Category Archives: Daily Market Update

Daily Market Update – February 11, 2015 (8:00 AM)

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

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

In a week where there’s very little economic news the Wednesday “Petroleum Status Report” may 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.

With 3 new positions opened this week I’m not anticipating doing much else that involves spending money, particularly as I don’t have much in the way of cash reserves. My hope is 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 mor
e 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.

Daily Market Update – February 10, 2015 (Close)

This morning there was the rare sight, at least for 2015, of the S&P 500 with a nice positive move in the pre-opening futures.

In general, the bigger the move the more staying power it has and the more likely it will set the tone for the day, but even then the unfolding events of the day will have their way.

Of course, sometimes there don’t have to be any events to cause significant reversals and that’s when everyone starts pointing to technical factors to explain the unexplainable.

Today there was no need for pointing toward anything in an attempt to get an explanation where none may have existed, but the market did stay true top its pre-opening trading, although it did take a little bit of a tortuous route to get there. It was in the final 2 hours that the market was able to reclaim some of the early advances that had been lost by mid-morning.

This morning the market was de-coupled from oil prices, which is really the way it should be and which is really the way logic would dictate that it would be. Logic, though, sometimes has no real place in things as the market fell or rose far more than it should have based on the size of the energy sector’s representation in the S&P 500.

While the market was showing a nice gain and with some more of those optimistic retail reports are coming in from smaller players like Aeropostale and The Gap, there is increasing reason to be hopeful that there will be some real dividend coming from the reduced cost of oil.

Whether that dividend does anything to move the stock market forward may be questionable, but at the very least it should push the economy forward and maybe some of that debate will come to an end. In the best of worlds the benefits top the economy would end up with better earnings data and stocks responding to profits, which is also the way it should be.

Meanwhile, this still remains a very quiet news week, but this morning brought the JOLT Survey which has, for the past few months been showing a trend that is one reflecting a positive shift in the workplace.

It has been showing that people with jobs have been willing to leave their jobs to look for, or take other jobs. More importantly those other jobs have been higher paying.

That paints a real picture of optimism. Rather than staying at a job someone doesn’t want due to the fear of how difficult it would be to find a new job, people are willing to take that chance in the recognition that there are more and better jobs out there.

The morning’s report continued that feeling of optimism among people in the workforce. Basically the boots on the ground have a better feeling about the future than do some indicators that may just need some time to catch up.

With a couple of new positions added yesterday, I still have room for a little more, but again would be much happier figuring out a different way to gen
erate this week’s revenue stream. A nice move higher today could bring some of the opportunities to sell calls on uncovered positions, but yesterday’s weakness just moved the needle a little further away.

While I generally like the market moving back and forth, because it helps to create higher option premiums, the downside is that it’s harder to find sustained moves to bring some positions that are in need of finding cover back into a range where even a “DOH Trade” is a reasonable thing to do.

In the meantime, however, there could be a powerful catalyst one – two punch in the week or two ahead as the major retailers begin to report their earnings and hopefully shower us with good guidance. The second part of that punch would be some continuing stability in energy prices, especially if there’s any sign of demand picking up and not just as the result of decreasing supply.

For now, there are at least a few positions set to expire this week and a fair number for the week after to end the monthly cycle. That gives me something to do and think about, which is a nice change from last week.

Hopefully this week will restore some of the activity that can make even down days profitable and sometimes fun.

Despite not being able to make those new call sales today, it was still enjoyable letting the excess energy in the market spread itself in a broad way.

I’m not shy about going along for the ride.

Daily Market Update – February 10, 2015 (9:00 AM)

This morning there was the rare sight, at least for 2015, of the S&P 500 with a nice positive move in the pre-opening futures.

In general, the bigger the move the more staying power it has and the more likely it will set the tone for the day, but even then the unfolding events of the day will have their way.

Of course, sometimes there don’t have to be any events to cause significant reversals and that’s when everyone starts pointing to technical factors to explain the unexplainable.

This morning the market is decoupled from oil prices, which is really the way it should be and which is really the way logic would dictate that it would be. Logic, though, sometimes has no real place in things as the market fell or rose far more than it should have based on the size of the energy sector’s representation in the S&P 500.

While the market is showing a nice gain and with some more of those optimistic retail reports are coming in from smaller players like Aeropostale and The Gap, there is increasing reason to be hopeful that there will be some real dividend coming from the reduced cost of oil.

