Category Archives: Daily Market Update

Daily Market Update – December 22, 2014 (Close)

Today looked as if it would open with a mildly higher bias, but the real impetus may come tomorrow, as the GDP is released, including any revisions to prior months.

Given how the day ended 150 points higher today that could really be a beautiful thing if the GDP could really give that push to the next level. Maybe it would offset the weakness shown by the energy sector today that put a lid on the S&P 500’s gains, as compared to the DJIA.

Oil prices have now been low enough and long enough to possibly already begin showing up in the GDP and that statistic has created some powerful moves in markets this year in both directions. If not this month, then the next month’s GDP report, which comes a day after the next FOMC Statement could be the one to start showing some real impact of lower energy prices on consumer spending and economic growth.

Although oil prices and the market seemed to de-couple last week there  will still be plenty of attention placed on the energy sector, which also seemed to de-couple somewhat from oil prices.

Today was another day of de-coupling, as it is sinking in that there’s much more to a market of stocks than just energy companies.

The morning already indicated a decline in oil prices, but the market was clearly heading again in the opposite direction. However, during this trade shortened week, with its expected low volume, anything can easily magnify and distort any trends.

While the traditional Santa Claus Rally is usually set to begin right after Christmas and even with some nice recovery last week, I’m not really anticipating establishing much in the way of new positions in anticipation of that rally.

I would just be happy to see prices, especially in the energy sector move higher and would like to see attention return to the retail sector, which is usually where we’re focused at this time of the year.

Although energy didn’t play along, it was good seeing the market rise without any real provocation and if we can get over the oil issue we may be able to start paying attention to the usual story this time of year.

The typical December story is that retail sales are disappointing heading into the final days of the Christmas holiday and then surprisingly, turn out to be better than expected when the dust settles.

This year we have almost none of the information that usually accompanies this time of the year, but the expectation has to be for good numbers as all of the signs are now pointing to an improving economy with more jobs, better paying jobs, a relatively warm winter, so far, and dropping oil and gas prices.

That would be a nice scenario to end out the year and usher in the next earni
ngs season that starts in  just a little more than 2 weeks.

Last week was an exceptionally slow trading week. Hopefully this week will provide an opportunity to make some trades, especially the sale of new call positions. I would like to see some more assignments this week, although at the moment there are only a handful of positions set to expire this Friday. Any opportunity to add to that list from among current positions would be a good thing, as in addition to the income received, I’d still like to reduce the total number of positions held.

With such a short trading week option premiums are going to be lower than usual, especially for the weekly variety. With some give back in volatility last week after that two day 700 point gain, there’s probably going to be less enticement to look at expanded weekly options, but that still may offer a little bit better premium.

Although last Friday was a fairly quiet trading day after a preceding 4 days of triple digit moves, including lots of intra-day volatility, there’s no reason to believe that it will be overly quiet this week, despite the calm that seems to be characterizing this morning’s open.

While I’d like to see an early week’s market climb in order to have some opportunity to sell calls, any sign of a give back of gains would be the time that I would consider adding some new positions, in the anticipation that this week could be as much of a roller coaster as last week.

Today’s strong triple digit gain is an indication of the kind of surprises, good and bad, that may await.

Daily Market Update – December 22, 2014 (8:15 AM)

Today looks as if it will open with a mildly higher bias, but the real impetus may come tomorrow, as the GDP is released, including any revisions to prior months.

Oil prices have now been low enough and long enough to possibly already begin showing up in the GDP and that statistic has created some powerful moves in markets this year in both directions. If not this month, then the next month’s GDP report, which comes a day after the next FOMC Statement could be the one to start showing some real impact of lower energy prices on consumer spending and economic growth.

Although oil prices and the market seemed to de-couple last week there  will still be plenty of attention placed on the energy sector, which also seemed to de-couple somewhat from oil prices.

The morning is actually indicating a decline in oil prices, but the market is heading again in the opposite direction, although this trade shortened week, with its expected low volume, can easily magnify and distort any trends.

While the traditional Santa Claus Rally is usually set to begin right after Christmas and even with some nice recovery last week, I’m not really anticipating establishing much in the way of new positions in anticipation of that rally.

I would just be happy to see prices, especially in the energy sector move higher and would like to see attention return to the retail sector, which is usually where we’re focused at this time of the year.

