Category Archives: Daily Market Update

Daily Market Update – November 12, 2014 (8:00 AM)

It’s now Wednesday, generally the quietest day of the week, right in the middle of what was expected to be a quiet week.

With Singles Day and Veterans Day now over, the most interesting thing this week may turn out to be today’s planned space landing on a moving comet.

How that figures into anything is debatable, but at least it’s interesting and really the stuff of science fiction.

While that’s going on the market seems as if it prepared to open weaker than the past two days, but still not with very much conviction.

While there are still some earnings reports to go, for the most part that has now been removed as an overall market catalyst, although individual stocks can obviously still have their significant ups and downs, although the prevalent significant movement, when it occurs, has been lower.

Those whose every breath is fully invested in the market know very well that November and December tend to be good months, regardless of how the holiday retailing season stacks up. While patterns tend to break down as they become more widely recognized, especially when everyone talks about it, such as with the “January Effect,” the November – December effect isn’t one that’s too widely discussed and there’s still plenty of reason to believe that there’s hedge fund fuel to keep that pattern alive for another year.

One thing that could definitely help the overall market to move higher would be some good numbers coming from the retailers that are just now gearing up to report their earnings. More importantly, their forward guidance can really be the catalyst that seems to be missing right now.

Those good numbers and good forward prospects have to come from more than the higher end retailers, though. That segment of society has noticeably increased discretionary spending, but in the really big picture they represent a very small portion of what really matters. Even Macys isn’t entirely reflective of an improving retail picture if it reports good earnings. The improved results really have to be seen from the bottom up, including dollar stores, Wal-Mart, specialty retailers and big box stores throughout the spectrum.

I hope that turns out to be the case, as it also will get the albatross around our necks to be released. That is the fear of when interest rate increases will finally happen. A heating up economy, especially in those phases that necessitate an increase in interest rates tends to be good for everyone and would finally get us over the fear of those hikes, just as the eventual announcement of a taper finally got us over the anticipation of that announcement.

For the next few days I doubt that I’ll be adding any new positions. With a couple of DOH Trades set to expire this week,  I would like to see them either expire or will have a need to roll them over, hopefully into a marketplace that has more willing sellers than has recently been the case.

That lack of a willing market of sellers may continue to
add to the difficulty of executing rollover trades at fair prices, but I expect that when hedge funds get back into the practice of hedging that will no longer be the case.

Daily Market Update – November 11, 2014 (Close)

Yesterday, in what is otherwise a slow week, so much attention was placed on the Alibaba manufactured holiday called “Singles Day.”

It’s a day that single people are supposed to take the time and present a gift to themselves. Of course there are those who might believe that being single is gift enough, but nonetheless, it is a perfectly materialistic occasion that would have the leaders of the 1948 Revolution apoplectic.Having actually celebrated a 30th wedding anniversary yesterday, coinciding with Singles Day, somehow I didn’t receive anything for my troubles, so maybe I should have just following the crowd and gifted myself.

Today, in the United States, it is Veterans Day, where we honor those who gave the gift of freedom rather than honoring themselves with a gift.

I’m not quite certain why stock markets are open, as the bond markets and banks are closed.

But they are and on those few days a year that the credit markets are closed and stocks do trade, those are usually fairly slow trading days.

And so it was today.

The morning’s futures seemed to be on course to follow the same path as yesterday, as that day’s listless opening was the pattern throughout the day and served as today’s templet, as well.

The only thing of note yesterday was the marked reversal in energy prices in the late morning which eliminated the sizeable gains in the sector with moderate losses. Insofar as energy is a significant portion of the S&P 500 it again limited those gains. Since the slide in energy started sometime in July 2014, the DJIA and S&P 500 have performed identically, gaining 3.1%, with the S&P 500 being held back due to its heavier energy representation.

In the meantime, any benefit to be gained from lower energy prices won’t really become apparent until the next quarter’s earnings are reported.

For now, ever since Goldman Sachs’ call for $75 crude, the markets have been relatively stable and I think may have bottomed, although there are further calls going as low as $50.

As an unusually early start to winter begins to sweep across parts of the nation the excess supply over demand may shift a little bit, but at these prices there is also bound to be those seeking bargain pricing and speculating on an eventual rebound.

Ordinarily, the thinking would be that low energy prices would spur other businesses to ramp up their activity, seeing it as a perfect time to be able to increase their margins.

