Category Archives: Daily Market Update

Daily Market Update – July 22,  2015  (9:15 AM)

More earnings came after yesterday’s closing bell and they continued the shift of the path of the first full week of earnings. That shiftt began before yesterday’s open.

While yesterday was another in a series of days in which the DJIA was lagging behind the S&P 500 and the NASDAQ 100, due in part to some large moves in DJIA comoponents and a streak of forward moves by a very small handful of NASDAQ components, this morning, as we get ready to begin, the shoe is on the other foot.

This time, the dual disappointments from Microsoft and Apple add a double dose of earnings disappointment to the NASDAQ, which is based on market capitalization, as opposed to the DJIA, which is based on share price.

That share price is one of the reasons, maybe the only real reason that Apple had to split 7 to 1. Had it not done so, this morning’s $9.50 decline in the futures trading would have detracted about 420 points from the DJIA, instead of the paltry 60 points.

Microsft, on the other hand, despite being only half as much as Apple on a percentage basis, is costing the DJIA only about 10 points.

On the other hand, the combined market capitalization of Apple and Microsoft was over $1.1 Trillion before this morning’s prices settle.

At the moment, before the opening bell rings, as a result the DJIA is down about 0.2%, the S&P 500 is down about 0.4% and the NASDAQ 100 is down 1.1%.

That’s a complete reversal odf the picture as the market had been moving higher, but sooner or later that’s the way most things go. Whatever goes up goes down and whatever lags, tends to catch up in relative terms.

While the earnings reports after yesterday’s close were disappointing, it really remains to be seen what kind of an impact the most recent reports will have on today’s market. Yesterday’s early disappointments took their real toll on the DJIA, but there was enough pain to spread around as the broader market got progressively weaker as the morning went on.

What was also noticeable yesterday was the large hits taken by some lesser known stocks when reporting earnings disappointments. Even announcing the plans to cut jobs, normally something that offsets some of the price declines associated with disappointing earnings, did little, if anything to stem the decline in Lexmark, for example.

With a little bit of cash still in hand, I don’t think that I’ll be likely to spend any more for the remainder of the week unless there’s some significant weakness to capitalize on, such as in Lexmark, maybe.

With still lots more earnings yet to be reported, there’s a need to erase the disappointments from yesterday and a need to paint a picture that’s consistent with an expanding economy.

Of course, that would re-introduce fears of an interest rate increase, but most are beginning to accept the likelihood that a rate increase will become reality by September.

Daily Market Update – July 21,  2015  (Close)

Earnings are coming through this morning and some of the methodology differences in calculating the DJIA and S&P 500 resulted in another divergence between the two this morning and it widened during the day’s trading session.

That happens whenever a DJIA component, or two, that happen to be relatively high priced per shares, as was the case this morning, have large moves in the same direction. The size of those moves is more accentuated in the DJIA than in the broader index that is market capitalization weighted, rather than being price weighted.

For example, IBM’s move this morning had contributed about 56 points to the DJIA, although in the wrong direction. United Technologies is doing the same, but only reducing the index by about 25 points. Of course, they have some considerable impact on the S&P 500, as well, since they are so large, but much less than on the DJIA and none on the NASDAQ 100.

In fact, by the time the closing bell rang IBM and United Technologies accounted for about 110 points of the DJIA’s loss.

While that’s always interesting, sometimes those divergences actually say something more than simply reflecting on the way the indexes are calculated.

In the previous week that dichotomy existed all through the week and included the NASDAQ 100, as well, which was the great out-performer, with the DJIA lagging behind the S&P 500, as well.

What the recent market has been reflecting is that the advance from the 5% mini-correction has been very much led by a small number of very large market capitalization stocks. Those stocks also happen to have been NASDAQ 100 stocks.

Late this morning there was actually something on CNBC that highlighted just that point, but they went a step further by recalculating the NASDAQ 100 if the big gainers had been removed. Suddenly, those large cap NASDAQ stocks were seen as having contributed nearly 100% of the NASDAQ’s very impressive gain.

Suddenly the actually health of the NASDAQ 96 or so wasn’t that great.

