Square, before Mayor Rudy Giuliani cleaned it up and chased all of the adult entertainment away. Those glass walls between the patrons pumping quarters into the booth and the paid entertainment must have been frustrating for those watching events unfold but being incapable of taking appropriate action. That’s especially the case if knowing that a more genteel, moneyed and privileged clientele was in the back room and had less restricted access.

Or so I’ve heard. I believe that there was an expression describing that situation, as well.

While analysts are going to be spending time trying to find something good to say about the data released, the number of new jobs created was the smallest in more than a year and included downward revisions of the past 2 months. In fact, the 126,000 new jobs created in March was about half of what the consensus had been expecting. The 69,000 jobs downward revisions makes you wonder whether the decidedly negative reaction to what was perceived as a heating up jobs market previously was warranted.

The smaller than expected job creation number caused an immediate and large decline in interest rates and a meaningful decline in stock futures, although on very light volume.

Still, there was a net increase in jobs, and there is no specter of unmanageable and unruly lines queuing up as in scenes from 75 years ago. Yet we will begin trading on Monday on the far end of a 3 day vacuum having been unable to respond to the immediate reactions to Friday morning’s news.

After a few days to mull it over we may learn whether the disappointing employment news is ultimately interpreted as being good or bad for the stock market and more specifically for the likelihood of interest rates being increased sooner rather than later.

After all, lately that seems to be all that markets have cared about and the speculation has gone back and forth as the data has done the same.

As far as the Treasury market is concerned their bet is on lower interest rates after the Employment Situation Report was released and they’re said to be smarter than the average investor.

When rates go
back up just as quickly, as they have volleyed back and forth over the past few weeks, we can remind ourselves that the back and forth of rates simply reflects how smart those bond traders really are.

One might think that any further decline in rates would be good for stocks particularly as an alternative to bonds, unless it is interpreted as being bad news that the tepid economic expansion was actually beginning a deceleration phase.

Couple that thought with the worry that the upcoming earnings season is going to highlight currency woes more than costs savings from lower energy and you do have the makings of continued uncertainty about where the next catalyst to move stocks higher will be coming from.

Normally, I like uncertainty, but unfortunately, the uncertainty that we’ve seen over the past few weeks as markets have regularly alternated between triple digit gains and losses hasn’t really moved volatility as much as it would seem to have been logical. That’s because most days have actually traded with great certainty, showing little variance from where the day’s trading started and then giving way to an all new kind of certainty the very next day.

We’ll see how that certainty shows itself on Monday.

It’s anyone’s guess.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

Whole Foods (NASDAQ:WFM) is one of many stocks that I currently own that are not earning their keep because they’re too far below their purchase price to warrant writing calls and generating premium income. While shares do go ex-dividend this week, the dividend is too small to justify chasing or to make a trade simply in the hopes of capturing that dividend.

However, I’ve been happy to see some of the share gains seen after earnings in February get digested, notwithstanding this past Thursday’ strong gain. The slow and methodical retracement of those gains is providing an opportunity to add shares of Whole Foods again with the goal of using new shares to help offset some of the losses on the non-performing lot, as was done 5 times in 2014.

However, following the previous share increase after earnings those shares just seemed too expensive to use as an offset to paper losses. However, now they appear to be more reasonably priced and ready to stabilize at that lower level.

Having add my General Motors (NYSE:GM) shares assigned last month I’ve wanted to repurchase shares since then. At the time the entry of an activist into the picture was unexpected and poor timing for me, but I’m glad to see shares come down from that activist induced high.

Through several bouts of share ownership during the Mary Barra era I’ve continued to be amazed at how well share price has persever
ed against a barrage of bad news. The toll on share price has generally been small and short lived, while being able to roll over option contracts helped to increase yield while awaiting assignment.

Shares offer attractive premiums, an increasingly attractive dividend and the watchful eyes of activists. That can be a good combination particularly since earnings are still a month away, giving some opportunity to collect those premiums before contending with the challenge of currency.

Bed Bath and Beyond (NASDAQ:BBBY) reports earnings this week and used to be one of those traditionally being among the last of S&P 500 members to report earnings. Now it’s either still among the last or possibly among the first, as earnings seasons now just tend to flow one into the next.