That would usually lead to incre
ased employment, increased spending and increased earnings.

But that doesn’t appear to be happening yet.

Maybe businesses are skeptical of low energy prices remaining low and continue to be cautious, but the reality is that the markets and the economy tend to do better when oil prices are increasing, as long as that increase is demand driven.

Maybe they just don’t see consumer demand increasing for discretionary items.

Now, we’re in the unusual position of having too much energy and not enough demand. Hopefully, whatever is saved in gas prices and heating prices will become part of an increase in discretionary spending.

We’ll find out later this week whether retailers have received any benefit at all from the increasing employment statistics over the past 3 months, but despite good numbers for the past year, there has continued to be a reluctance to spend.

Something is just qualitatively different about this recovery and the typical patterns just aren’t materializing or are just taking much longer to become evident.

Hopefully retail will bring some good news this week and energy pricing will moderate as consumer demand leads to greater overall economic activity.

With Macys and JC Penney reporting after today’s close maybe we’ll get something to bring some life into the market this week. With next week being the last week of the cycle it’s never too late to sell any options if the market can find a reason to move suddenly higher.

Daily Market Update – November 11, 2014 (9:00 AM)

Yesterday, in what is otherwise a slow week, so much attention was placed on the Alibaba manufactured holiday called “Singles Day.”

It’s a day that single people are supposed to take the time and present a gift to themselves. Of course there are those who might believe that being single is gift enough, but nonetheless, it is a perfectly materialistic occasion that would have the leaders of the 1948 Revolution apoplectic.Having actually celebrated a 30th wedding anniversary yesterday, coinciding with Singles Day, somehow I didn’t receive anything for my troubles, so maybe I should have just following the crowd and gifted myself.

Today, in the United States, it is Veterans Day, where we honor those who gave the gift of freedom rather than honoring ourselves with a gift.

I’m not quite certain why stock markets are open, as the bond markets and banks are closed.

But they are and on those few days a year that the credit markets are closed and stocks do trade, those are usually fairly slow trading days.

The morning’s futures seem to be following the same path as yesterday’s, as that listless opening was the pattern throughout the day.

The only thing of note yesterday was the marked reversal in energy prices in the late morning which eliminated the sizeable gains in the sector with moderate losses. Insofar as energy is a significant portion of the S&P 500 it again limited those gains. Since the slide in energy started sometime in July 2014, the DJIA and S&P 500 have performed identically, gaining 3.1%, with the S&P 500 being held back due to its heavier energy representation.

In the meantime, any benefit to be gained from lower energy prices won’t really become apparent until the next quarter’s earnings are reported.

For now, ever since Goldman Sachs’ call for $75 crude, the markets have been relatively stable and I think may have bottomed, although there are further calls going as low as $50.

As an unusually early start to winter begins to sweep across parts of the nation the excess supply over demand may shift a little bit, but at these prices there is also bound to be those seeking bargain pricing and speculating on an eventual rebound.

Ordinarily, the thinking would be that low energy prices would spur other businesses to ramp up their activity, seeing it as a perfect time to be able to increase their margins.

That would usually lead to increased employment, increased spending and increased earnings.

But that doesn’t appear
to be happening yet.

Maybe businesses are skeptical of low energy prices remaining low and continue to be cautious, but the reality is that the markets and the economy tend to do better when oil prices are increasing, as long as that increase is demand driven.

Maybe they just don’t see consumer demand increasing for discretionary items.

Now, we’re in the unusual position of having too much energy and not enough demand. Hopefully, whatever is saved in gas prices and heating prices will become part of an increase in discretionary spending.

We’ll find out later this week whether retailers have received any benefit at all from the increasing employment statistics over the past 3 months, but despite good numbers for the past year, there has continued to be a reluctance to spend.

Something is just qualitatively different about this recovery and the typical patterns just aren’t materializing or are just taking much longer to become evident.

Hopefully retail will bring some good news this week and energy pricing will moderate as consumer demand leads to greater overall economic activity.

Daily Market Update – November 10, 2014 (Close)

Last week there was plenty of reason to believe that the market would do something to make either bulls or bears happy.

There were potentially 3 big stories for the week, each of which could have moved the market in a big way. As it would turn out the market didn’t care very much and did little of anything, other than acted a little surprised by the election results that were very widely expected.

