Category Archives: Daily Market Update

Daily Market Update – November 4, 2014 (Close)

Yesterday was one of those rare days when the market did what you would have reasonably expected from it, although that isn’t the case as often as should be the case.

There was really no news, maybe a little bit of a hangover from the latter half of last week and no real reason for the market to do anything, at all.

And that’s exactly what yesterday was like. There was almost no movement within a pretty tight trading range. For all of the excitement about Friday’s announcement by the Bank of Japan, there was absolutely no carry over through the weekend and it’s unlikely that we will ever see the benefit of Japan’s Quantitative Easing as it creates, perhaps, a more appealing competitor to our own equity markets.

There wasn’t much reason to think that today would have been any different and the futures markets were indicating that it should be another quiet day, but those indications are very often not very accurate when the futures trading is listless.

The trading range today did turn out to be bigger than yesterday, but there really wasn’t too much real movement. The overall market, probably due to its bigger energy representation, which was absolutely hammered today, greatly lagged the DJIA, but still wasn’t terribly off.

The real excitement may begin tomorrow as election results come in and we may find out whether control of the Senate moves over from one party to another, although there may be a delay if run-off elections become necessary in a key state or two. Still, that result is so widely expected that there shouldn’t be too much of a reaction as one form of balance and gridlock is traded for another form of balance and gridlock.

Most people, and I suspect most investors won’t care too much about the mid-term elections and what impact they may have on policy and the economy. What it known with great certainty is that the moment those results are in the winners will already be planning their re-elections and the losers will already be mapping out strategies for 2016, when it really counts.

Tomorrow morning also brings the ADP Employment Report which sometimes has the ability to presage the really important Employment Situation Report on Friday.

In-between will possibly be some news from the ECB which could signal an EU intention to initiate Quantitative Easing, although expected, may still come as a surprise and give markets another boost.

So the latter half of the week may have reasons for the market to show some reaction and hopefully it will be in a positive direction, as it has now been a full day since having set another record closing high.

But with a couple of opening transactions already made this week and cash at its lowest point in years, I would like to simply see what most everyone wants to see with those holdings.

With volatility again at such a low level after only a couple of weeks of flirting with some more normal levels each passing day makes the sale of a weekly option less appealing, so yesterday would have been a very nice day for a market surge, especially when there’s no intention or desire to add new positions.

That didn’t happen and it didn’t look, from initial appearances, as if it would happen today, although individual opportunities could always appear, but lately, in the absence of earnings news, there has been little to no substantive movement in individual names on a daily basis. Moves have been fairly muted, especially on the upside.

Today was simply a day of waiting for tomorrow.

Daily Market Update – November 4, 2014 (8:15 AM)

Yesterday was one of those rare days when the market did what you would have reasonably expected from it, although that isn’t the case as often as should be the case.

There was really no news, maybe a little bit of a hangover from the latter half of last week and no real reason for the market to do anything, at all.

And that’s exactly what yesterday was like. There was almost no movement within a pretty tight trading range. For all of the excitement about Friday’s announcement by the Bank of Japan, there was absolutely no carry over through the weekend and it’s unlikely that we will ever see the benefit of Japan’s Quantitative Easing as it creates, perhaps, a more appealing competitor to our own equity markets.

There’s not much reason to think that today would be any different and the futures markets are indicating that it should be another quiet day, but those indications are very often not very accurate when the futures trading is listless..

The real excitement may begin tomorrow as election results come in and we may find out whether control of the Senate moves over from one party to another, although there may be a delay if run-off elections become necessary in a key state or two. Still, that result is so widely expected that there shouldn’t be too much of a reaction as one form of balance and gridlock is traded for another form of balance and gridlock.

Most people, and I suspect most investors won’t care too much about the mid-term elections and what impact they may have on policy and the economy. What it known with great certainty is that the moment those results are in the winners will already be planning their re-elections and the losers will already be mapping out strategies for 2016, when it really counts.

Tomorrow morning also brings the ADP Employment Report which sometimes has the ability to presage the really important Employment Situation Report on Friday.