Whether that dividend does anything to move the stock market forward may be questionable, but at the very least it should push the economy forward and maybe some of that debate will come to an end. In the best of worlds the benefits top the economy would end up with better earnings data and stocks responding to profits, which is also the way it should be.

Meanwhile, this still remains a very quiet news week, but this morning brings the JOLT Survey which has, for the past few months been showing a trend that is one reflecting a positive shift in the workplace.

It has been showing that people with jobs have been willing to leave their jobs to look for, or take other jobs. More importantly those other jobs have been higher paying.

That paints a real picture of optimism. Rather than staying at a job someone doesn’t want due to the fear of how difficult it would be to find a new job, people are willing to take that chance in the recognition that there are more and better jobs out there.

With a couple of new positions added yesterday, I still have room for a little more, but again would be much happier figuring out a different way to generate this week’s revenue stream. A nice move higher today could bring some of the opportunities to sell calls on uncovered positions, but yesterday’s weakness just moved the needle a little further away.

While I generally like the market moving back and forth, because it helps to create higher option premiums, the downside is that it’s harder to find sustained moves to bring some positions that are in need of finding cover back into a range where even a “DOH Trade” is a reasonable thing to do.

In the meantime, however, there could be a powerful catalyst one – two punch in the week or two ahead as the major retailers begin to report their earnings and hopefully shower us with good guidance. The second part of that punch would be some continuing stability in energy prices, especially if there’s any sign of demand picking up and not just as the result of decreasing supply.

For now, there are at least a few positions set to expire this week and a fair number for the week after to end the monthly cycle. That gives me something to do and think about, which is a nice change from last week.

Hopefully this week will restore some of the activity that can make even down days profitable and sometimes fun.

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

There is extraordinarily little economic news scheduled to be released this week.

 While there are a few companies of note reporting earnings this week, none of them will get too much attention for much longer than it takes to report the earnings and none of them will be impactful. They may be interesting, but not impactful.

It’s in the following two weeks that major national retailers begin to report their earnings and provide some guidance into the next quarter, which will be the first one to fully have a chance to show some benefit from reduced oil prices on the economy.

And if there is no impact?

At least it will put the debate to rest as oil prices now seem to be stabilizing at a point 10% above the very recent lows.

This week oil may be the most important story, but as with a few weeks ago the story just as easily could become how the stock market and oil prices have come decoupled, as was already seen last Friday and seems to be the developing case as the futures are trying to set the tone for the week to begin.

With a little more cash to begin the week but still with an objective of trying to raise that cash level at the end of the week, I don’t anticipate doing much in the way of adding new positions this week.

While I’d prefer to at least see some more activity than last week I wouldn’t mind seeing some give backs of last week’s gains. Unless you have an unbridling bull market awaiting, it’s hard to digest a weekly 3% gain and right now there’s not too much reason to expect that there’s that kind of a bull market awaiting, at least not until the retailers start their reporting.

AS was the case last week, there’s not much reason to want to jump in with additional funds when the market is already rising. If you’re otherwise invested, at least you can enjoy the ride with what you already have at risk, rather than add more to that risk exposure.

With a few positions set to expire this week and twice as many next week to end the February 2015 option cycle, the likelihood for any new positions this week is to look for weekly expirations, so as to not add to the risk of having too many expire next week and still maintaining a chance  of adding to cash reserves.

As has been the case for quite some time, but has been difficult for most of 2015, my preference continues to be trying to find opportunities to put uncovered positions to work or to squeeze more income out of existing positions by rolling them over. Part of that becomes necessity if markets aren’t continually rising as they did in 2013 and 2014, resulting in a consistent stream of assignments.

Thus far, 2015 has been more like 2011 and 2012 and would be even more so if the volatility could still climb higher. That would lead to far less opening of new positions and much more trading that centers on rollovers and fin
ding new covers for uncovered positions.

AS long as the market trades within a reasonable range, rather than taking a large drop downward, that can be a very nice environment and may even see more reason to look at monthly option contracts in order to lock in premiums that themselves are moving higher due to the volatility rise.

That’s still my dream for 2015.

Daily Market Update – February 6, 2015 (8:30 AM)

The Week in Review will be posted by 6 PM and the Weekend Update will be posted by Noon on SUnday.

Today’s possible trade outcomes include:

Assignments:  HAL

Rollovers:  GPS, MET

Expirations:  EMC

This week’s ex-dividend positions were Intel (2/4 $0.24) and MET (2/4 $0.35)

Next week’s ex-dividend positions is BP (2/11 $0.60)

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