While the market was just a hair away from setting a new high on the S&P 500 and while the NASDAQ has again closed at another new high, the advance has been nowhere near as broad as you might believe. It’s very much been a phenomenon of a handful of companies that are distorting the indexes, especially the S&P 500 and the NASDAQ 100.

That creates a condition where you can feel left behind, but are very much in the same boat as most people, unless they happen to have shares in those great gainers.

Hopefully some of the good fortune of those that have been carrying the markets will diffuse a little bit to the rest of the market and carry it along for the ride higher.

That, surprisingly, wasn’t going to be th case today, even though the DJIA was far worse than the S&P 500 to end the day.

After a good beginning to earnings season, this morning had brought some disappointing numbers, but no real surprises.

There are still lots more earnings reports to come and for the moment not too much economic news. Neither is there international events on the immediate horizon to hijack our attention.

While earnings will continue to come in at a strong pace for the next week or so the re-strengthening of the US Dollar may again begin to temper forward guidance, although that hasn’t been the case to this point.

While I’d like to see some increase in volatility in order to make option premiums more attractive, at the moment that’s outweighed by a hope that the market does get to follow in the path of some of those recent great NASDAQ gainers and simply move higher.

I would trade off opening new pos
itions for the time being for that kind of equilibration and spreading of the wealth.

Daily Market Update – July 21,  2015  (8:30 AM)

Earnings are coming through this morning and some of the methodology differences in calculating the DJIA and S&P 500 are resulting in another divergence between the two this morning.

That happens whenever a DJIA component, or two, that happen to be relatively high priced per shares, as is the case this morning, have large moves in the same direction. The size of those moves is more accentuated in the DJIA than in the broader index that is market capitalization weighted, rather than being price weighted.

For example, IBM’s move thois morning is contributing about 56 points to the DJIA, although in the wrong direction. United Technologies is doing the same, but only reducing the index by about 25 points. Of course, they have some considerable impact on the S&P 500, as well, since they are so large, but much less than on the DJIA and none on the NASDAQ 100.

While that’s always interesting, sometimes those divergences actually say something more than simply reflecting on the way the indexes are calculated.

In the previous week that dichotomy existed all through the week and included the NASDAQ 100, as well, which was the great out-performer, with the DJIA lagging behind the S&P 500, as well.

What the recent market has been reflecting is that the advance from the 5% mini-correction has been very much led by a small number of very large market capitalizatoin stocks. Those stocks also happen to have been NASDAQ 100 stocks.

While the market was just a hair away from setting a new high on the S&P 500 and while the NASDAQ has again closed at another new high, the advance has been nowhere near as broad as you might believe. It’s very much been a phenomenon of a handful of companies that are distrorting the indexes, especially the S&P 500 and the NASDAQ 100.

That creates a condition where you can feel left behind, but are very much in the same boat as most people, unless they happen to have shares in those great gainers.

Hopefully some of the good fortune of those that have been carrying the markets will diffuse a little bit to the rest of the market and carry it along for the ride higher.

After a good beginning to earnings season, this morning has brought some disappointing numbers, but no real surprises.

There are still lots more earnings reports to come and for the moment not too much economic news. Neither is there international events on the immediate horizon to hijack our attention.

While earnings will continue to come in at a strong pace for the next week or so the re-strengthening of the US DOllar may again begin to temper forward guidance, although that hasn’t been the case to this point.

While I’d like to see some increase in volatility in order to make option premiums more attractive, at the moment that’s outweighed by a hope that the market does get to follow in the path of some of those recent great NASDAQ gainers and simply move higher.

I would trade off opening new positions for the time being for that kind of equilibration and sharing of the wealth.

Daily Market Update – July 20,  2015  (Close)

There is almost nothing happening this week on the economic calendar.

There’s also not too much expected on the international front as for now Greece and China seem to be quiet and Europe is getting ready for its month off. While Greece may be off the map for a while to come, it’s still anyone’s guess as to when we get back to realizing what a potential calamity may be forming in China.

But until any further indication that will be the case, it’s as if China doesn’t exist, at least in regard to presenting a level of liability that we’d prefer not to have to face.

