Category Archives: Daily Market Update

Daily Market Update – June 9, 2015  (8:30 AM)

We are about a month away from the next earnings season and between now and then, other than the usual major economic reports or events, such as the Employment Situation Report or an FOMC Statement release, there isn’t too much to get anyone overly excited.

There’s still some drama in Europe, but mostly we’re in a holding pattern, although the market may simply become susceptible to technical factors. The latter is only likely to do one thing if it takes hold and that’s to pull markets lower.

With the weakness theme having taken hold over the last few weeks we are still only less than 3% below market highs as attrition has been gnawing at the market. It’s that slow attrition that could bring the technical traders back to life, as the S&P 500 approaches the 2041 level, which would require about another 2.5% decline and from there has only 2000 as a support level.

But even with all of those events taking place, that would only account for less than a 7% decline.

With this morning’s pre-opening futures trading looking as if it will be just another of the same days as we’ve been seeing over the past 3 weeks, there’s not too much telling how the day will proceed. Yesterday was one of slow erosion and attrition as buyers are just finding little reason to get excited about anything.

Meanwhile, as interest rates are climbing, as they are now for the third time over the past few months, there’s renewed competition for investor’s dollars. What remains to be seen is whether these interest rate increases being seen in the market will persist. Previous attempts to predict the Federal Reserve’s actions proved to be too early and those interest rates fell back down giving some momentum back to stocks.

This time around the bond market may finally be getting it right. This week’s Retail Sales Report may give some further ammunition to the idea that the economy isn’t as weak as the GDP has been indicating.

That leads to next week and the FOMC Statement Release.

It’s probably not too likely that any policy change will occur by then, but all it takes is a change in the wording of the statement that might indicate a change in policy is coming soon. The initial impact of that will probably be to drive even more activity over to bonds and put further pressure on stocks.

Hopefully, though, that kind of pressure will be short lived, as it usually is and will be followed by an earnings season that ends up with better revenues and increased bottom lines, as the expected continuing dollar strength hasn’t materialized.

Right now, that’s still in the distant future.

In the immediate future, such as this week and next it’s all going to be about the FOMC and getting prepared to deal with that as the monthly option cycle will end just 2 days after the FOMC release.

While awaiting the news I have neither the available cash and am generally unwilling to use margin, nor the inclination to put much more at risk at a time when the bias is definitely on the side of sellers.

As with most cycles, whether up or down, it’s just a question of how long it will go on and whether the next leg of the cycle will atone for what preceded it.

For the remainder of this week I expect that I’ll be a spectator more than anything else while letting others figure out what the next step will be and let the stock and bond guys fight it out over who gets the marginal dollars that may be on the fence.

Right now, they won’t be my dollars.

.

Daily Market Update – June 8, 2015  (Close)

There isn’t too much economic news scheduled for this week and that should mean that teh markets will be relatively calm.

That would be a comforting thought, if it also wasn’t so unlikely to be the case. 

The past few weeks haven’t had too much news other than for the final day of the trading week, but the propensity to move lower has been pretty clear.

Even though if you squinted really hard you may have been able to see some positive signs coming from some of those trading days of the past two weeks, the reality has become that the market really can’t find much reason to try and go past those recent highs.

What has really been striking is the resurgence of the bond market as it has decided that rates are going higher sooner than anyone had come to recently expect. It is making its third recent assault on the ceiling on interest rates in the past few months and this time it may have it right.

The past week’s strong Employment Situation Report coupled with the idea that what we thought was a weaker than expected economy based on faulty data has suddenly created the idea that interest rate increases could even come as early as in 2 weeks.

This week’s Retail Sales Report could open some eyes if it gives reason to believe that consumers are finally coming alive.

When you look back just a week earlier and remember that people had started suggesting that a data driven Federal Reserve could possibly wait until 2016 to begin their rate increases, the idea of it now happening in two weeks can be pretty unsettling.

And that’s exactly what the markets have become.

