Author Archives: TheAcsMan

Daily Market Update – October 10, 2014 (8:30 AM)

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

The following are possible outcomes for today:

Assignments:  none

Rollovers:  EMC

Expirations: WFM, DOW, GPS, HAL

The following were ex-dividend this week: GPS (10/6 $0.22), CPB (10/8 $0.31), DRI (10/8 $0.55), CHK (10/10 $0.09), FCX (10/10 $0.31)

There are currently no ex-dividend positions for next week

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

Daily Market Update – October 9, 2014 (Close)

It’s almost a little eerie when one day can go down 272 points and the next day can go up 274 points.

Of course when the third day see prospects of a 300 point decline it gets a little tiresome. Even if you do like the idea of volatility rising the process can really be painful.

While yesterday’s rebound was definitely welcome there’s still no escaping the historical significance of such large upward moves. They tend to occur during market downtrends and aren’t generally parts of the building blocks that take markets higher in a sustained fashion.

The October 2007 to March 2009 period was filled with those kind of days and if you can remember back to those days how many times did you think “finally, we’re done with all of the selling”?

There was a lot of talk about how yesterday represented a “key reversal” day.

That’s one where the market opens lower than the previous day, then moves to a new low, before reversing course to close higher than the previous day’s high.

There was a lot of talk about it because many see it as a very bullish sign, although like so many such signs it’s not as valid as many would like to believe. In fact, Thomas Bulkowski, who extensively studies chart patterns has reported that about 51% of the time that a key reversal occurs during a market downtrend, such as we’re currently experiencing, the trend continues downward after the  key reversal.

I don’t know if he’s right, but somebody is wrong when it comes to the significance of the exalted key reversal.

Still, yesterday was welcome as we head into the final days of the week and always hopeful for some combination of assignments and rollovers.

One of those hopes, The Gap, got dashed yesterday after the close, as its CEO unexpectedly announced hos retirement, saying he was unable to commit anew to the time being asked of him.

That’s a very bizarre reason, but more bizarre has been the immediate reaction to the announcement, particularly considering that there was nothing terribly spectacular about the CEO or his performance. If anything, during his reign, The Gap has been incredibly inconsistent in its performance and certainly not a stellar retail performer.

The market may be reacting to uncertainty over the real reasons for his sudden departure. The after hours response came before The Gap released its monthly same store sales, which were flat, but did indicate an increase in expenses, which ordinarily would probably have caused some drop in shares in the aftermarket. However, in the past, The Gap has typically made initial 5% moves in either direction upon same store sales, although often quickly reversing the initial reactions. This time, it’s a 10% move in the absence of significant same store sales news.

So that will be one to watch and weather as we await the real story.

For the morning there didn’t appear to be a follow through forthcoming to yesterday’s gains, although precious metals were showing a large bounce after prolonged selling. As often is the case, there’s no readily apparent reason for doing so other than the possibility that those inclined to trade precious metals suddenly believe that the selling was overdone, perhaps buoyed a bit by yesterday’s FOMC.

While I would have liked to see the same thing in today’s equity market, it’s a good thing that I didn’t hold my breath. I would have been happy with some stability in  prices and simply a little respite from a large move opposite to yesterday’s in an effort to see those positions set to expire tomorrow either be assigned or rolled over.

That wasn’t asking for too much, but today’s sell off was really over the top and again had no real reason for being, no matter how much people point once again at Martio Draghi for calling for economic reform from European leaders.

So while I was hoping to get some rollovers either done today or be in better position to do so, it was a repeat of last Thursday when the possibility was also made less likely.

Last week Friday’s strong gain salvaged the week, but I’m not so positive about the same happening tomorrow, as today was beginning to feel a little more like a blow off kind of sale, but still didn’t reach that level.

As far as rollovers go,  you may have noticed that with, what may be a temporary increase in volatility, I’ve taken the opportunity to take advantage of some improving premiums in forward weeks by rolling over to periods other then the next coming week. That offers a little extra bit of diversification and reduces dependency on a single week, which can easily be subject to a sudden adverse price movement.

With a few positions already set to expire next week, I may look for tomorrow’s rollover opportunities beyond that monthly cycle end date to further add to that spreading of risk, if possible.

December anyone?

Daily Market Update – October 9, 2014 (8:30 AM)

It’s almost a little eerie when one day can go down 272 points and the next day can go up 274 points.

While yesterday’s rebound was definitely welcome there’s still no escaping the historical significance of such large upward moves. They tend to occur during market downtrends and aren’t generally parts of the building blocks that take markets higher in a sustained fashion.

