Category Archives: Daily Market Update

Daily Market Update – September 1,  2015  (Close)

There are some nights that I go to bed just knowing that the following day is not likely to be a very good one.

Last night was one of those nights as the S&P 500 futures were tumbling and the outlook for China and Japan weren’t looking very good as their opens were getting near.

I tend to wake up even earlier than usual the next morning to see whether overseas markets were able to turn around, but more importantly to see whether our futures were able to turn around in the early hours of the morning.

Not as if there was really anything that could be done about it, other than having an extra cup of coffee.

Many times those markets do turn around because the overnight futures trading is really very light and it doesn’t take that much to stop what may be looking like a hemorrhage, but isn’t really.

For anyone that actually looks at individual stock prices in the pre-open, you may recall how Holly Frontier had fallen $12 one morning last week on a volume of about 305 shares. Once the opening bell rang, Holly Frontier started trading at a loss of about $1, pretty much where it ended the day even as the market fell by more than 3%.

This morning it was United Continental that was down about 20% in the pre-open on also just a couple of hundred of shares.

This morning, though, it looked as if the selling in the S&P 500 futures had gotten worse from the previous evening.

Overnight China fell, but not as much as has become their norm lately, but Japan also fell and they fell with Chinese market-like quality and quantity, approaching a 5% decline for their session.

Hong Kong, too and Europe was now following.

The news from China wasn’t very good, especially as you start seeing some more desperate kind of moves, which includes some coerced buying by brokerage houses and increasing threats of arresting and punishing “malicious short sellers.”

Last week’s impressive recovery during the middle of the week took the S&P 500 out of correction territory, but this morning’s early losses would put it right back. That tends to be the pattern of markets that feature really large moves higher, as we’ve definitely been seeing over the past few months and especially pronounced over the last few weeks.

The net sum of all of the large moves higher and large moves lower tends to be a negative one and in a meaningful way.

So far, this recent series of very large moves higher has certainly been consistent with history.

With the morning looking as if it was about to get off to a very sour start, it probably wasn’t a great time to go hunting for anything that looked like a bargain, as that hasn’t necessarily been a good strategy of late, despite those occasional appearances to the contrary.

Still, it was hard to resist a small position in General Electric for the day and somehow a couple of rollover opportunities popped up, as well, despite what would be another 400+ down session.

At this point, probably the best thing the market could do would be to re-group at this lower level and build the kind of technical support necessary to launch a move higher than can be sustained. These quantum leaps higher are basically worthless, as they represent points that people who wished that they had gotten out earlier then simply take the new opportunity presented to them to cash out.

That sort of thing doesn’t happen when the recovery from a severe drop is slow and methodical.

Forget about technical analysis and support and resistance levels. It’s all about basic investor psychology th
at continually balances fear and greed.

With that drop the fear is definitely overtaking the greed, as there’s not too much evidence of bottom dipping going on.

Today was expected to be a likely day of observation, but maybe the rest of the week may turn out that way, as it culminates with the Employment Situation Report.

The August data is usually on the low side, but a larger than expected number might lead to selling, at least the way our mindset has been for the past year or more. However, we may now be finding ourselves at a cross road in the realization that our economy is a relative winner against the rest of the world and a rate increase would just be confirmation of that fact.

I hope that number is a good one on Friday, not just for what it means for individuals in the workforce, but for what it could mean as it may be the start of a market resurgence based on optimism for accelerating economic growth.

Daily Market Update – September 1,  2015  (8:00 AM)

There are some nights that I go to bed just knowing that the following day is not likely to be a very good one.

Last night was one of those nights as the S&P 500 futures were tumbling and the outlook for China and Japan weren’t looking very good as their opens were getting near.

I tend to wake up even earlier than usual the next morning to see whether overseas markets were able to turn around, but more importantly to see whether our futures were able to turn around in the early hours of the morning.

Many times they do because the overnight futures trading is really very light and it doesn’t take that much to stop what may be looking like a hemorrhage, but isn’t really.

For anyone that actually looks at individual stock prices in the pre-open, you may recall how Holly Frontier had fallen $12 one morning last week on a volume of about 305 shares. Once the opening bell rang, Holly Frontier started trading at a loss of about $1, pretty much where it ended the day even as the market fell by more than 3%.

