Category Archives: Daily Market Update

Daily Market Update – January 22, 2015 (7:30 AM)

All eyes are on this morning’s announcement from the European Central Bank regarding an initiation of its version of Quantitative Easing.

Over the past few months as all eyes had previously been focused on the ECM in expectation of the very same announcement, there had been nothing but disappointment, as Mario Draghi, the President of the ECB talked a great game and occasionally spoke with a John Wayne like swagger and confidence, but delivered on none of it.

This morning, although this has been said before, may be different.

The reason it may finally really be different is because of a credible leak yesterday that gave details of the monthly size of the ECB bond buybacks. The figures suggested seemed to be right along the lines of what many believed it needed to be and was received warmly, although with nowhere near the enthusiasm of previous  well placed source leaks or educated guesses regarding the FOMC‘s upcoming actions, from the Wall Street Journal’s Jon Hilsenrath.

Yesterday’s leak may have been what was responsible for the market’s decisive turnaround shortly after the opening bell.

This morning, ahead of the expected announcement the futures are just mildly higher, so it remains to be seen what effect, if any and in what size the reaction might be and, of course, for how long that recation will last.

While the news may be beneficial for European stock markets in the longer term, there’s really no reason to think that it will be the kind of news or provide the kind of fuel needed to send US markets higher for anything much more than a day or so.

The real impetus could still be upcoming earnings, although thus far, they haven’t been very impressive, although we really haven’t heard anything yet from those businesses that would reasonably be expected to benefit from a severe drop in energy prices.

Interestingly, in an interview yesterday, the CEO of Dow Chemical, which has small oil holdings as part of a Kuwaiti partnership and has seen its shares drop sharply in concert with oil prices, said that the net result of energy price declines was very good for Dow Chemical, because it is a far greater user of energy than it is a producer of energy. That’s something that hasn’t really been factored in yet and Dow Chemical reorts its earnings next week.

As with many companies, the earnings may be of interest, but it’s the future guidance that may hold the key.

Hopefully this morning’s ECB announcement will bring some happy news to the US markets as that would be a good way to bring a shortened trading week to its end.

With a few positions set to expire tomorrow, I’d like to see them positioned to either be assigned or rolled over and a couple of good days in succession would really help.

So, Mario? What’s it going to be?

Daily Market Update – January 21, 2015 (Close)

Yesterday was not very different from much of the rest of this month.

It was actually a very volatile day, only the magnitude was missing.

This past week Jamie Dimon mentioned that JP Morgan traders  were victims of “bad volatility,” making the kind of distinction that isn’t really discussed very much, especially as the concept of volatility itself is so complex.

Yesterday, though, was an example of the good kind of volatility, as the market made intra-day moves in alternating directions. The more about faces in a single day and the less the net result of those moves, the better is the volatility, which is also sometimes considered to be a measure of uncertainty felt by traders.

The moves back and forth keep you on your toes and you never can really develop any confidence about direction. What can be more uncertain than that?

Yesterday finished virtually unchanged after positive indications in the pre-open futures trading that didn’t last very long. The ensuing decline after the open looked as if it might convincingly take the market toward another of the now familiar triple digit losses, but it reversed itself as inexplicably as the reverse from the futures occurred.

During the early part of yesterday’s decline I surprised myself by actually liking some positions during a time that I was thinking in terms of conserving cash.

I’m still surprised, but after last week’s incredibly slow trading and waiting for something to happen, I wasn’t particularly interested in repeating that, even though the outcome was acceptable.

But passivity has its limits and if the volatility seen thus far is any indication of what’s to come in 2015, passivity isn’t going to have the kind of success that it had in 2014.

This morning the market was pointing lower in the pre-open trading, very similar to the level at which it was pointing higher yesterday. In neither situation was there much reason for the moderate gain or loss, respectively and when there was no real reason to account for futures trading, those mild or moderate moves often have a way of disappearing once trading gets started for real.

So despite the indication of a loss to begin the day, I was still hopeful that there will be some new opportunities arising, especially when it comes to selling calls on uncovered positions. I think that the 3 new positions opened yesterday may end up being the sum total for the week, but even as cash shrinks away, it’s hard to think in terms of absolutes.

As it would turn out, today was pretty much the mirror opposite of yesterday, as the early losses in the futures turned out within the first 30 minutes of trading and the day ended with a decent gain, but again with a fairly wide trading range
due to the early triple digit decline.

More good volatility.

With this being a shortened trading week and with a little bit of that volatility being built into premiums, if those opportunities do show up, there’s reason to look at establishing some contracts for next week, particularly since it would be nice to get diversified in time again and lock in some of the premiums that reflect some of that volatility.

Additionally, while there’s very little economic news coming from our shores this week to really move markets, there is a chance that the ECB may be able to move markets in one direction or another when it either makes an announcement regarding the implementation of quantitative easing or again simply defers action.

