Category Archives: Daily Market Update

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

The initial reason given for yesterday’s market sell-off was rampant profit taking among people waiting to sell until after New Years, so that they could delay paying their capital gains taxes until 2016.

Yet somehow the same didn’t occur in January 2013, when there were far more gains from the previous year and if it happened in January 2014, it waited a couple of weeks for one of those standard mini-corrections to kick in.

The likelihood that yesterday’s 330+ sell-off was tax related was pretty small, as in the absence of any kind of panic or major news story, it’s not likely to see so many acting in concertt for the same reason. Instead, it’s more likely that with oil getting below $50 the market again got dragged along, after having disengaged itself from that weakness with the realization that as long as demand exists, falling oil prices is an incredible gifts to most economies and to most companies.

While yesterday’s drop did begin to create some appealing price points for some stocks, there’s still a lot of uncertainty ahead this week and I wasn’t overly eager to commit to any new positions. There’s still the issue of falling oil, as the futures are pointing lower again this morning and the unknowns of the upcoming FOMC Statement release and the Employment Situation Report.

I don’t really expect either of the latter two to drag markets lower, as it’s unlikely that the FOMC would so quickly say anything to go counter to their declaration for “patience” before interest rate rises are considered. Their change to that wording was interpreting as meaning that they would have greater flexibility in responding to data, but the data is still scant.

The actual FOMC meeting starts today and for the past few months markets have abandoned their caution in anticipation of the release and rallied in advance of the meeting. This morning’s stock futures indicates a mild rise, but after a 330 point decline, that rise barely even qualifies as a bounce, much less an FOMC inspired rally.

With no new positions opened yesterday there’s still plenty of opportunity to do so, but I don’t know if that opportunity will result in the probability of doing so.

While oil continues to grab attention there has been almost no discussion of holiday retail sales and they have mostly gone under the radar, as the only thing we really know is that some declines in brick and mortar sales may have been offset by on-line activity. As earnings season begins next week and the major retailers begin to announce their earnings a couple of weeks into the season, we should begin seeing some of the data that the FOMC may begin to consider, as there’s likely to be some evidence of the consumer sector heating up.

Unfortunately, good economic news in the US, fueled by lower oil and continuing good news on the employment front, may be tempered a bit by some renewed nervousness over
what’s going on in the European Union, as the  fragility and dysfunction of the Greek economy is being replayed and the integrity of the Euro and the entire European Union is again being questioned.

There’s some reason to believe that yesterday’s weakness across Europe as a result of the building concern may have spilled over to our side. If that’s the case, the uncertainty may still have a few weeks to go. What is a little concerning is that the regularity of our mini-corrections every two months for the past 2 years is being disrupted, as we had one right on schedule in mid-December, but are now seeing a very uncharacteristic second wave of selling after the recovery that began in the middle of December.

Not only is that second wave of selling unusual, given the past couple of years, but it also disrupted what is usually a very good December and wiped out the Santa Claus Rally.

Each of those is usually as much of a “done deal” as you can find, but not this year.

So for today, I’m hoping that the pre-FOMC enthusiasm does take hold and would gladly sell calls into strength, but I’m not counting on it and not especially counting on the subsequent major economic events of the week to propel us forward in any meaningful way this week.

Daily Market Update – January 5, 2015 (Close)

The first week of 2015 may be a busy one with economic news.

After today’s horrible day, we could use some economic news of any kind to give us something to think about, because today there was really nothing to think about and that didn’t work out terribly well.

On the schedule for some thought is this week’s FOMC Statement release. Although it always seems as if we just had one of those, this month there will actually be two of them to ponder.

The one this week is followed by an Employment Situation Report on Friday and either one can move markets, although at this point it’s hard to imagine how either could really move markets forward very much, as the pattern now seems to be pretty clear for each.

The FOMC is now just teasing us as far as when interest rates will increase and the Employment Situation Report gives us good news about growing employment, making us wonder when wage inflation will finally become a reality,

The FOMC will be especially interesting as since the last one there has been some indication that the GDP will be growing at a much faster than expected rate due to the drastically lowered energy prices. That may be the kind of data that causes the FOMC to start thinking more seriously about interest rate increases as the previous FOMC statement finally changed the wording from “considerable time” to “patience,” with regard to when those rate increases may begin.

Another strong Employment Situation report, though, could very conceivably set the stage for the second of the month’s FOMC Statements to  put forward a more hawkish kind of  position on the prospects of higher rates, which would be reasonably expected to cast a short term pall on the market’s climb.