The typical December story is that retail sales are disappointing heading into the final days of the Christmas holiday and then surprisingly, turn out to be better than expected when the dust settles.

This year we have almost none of the information that usually accompanies this time of the year, but the expectation has to be for good numbers as all of the signs are now pointing to an improving economy with more jobs, better paying jobs, a relatively warm winter, so far, and dropping oil and gas prices.

That would be a nice scenario to end out the year and usher in the next earnings season that starts in  just a little more than 2 weeks.

Last week was an exceptionally slow trading week. Hopefully this week will provide an opportunity to make some trades, especially the sale of new call positions. I would like to see some more assignments this week, although at the moment there are only a handful of positions set to expire this Friday. Any opportunity to add to that list from among current positions would be a good thing, as in addition to the income received, I’d still like to reduce the total number of positions held.

With such a short trading week option premiums are going to be lower than usual, especially for the weekly variety. With some give back in volatility last week after that two day 700 point gain, there’s pr
obably going to be less enticement to look at expanded weekly options, but that still may offer a little bit better premium.

Although last Friday was a fairly quiet trading day after a preceding 4 days of triple digit moves, including lots of intra-day volatility, there’s no reason to believe that it will be overly quiet this week, despite the calm that seems to be characterizing this morning’s open.

While I’d like to see an early week’s market climb in order to have some opportunity to sell calls, any sign of a give back of gains would be the time that I would consider adding some new positions, in the anticipation that this week could be as much of a roller coaster as last week.

Daily Market Update – December 19, 2014 (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 include:

Assignments:  EBAY, FAST, GE, K, TGT

Rollovers:   none

Expirations:  AZN, GDX, JOY, LXK, MAT, SBGI

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

This week’s ex-dividend positions were: GE and LVS.

There are currently no ex-dividend positions next week.

Unless there are some compelling forward month premiums on some of the current monthly option positions, I will likely not attempt to rollover the positions, in order to avoid the relatively high costs of closing out those contracts.

Daily Market Update – December 18, 2014 (Close)

Yesterday was a nice day and did a little bit to make up for the recent 5% decline in the S&P 500, but if you’re holding energy sector stocks, there’s still a long way to go.

Some of that way looked like it could be achieved this morning as oil was headed higher in the futures markets and Vladimir Putin, already in the third hour of his annual address to the Russian nation was providing a calming tone to markets, while pointing his finger at “external sources” for his nation’s economic woes.

No matter.

On the heels of yesterday’s FOMC which made a further commitment to low interest rates, the pre-open trading was showing another strong gain. Not quite the almost 300 points that were added yesterday, but a good gain, nonetheless. That gain, as it turned out was real, and was 400 points higher and more than added to yesterday’s gain.

It was especially good coming at the end of a monthly cycle and possibly helping in the objective of seeing some assignments and rollovers.

For the last two days of this monthly cycle that’s where the focus will be.

With yesterday’s gain, as well as the head fake gains that were lost on Tuesday, the temptation was to try and make some DOH Trades, but for now, there’s reason to resist those temptations, even as the market had a great gain today.

While premiums are showing some evidence of increase, there;’s still too much of a chance of seeing the same kind of gap movements, this time higher, as have been seen, especially the kind that took the energy sector lower.

That was especially true today, as the gains kept on going even after the gains in oil reversed themselves.

For the first time in a couple of weeks has come the realization that lower energy costs are great for the market and for everyone in the US.

Just wait until next week as the GDP data and revisions are released.

Today was a good day to avoid the risks associated with DOH Trades and instead just enjoy the ride.

The problem with having a DOH Trade position in the event of a gap higher is that as the volatility then falls and the trading volume dries up, as it has, it is difficult to get a rollover trade executed and you are left in a position of either taking a year end loss or not participating in the upward climb of shares that were disproportionately beaten down
.

However, if the march higher continues, especially if lucky enough to see prices approaching pre-plunge levels, or at least approaching the breakeven price of a position, there may be reason to start looking at those opportunities to add half of a percent here and there.

But today didn’t seem like that day, either, as it was an especially good sign to see an uncoupling between energy prices and the overall market. Even energy stocks, which had initially reversed as did the underlying commodity, went on to recover a good portion of their gains.

Another trade that I may resist making are for those positions that have only monthly contracts and may be a little too expensive to buy back relative to the premium received for selling new positions. That includes such stocks as Fastenal, Kellogg, Lexmark, Mattel and Sinclair Broadcasting. I may rather see them expire and hope to be able to sell new calls on them, if not assigned, as the new monthly option cycle begins.

