Category Archives: Daily Market Update

Daily Market Update – March 24, 2015  (9:00 AM)

Well, at least yesterday came close to being able to put together two consecutive days of gains for the first time in a month.

Up until the last 10 minutes or so it looked as if it would happen.

There was actually some reason to feel optimistic yesterday as the Existing Home Sales were higher and Federal Reserve Vice-Chair Stanley Fischer gave the first of his two talks this week and didn’t shy away from plainly stating that rates were going up.

Perhaps had those events happened a week earlier the market may have taken it as a set of signs that it would be appropriate to take a plunge.

Instead, there was both something refreshing about Fischer actually joking about impending rate increases and the market reacting rationally to news that would have sent it into a panic just days ago.

That may be reason enough to have some optimism as the market continues to be able to find higher ground even as so many stocks are being challenged on a 50 day basis, which many consider to be a bearish signal.

While there’s nothing much else scheduled between today and the end of the week, there’s always Friday and Stanley Fischer has another chance to get people nervous now that he’s softened them up with economic humor.

It will be interesting to hear his comments in light of the GDP statistics that will be released that morning, as most everyone will be  focusing on whether the GDP finally begins to show the consumer led expansion that we’ve now been expecting for about 4 months of lower energy prices.

This morning the Consumer Price Index was up 0.2%, which did nothing to excite the pre-opening futures, which like yesterday were trading fairly flat. That was, however, the first increase seen since October 2014, but it actually reflected higher gas prices seen over the past month. The increase was, though, perhaps an indication that the annual inflation rate may reach the Federal Reserve target of 2% or even beyond, which could give some justification for the first interest rate increase.

In its very early response, though, the bond market was taking rates down ever so slightly.

So far there hasn’t been any validation of the thesis that consumer spending was going to increase in a meaningful way as energy prices decreased in a meaningful way. Even retailers that had initially started painting a rosy picture stepped back a little when providing earnings guidance over the past month.

Yesterday, though, most of the day was simply one of trading without any reason to go up nor down, although over the previous week the market hasn’t really needed a reason to make a large move, although each of those moves was in some way erased or mostly erased the following day.

With a couple of new positions opened yesterday there still may be some more for the rest of the week, but there’s no real compelling reason to put more at risk when the market continues to be so directionless.

If that direction does turn higher, it would still be nice to see some very strong mo
ves in that direction, even if they don’t have much in the way of staying power. Those are the kind of moves that can make sale of calls on uncovered positions begin to look appealing. Additionally, those large moves, especially if occurring with lots of intra-day price fluctuation sends premiums higher. Lately we’ve had the large moves, but without the intra-day fluctuation, so the volatility has actually been falling and taking premiums along with it.

As with yesterday there’s not too much reason to rush into any trades and plenty of reason to simply watch and see where the market may head for the day.

Daily Market Update – March 23, 2015  (Close)

This should be a relatively quiet week on the news front 

I don’t usually look at “Existing Home Sales” very much, but that was one of the factors cited by the FOMC last week as being a reason to delay interest rate hikes, as those sales continue to be disappointing, having been on a downtrend for the past 9 months.

While the weather may still be at play as those figures are reported this morning any uptick leading into Friday’s GDP report and then Stanley Fischer’s scheduled speech could easily get markets fearful again of coming interest rate increases.

As it would turn out those Existing Home Sales were improved and Stanley Fischer spoke today, as well as still being scheduled on Friday and the world didn’t explode.

In fact, the market actually finally was almost able to string two higher days on the DJIA, missing out only in the final 2 minutes of trading. But the market did break that string of alternating triple digit moves.

It still is confusing why everyone is so afraid of the initiation of such increases, as the market has generally done very well during the early stages of such increases.

Unless there are real signs of an economy heating up too fast there shouldn’t be the fears that rates are going to start increasing too often and too quickly. That would definitely stifle stocks as investors would look for alternatives.

