Category Archives: Daily Market Update

Daily Market Update – October 20,  2015  (8:45 AM)

The earnings are flowing in as the morning is ready to begin, but the biggest news and the biggest moves are coming from companies with news unrelated to earnings. When stock prices are low corporate opportunists and activists take center stage and companies take actions that they probably should have taken before the barrel was placed against their head.

As far as the earnings go, so far they haven’t been terribly exciting and they haven’t had too much impact on the market. Companies are still attempting to mitigate bad news with announcements of share buybacks, but that’s having less and less impact, even as buybacks make much more sense at lower share prices and should be more applauded by investors now than when being undertaken at record highs.

This morning is shaping up no differently and the excitement level is hard to find, as there is no pattern developing in the health, quality and forward looking nature of earnings being reported.

What does appear to be a continuing pattern is that the market is punishing unexpected bad news much more than it is rewarding unexpected good news.

With the FOMC getting ready to meet next week the days are dwindling to just a handful remaining for any meaningful economic data to be released that could reasonably be expected to lead to an FOMC decision to raise interest rates.

Given the way in which the market turned around its thinking and again decided that a delay in that rate hike was a good thing, I would imagine that as we draw closer to the FOMC meeting we could expect another in a series of higher moving days.

As long as there’s no overwhelmingly negative picture being painted by corporate earnings that next move higher may be coming. Ironically, even a sad earnings picture may end up being a good thing as far as minimizing the likelihood of a rate increase, so traders may actually be indifferent to earnings this time around.

That may explain the relatively listless trading of the past week.

I was happy to find some potential investment opportunities yesterday and now wouldn’t mind if that listlessness continued in order to have a better chance at seeing those positions either get assigned or be in position for rollovers.

With what has become the new normal for new positions opened in a week, maybe even a little bit higher than the new normal, I don’t expect to part with much more cash for the week. However, every time that I think that’s going to be the case it seems that something pops up to change my mind. Despite the market having impressively recovered most of the large correction since the end of August, there still appear to be opportunities. I don’t have too much free cash to explore those opportunities, but as I’ve done for the past few months, I don’t mind borrowing from myself with the intention of a quick repayment of those loans.

So far, that short term horizon has been working out since the market took its plunge some two months ago.

With only one position expiring next week, I’d like to see more assignments than rollovers, but either would be just fine. In fact, the one position expiring next week is one that I’ve been trying to rollover for the past week and am hopeful that I can still keep that trade alive, as it has been a classic revenue machine despite having had very little net movement in share price.

Otherwise, this week, just as has been the case for the past month or so, has been dictated by energy and materials. Thus far, the past few days have been negative in those sectors, but as also has been the case over the past few months, that’s bound to change and then change again and again.

Daily Market Update – October 19,  2015  (Close)

This will be a big week for earnings, as about 20% of the S&P 500 reports and with a large number of DJIA components from among them.

The week is getting started with a really disappointing earnings report from Morgan Stanley which I thought might make it an attractive financial stock to consider buying , after not having owned it for a while.

Short story?

It did.

The market also woke up this morning to the news of nearly 7% GDP growth in China.

Depending upon who you listen to, the spin is either that the reported growth is disappointing or it’s better than expected.

The one thing that you can probably count on is that it may be more deserving of revision than our own imperfect reports. While we occasionally hear people claim that our economic reports are cooked, especially immediately before a Presidential election, there’s not too much reason to believe that the Chinese economic reports aren’t manipulated on a very regular basis in order to fulfill political needs.

Considering that there’s a fair amount of pressure from within and outside, you could understand why there might be some undeserved optimism being reflected in official data.

This morning the market looked as if it may be taking a little rest and looking for some kind of cue in order to decide where to go next.

Short story?

It did.

While the FOMC will probably be paying some attention to earnings and to matters in China, it’s not too likely that there will be enough coming from any sources, reliable data or otherwise, to give a really good reason to push forward with an interest rate increase.

Now, sitting at the end of October, it’s actually hard to believe that we may not get that rate hike until 2016, as that kind of delay had been widely urged by most of the world. Not that long ago that smart money had been on an increase in March 2015, then June, then July and even October.

While traders aren’t looking at that delay as being bad news, it really is bad news, as our own economy can’t seem to get the kind of traction to create any meaningful heat. It’s now been a while since Quantitative Easing has ended and there has been lots of time for something to take hold, but growth has been elusive, even as expectations for it have been widespread.

Basically, the smart money doesn’t know much more about things than anyone else.

With a decent amount of cash freed up by assignments last week and with only a small number of positions set to expire this week, I was inclined to want to spend some of that cash or at the very least look for some rollovers from among the upcoming week’s expirations in order to generate some income.

As has been a successful strategy over the past few weeks, not because there’s been anything new about the strategy, but more because that’s just how things have worked out, I’d have loved to have see a down Monday to start the week so that new positions could be added on weakness.

Short story?

It didn’t happen that way, but neither did it run loose higher.

While it’s generally a good idea to buy low, lately Mondays have offered that opportunity more than they had in the past year, treading water seemed good enough today, especially for those positions that have already had their own personal plunges lately.