While Bed bath and Beyond isn’t likely to suffer much due to the strengthening dollar, in fact it may benefit from increased buying power, it may report some detriment from the west coast port disruptions.

Bed Bath and Beyond is no stranger to large moves when announcing its earnings, but this time the options market is implying a move of 6.5%. A 1% ROI may be possible by selling put options as much as 7.1% below the week’s closing price. That’s not as large of a cushion as I would prefer seeing, but if selling puts and faced with the possibility of assignment, I wouldn’t mind taking ownership of shares rather than attempting to roll the put options over.

Being booted from the DJIA isn’t necessarily a bad thing, just as being added isn’t always a good thing as far as stock prices go.

Few have done as well as Alcoa (NYSE:AA), which despite a nearly 50% decline since reaching it’s peak post-DJIA share price is still about 65% higher and has well out-performed the S&P 500 and the DJIA.

Alcoa, which reports earnings this week, and while perhaps no longer considered to be the kick-off to a new earnings season still remains the first to get much attention.

Shares have been in a considerable decline for the past 2 months after having recovered from most of the decline that preceded the market’s decline in early December 2014. The subsequent recovery in share price at that time was in lock step with the S&P 500 from mid-December to mid-January when earnings intervened.

Unlike most earnings related trades that I consider, for this one I’m not looking at the sale of puts, but rather a buy/write and am further considering the use of a slightly out of the money option, rather than an in the money strike price, in the belief that there’s reason to suspect both on a technical basis and a fundamental basis that there is room to move higher.

While it’s too soon to tell how its continuing performance will be, AT&T (NYSE:T) has joined Alcoa as an ex-member of the DJIA. During the two week period of its exile, shares have out-performed the S&P 500, just as its replacement has t
railed.

While 2 weeks doesn’t make for a trend, as AT&T shares are ex-dividend this week, I think there may be enough past history with other ex-members in the immediate period of their expulsion to create a tiny additional increment of confidence. WHile that confidence doesn’t necessarily extend to believing that shares will move higher in the very near term, it does make me feel better about the prospects of it continuing to out-perform the broader market.

With it’s very generous dividend the option premium isn’t very large, but at the very least will offset some of the decline in price that will occur as the dividend is taken into account. With much of the competitive hoopla and pressure now in the past and with less of a concern about currency fluctuations, this may be a good time to consider a position as shares may be a bit more immune to some of the pressures that may face many other multi-national companies as earnings are soon to be released.

Finally, being added to the DJIA isn’t necessarily a golden ticket, either, as some more recently added members may attest.

In exchange for AT&T’s departure Apple (NASDAQ:AAPL) was added and has since trailed the narrow index as excitement mounts over the prospects for its latest product entry.

I’m not as excited about that as I am about the prospects of Apple announcing a dividend increase most likely concurrent with its next earnings release in 3 weeks. Between now and then I think there are going to be many opportunities for Tim Cook and others to increasingly whip up excitement and demand for a product that has a fairly low bar being set.

In the meantime Apple continues to offer an attractive option premium and can easily be considered as either a buy/write or put sale, as there is considerable liquidity on either side of the options aisle.

Traditional Stocks: Apple, General Motors

Momentum Stocks: none

Double Dip Dividend: AT&T (4/8), Whole Foods (4/8 $0.13)

Premiums Enhanced by Earnings: Alcoa (4/8 PM), Bed Bath and Beyond (4/8 PM)

Remember, these are just guidelines for the coming week. The above selections may become actionable, most often coupling a share purchase with call option sales or the sale of covered put contracts, in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week with reduction of trading risk.

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Week in Review – March 30 – April 2, 2015

 

 

Option to Profit Week in
Review –  March 30 – April 2,  2015
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
2 / 2 1 4 1  /  0 0 / 0 0

    

Weekly Up to Date Performance

March 30 – April 2,   2015

It was yet another week of uncertainty, but at least the week ended on an up note.

There were 2 new positions opened this week and they lagged both the adjusted and unadjusted S&P 500. Those positions trailed the adjusted S&P 500 by 1.0% and under-performed the unadjusted S&P 500 by 1.1% in a reversal of last week’s comparative results.

