Category Archives: Daily Market Update

Daily Market Update – February 17, 2015 (9:00 AM)

Another day and another day of snow on the east coast.

This week there’s very little going on in economic news other than tomorrow’s FOMC Statement release, so snow may be the top issue for the next few days.

Coming off of last week’s nice gains and adding to what has been a nice February, so far, I wouldn’t mind if this was a quiet week for the markets. The latest pattern of recovery from the last of several drops lower has been very different from the previous recoveries.

Instead of jumping straight back from those drops, usually about 5% lower, this time around the market has been taking two steps forward and then either a small step back or simply digesting the move higher.

Considering that in the past two months these market drops have been coming on a much more frequent basis, there was reason to start getting concerned. When they had been coming on a regular basis, just about every 2 months for nearly the past 3 years, it does get your attention when you get about 4 of those drops in the period of time that you normally would have seen just one. 

The manner in which Friday’s record close was set was a much better way to do so than those straight lines to the top. This week would be a perfect one to digest those gains for the month and take a rest to move even higher.

So far, looking at the pre-open futures it looks as if it will be a totally non-committal kind of opening.

Last month was the first time in several months that the market didn’t go substantially higher on the day before an FOMC Statement release, which was a return to the more logical way of trading in advance of the release. Today may be another month that returns to a more rational pattern of not getting too far ahead of the curve before some potentially substantive policy change may be made known.

With lots of positions expiring this week I hope that the FOMC Statement, whatever nuanced phrases it may contain that do or don’t signal a change in policy, does nothing to move the markets in any substantial way.

Since there are so many positions expiring this week and that currently are in a position to be assigned and there was some replenishment in cash from last week’s assignments, the likelihood is that if there are any new purchases for this trade shortened week I would want to look at expirations that are somewhere in the March 2015 cycle.

The problem with goiung out too far in those contracts is that while the market moves higher the general trend will be that those premiums will be getting relatively smaller. In the face of an advancing market you really don’t want to commit your positions too far in advance and possibly miss more of the upsi
de, especially at such low premiums.

With already a number of positions set to expire on the final week of the March 2015 option cycle, any new contracts would try to look at expiration dates in between, although some of this week’s potential stock picks have only monthly options available, so those go a little counter to strategies to diversify positions by expiration and optimize premiums.

FOr this morning my expectation is that I’ll be sitting tightly on the cash pile waiting to see if any thing of interest looks like it’s going on further sale or at least firming up and maybe poised for a small comeback.

With a number of the week’s expiring positions in or near the money, there is a little bit of a cushion in the event that the market reacts poorly after the FOMC Statement, so there’s not too much need to think about doing rollovers early in the week, although even when there is reason to think about doing so there most often isn’t a worthwhile trade to be made.

Hopefully, then, this week will have little drama and little of that market heat for anything other than offering some more chance to sell calls on uncovered positions and melt some snow.

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Daily Market Update – February 13, 2015 (8:30 AM)

The Week in Review will be posted by 6 PM tonight and the Weekend Update will be posted by Noon on Monday, as markets are closed in celebration of Presidents Day.

The following trade outcomes are possible this week:

Assignments:  ATVI, MSFT

Rollovers:  GPS, MET

Expirations:   GDX puts

The following position was ex-dividend this past week: BP (2/11 $0.60)

The following will be ex-dividend next week.  MAT (2/17 $0.38), RIG (2/18 $0.75), AZN (2/18 $1.88)

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

Daily Market Update – February 12, 2015 (Close)

This morning, based on the pre-opening futures, looked to have a similar opening to that seen on Tuesday.

The futures were pointing nicely higher, approaching a triple digit gain on the DJIA, and those kind of larger moves tend to have more staying power. At least they tend to give a little more direction to trading once the market actually opens.

That would have been a welcome move, particularly as the week was coming to its end and the fate of those positions set to expire this week are being determined during the final hours of trading for the week.

Luckily that is exactly the way the day worked out as the market was never trading at a loss for the day and actually closed near its highs for the day and ended up within easy distance of an all time high, not having done so since the end of December.

The news that seems to be responsible for the move actually started shortly after yesterday’s market closed and the S&P 500 futures went up about 12 points and the DJIA went nearly 100 points higher.

