Category Archives: Daily Market Update

Daily Market Update – October 7,  2015  (Close)

After Monday’s 300 point surge it was Tuesday’s turn to take a day off, following the previous week’s pattern.

If that pattern were to hold true, the expectation would have been for today to be a day when the market gave back its earlier gains of the week.

Instead, though, the morning’s futures trading had been pointing toward what could have been a triple digit move, but instead of being lower, it’s 100 points higher.

The day actually finished exactly that way, even after having given up those gains mid-session, but the bottom line was that there was resilience.

That’s not been the recent trend as the market has now begun to move further away from the 10% correction level. Following yesterday’s close, the S&P 500 is now less than 8% lower as we head into the 8th week after the sharp declines that took us to a correction.

Following today’s close that was now down to about 7% below the summer’s highs.

With earnings season starting tomorrow and really getting underway next week, there’s very little enthusiasm for the results that are expected to be reported. The last two rounds of earnings haven’t been great as currency issues have kept revenues down and the impact of share buybacks on per share earnings is stabilizing so that artificial boost isn’t continuing to improve that metric.

So expectations are low and prices, by and large, are already low, at least in relative terms.

While it’s often a mistake to believe that prices couldn’t go any lower and it’s very easy to get sucked into what’s known as a value trap, selective buying at and around the 10% market decline level has, thus far, been a reasonable approach. While i expect that we may see some price moves higher as earnings are released, it would be easier to have a level of confidence if markets could give back some of those recent gains and move closer to that 10% correction line as earnings are getting ready to be released.

Before thinking too much about next week, though, we still have to get through this week.

Barring some drastic moves lower there is a good chance of seeing some combination of assignments and rollovers, but I don’t think that there’s too much reason to add to the week’s new positions as we await the end to this week.

For those over-exposed to energy and commodities this week has offered some catch-up performance just as previous weeks have under-performed, but points out how patience can be a virtue, even if a very frustrating one.

I wouldn’t mind seeing that unusual relationship of increasing energy and commodity prices and the market moving higher continue, even if it meant paying more at the pump and elsewhere.  I certainly wouldn’t mind ultimately extricating myself from some of those energy and commodity positions, though.

The rest of the week has little economic news to move markets, although Jobless Claims are released tomorrow morning and FOMC Minutes see the light of day in the afternoon.

Those minutes are sometimes market movers as traders and algorithms pore over each and every word looking for insights into what the FOMC’s level of conviction may be on certain actions. Despite the fact that there isn’t a necessarily good correlation between what’s found in those minutes and what actually transpires in the near future, traders haven’t given up on them as opening the door into the collective mind of the FOMC.

So there may be some gyrations tomorrow, as a result, but they shouldn’t be too long lasting. at least hopefully not long enough to alter the hoped for results as the week’s option contracts come to their end.

Daily Market Update – October 7,  2015  (8:45 AM)

After Monday’s 300 point surge it was Tuesday’s turn to take a day off, following the previous week’s pattern.

If that pattern were to hold true, the expectation would have been for today to be a day when the market gave back its earlier gains of the week.

Instead, though, the morning’s futures trading is pointing toward what may be a triple digit move, but instead of being lower, it’s 100 points higher.

That’s not been the recent trend as the market has now begun to move further away from the 10% correction level. Following yesterday’s close, the S&P 500 is now less than 8% lower as we head into the 8th week after the sharp declines that took us to a correction.

With earnings season starting tomorrow and really getting underway next week, there’s very little enthusiasm for the results that are expected to be reported. The last two rounds of earnings haven’t been great as currency issues have kept revenues down and the impact of share buybacks on per share earnings is stabilizing so that artificial boost isn’t continuing to improve that metric.

So expectations are low and prices, by and large, are already low, at least in relative terms.

While it’s often a mistake to believe that prices couldn’t go any lower and it’s very easy to get sucked into what’s known as a value trap, selective buying at and around the 10% market decline level has, thus far, been a reasonable approach. While i expect that we may see some price moves higher as earnings are released, it would be easier to have a level of confidence if markets could give back some of those recent gains and move closer to that 10% correction line as earnings are getting ready to be released.

Before thinking too much about next week, though, we still have to get through this week.

Barring some drastic moves lower there is a good chance of seeing some combination of assignments and rollovers, but I don’t think that there’s too much reason to add to the week’s new positions as we await the end to this week.