The new positions lost 0.7% while the unadjusted S&P 500 gained 0.4% for the week and the adjusted S&P 500 gained 0.2% for that period.

Existing positions, on the other hand, again out-performed the S&P 500. They were 0.9% higher, which was 0.6% better than the S&P 500’s performance for the week. That’s better than last week, when they also out-performed the S&P 500, but still lost money for the week.

Out-performance is good, but only to a degree.

Positions closed in 2015 continue to out-perform the market. They are an average of 5.3% higher, while the comparable time adjusted S&P 500 average performance has been 1.6% higher. That 3.8% difference represents a 242.1% performance differential. That remains unusually high and is associated with the longer period of holding of those closed positions than is more typically the case. I would much rather see that differential be smaller but be based on far more assignments resulting in closed positions.

 

Despite a couple of large moves this week, it was like a number of other weeks so far in 2015.

Not much really changed and there certainly wasn’t too much going on to account for any of the moves seen.

With a couple of large declines this week I had lost much confidence that rollovers or assignments would happen and with only 4 days of trading each and every day and each and every big move was that much more meaningful.

Luckily, and again there really wasn’t too much reason, Thursday ended the week on a positive note, although it did look for a while as if it all would vaporize.

Somehow, when it was all done for the week all positions expiring were either rolled over or assigned.

I definitely wasn’t expecting that outcome.

I would have liked to have seen more than the single assignment that occurred, but even that one was in doubt until the final few minutes of trading, so I won’t complain. I’m happy to have even that small amount added to my cash reserves which are uncomfortably small right now.

That means that I’m not too likely to be in a big buying mood, or even in position to want to be buying when the bell rings on Monday.

When that bell does ring it may be in the position of having to catch up to whatever tomorrow’s Employment Situation Report will bring. Since bond markets will be open on Good Friday, while stock markets are closed, any significant reaction to the report on Friday could create a considerable gap when equity markets get ready for trading on Monday. Given how volatile the bond market has been lately, especially in response to the Employment Situation Report, I’d be happy to see a very mid-range number being released tomorrow.

It’s hard to imagine what kind of a number could possibly lead to stock market optimism, so I’d rather not see any reason at all for bonds to make any kind of meaningful move.

With a number of positions set to expire next week and a handful more the following week to end the April 2015 cycle, the only goal I would have in the event of any new purchases is to be able to recycle whatever money is put to work as quickly as possible. That would probably mean sticking to a weekly contract next week.

In the best of all worlds the market would begin the week as this week started on a strong move higher, as I continue to prefer any opportunity to sell calls on existing uncovered positions.

Friday’s apparent deal with Iran, to at least establish a framework for a nuclear inspection deal may again alter the energy pricing dynamic and that could again cause the market to react to energy prices.

With 3 days to digest what just happened, much of it may be forgotten by Monday, especially if the EMployment Situation Report is still on people’s minds.

Hopefully Thursday’s trading, which was essentially positive, will set the tone for the rest of the month as we await earnings challenges that actually start all over again next week.

 

 

 



This week’s details may be seen in the Weekly Performance spreadsheet * or in the PDF file, as well as as in the summary.below

(Note: Duplicate mention of positions reflects different priced lots):



New Positions Opened:   CSCO, UAL

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  UAL

Calls Rolled over, taking profits, into extended weekly cycle:  none

Calls Rolled over, taking profits, into the monthly cycle: ATVI, CSCO, GDX

Calls Rolled Over, taking profits, into a future monthly cycle:  none

Calls Rolled Up, taking net profits into same cyclenone

New STO:  ABBV (5/15)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: MET

Calls Expired:  none

Puts Assigned:  none

Stock positions Closed to take profits:  none

Stock positions Closed to take losses: none

Calls Closed to Take Profits: none

Ex-dividend Positions: EMC (3/30 $0.12), CSCO (3/31 $0.21)

Ex-dividend Positions Next Week: GPS (4/6 $0.23), WFM (4/8 $0.13)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, ANF, BAC, CHK, CLF, COH, DOW, FAST, FCX, GDX, HAL, HFC, .INTC, JCP, JOY, LVS, MAT, MCP, MOS,  NEM, RIG, WFM, WLT (See “Weekly Performance” spreadsheet or PDF file)



* If you don’t have a program to read or modify spreadsheets, you can download the OpenOffice Suite at no cost.