That news was that there was some kind of an agreement between the the ECB, EU and Greece over its debt.

That gain disappeared in the late afternoon and early evening yesterday, but then returned and seemed to be holding as the morning’s session was set to begin. It was, however, weakened a little by another weaker than expected “Retail Sales” report, that will hopefully be undone as the major retailers begin reporting earnings over the next two weeks and start focusing on the future, rather than the past, to look at the potential impact of lower energy prices, more people at work and more people receiving higher salaries.

With 5 positions set to expire this week and 8 the following week, I would much prefer seeing assignments this week rather than rolling over those positions. However, if rollovers are called for, or if there may be some other reason for a rollover, such as to capture Microsoft’s dividend, I would likely want to look at an expiration date sometime after next week.

The slightly elevated volatility makes that a little more palatable.

As it is  next week offers only 4 days of premium, due to the Presidents Day holiday and there are more than enough expiring positions than to add too many more and increase risk of a sudden market drop just before that expiration.

If tomorrow can add to today’s gain, it will hopefully position those expiring contracts to be more likely to be assigned and may even offer a miracle of selling some more new call contracts on existing positions, as was the case today.

Anyway, that’s my dream and I’m sticking to it for at least one more day.

Daily Market Update – February 11, 2015 (Close)

Yesterday was a nice surprise.This morning there wasn’t much reason to expect the same kind of upward movement and the pre-open futures weren’t showing any indication of continuing with yesterday’s gains.

However, those pre-open numbers were benign enough that anything would be reasonable when the opening bell rang, as there’s not much commitment one way or the other this morning.

It was a little surprising to see a nearly 100 point loss develop in the first hour, just as it was then a little surprising to see a nearly 100 point reversal within another hour, then another 100 point downturn by mid afternoon and yet another by the close. 

In a week where there’s very little economic news the Wednesday “Petroleum Status Report” was in a position to take on more importance than it usually does. It’s not a report that I typically pay attention to other than to watch the immediate reactions to the inventory news that are similar to the back and forth movements often seen when earnings are released in the after hours trading.

The reaction is often a combination of reacting to the news, reacting to the expectations and trying to figure out whether the news is good or bad and then applying some kind of reverse psychology analysis to all of it.

With some hint from the Saudi Oil Minister of expectations for demand increases in the next year more and more attention is going to be paid to inventory levels for as long as energy prices seem to be in play and right now those prices have been moving in big chunks in both directions.

But that’s also been the case for just about everything other than the US Dollar.

Stocks for certain have been gyrating, but so have interest rates and precious metals. Oil is now just another of those asset classes that is having a really hard time deciding where it should be going.

Today’s report will get plenty of scrutiny, but even then the next question is whether the market decides to re-couple or de-couple from energy prices. In a normal world it’s usually de-coupled, but over the past month or two it has spent more time joined at the hip with oil prices than behaving normally.

Today the market had many faces while the face of energy was singular and mostly strongly lower as there are indications that despite fewer rigs drilling for oil, the US is actually pumping even more oil at the moment and adding to supplies.

What does all of that mean?

Whatever it may have meant today it will be forgotten by tomorrow, or maybe mean something different altogether.

With 3 new positions opened this week I’m not anticipating doing much else that involves spending money, for the rest of the week, particularly as I don’t have much in the way of cash reserves. My hope i
s that the next few days can add to those cash reserves or at least position next Friday’s monthly option cycle ending contracts to be more likely to be assigned.

Or rolled over.

The idea is to generate income, but as the market may be poised for increasing volatility the preference is to  preserve cash and use existing assets to generate income, sometimes even rolling over positions that might otherwise be assigned.

That becomes more likely as forward week options show more volatility than the expiring week’s options and the differential in buy and sell premiums increases.

Right now, there’s not much in the way of added premium for selling in the money options and as long as near term volatility is higher than longer term, it is relatively more expensive to buy back those in the money positions.

However, if that forward week volatility starts showing more increases, that situation may change and could result in preferring rollovers to assignments.

That would be nice, except the wish for volatility to increase has been a long and ongoing one and I’ll believe it only when I see it.