Daily Market Update – October 19,  2015  (8:30 AM)

This will be a big week for earnings, as about 20% of the S&P 500 reports and with a large number of DJIA components from among them.

The week is getting started with a really disappointing earnings report from Morgan Stanley which may be making it an attractive financial stock to consider buying , after not having owned it for a while.

The market also woke up this morning to the news of nearly 7% GDP growth in China.

Depending upon who you listen to, the spin is either that the reported growth is disappointing or it’s better than expected.

The one thing that you can probably count on is that it may be more deserving of revision than our own imperfect reports. While we occasionally hear people claim that our economic reports are cooked, especially immediately before a Presidential election, there’s not too much reason to believe that the Chinese economic reports aren’t manipulated on a very regular basis in order to fulfill political needs.

Considering that there’s a fair amount of pressure from within and outside, you could understand why there might be some undeserved optimism being reflected in official data.

This morning the market looks as if it may be taking a little rest and looking for some kind of cue in order to decide where to go next.

While the FOMC will probably be paying some attention to earnings and to matters in China, it’s not too likely that there will be enough coming from any sources, reliable data or otherwise, to give a really good reason to push forward with an interest rate increase.

Now, sitting at the end of October, it’s actually hard to believe that we may not get that rate hike until 2016, as that kind of delay had been widely urged by most of the world. Not that long ago that smart money had been on an increase in March 2015, then June, then July and even October.

While traders aren’t looking at that delay as being bad news, it really is bad news, as our own economy can’t seem to get the kind of traction to create any meaningful heat. It’s now been a while since Quantitative Easing has ended and there has been lots of time for something to take hold, but growth has been elusive, even as expectations for it have been widespread.

Basically, the smart money doesn’t know much more about things than anyone else.

With a decent amount of cash freed up by assignments last week and with only a small number of positions set to expire this week, I’m inclined to want to spend some of that cash or at the very least look for some rollovers from among the upcoming week’s expirations in order to generate some income.

AS has been a successful strategy over the past few weeks, not because there’s been anything new about the strategy, but more because that’s just how things have worked out, I’d love to see a down Monday to start the week so that new positions could be added on weakness.

It’s generally a good idea to buy low, but lately Mondays have offered that opportunity more than they had in the past year.

This morning the market is just a little bit weaker as we await the opening bell, but I wouldn’t mind some sellers piling on and at least erasing last Friday’s late session gains.

Daily Market Update – October 16,  2015  (8:30 AM)

The Weekend Update will be posted by 6 PM and the Weekend Update will be posted by Noon on Sunday.

The following trade outcomes are possible today:

Assignments:  ABBV, SBGI

Rollovers: ANF

Expirations:  EMC, MRO

The following were ex-dividend this week:  FCX (10/12 $0.05), AAB (10/13 $0.51)

The following will be ex-dividend next week: FAST (10/23 $0.28)

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

Daily Market Update – October 15,  2015  (Close)

Yesterday’s sell off was really unexpected, but if you filtered out the really large drops in Wal-Mart and Boeing, both DJIA components, all of a sudden it wasn’t quite that large.

Those two accounted for more than half of yesterday’s loss in that index, which was down 0.8%, while the S&P 500 was only down by 0.5%.

That’s still a sizeable drop, but it was really greased by the rapid plunge in Wal-Mart, which took a nearly 10% plunge in a heart beat, about 64 minutes into trading.

This morning it looked as if we’re back to the pattern that was in effect prior to the run higher over the previous 10 days.

That pattern had large declines one day being very often offset in part the following day by some kind of tepid recovery.

The net result of that pattern was to take the market lower and lower.

While I’d like to see the market strengthen, the way it had moved higher over these two previous weeks isn’t really the historical way that the markets have built strength.

But right at noon, something just clicked and the market went on another tear higher. Maybe it was a very minor support level at the 1994 level on the S&P 500, but that’s as good of an explanation as anything else that you can conjure up.

For the rest of this week and for next week, which is the start of the November 2015 option cycle, there continues to be relatively little news, yet today showed you don’t need news.

While we await the FOMC meeting the following week most of our attention will be focused on earnings which really started in force earlier this week and continued this morning with some big names reporting.

With some mixed results coming from the major financials there hasn’t been too much reason for the market to make a strong statement in one direction or another as the financial sector results so far seem to be very much company specific and without any over-riding themes.

What was pretty fascinating today was how some of those disappointing earnings reported this morning before the opening bell were really turned around as the day ended. Goldman Sachs, for example did a nearly $10 turnaround, or about 6%

For the rest of the week I don’t think that I’ll surprise myself again and open another new position as was the case yesterday. Increasingly, as this market goes back and forward, I find myself doing what has often been the easiest and most profitable of all things, which is simply to go back to the well for the same stocks over and over again. As long as those stocks go back and forth around some kind of arbitrary price point it is almost like shooting fish in a barrel.

That accounts for the fact that two of this week’s purchases weren’t on the prospective weekly list and that’s been the case over the past few weeks, as well.

There’s no doubt that doing things that way is more boring, but it’s the kind of boring that I can easily live with and would much rather deal with than the excitement of new discovery.

Hopefully this week will again end with a good combination of rollovers and assignments and leave us in good shape to begin populating the November weekly cycle with positions.