The technical indicators after the past 7 or 8 trading sessions point higher even as the market has been unable to even have 2 consecutive days higher.

This morning the market was perfectly flat as we awaited the beginning of trading. Lately, however, with only a single day’s exception, that pre-open trading hasn’t been an indicator of the direction nor the size of the move by the closing bell.

Today it was pretty good as the market traded in a fairly tight range, only showing a little bit of relative weakness in the closing 15 minutes.

What has been especially interesting is that in the time of those previous trading sessions there had also only been a single day in which the trading theme saw a reversal, so it was interesting to see whether the market would continue trading in a state of fugue as the week began.

With a couple of assignments last week and some cash added to the pile I was less reluctant to spend some money to establish new positions. Since there are only 2 positions set to expire this week the greatest likelihood is that I would look for opportunities with contracts also expiring this week, in order to increase the likelihood of being able to recycle money to re-deploy in the following week.

A couple of those opportunities did come along, but I’m still open to some more.

But as the volatility has moved again near its low point for the past year, despite all of those triple digit moves, there’s little attraction for looking at longer time frame contracts, as those premiums are just getting so low. With a smattering of contracts already set to expire for all of the weeks in the April 2015 cycle there’s not too much reason to look for opportunities to populate those at the moment.

Again, as has been the case for quite some time, I would most invite any opportunity to simply conserve cash and generate income through the sale of options on existing uncovered positions. After making those new purchases today I would now especially welcome a repeat of some of last week’s unfounded moves higher.

Last week was a good week for that and that always offers some enhancement to return as it generates cash flow. However, what has been especially frustrating is that the market’s inability to string together meaningful moves forward has resulted in lost opportunities to sell those call options. That’s because any hopes of seeing shares move even higher in anticipation of some sort of rally have generally been dashed, although there have also been some exceptions.

Despite those exceptions, such as with Astra Zeneca and Sinclair Broadcasting, I think that I would still jump at any opportunity at this point to lock in any premiums on moves higher, as more and more stocks are moving higher in isolated ways and unable to hold those levels.

This morning I waited until the Existing Home Sales data was released to see if there was any reason for the markets to forget about their celebration of a continued dovish stance on interest rates. The last time the market responded with relief it only lasted 2 days, so it seemed right to see how long the party would keep going this time.

And if the party does keep going?

I still wouldn’t mind a repeat of last week, with or without new positions to enjoy the ride.

Daily Market Update – March 23, 2015  (8:45 AM)

This should be a relatively quiet week on the news front Week in Review will be posted by 6 PM and the Weekend Update will be posted by Noon on Sunday.

I don’t usually look at “Existing Home Sales” very much, but that was one of the factors cited by the FOMC last week as being a reason to delay interest rate hikes, as those sales continue to be disappointing, having been on a downtrend for the past 9 months.

While the weather may still be at play as those figures are reported this morning any uptick leading into Friday’s GDP report and then Stanley Fischer’s scheduled speech could easily get markets fearful again of coming interest rate increases.

It still is confusing why everyone is so afraid of the initiation of such increases, as the market has generally done very well during the early stages of such increases.

Unless there are real signs of an economy heating up too fast there shouldn’t be the fears that rates are going to start increasing too often and too quickly. That would definitely stifle stocks as investors would look for alternatives.

The technical indicators after the past 7 or 8 trading sessions point higher even as the market has been unable to even have 2 consecutive days higher.

This morning the market is perfectly flat as we await the beginning of trading. Lately, however, with only a single day’s exception, that pre-open trading hasn’t been an indicator of the direction nor the size of the move ny the closing bell.

What has been especially interesting is that in that time there has also only been a single day in which the trading theme saw a reversal, so it will be interesting to see whether the market continues trading in a state of fugue

With a couple of assignments last week and some cash added to the pile I’m less reluctant to spend some money to establish new positions. Since there are only 2 positions set to expire this week the greatest likelihood is that I would look for opportunities with contracts also expiring this week, in order to increase the likelihood of being able to recycle money to re-deploy in the following week.