This morning, though, it looks as if the selling in the S&P 500 futures has gotten worse.

Overnight China fell, but not as much as has become their norm lately, but Japan also fell and they fell with Chinese market-like quality.

Hong Kong, too and Europe is now following.

The news from China isn’t very good, especially as you start seeing some more desperate kind of moves, which includes some coerced buying by brokerage houses and increasing threats of punishing “malicious short sellers.”

Last week’s impressive recovery during the middle of the week took the S&P 500 out of correction territory, but this morning’s early losses will put it right back. That tends to be the pattern of markets that feature really large moves higher, as we’ve definitely been seeing over the past few months and especially pronounced over the last few weeks.

The net sum of all of the large moves higher and large moves lower tends to be a negative one and in a meaningful way.

So far, this recent series of very large moves higher has certainly been consistent with history.

With the morning looking as if it about to get off to a very sour start, it’s probably not a good time to go hunting for anything that looks like a bargain, as that hasn’t necessarily been a good strategy of late, despite those occasional appearances to the contrary.

At this point, probably the best thing the market could do would be to re-group at this lower level and build the kind of technical support necessary to launch a move higher than can be sustained. These quantum leaps higher are basically worthless, as they represent points that people who wished that they had gotten out earlier then simply take the new opportunity presented to them to cash out.

That sort of thing doesn’t happen when the recovery from a severe drop is slow and methodical.

Forget about technical analysis and support and resistance levels. It’s all about basic investor psychology that continually balances fear and greed.

Today is likely to be one of observation and that may be the case for the rest of the week, as well, which culminates with the Employment Situation Report.

The August data is usually on the low side, but a larger than expected number might lead to selling, at least the way our mindset has been for the past year or more. However, we may now be finding ourselves at a cross road in the realization that our economy is a relative winner against the rest of the world and a rate increase would just be confirmation of that fact.

I hope that number is a good one on Friday, not just for what it means for individuals in the workforce, but for what it could mean as it may be the start of a market resurgence based on optimism for accelerating economic growth.

Daily Market Update – August 31,  2015  (8:15 AM)

While it’s not too likely that this week, or any week, can really be anything like the one that we just concluded, with lots of global economic turmoil being fomented from within China continuing, you just never know.

This morning the week begins with news that CHina has announced that it will no longer be buying stocks in its open markets, helping to support those prices amidst a plunge that had taken t6he SHanghai market down by more than 30%.

As it is, even with a wide range of interventions all within a confined period of time, that market is still down 20% and it really is anyone’s guess as to what unbridled market forces can now accomplish, if intervention is ending.

This morning, our own futures are pointing to another triple digit decline, after last week’s very tumultuous week ended on a very sedate note.

For our part, the only real potential catalyst that we may have to move markets will come on Friday, as the Employment SItuation Report is released.

The timing of that release may be a little unfortunate as markets are closed on the following Monday.

Although the past few years haven’t seen the exercise of the old adage of to not stay long over a weekend of uncertainty, especially if it’s going to be a long holiday extended weekend, this time it could be different.

With lots of uncertainty over what the FOMC has in mind and whether it interprets data differently from the rest of us, any indication of a strong jobs market could again stoke those completely unnecessary fears of an interest rate hike.

I still can’t understand why that has been feared so much and for so long, especially since so many people are well versed in the market’s trading patterns. Such early rate hikes turn out to come at times when markets still have lots of energy to move higher.

Anyway, as was noted in this week’s Weekend Update, whatever may await us is open to lots of interpretation.

10% corrections mean nothing as far as predicting where the market will go next. They certainly don’t portend an upcoming bear market. Yet, on the other hand, the kind of really large moves higher that we’ve seen do portend a continuing weak market.

With a few positions set to expire this week, an unusually large number of ex-dividend positions and still relying on the equivalent of margin funds to make new purchases, I am not likely to be anxious to open any new positions.

Of course, I’ve said that before.

As has been the case for quite a while, I would be most happy with the chance to sell call options on uncovered positions,  and would love to see some assignments this week to repay myself the margin extended to me.

That, however, seems unlikely as the week begins, so instead, I’d be really happy just to see those expiring positions get rolled over.