For those over-exposed to energy and commodities this week has offered some catch-up performance just as previous weeks have under-performed, but points out how patience can be a virtue, even if a very frustrating one.

I wouldn’t mind seeing that unusual relationship of increasing energy and commodity prices and the market moving higher continue, even if it meant paying more at the pump and elsewhere.  I certainly wouldn’t mind ultimately extricating myself from some of those energy and commodity positions, though.

The rest of the week has little economic news to move markets, although Jobless Claims are released tomorrow morning and FOMC Minutes see the light of day in the afternoon.

Those minutes are sometimes market movers as traders and algorithms pore over each and every word looking for insights into what the FOMC’s level of conviction may be on certain actions. Despite the fact that there isn’t a necessarily good correlation between what’s found in those minutes and what actually transpires in the near future, traders haven’t given up on them as opening the door into the collective mind of the FOMC.

So there may be some gyrations tomorrow, as a result, but they shouldn’t be too long lasting. at least hopefully not long enough to alter the hoped for results as the week’s option contracts come to their end.

Daily Market Update – October 6,  2015  (Close)

Last week it was down big, take a break, up big, take a break and up big following a big intra-day reversal.

This week got started with an up big kind of move and the following day looked as if it might be another of the “take a break” kind of days, but lately there hasn’t been too much of a reason for much of anything that we’ve been seeing.

As long as you ignore the impact of a single stock on the DJIA, which helped the index move higher, the S&P 500 went lower, but only mildly so, making it a breather kind of day.

Yesterday’s 300 point gain in the DJIA has left the S&P 500 less than 7.5% below its all time highs. That means that it had moved about 4.5% from its intra-day low on Friday to its close on Monday.

That gain came after the initial reaction to the poorer than expected Employment Situation Report data was released and there’s not much of an explanation to account for that large magnitude change in direction other than a change in the market’s thinking about prevailing economic data.

We may begin slowly getting some idea of what corporate America is experiencing as earnings begin again this week and in a normal world that earnings news would get appropriately translated by stock investors, but it seems as if it’s been a long time since there has been a normal world for those stock investors.

Some consistently good numbers on both top and bottom lines would do wonders for investors who surely would come to appreciate the fruits of an expanding economy more than the prospects of a fourth phase of Quantitative Easing.

It’s even hard to understand how people could have been talking about such prospects literally just days after having talked about how an interest rate increase was inevitable and could have come as early as in just a few weeks.

As Doug Kass so frequently has been saying of late “the market has no memory.”

Ultimately, it’s much better when the market does have a memory and is rational, but that may be asking too much.

Yesterday, despite the sharp climb higher, I found some reason to add some new positions. I usually like to do so when markets or individual stocks are heading lower, but the opportunities still seemed opportune.

I don’t usually suffer from the “fear of missing out” and certainly had no expectation of the market continuing its torrid 2 day rise, but the 2 new positions opened did seem to be reasonable safe trades for a short term horizon.

For the longer term, there was also some opportunity to sell longer dated calls on some uncovered positions, but the premiums are already beginning to show some relative decline as volatility has fallen quite a bit as the market has taken that rapid climb.

History hasn’t been one to warrant the belief that large and rapid climbs higher are sustainable, so whatever opportunities may arise to sell calls on non-performing assets may be worth taking while waiting for the market to actually create a more sound foundation upon which it can begin seriously heading and staying higher.

With plenty of time left in this week I still wouldn’t count out the possibility of adding some more new positions, but would much rather be in a position to watch existing assets appreciate and maybe get some more opportunity to put the lazy ones back to work or even simply rollover some that might be in line for assignment.

Ultimately, it’s all just money and it may not matter what the source of the money was, as long as there’s no white powder residue.

 

Daily Market Update – October 6,  2015  (8:30 AM)

Last week it was down big, take a break, up big, take a break and up big following a big intra-day reversal.

This week got started with an up big kind of move and the following day looks as if it may be another of the “take a break” kind of days, but lately there hasn’t been too much of a reason for much of anything that we’ve been seeing.

Yesterday’s 300 point gain in the DJIA has left the S&P 500 less than 7.5% below its all time highs. That means that it had moved about 4.5% from its intra-day low on Friday to its close on Monday.

That gain came after the initial reaction to the poorer than expected Employment Situation Report data was released and there’s not much of an explanation to account for that large magnitude change in direction other than a change in the market’s thinking about prevailing economic data.