Today’s gains, however, left Fastenal and Kellogg in position to be assigned, which would be a good outcome, if it can end up that way.

Normally I look at expired positions as a failure, but sometimes they are just an expression of not wanting to endure the expense of the rollover, especially if the cost of buying back the short position is unduly high, as it often is on those relatively thinly traded monthly positions.

Meanwhile, as another earnings season begins in a month or so, some of those monthly positions may look at a February 2015 expiration date, particularly if there’s a dividend that may also be up for capture, such as  is the case with Fastenal, although assignment is still a possibility.

For now, I hope that some of these market gains continue as the realization that low energy prices can only move the economy forward as GDP can only grow when the fourth quarter statistics are  released. Ultimately, the energy sector will eventually catch up, as it always does.

That may be little solace for holding positions in that sector now, but nothing defines what cycles are all about better than commodities.

But as long as oil looks as if it as some point of stability, or maybe even climbing higher, there’s still some time to actually get that Christmas Rally that everyone has been expecting. Add to that some good retail numbers, and we’ve heard almost nothing about holiday sales as all news has been oil-centric, and you have the makings for some nice moves higher in the last 2 weeks of 2014.

Daily Market Update – December 18, 2014 (8:00 AM)

Yesterday was a nice day and did a little bit to make up for the recent 5% decline in the S&P 500, but if you’re holding energy sector stocks, there’s still a long way to go.

Some of that way may be achieved this morning as oil is headed higher in the futures markets and Vladimir Putin, already in the third hour of his annual address to the Russian nation is providing a calming tone to markets, while pointing his finger at “external sources” for his nation’s economic woes.

No matter.

On the heels of yesterday’s FOMC which made a further commitment to low interest rates, the pre-open trading is showing another strong gain. Not quite the almost 300 points that were added yesterday, but a good gain, nonetheless. That gain, if it turns out to be real, added to yesterday’s is especially good as coming at the end of a monthly cycle and possibly helping in the objective of seeing some assignments and rollovers.

For the next two days that’s where the focus will be.

With yesterday’s gain, as well as the head fake gains that were lost on Tuesday, the temptation was to try and make some DOH Trades, but for now, there’s reason to resist those temptations. While premiums are showing some evidence of increase, there;’s still too much of a chance of seeing the same kind of gap movements, this time higher, as have been seen, especially the kind that took the energy sector lower.

The problem with having a DOH Trade position in the event of a gap higher is that as the volatility then falls and the trading volume dries up, as it has, it is difficult to get a rollover trade executed and you are left in a position of either taking a year end loss or not participating in the upward climb of shares that were disproportionately beaten down.

However, if the march higher continues, especially if lucky enough to see prices approaching pre-plunge levels, or at least approaching the breakeven price of a position, there may be reason to start looking at those opportunities to add half of a percent here and there.

Another trade that I may resist making are for those positions that have only monthly contracts and may be a little too expensive to buy back relative to the premium received for selling new positions. That includes such stocks as Fastenal, Kellogg, Lexmark, Mattel and Sinclair Broadcasting. I may rather see them expire and hope to be able to sell new calls on them, if not assigned, as the new monthly option cycle begins.

Normally I look at expired positions as a failure, but sometimes they are just an expression of not wanting to endure the expense of the
rollover, especially if the cost of buying back the short position is unduly high, as it often is on those relatively thinly traded monthly positions.

Meanwhile, as another earnings season begins in a month or so, some of those monthly positions may look at a February 2015 expiration date, particularly if there’s a dividend that may also be up for capture, such as  is the case with Fastenal, although assignment is still a possibility.

For now, I hope that some of these market gains continue as the realization that low energy prices can only move the economy forward as GDP can only grow when the fourth quarter statistics are  released. Ultimately, the energy sector will eventually catch up, as it always does.

That may be little solace for holding positions in that sector now, but nothing defines what cycles are all about better than commodities.

But as long as oil looks as if it as some point of stability, or maybe even climbing higher, there’s still some time to actually get that Christmas Rally that everyone has been expecting. Add to that some good retail numbers, and we’ve heard almost nothing about holiday sales as all news has been oil-centric, and you have the makings for some nice moves higher in the last 2 weeks of 2014.