While most want to hear news of an European QE becoming reality and it would likely give a momentary boost to our markets, especially if there are those who still doubt its announcement tomorrow, I think that it would serve to detract from US equity liquidity by removing some money from our markets to European markets.

For those who believed that was the mechanism that fueled our own market’s rally from 2009, it would be difficult to ignore the same mechanism helping Europe to some degree and that money for new investment in European equities  has to come from somewhere.

So while European QE may be a good idea and while ECB President Draghi has certainly been dragging, I’m fine with him continuing to talk the talk and leaving it at that.

Daily Market Update – January 21, 2015 (8:00 AM)

Yesterday was not very different from much of the rest of this month.

It was actually a very volatile day, only the magnitude was missing.

This past week Jamie Dimon mentioned that JP Morgan traders  were victims of “bad volatility,” making the kind of distinction that isn’t really discussed very much, especially as the concept of volatility itself is so complex.

Yesterday, though, was an example of the good kind of volatility, as the market made intra-day moves in alternating directions. The more about faces in a single day and the less the net result of those moves, the better is the volatility, which is also sometimes considered to be a measure of uncertainty felt by traders.

The moves back and forth keep you on your toes and you never can really develop any confidence about direction. What can be more uncertain than that?

Yesterday finished virtually unchanged after positive indications in the pre-open futures trading that didn’t last very long. The ensuing decline after the open looked as if it might convincingly take the market toward another of the now familiar triple digit losses, but it reversed itself as inexplicably as the reverse from the futures occurred.

During the early part of yesterday’s decline I surprised myself by actually liking some positions during a time that I was thinking in terms of conserving cash.

I’m still surprised, but after last week’s incredibly slow trading and waiting for something to happen, I wasn’t particularly interested in repeating that, even though the outcome was acceptable.

But passivity has its limits and if the volatility seen thus far is any indication of what’s to come in 2015, passivity isn’t going to have the kind of success that it had in 2014.

This morning the market is pointing lower in the pre-open trading, very similar to the level at which it was pointing higher yesterday. In neither situation was there much reason for the moderate gain or loss, respectively and when there is no real ereason to account for futures trading, those mild or moderate moves often have a way of disappearing once trading gets started for real.

So despite the indication of a loss to begin the day, I’m still hopeful that there will be some new opportunities arising, especially when it comes to selling calls on uncovered positions. I think that the 3 new positions opened yesterday may end up being the sum total for the week, but even as cash shrinks away, it’s hard to think in terms of absolutes.

With this being a shortened trading week and with a little bit of volatility being built into premiums, if those opportunities do show up, there’s reason to look at establishing some contracts
for next week, particularly since it would be nice to get diversified in time again and lock in some of the premiums that reflect some of that volatility.

Additionally, while there’s very little economic news coming from our shores this week to really move markets, there is a chance that the ECB may be able to move markets in one direction or another when it either makes an announcement regarding the implementation of quantitative easing or again simply defers action.

While most want to hear news of an European QE becoming reality and it would likely give a momentary boost to our markets, especially if there are those who still doubt its announcement tomorrow, I think that it would serve to detract from US equity liquidity by removing some money from our markets to European markets.

For those who believed that was the mechanism that fueled our own market’s rally from 2009, it would be difficult to ignore the same mechanism helping Europe to some degree and that money for new investment in European equities  has to come from somewhere.

So while European QE may be a good idea and while ECB President Draghi has certainly been dragging, I’m fine with him continuing to talk the talk and leaving it at that.

.

Daily Market Update – January 20, 2015 (Close)

After a really tumultuous week last week that saw wild gyrations in metals, precious metals, currencies, fixed income, oil and stock markets, this week may be a little quieter. At least that’s the view you get when looking at the small number of scheduled economic report releases for this week.

The good news is that our own stock market had no reason to follow yesterday’s Shanghai market in its 7.7% plunge, as for the most part that plunge was seen as having resulted from good intentions. In that case there were significant changes made to the manner in which margin could be used to fuel speculation and that took a lot of wind out of distant sails, much in the same way as when futures markets here change their margin requirements periodically in response to large uni-directional price moves.

The big news story for the week is the same as the world has been awaiting for months and maybe longer.

There’s renewed speculation that this will finally be the week that the ECB President Mario Draghi finally announces some form of European Quantitative Easing.

It’s hard to know what the reaction will be, either way. We’ve become so accustomed to the disappointment of not getting that announcement that we may be completely numb to anymore of the same. By the same token, if it is finally to become a reality there may just be lots of shrugged shoulders and wonderment about what all of the fuss was about.

Ultimately, if it ever does become reality the ECB’s Quantitative Easing will probably not be helpful for our own markets, just as our QE helped US markets and not European ones.