They’re unsettled because their notions of where we the economy is standing may not be very valid and that could lead to sudden shifts in monetary policy.

No one likes that sort of thing.

The pre-opening futures to begin this week were pointing to a very quiet open. Whether that was going to stay the case as the day, much less the week unfolded was going to be anyone’s guess, but with my cash reserves much lower than I would like, I wasn‘t expecting to be opening many new positions for the week. The general uncertainty also added to the reluctance to make much in the way of a commitment.

Like last week, this one will have a nice number of existing positions going ex-dividend and that offers some solace. However, with only a small number of positions scheduled to expire this week, there may not be very much trading activity or opportunity to generate new income, unless an unexpectedly strong move higher creates the chance to sell calls on uncovered positions.

Of greater concern, however, are the large number of positions set to expire next week, just 2 days after the FOMC Statement release.

The concern, although still based on a small likelihood, is that if the FOMC does announce an interest rate increase, that will send markets sharply lower in the short term.

With just 2 days of recovery time until expiration that would put those positions set to expire at risk, so there may have to be some additional thought put to rolling those positions over this week, where possible or feasible.

For now, it’s just a question of sitting back and seeing where the momentum may take the market. At the moment, what looked to be a quiet opening simply deteriorated as the day went on, keeping in line with the theme of the past 2 weeks. as there has been
nothing to give reason to bid prices higher.

Hopefully the bond market will take a little break this week and offer less competition to the stock market as we await any news that could create optimism and count down until the start of the next earnings season next month, which could offer those reasons.

Daily Market Update – June 8, 2015  (9:00 AM)

There isn’t too much economic news scheduled for this week and that should mean that teh markets will be relatively calm.

That would be a comforting thought, if it also wasn’t so unlikely to be the case. 

The past few weeks haven’t had too much news other than for the final day of the trading week, but the propensity to move lower has been pretty clear.

Even though if you squinted really hard you may have been able to see some positive signs coming from some of those trading days of the past two weeks, the reality has become that the market really can’t find much reason to try and go past those recent highs.

What has really been striking is the resurgence of the bond market as it has decided that rates are going higher sooner than anyone had come to recently expect. It is making its third recent assault on the ceiling on interest rates in the past few months and this time it may have it right.

The past week’s strong Employment Situation Report coupled with the idea that what we thought was a weaker than expected economy based on faulty data has suddenly created the idea that interest rate increases could even come as early as in 2 weeks.

This week’s Retail Sales Report could open some eyes if it gives reason to believe that consumers are finally coming alive.

When you look back just a week earlier and remember that people had started suggesting that a data driven Federal Reserve could possibly wait until 2016 to begin their rate increases, the idea of it now happening in two weeks can be pretty unsettling.

And that’s exactly what the markets have become.

They’re unsettled because their notions of where we the economy is standing may not be very valid and that could lead to sudden shifts in monetary policy.

No one likes that sort of thing.

The pre-opening futures to begin this week are pointing to a very quiet open. Whether that’s going to stay the case as the day, much less the week unfolds is going to be anyones guess, but with my cash reserves much lower than I would like, I’m not expecting to be opening many new positions for the week. The general uncertainty also adds to the reluctance to make much in the way of a commitment.

Like last week, this one will have a nice number of existing positions going ex-dividend and that offers some solace. However, with only a small number of positions scheduled to expire this week, there may not be very much trading activity or opportunity to generate new income, unless an unexpectedly strong move higher creates the chance to sell calls on uncovered positions.

Of greater concern, however, are the large number of positions set to expire next week, just 2 days after the FOMC Statement release.

The concern, although still based on a small likelihood, is that if the FOMC does announce an interest rate increase, that will send markets sharply lower in the short term.

With just 2 days of recovery time until expiration that would put those positions set to expire at risk, so there may have to be some additional thought put to rolling those positions over this week, where possible or feasible.