The October 2007 to March 2009 period was filled with those kind of days and if you can remember back to those days how many times did you think “finally, we’re done with all of the selling”?

There was a lot of talk about how yesterday represented a “key reversal” day.

That’s one where the market opens lower than the previous day, then moves to a new low, before reversing course to close higher than the previous day’s high.

There was a lot of talk about it because many see it as a very bullish sign, although like so many such signs it’s not as valid as many would like to believe. In fact, Thomas Bulkowski, who extensively studies chart patterns has reported that about 51% of the time that a key reversal occurs during a market downtrend, such as we’re currently experiencing, the trend continues downward after the  key reversal.

I don’t know if he’s right, but somebody is wrong when it comes to the significance of the exalted key reversal.

Still, yesterday was welcome as we head into the final days of the week and always hopeful for some combination of assignments and rollovers.

One of those hopes, The Gap, got dashed yesterday after the close, as its CEO unexpectedly announced hos retirement, saying he was unable to commit anew to the time being asked of him.

That’s a very bizarre reason, but more bizarre has been the immediate reaction to the announcement, particularly considering that there was nothing terribly spectacular about the CEO or his performance. If anything, during his reign, The Gap has been incredibly inconsistent in its performance and certainly not a stellar retail performer.

The market may be reacting to uncertainty over the real reasons for his sudden departure. The after hours response came before The Gap released its monthly same store sales, which were flat, but did indicate an increase in expenses, which ordinarily would probably have caused some drop in shares in the aftermarket. However, in the past, The Gap has typically made initial 5% moves in either direction upon same store sales, although often quickly reversing the initial reactions. This time, it’s a 10% move in the absence of significant same store sales news.

So that will be one to watch and weather as we await the real story.

For the morning there doesn’t appear to be a follow through forth
coming to yesterday’s gains, although precious metals are showing a large bounce after prolonged selling. As often is the case, there’s no readily apparent reason for doing so other than the possibility that those inclined to trade precious metals suddenly believe that the selling was overdone, perhaps buoyed a bit by yesterday’s FOMC.

While I’d like to see the same thing in today’s equity market, I’m not going to hold my breath. Instead, I’d be happy with some stability in  prices and a little respite from a large move opposite to yesterday’s in an effort to see those positions set to expire tomorrow either be assigned or rolled over.

As far as rollovers go,  you may have noticed that with, what may be a temporary increase in volatility, I’ve taken the opportunity to take advantage of some improving premiums in forward weeks by rolling over to periods other then the next coming week. That offers a little extra bit of diversification and reduces dependency on a single week, which can easily be subject to a sudden adverse price movement.

With a few positions already set to expire next week, I may look for today and tomorrow’s rollover opportunities beyond that monthly cycle end date to further add to that spreading of risk, if possible.

Daily Market Update – October 8, 2014 (Close)

There are lots of people who are dismayed to see the market pointing mildly higher this morning. Imagine how they must feel as it came to its unlikely close this afternoon.

That’s because they believe that after a 272 point sell off the real healthy market action would be to have a blow out kind of selling environment. That is thought to be akin to “getting it all out of your system” and then being in a position to start all anew.

Instead, thanks mostly to a dovish FOMC Statement that took notice of European weakness, the market erased yesterday’s loss and even had one of those “key reversals” that get mentioned every now and then.

Thoose are supposed to be very, very positive signals.

The “blow out” theorists do seem to have history on their side, but it tends to be the sort of thing that you see during a protracted market decline and has more false positives than you might want to know about if you believed in that theory. Just look at the period of time between October 2007 and March 2009 and you’ll see lots of declines that could have qualified as “blow outs,” but were predictive of nothing.

Before getting too smug about what means what, those key reversals aren’t perfect, either.

On the other hand, there’s probably nothing terribly wrong with creating another one of these 5% declines that seem to occur every two months. We’re less than 1.5% away from having done that and if the past two years is any guide, after having done so it’s off to more new records.

That pattern will remain to be a valid one until it’s broken and it’s anyone’s guess whether we are on a path to break the pattern now, but we should know soon, as the peak to trough back to peak over the past two years has generally been on the order of less than 3 weeks.

Did today break reconfirm that pattern?

Well, maybe, but you would have been prematurely optimistic if saying the same thing last Friday on a similar kind of day.

But with today being an FOMC Statement release day there may be a little more riding on it than usual. Always something that the market finds a reason to react to, today any change that could be construed as indicating interest rate hikes coming sooner than expected could really tip the already nervous market into something of a blow off kind of selling pattern.