This week we’re also left to wonder what ever happened to December and where the Santa Claus Rally went? The 300+ point drop to begin the new year didn’t do much to convince me that the Santa Claus Rally was just a little late in getting started. In fact, the way in which the tepid buying in the final 10 minutes faded was enough reason to believe that The Grinch was in control of things.

While wondering about such things there can also be all kinds of speculation as to what may motivate investors to begin 2015. As this morning’s sell off was getting started the conventional theory was that sellers were unloading money makers and waited until after the new year began so that they could wait another year to pay taxes.

That’s plausible, but it’s just not too likely that you would see so many people and so much volume in concert, reflecting people independently deciding to act the same way in their perceived best interests.

Just as plausible is th
at we followed the lead set in Europe and the tumbling Euro.

Maybe oil and the stock market are moving in tandem again, after oil broke the $50 level today amid reports of OPEC member nations now pumping even more oil, because they really need the money.

Forget the basic economic law of supply and demand. In this case it’s as simple as “pump more. make more.”

Or maybe we just don’t know what really went on today, but whatever it was, it wasn’t a good way to get things off, although the first trading week of 2014 wasn’t really very good, either.

It seems as if it has been a couple of years since “The January Effect” has actually occurred and some of those dogs in the DJIA have been dogs for more than just the one year that they were supposed to be in the doghouse.

With no assignments last week and no new cash added to reserves, I’m not overly enthused about committing new money this week. I would much rather see some assignments to begin the first week of the year and have a chance to see what, if any, theme gets us started.

Despite some of the really large price drops today, including in some positions that were on the potential buy list for this week, it’s not easy to be the first one to step in and test the waters as there wasn’t much evidence of people picking up bargains today.

For now there doesn’t look as if there is any new theme, as low oil prices continue to be the major story, as those prices may now once again be in control of where stocks are going from one day to the next.

The morning futures didn’t do too much to give me hope for being able to simply sell calls on existing uncovered positions, as that would still have been my preference this week as it has been now for quite a while. At least the gold miners were higher today, but you know that on days when your portfolio protection kind of stocks are higher it may not be a terribly good day to be a stock, otherwise.

With four positions set to expire this week it did at least offer some more income generation opportunities than the previous week, which may have been the slowest such week in the past 5 years. The good news is that now there are only 3 positions set to expire this Friday. Other than that it’s not too easy to find anything resembling good news.

Looking a week ahead, with a fair number of positions set to expire as the monthly cycle comes to its end, any new purchases this week are more likely to consider the use of weekly options, where available, rather than the extended ones, especially as the volatility continues to make the extended weekly premiums less appealing.

In the event, however, that the FOMC does introduce some kind of rally, as has been the case for the day before the FOMC Statement release the past few months, there may be reason to try and lock in some premiums on that kind of good news through the use of the expanded weeklies or even heading into the February cycle, as earnings season will also be at hand very soon.

After today, I’ll only believe that after i see it, though.

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Daily Market Update – January 5, 2015 (8:45 AM)

The first week of 2015 may be a busy one with economic news.

Although it always seems as if we just had an FOMC Statement release this month there will actually be two of them to ponder.

The one this week is followed by an Employment Situation Report on Friday and either one can move markets, although at this point it’s hard to imagine how either could really move markets forward very much, as the pattern now seems to be pretty clear for each.

The FOMC is now just teasing us as far as when interest rates will increase and the Employment Situation Report gives us good news about growing employment, making us wonder when wage inflation will finally become a reality,

The FOMC will be especially interesting as since the last one there has been some indication that the GDP will be growing at a much faster than expected rate due to the drastically lowered energy prices. That may be the kind of data that causes the FOMC to start thinking more seriously about interest rate increases as the previous FOMC statement finally changed the wording from “considerable time” to “patience,” with regard to when those rate increases may begin.

Another strong Employment Situation report, though, could very conceivably set the stage for the second of the month’s FOMC Statements to  put forward a more hawkish kind of  position on the prospects of higher rates, which would be reasonably expected to cast a short term pall on the market’s climb.

This week we’re also left to wonder what ever happened to December and where the Santa Claus Rally went?

While doing that there can also be all kinds of speculation as to what may motivate investors to begin 2015.

It seems as if it has been a couple of years since “The January Effect” has actually occurred and some of those dogs in the DJIA have been dogs for more than just the one year that they were supposed to be in the doghouse.