This week there’s very little on the economic calendar that could potentially move markets and as unpredictable as the world has always been, there doesn’t appear to be any particular flash point this week, as some signals being sent on Friday regarding a Russian incursion into Ukraine haven’t been validated.

So, logic might suggest that this morning’s listless futures trading would characterize the week ahead, but that kind of logic didn’t fare too well last week and there’s not much reason to ever expect that quiet futures trading has any great predictive power.

For now, that doesn’t really matter too much.

Ultimately, what forms action is the availability of cash, the need to raise cash or the need to preserve cash.

The reality is that the market is still at new highs and the momentum has clearly been in a single direction for the past 3 weeks, although it did slow down just a little bit last week. Historically, the last 2 months of the year outperform the preceding 10 months, especially in years that hedge funds are likely to be trailing the broad market, as they are again this year.

Today would end up just adding to those new highs. Not by much, but still, a little higher than ever before.

With little to lose, especially if investing other people’s money and not their own,  I expect that hedge funds may fuel that momentum, just as I think they have been already causing the options market to see less volume, as they take hedges off in an effort to go for the fences.

With some more cash in hand after some assignments last week I’m not  opposed to adding new positions in order to take advantage of any potential continuation of the upward momentum, but I would still like to be able to generate whatever income possible from additional call sales, despite the realization that it may continue being more difficult to rollover positions as sellers are fewer or asking relatively exorbitant premiums as trying to close out positions near the week’s end.

With a few positions scheduled to expire this and the same next, the low volatility makes it unlikely that I would be looking at expanded weekly options unless there is an earnings report or a dividend involved.

That was definitely the case with the purchase of Mattel today and the use of the December and may be reason to rollover the additional Sinclair Broadcasting option sold today on the new shares picked up.

I expect this week to be relatively light in personal trading, but fortunately there are some dividends this week as well. One of those, International Paper, may be at risk for early assignment, but is also a potential choice for addition of a new position this week. I may look at opportunities to roll that existing position over in order to keep the dividend, but like Intel the previous week the traders just weren’t there to make a deal. With International Paper there will still be two more days to try and get a trade done, but the participants are few and far between as are the spreads.

As long as it takes 2 parties to complete a trade that’s an obstacle that I hope won’t last very long.

Daily Market Update – November 10, 2014 (8:45 AM)

Last week there was plenty of reason to believe that the market would do something to make either bulls or bears happy.

There were potentially 3 big stories for the week, each of which could have moved the market in a big way. As it would turn out the market didn’t care very much and did little of anything, other than acted a little surprised by the election results that were very widely expected.

This week there’s very little on the economic calendar that could potentially move markets and as unpredictable as the world has always been, there doesn’t appear to be any particular flash point this week, as some signals being sent on Friday regarding a Russian incursion into Ukraine haven’t been validated.

So, logic might suggest that this morning’s listless futures trading would characterize the week ahead, but that kind of logic didn’t fare too well last week and there’s not much reason to ever expect that quiet futures trading has any great predictive power.

For now, that doesn’t really matter too much.

Ultimately, what forms action is the availability of cash, the need to raise cash or the need to preserve cash.

The reality is that the market is still at new highs and the momentum has clearly been in a single direction for the past 3 weeks, although it did slow down just a little bit last week. Historically, the last 2 months of the year outperform the preceding 10 months, especially in years that hedge funds are likely to be trailing the broad market, as they are again this year.

With little to lose, especially if investing other people’s money and not their own,  I expect that hedge funds may fuel that momentum, just as I think they have been already causing the options market to see less volume, as they take hedges off in an effort to go for the fences.

With some more cash in hand after some assignments last week I’m not  opposed to adding new positions in order to take advantage of any potential continuation of the upward momentum, but I would still like to be able to generate whatever income possible from additional call sales, despite the realization that it may continue being more difficult to rollover positions as sellers are fewer or asking relatively exorbitant premiums as trying to close out positions near the week’s end.

With a few positions scheduled to expire this and the same next, the low volatility makes it unlikely that I would be looking at expanded weekly options unless there is an earnings report or a dividend involved.

I expect this week to be relatively light in personal trading, but fortunately there are some dividends this week as well. One of those, International Paper, may be at risk for early assignment, but is also a potential choice for addition of a new position this week. I may look at opportunities to roll that existing position over in order to keep the dividend, but like Intel the previous week the traders just weren’t there to make a deal.

As long as it takes 2 parties to complete a trade that’s an obstacle that I hope won’t last very long.