We may begin slowly getting some idea of what corporate America is experiencing as earnings begin again this week and in a normal world that earnings news would get appropriately translated by stock investors, but it seems as if it’s been a long time since there has been a normal world for those stock investors.

Some consistently good numbers on both top and bottom lines would do wonders for investors who surely would come to appreciate the fruits of an expanding economy more than the prospects of a fourth phase of Quantitative Easing.

It’s even hard to understand how people could have been talking about such prospects literally just days after having talked about how an interest rate increase was inevitable and could have come as early as in just a few weeks.

As Doug Kass so frequently has been saying of late “the market has no memory.”

Ultimately, it’s much better when the market does have a memory and is rational, but that may be asking too much.

Yesterday, despite the sharp climb higher, I found some reason to add some new positions. I usually like to do so when markets or individual stocks are heading lower, but the opportunities still seemed opportune.

I don’t usually suffer from the “fear of missing out” and certainly had no expectation of the market continuing its torrid 2 day rise, but the 2 new positions opened did seem to be reasonable safe trades for a short term horizon.

For the longer term, there was also some opportunity to sell longer dated calls on some uncovered positions, but the premiums are already beginning to show some relative decline as volatility has fallen quite a bit as the market has taken that rapid climb.

History hasn’t been one to warrant the belief that large and rapid climbs higher are sustainable, so whatever opportunities may arise to sell calls on non-performing assets may be worth taking while waiting for the market to actually create a more sound foundation upon which it can begin seriously heading and staying higher.

With plenty of time left in this week I still wouldn’t count out the possibility of adding some more new positions, but would much rather be in a position to watch existing assets appreciate and maybe get some more opportunity to put the lazy ones back to work.

Daily Market Update – October 5,  2015  (Close)

The last few weeks have been weeks of polar extremes. Not necessarily from one week to the next, but rather during the course of each individual week.

We’ve had the recent experience of opening weeks up very weakly or very strongly and then ending the week in just the opposite fashion.

Last week’s very impressive turnaround on Friday helped to end a consecutive streak of losing weeks and lifted the S&P 500 from being below that 10% correction line that we’ve been tethered to for the past 6 weeks.

This morning begins a week that really doesn’t have very much in the way of news. While FOMC Meeting Minutes are being released near the end of the week and another earnings season also begins near the end of the week, there’s little before that to get much attention.

Last week certainly had its ups and downs culminating with a very disappointing Employment Situation Report that really sent stocks in a freefall as they started Friday’s trading. That disappointment was related to the newfound belief that a rise in interest rates wouldn’t strangle the economy and was, instead, reflective of an improving economy.

So not getting that increase sent a message that all wasn’t well, but that message didn’t last very long.

Fortunately, that turnaround on Friday helped to see to it that a number of positions got assigned and was a nice thing to happen for anyone looking to increase their cash position.

Now, with more cash in hand, I’m still willing to part with some, particularly as premiums are relatively elevated and share prices have the appearance of being bargain priced.

That appearance can always be deceiving, of course, as they could and do frequently get even cheaper if they’re not attractive enough to draw in buyers.

Lately I’ve been buying more than has been the case for nearly the past 6 months, but there is still some uncertainty about what comes next for our own market.

As the 10 Year Treasury fell below 2% on Friday, once again stocks become more attractive. As China, Japan and Europe have their own hurdles that just adds to the appeal that US equity markets hold.

While the FOMC may not have gotten any real reason to justify a rise in interest rates after this past week’s Employment SItuation Report, the beginning of another earnings season may start to supply some proof that the consumer is returning and becoming more optimistic and confident. An increase in both revenues and earnings could be the sign that we all are looking for that the economy is on an expansion path and could finally be what the FOMC needs to justify the action that they’ve been telegraphing for so long.

This week I will be open to parting with cash, particularly since there are only a small number of expiring positions for the week and only a single ex-dividend position to create the cash stream that I’ve become addicted to. What I didn’t count on was parting with the cash so quickly and in the face of a market that had already climbed quite a bit straight out of the gate.

As with previous weeks I will be likely drawn more to short term contracts and would love to add a dividend or two to the mix, but you never know where the opportunity will be, as the script is frequently poorly suited for unfolding events. Today followed the script a little bit and followed an older dated script, as well.

With today’s 304 point climb, nearly identical to last Monday’s decline of 312 points, I’d like to see some more equilibration as we near the end of the week and wouldn’t mind some more of that dance in the vicinity of the 10% correction line