Additionally, as the volatility has moved again near its low point for the past year, despite all of those triple digit moves, there’s little attraction for looking at longer time frame contracts, as those premiums are just getting so low. With a smattering of contracts already set to expire for all of the weeks in the April 2015 cycle there’s not too much reason to look for opportunities to populate those at the moment.

Again, as has been the case for quite some time, I would most invite any opportunity to simply conserve cash and generate income through the sale of options on existing uncovered positions.

Last week was a good week for that and that always offers some enhancement to return as it generates cash flow. However, what has been especially fru
strating is that the market’s inability to string together meaningful moves forward has resulted in lost opportunities to sell those call options. That’s because any hopes of seeing shares move even higher in anticipation of some sort of rally have generally been dashed, although tehre have also been some exceptions.

Despite those exceptions, such as with Astra Zeneca and Sinclair Broadcasting, I think that I would still jump at any opportunity at this point to lock in any premiums on moves higher, as more and more stocks are moving higher in isolated ways and unable to hold those levels.

This morning I will likely wait until at least the Existing Home Sales data is released and see if there is any reason for the markets to forget about their celebration of a continued dovish stance on interest rates. The last time the market responded with relief it only lasted 2 days, so let’s see how long the party will keep going this time.

And if the party does keep going?

I still wouldn’t mind a repeat of last week, with or without new positions to enjoy the ride.

Daily Market Update – March 20, 2015  (9:00 AM)

The Week in Review 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:  GME, SBGI

Rollovers:  LXK

Expirations:  BAC, BP, DOW, EMC, GDX

The following were ex-dividend this week:  LVS (3/19 $0.65)

The following are ex-dividend next week:  DOW (3/27 $0.42)

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

Daily Market Update – March 19, 2015  (9:00 AM)

That was quite a gift that the FOMC gave to markets yesterday and it was also nice having Janet Yellen add to that gift.

The real gift, however, was the way in which markets reacted, because there really wasn’t very much contained in the FOMC Statement that should have given traders reason to believe that there was increased clarity.

In fact, it’s sort of amazing how the market reacted.

And not just the stock market which turned around over 300 points. But the precious metals, currencies and bond markets all rallied in a big way.

What was fascinating was that almost everyone had been arguing over whether the word “patience” would come out or not from the FOMC Statement. That word was thought to be the difference between getting an interest rate hike in June versus September.

While the word was removed, all that was said with regard to timing was that the rate hike would likely not come at the next FOMC meeting in April.

April? No one was expecting that, so what clarity was then added to justify the kind of response seen?

Hard to say, but it’s also hard to look a proverbial gift horse in the mouth.

The reality is and continues to be that the economy isn’t really showing much in the way of evidence to suggest that inflation is heating up. If you believe the FOMC as they continue to say that they are “data driven,” you have to believe that they don’t have the data to create the belief that the brakes have to be put on the economy as it was heating up too much.

No matter. It was nice seeing that turnaround, but I think it adds to the confusion that’s been seen in the market. Not only is it alternating once again between strong up and down days like it did in January, but there is a stealth bear market going on even as the S&P is less than 1% from its all time high.

That stealth bear market is seen in the large number of stocks that are actually below their 200 day moving averages and the increasing number where the 50 day moving average is approaching or dipping below the 200 day moving average.

In a bullish kind of market the pictures should be reversed.

That’s why you really don’t see or hear of too many people running around bragging about their performance.

Today the feel of the DJIA may be a little different as many are talking about how its volatility will increase now that APple has joined the index, as it is priced more than 3 times what AT&T had been. Since the index is price weighted and not market capitalization weighted, price matters. What’s been over-looked in that analysis is that a post-split Visa begins trading today and that has gone from about $268 to $68, so whatever volatility Apple may bring the split in Visa should be a tempering factor.