That’s true even though we all know that with each passing month that interest rate hike becomes a case of “sooner rather than later.”

Yesterday’s sell-off in advance of today’s FOMC wa
s surprising and again, there really wasn’t very much of substance to support that kind of selling, although fingers were pointed at Europe. However, the market which had already opened gapped down from the previous day’s close took a real drop sometime after 2 PM without any new news to account for that sell off.

This kind of back and forth alternation between losses and gains, especially in the magnitude of the changes is different from the 5% corrections that we’ve gotten accustomed to seeing. Those have been more based on smaller, but sustained movements lower, just as the bounces higher had also not been characterized by explosive movements.

What that means is also anyone’s guess. In the past 5 years it has both meant a highly tumultuous market with a large net decline, as well as a market that essentially was treading water.

Volatility, as the day was getting ready to begin trading, was at the same level it was at its peak during the last market mini-correction, when the S&P 500 stood at 1925, which was 10 points below yesterday’s close.

In the past year volatility hit its peak in February, approximately 25% higher than it currently sits and the S&P 500 was then at 1741, which would represent a very sizeable drop from the current level.

However, even that February volatility peak is fairly low by historical standards, so there’s some reason to be concerned, but only if there is a breech of the usual 10% correction threshold.

For those that have cash reserves, despite what appears to be some bargain prices, I would still be reluctant to do much shopping, although an occasional purchase can still be a timely one.Today’s surge after the FOMC report was interesting to watch, but other than looking for some opportunities to sell calls, it wasn’t very enticing as far as making me part with any more money.

If you’ve been sitting back, today was a good day to continue inactivity and tomorrow may be the same. If the market is destined to go higher after today’s key reversal, let it do so and let it do the hard lifting. If it results in some assignments, that would be just fine by me.

Daily Market Update – October 8, 2014 (9:00 AM)

There are lots of people who are dismayed to see the market pointing mildly higher this morning.

That’s because they believe that after a 272 point sell off the real healthy market action would be to have a blow out kind of selling environment. That is thought to be akin to “getting it all out of your system” and then being in a position to start all anew.

The “blow out” theorists do seem to have history on their side, but it tends to be the sort of thing that you see during a protracted market decline and has more false positives than you might want to know about if you believed in that theory. Just look at the period of time between October 2007 and March 2009 and you’ll see lots of declines that could have qualified as “blow outs,” but were predictive of nothing.

On the other hand, there’s probably nothing terribly wrong with creating another one of these 5% declines that seem to occur every two months. We’re less than 1.5% away from having done that and if the past two years is any guide, after having done so it’s off to more new records.

That pattern will remain to be a valid one until it’s broken and it’s anyone’s guess whether we are on a path to break the pattern now, but we should know soon, as the peak to trough back to peak over the past two years has generally been on the order of less than 3 weeks.

But with today being an FOMC Statement release day there may be a little more riding on it than usual. Always something that the market finds a reason to react to, today any change that could be construed as indicating interest rate hikes coming sooner than expected could really tip the already nervous market into something of a blow off kind of selling pattern.

That’s true even though we all know that with each passing month that interest rate hike becomes a case of “sooner rather than later.”

Yesterday’s sell-off in advance of today’s FOMC was surprising and again, there really wasn’t very much of substance to support that kind of selling, although fingers were pointed at Europe. However, the market which had already opened gapped down from the previous day’s close took a real drop sometime after 2 PM without any new news to account for that sell off.

This kind of back and forth alternation between losses and gains, especially in the magnitude of the changes is different from the 5% corrections that we’ve gotten accustomed to seeing. Those have been more based on smaller, but sustained movements lower, just as the bounces higher had also not been characterized by explosive movements.

What that means is also anyone’s guess. In the past 5 years it has both meant a highly tumultuous market with a large net decline, as well as a market that essentially was treading water.

Volatility is now at the same level it was at its peak during the last market mini-correction, when the S&P 500 stood at 1925, which is 10 points below yesterday’s close.

In the past year volatility hit its peak in February, approximately 25% higher than it currently sits and the S&P 500 was then at 1741, which would represent a very sizeable drop from the current level.

However, even that February volatility peak is fairly low by historical standards, so there’s some reason to be concerned, but only if there is a breech of the usual 10% correction threshold.

For those that have cash reserves, despite what appears to be some bargain prices, I would be reluctant to do much shopping, although an occasional purchase can still be a timely one.

If you’ve been sitting back, today seems to be a good day to continue inactivity.