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Daily Market Update – April 2, 2015

 

 

 

Daily Market Update – April 2, 2015  (8:15 AM)

The Week in Review will be posted by 6 PM tonight and the Weekend Update will be posted by Sunday at 12 Noon.

The following trade outcomes are possible today:

Assignments:  none

Rollovers:   CSCO, UAL

ExpirationsATVI, MET

The following were ex-dividend this week:  EMC (3/30 $0.12), CSCO (3/31 $0.21)

The following are ex-dividend next week: GPS (4/6 $0.23), WFM (4/8 $0.13)

 

Trades, if any, will be attempted to be made by 3:30 PM (EDT)

 

 

 

 

 

 

 

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Daily Market Update – April 1, 2015 (Close)

 

 

 

Daily Market Update – April 1, 2015  (Close)

Yesterday was just another in a series of bad days that lately seem to come whenever there appears to have been some reason to be optimistic. For every really nice day there has been an equally bad day either before or after. That explains why we could have had about 15 days in which the market was 150 points higher or more in 2015 only to find a market that has been virtually unchanged during that period.

Yet despite what a rational person would describe as being a volatile environment, the actual volatility is virtually unchanged over the past 4 weeks. That’s because most days have seen very little variation in direction. They’ve either been good days from the start or bad days from the start. People patiently sitting and waiting for intra-day turnarounds, as is generally very common, have been pretty disappointed over the past month, with the exception of two days of trading.

With an acceleration of selling in the final hour, something that we’ve seen a number of times in the past 2 weeks, the DJIA finally did end up down 200 points and left the market in negative territory to end the quarter.

That hadn’t happened for about 2 years, but it’s time to move on. It’s a new month and it’s a new quarter.

You wouldn’t have known that, though, by the way today went.

Hopefully maybe starting tomorrow, April will follow the alternating pattern of the past 4 months, because that would mean a nicely higher move for the month, as lately they’ve been very neatly bundled packages of good or bad from the outset.

Looking at the futures this morning, which had deteriorated from having been perfectly flat, they were still far better from where they were late last night.

For some reason, not that there has to always be a reason, the futures plunged last night, after also trading flatly after the market close. When you see piling on in the futures after an accelerating negative close, that’s usually a sign of bad things to come.

This time it was a little unusual because there was a few hours of delay before the heavy selling started.

But somewhere along the line overnight whatever it was that upset traders seemed to have taken a break, or better yet, had just gone away.

If only.

This morning had an ADP Employment Report in advance of Friday’s Employment Situation Report.

The ADP Report doesn’t usually get too much of a reaction from markets unless it’s really far from what was expected. This week, however, could have been a little different because with markets closed on Friday there won’t be a chance to trade the Employment Situation Report, so ADP could end up being a proxy for that trade.

After yesterday’s sell off and that quick drop in the futures, it probably wouldn’t take too much to get back on that path. At this point too much of anything, either too many new jobs or too few new jobs could both be construed as bad news.

As it w
ould turn out, despite some disappointing numbers that were lower than expected, the market really did nothing at that point. It was much later that everyone just seemed to give up.

With bond markets open on Friday there could still be some disruption of markets after the more meaningful Employment Situation Report is released, but for equity traders it’s either doing something today or having to waiting until Monday to respond to the data that could be inferred to have implications for the timing of any interest rate increases.

Otherwise, I didn’t think there would be much to do for the remaining 2 days of this week, other than hoping that the market recovers enough to give the few positions that are set to expire this week a chance to either be rolled over or be assigned.

After today’s sharp drop, those hopes are further removed from the realm of the probable.

But we’ll see what tomorrow can bring.

After that and after a 3 day break from markets it will be time to strap on and get ready for what could be an interesting earnings season as it could be anyone’s guess how the balance between currency issues and energy cost savings play out.

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