Hopefully this week will see some liquidity increase in the options market, as it would be great to take advantage of growing premiums. But as last week showed, there was so much uncertainty that buyers and sellers of options just couldn’t commit themselves to the trades, as the bid – ask spreads were unusually large. For the most part, it was the absence of buyers for both calls and puts that was at fault last week.

Continued market volatility, though, would likely start bringing in more motivated buyers and that would be great, because I am definitely a motivated seller.

Hopefully, this week will also continue the recent trend of out-performing the market, but also do so in more than relative terms and also add to portfolio value.

That’s more meaningful than just being able to say “I won,”when you still ended up losing.

Daily Market Update – August 28,  2015  (7:30 AM)

The Week in Review will be posted by 12 Noon on Saturday and the Weekend Update will be posted by Noon on SUnday.

The following trade outcomes are possible today:

Assignments:   none

Rollovers:    none

Expirations:   none

The following were ex-dividend this week: MAT (8/24 $0.38), ANF (8/28 $0.20), SBGI (8/28 $0.16)

The following will be ex-dividend next week:   HAL (8/31 $0.18), HFC (8/31 $0.33), COH (9/3 $0.34), BAC (9/2 $0.05), MOS (9/1 $0.28), JOY (9/2 $0.20), KSS (9/4 $0.45)

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

Daily Market Update – August 27,  2015  (Close)

This has been a week of some really jaw dropping moves, but still, in percentage terms, nothing like some of the plunges, surges and then more plunges that we saw in 2008 and the early part of 2009.

Some people are mentioning that, but they treading very softly. They’re not saying the unsaid. That is that all of those incredibly stunning moves higher were more than offset by stunning moves lower, in addition to death by a thousand cuts.

In addition to the really large moves higher, back in 2008 and 2009, as well as late 2007, there were lots of smaller moves that simply added up to move markets significantly lower.

What was missing were the same kind of smaller moves strung together to bring the market higher.

I was happy to be able to get some trades in yesterday to take advantage of some of the strength, but the options market is still not fully participating in terms of volume and willingness to make trades.

While yesterday may have added a little more to the overall sense of confusion about which way things will move next, this morning’s strong open to the futures trading may bring some of those reluctant option buyers out from the woodwork.

Although two consecutive days don’t really make a trend, the bar is set pretty low and people are looking for any sign of stability in the market.

The overnight action by China to purchase stocks in the open market turned things around in Shanghai and may have helped today get off to a positive start as we awaited GDP numbers and any other comments that might come from the Federal Reserve party at Jackson Hole, that is not being attended by Janet Yellen.

Those GDP numbers were strong and may have given the very first suggestion that the economy is getting stronger.

What was fascinating today was that the mrket could close up more than 350 points after yesterday’s 600+ points on a day that could have made it easier for the FOMC to raise rates and on a day that oil surged.

Go figure,

So instead of hearing anything from Janet Yellen after today’s unusual combination of events, we may get to hear someting from her Vice-Chair, and nearly everyone’s mentor, Stanley Fischer. in her absence.

With no positions set to expire this week, but with some rollovers, new positions opened and an isolated call sale on an uncovered position, in addition to some ex-dividend positions, it has been a decent income week, but there’s still much more to be done.

Today’s action also mde it more appealing, on paper, anyway.

I don’t know how much of what remains undone will get done during the rest of the week, but I definitely would welcome the climb higher.

It would be much nicer, though to see that climb come in little bits and drabs. You may or may not believe in technical analysis, and by and large, I don’t, but there is something to be said for the unsustainability of real surges higher.

When there’s not a very good foundation underneath a stock’s price, it really is very easy to see those shares tumble. As much as everyone talks about a V-shaped recovery, they’re not necessarily the kind that you like to see for longer term stability.

On the other hand, if you established some positions before the climb higher, you can definitely take advantage of the higher premiums available even on out of the money strikes.

That’s what has really been missing for the longest time. In that kind of environment you find yourself not opening very many new positions, but rather trying to keep playing and re-playing the same ones, as even in the money
positions may make more sense to keep that to let be assigned.

We’re not quite at that stage yet, but if this back and forth does continue it could end up being a trader’s best friend. For now, though, it would really be good to create some base beneath these past two days and set up markets and portfolios to challenge resistance, now that it has challenged support.