While the US markets have, to some degree been the only game in town for the past few years, that may change as the ECB injects liquidity into the market.

We’ll see.

For now, it’s the second week of earnings and after the banks disappointing reports, which were continued this morning by Morgan Stanley, everyone is waiting to hear whether there’s really evidence of good things to come from steep energy price drops that will begin showing up in raised guidance.

That is the only likely candidate to actually give our markets good reason to move higher after having created an unusual triple bottom over the past month. The real impetus for that to happen will have to wait until the major retailers are on tap to present earnings, but that is still about 5 weeks away, although sometimes it’s hard to keep good news all bottled up inside and altered guidance could pop up between now and then.

Having had a few assignments last week I’m happy to have the cash reserves replenished a little, but would still like to see that level grow some more.

Despite having liked to have seen that, it was hard to resist making some purchases to start the week, that as it is, only has 4 days of premium to give.

As it was, with only 3 positions set to expire this week and serve as potential candidates there wasn’t too much too be in a position to replenish those cash reserves, even if all were to be assigned on Friday. While there is already a fair number of positions set to expire during the last week of the February 2015 monthly cycle, there is very little in-between.

Since I was already in a frame of mind to make those purchases, it was relatively easy to get back into the frame of mind that hasn’t been in place for a while, although I wasn’t expecting the market to so quickly give up its early gains, especially in the absence of news and well before what would turn out to be a sharp decline in oil prices.

AS expected, those new purchases used this Friday’s expiration and hopefully there will be enough good news this week to keep them in contention for assignment, or at least easy rollover.

With those purchases out of the way, though, I’d love to get back to the real priority of seeing existing uncovered positions finally begin to earn their keep.

Disappointingly, that wasn’t the case last week, as the first 4 days of trading took the market much lower. Even with Friday’s 200 point gain the market finished 1.2% lower, making it the third consecutive losing week.

At least this week, which initially looked as if would get off to a nice start, didn’t end up taking a big step backward and so at least for the remaining 3 days left this week there may still be some more opportunities than last week’s incredibly slow trading that left me lucky seeing any rollovers, much less assignments.

Daily Market Update – January 20, 2015 (8:30 AM)

After a really tumultuous week last week that saw wild gyrations in metals, precious metals, currencies, fixed income, oil and stock markets, this week may be a little quieter. At least that’s the view you get when looking at the small number of scheduled economic report releases for this week.

The good news is that our own stock market had no reason to follow yesterday’s Shanghai market in its 7.7% plunge, as for the most part that plunge was seen as having resulted from good intentions. In that case there were significant changes made to the manner in which margin could be used to fuel speculation and that took a lot of wind out of distant sails, much in the same way as when futures markets here change their margin requirements periodically in response to large uni-directional price moves.

The big news story for the week is the same as the world has been awaiting for months and maybe longer.

There’s renewed speculation that this will finally be the week that the ECB President Mario Draghi finally announces some form of European Quantitative Easing.

It’s hard to know what the reaction will be, either way. We’ve become so accustomed to the disappointment of not getting that announcement that we may be completely numb to anymore of the same. By the same token, if it is finally to become a reality there may just be lots of shrugged shoulders and wonderment about what all of the fuss was about.

Ultimately, if it ever does become reality the ECB’s Quantitative Easing will probably not be helpful for our own markets, just as our QE helped US markets and not European ones.

While the US markets have, to some degree been the only game in town for the past few years, that may change as the ECB injects liquidity into the market.

We’ll see.

For now, it’s the second week of earnings and after the banks disappointing reports, which were continued this morning by Morgan Stanley, everyone is waiting to hear whether there’s really evidence of good things to come from steep energy price drops that will begin showing up in raised guidance.

That is the only likely candidate to actually give our markets good reason to move higher after having created an unusual triple bottom over the past month. The real impetus for that to happen will have to wait until the major retailers are on tap to present earnings, but that is still about 5 weeks away, although sometimes it’s hard to keep good news all bottled up inside and altered guidance could pop up between now and then.

Having had a few assignments last week I’m happy to have the cash reserves replenished a little, but
would still like to see that level grow some more.

However, that;s not going to happen this week as there are only 3 positions set to expire this week and serve as potential candidates. While there is already a fair number of positions set to expire during the last week of the February 2015 monthly cycle, there is very little in-between.

I would like to make some new purchases this week and am most likely to consider using weekly expirations, but just as in past weeks, would be most happy seeing existing uncovered positions finally begin to earn their keep.

Disappointingly, that wasn’t the case last week, as the first 4 days of trading took the market much lower. Even with Friday’s 200 point gain the market finished 1.2% lower, making it the third consecutive losing week.

At least this week looks as if it may get off to a better start and may offer some more opportunities than last week’s incredibly slow trading that left me lucky seeing any rollovers, much less assignments.