What we do have this week is an avalanche of earnings and by all indications from last week, they are going to be better than expected.

The flow of positive information comes at a time that the market is just a fraction of a percent away from its all time highs and depending upon your persepctive is within easy reach of a technical resistance point or technical support point.

Depending upon how you look at it, that point is a launching pad for a climb higher or a jump off point to go lower.

But when you combine it with what may be a torrent of continuing good news there may be reason to think that it will end up being a launching pad more than anything else.

Considering that we’ve just bounced back from another one of those mini-corrections, although it was overdue, there’s not too much evidence over the past 3 years that we would turn around and head right back into another such correction without a substantive move higher and to new highs, first.

So far, as some more good earnings were released this morning, the market looked as if it will be getting the week off to a quiet start and it stayed subdued all day long. Considering the kinds of gains that were made last week, simply staying in place isn’t necessarily a bad thing as trying to create some solid and firm ground underneath that rapid ascent tends to be a better way to reach new highs.

With a little bit of cash from not having spent any last week and with no positions set to expire this week as the August 2015 cycle begins, I’m anxious to do something to create some income for the week beyond the single ex-dividend position for the week. Biut beyond the single purchase today in Best Buy, I don’t know how much more it will take to enice me to dip in even more.

Of course, the dilemma is not really wanting to spend that money in a chase of prices moving higher. The greater that everyone feels certain that the next move will be higher makes you get concerned that the crowd will be, as it usually is, wrong.

With the absence of overhanging or unresolved bad news and with earnings continuing to surprise to the upside, it is hard, though to see the near term reason for the market to not move to a higher point.

For that reason I am more likely to want to spend some money this week, but again will be looking at short term expirations in an effort to make some quick income and to hopefully be able to recycle cash from anticipated assignments.

While I usually would prefer to add those positions while the market shows some weakness, it’s possible that a mildly higher opening may represent relative weakness and that may be the best possible as market confidence has reason to be growing.

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

There is almost nothing happening this week on the economic calendar.

There’s also not too much expected on the international front as for now Greece and China seem to be quiet and Europe is getting ready for its month off. While Greece may be off the map for a while to come, it’s still anyone’s guess as to when we get back to realizing what a potential calamity may be forming in China.

But until any further indication that will be the case, it’s as if China doesn’t exist, at least in regard to presenting a level of liability that we’d prefer not to have to face.

What we do have this week is an avalanche of earnings and by all indications from last week, they are going to be better than expected.

The flow of positive information comes at a time that the market is just a fraction of a percent away from its all time highs and depending upon yoour persepctive is within easy reach of a technical resistance point or technical support point.

Depending upon how you look at it, that point is a launching pad for a climb higher or a jump off point to go lower.

But when you combine it with what may be a torrent of continuing good news there may be reason to think that it will end up being a launching pad more than anything else.

Considering that we’ve just bounced back from another one of those mini-corrections, although it was overdue, there’s not too much evidence over the past 3 years that we would turn around and head right back into another such correction without a substantive move higher and to new highs, first.

So far, as some more good earnings are released this morning, the market looks as if it will be getting the week off to a quiet start. Considering the kinds of gains that were made last week, simply staying in place isn’t necessarily a bad thing as trying to create some solid and firm ground underneath that rapid ascent tends to be a better way to reach new highs.

With a little bit of cash from not having spent any last week and with no positions set to expire this week as the August 2015 cycle begins, I’m anxious to do something to create some income for the week beyond the single ex-dividend position for the week.

Of course, the dilemma is not really wanting to spend that money in a chase of prices moving higher. The greater that everyone feels certain that the next move will be higher makes you get concerned that the crowd will be, as it usually is, wrong.

With the absence of overhanging or unresolved bad news and with earnings continuing to surprise to the upside, it is hard, though to see the near term reason for the market to not move to a higher point.

For that reason I am more likely to want to spend some money this week, but again will be looking at short term expirations in an effort to make some quick income and to hopefully be able to recycle cash from anticipated assignments.

While I usually would prefer to add those positions while the market shows some weakness, it’s possible that a mildly higher opening may represent relative weakness and that may be the best possible as market confidence has reason to be growing.