With no assignments last week and no new cash added to reserves, I’m not overly enthused about committing new money this week. I would much rather see some assignments to begin the first week of the year and have a chance to see what, if any, theme gets us started.

For now there doesn’t look as if there is any new theme, as low oil prices continue to be the major story, even though they are no longer the primary forces in moving the market from one day to the next.

The morning futures aren’t doing to much to give me hope for being able to simply sell c
alls on existing uncovered positions, as that would still be my preference this week as it has been now for quite a while.

With four positions set to expire this week it does at least offer some more income generation opportunities than the previous week, which may have been the slowest such week in the past 5 years.

Looking a week ahead, with a fair number of positions set to expire as the monthly cycle comes to its end, any new purchases this week are more likely to consider the use of weekly options, where available, rather than the extended ones, especially as the volatility continues to make the extended weekly premiums less appealing.

In the event, however, that the FOMC does introduce some kind of rally, as has been the case for the day before the FOMC Statement release the past few months, there may be reason to try and lock in some premiums on that kind of good news through the use of the expanded weeklies or even heading into the February cycle, as earnings season will also be at hand very soon.

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Daily Market Update – January 2, 2015 (8:30 AM)

The Week in Review will be posted by 6:00 PM and the Weekend Update will be posted by Noon on Sunday.

Today’s possible trade outcomes are:

Assignments:  none

Rollovers:  none

Expirations:  DOW 

This week’s ex-dividend position was DOW (12/29 $0.42)

Next week’s ex-divdend position is GPS (1/5 $0.22)

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

Daily Market Update – December 31, 2014 (Close)

So far the first two days of this week have been disappointing if you’ve been looking for that fabled Santa Claus Rally, as I have.

You may have had a better chance of spotting the real Santa Claus on Christmas Eve than experiencing that rally, although there’s still Friday, strictly speaking, as that is the fifth day after Christmas.

This morning’s futures looked as if today will be just like the previous two days of this week and that trading would be in a narrow range.

The good news is that the range wasn’t anywhere near as narrow, but the bad news was that it was in the wrong direction, especially in the last hour.

This morning it looked as if that trading may get off to a positive start, even as energy prices were again moderately lower and getting further away from that $54 level.

I didn’t expect that there would be be much personal action today, but I didn’t expect much yesterday, either, and at least two trades came out of the boredom and even more today. 

Fortunately, those opportunities came before the market decided to not cooperate with those in a party mood.

While there was some economic news today, such as the Jobless Claims, nothing was really of the stature to typically move markets. Friday reveals an ISM number and sometimes that has an impact on things, but the beginning of a new tax year can bring its own dynamic, regardless of economic report activity.

Today, instead, was a day to think about last minute tax strategies, as looking through closets that are screaming for items to be donated and maybe losing positions longing to be sold.

The basic rule for the former may be related to how your waist size has changed over the year. Meanwhile, the basic rule for the latter is based on your tax rate.

That rate, together with the time frame of your holding determines what kind of tax benefit you can get from taking a loss on the position.

That value can be expressed on a per share basis.

The question becomes can you reasonably expect the stock to appreciate by that much in the next 30 days, at which point you can buy shares back without triggering the “Wash Sales Rule.”

If the answer is that you don’t expect the stock to gain that much in that time frame, then there may be a tax advantage from selling, if in a taxable account.

A spreadsheet to do the calcul
ations is located at http://j.mp/1BhNGMI and offers a quick and simple analysis of whether or not it may make sense to take a loss.

That’s always a touchy subject and I hate taking losses other than for tax reasons, but I especially hate the idea of taking a loss in what should be a sound company, but may be subject to basic economic laws or business cycles

That definitely is the case in the energy sector, but I also think that is the case in all commodities, including metals. In the latter case that cycle has been much more prolonged than I ever would have imagined, but at some point an ascent will occur, as it always has in the past. Just as I hate taking losses, I especially hate to watch that ascent occur after I’ve taken the losses.

For today I wasn’t too worried about such things, but surprisingly did get an answer to my hopes for any errant opportunities to sell some calls on uncovered positions. I was prepared to hold my breath for those opportunities, even at the risk of turning blue, but it didn’t have to be that way.

I’d rather be a nice shade of pink, anyway, but maybe even more appropriately, a really nice shade of green to start the new year. A few of those unexpected sales at least may end up paying for tonight’s libations, just as the last hour’s sell off put me in a less festive mood, but at least the bubbles may cure that.

Happy New Year and wishes for health, happiness and prosperity to all.