For now, it’s just a question of sitting back and seeing where the momentum may take the market. At the moment, despite the quiet that looks as if it’s heading our way, for the most part that’s how markets have looked every morning in the past few weeks, only to deteriorate as there has been nothing to give reason
to bid prices higher.

Hopefully the bond market will take a little break this week and offer less competition to the stock market as we await any news that could create optimism and count down until the start of the next earnings season next month, which could offer those reasons.

Daily Market Update – June 5, 2015  (8:00 AM)

The Week in Review will be posted by 10 PM and the Weekend Update will be posted by Noon on Sunday.

The following trade outcomes are possible today:

Assignments:  none

Rollovers:  none

Expirations:   MOS, MRO, WY

The following were ex-dividend this week:  HAL (6/1 $0.18), JOY (6/2 $0.20), MOS (6/2 $0.27), BAC (6/3 $0.05), COH (6/3 $0.34), HFC (6/3 $0.33), WY (6/3 $0.29)

The following will be ex-dividend next week. GM (6/8 $0.36), KSS (6/8 $0.45), BBY (6/9 $0.23), NEM (6/9 $0.025), KO (6/11 $0.33)

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

Daily Market Update – June 4, 2015  (Close)

With the Employment Situation Report coming tomorrow, the pre-open futures was continuing its recent pattern of indecisiveness, as the morning was going counter to yesterday’s trading.

The futures were improving as the morning had proceeded, with the early triple digit losses reflecting some bad overseas sessions over Greek concerns getting more manageable

However, given that there has been a 0.5% move higher in the S&P 500 over the course of the first 3 trading days of the week and the uncertainty contained in tomorrow’s Employment Situation Report, it’s completely understandable why the market might be reluctant to add to those gains.

What there wasn’t was any reason to lose nearly 200 points on the day.

While there were reasons to be optimistic following the first 2 days of trading this week, it was less easy to be so yesterday, despite the market gains.

Those gains were much better in the DJIA than they were in the S&P 500, although as the DJIA gains eroded heading into the close, the gap between the two indexes did get smaller. Still, the gains weren’t as broad as they may have appeared.

Today was disappointing, not only for the size of the loss, but because the market had actually erased the pre-futures losses after tumbling about 100 points at the open and was looking as if it might really sky rocket.

And then it didn’t.

This morning there had to be concern about the upcoming Employment Situation Report, not just for what the data happens to be, but also because there’s no telling how the market will react if the data is outside of the expected range.

On top of that, with talk of more adjustments to previously released GDP data comes lots of uncertainty about the validity of economic data to date.

With so many people now taking a position that interest rate hikes may be held at bay until 2016, there could be a very significant surprise in store if revised data shows that the economy has been much stronger than we’ve been lead to believe.

While most understand that interest rate increases would be a good thing for the economy, even while likely causing some near term and short lived selling pressure, that scenario might be less likely if interest rate increases occurred as a result of the sudden realization that previous data had been invalid.

It’s much easier to deal with what may be perceived as bad news if you can prepare yourself for it or if it’s expected. Despite anecdotes of an economy much better than what economic data has reflected, the market has been taking its lead from the expectation that a stagnant economy would delay hold interest rate increases.

With the next FOMC meeting occurring just 2 days before the end of the June 2015 option cycle, any indication that the economy is stronger than previous data has indicated would be a good reason to want to rollover those positions well in advance of their expiration.

Just in case.

With only 3 positions now set to expire tomorrow, there’s not that much at stake as we get closer to the big reveal tomorrow morning.

However, just as was the case earlier this week, even though I generally like to wait until Friday to try my rollover trades, I would have liked to take any opportunity as it may have arisen. It’s just that today wasn’t going to be that day..

While I’d like to see some assignments in order to replenish the cash reserve that was spent down this week in the pursuit of dividends and premiums, I think I would rather get the chance to rollover positions and pocket the premiums with certainty, than to await the uncertainty of their assignment.

Maybe tomorrow will be that day.