In-between will possibly be some news from the ECB which could signal an EU intention to initiate Quantitative Easing, although expected, may still come as a surprise and give markets another boost.

So the latter half of the week may have reasons for the market to show some reaction and hopefully iut will be in a positive direction, as it has now been a full day since having set another record closing high.

But with a couple of opening transactions already made this week and cash at its lowest point in years, I would like to simply see what most everyone wants to see with those holdings.

With volatility again at such a low level after only a couple of weeks of flirting with some more normal levels each passing day makes the sale of a weekly option less appealing, so yesterday would have been a very nice day for a market surge, especially when there’s no intention or desire to add new positions.

That didn’t happen and it doesn’t look, from initial appearances, as if it will happen today, although individual opportunities could always appear, but lately, in the absence of earnings news, there has been little to no substantive movement in individual names on a daily basis. Moves have been fairly muted, especially on the upside.

Today may simply be a day of waiting for tomorrow.

Daily Market Update – November 3, 2014 (Close)

After all of the tumult in October when the dust finally settled the month was 2% higher and we begin November at all time highs again.

What is interesting, to me, at least, is that we are in the same position as last year at this time.

Back in November 2013, by and large, hedge funds were severely underperforming a market that would end the year about 30% higher. There was lots of speculation that those hedge funds would either be faced with closing shop or letting it ride for the remaining two months and fueling the market through substantial bets that followed the year long momentum.

Those final 2 months saw a 5% increase, but that was just barely higher than the rate for the previous 10 months. However, before the role of hedge funds attempting to rescue their performances is discounted, the market trend turned almost immediately once the new year started.

With 2 months left to go in 2014 we may again see desperate hedge funds taking off their hedges in hopes of playing catch-up and either continuing the market in its current momentum or propelling it forward.

Or they could just close up shop.

Last week saw the bubble burst for those who pinned their hopes on Quantitative Easing being delayed, yet the market ignored the disowning of the fuel that pushed it forward and pushed it forward even more.

That wasn’t expected by many and the initial response by the market seemed to be confusion rather than full speed ahead. But even more surprising was the news from the Bank of Japan. While all eyes were on the ECB and Mario Draghi, little was expected from Japan.

This morning there didn’t appear to be any follow through, but there rarely is to big events from the previous week, even if just a single trading day earlier. That sort of ambivalence was the name of the game today as trading was listless and within a pretty tight range.

Instead, this week focuses on the elections and the Employment Situation Report and with an ECB interlude on Thursday, which could act as another stimulus.

Most already expect control of the Senate to shift to Republicans, so you wouldn’t expect too much impact on Wednesday’s markets, but lately even the expected seems to come as a surprise and instead of being discounted as those sort of things usually have been, they are celebrated the following day.

Unless there is some surprise or unless the final verdict is delayed due to the need for run-off elections, the expectation is that mid-week should see some advances, but there are still the hurdles of Monday and Tuesday that have to be dealt with first.

While I’m not adverse to opening some new positions this week, the two opened today may be the full extent of buying. I still would much prefer taking advantage of any potential market strength to sell calls on existing positions. However, today’s lack of buying & with no real standouts, other than Herbalife, which went inexplicably much higher in advance of earnings, there was no opportunity to find those option sales.

That has been the aim for a while, but has been difficult to do, especially as the motive isn’t being reinforced with low volatility, It’s hard to think about putting positions at risk of assignment when the reward is so low, or that assignment would leave that position having significantly under-performed the market for the duration of its holding period.

However, I am increasingly looking at using lower than cost strike prices and accepting assignment in cases where the sum total of premiums and dividends leaves an assigned position in profit territory, solely for the purpose of raising cash reserves, as opposed to using them as “DOH Trades” to help accumulate dividends with the intention of seeing those sold option positions expire.

Like those hedge funds that may be ready to go all in, I’d love to do the same, but not so much with new cash, only with existing idle assets.

Where the opportunities may arise, I may be more willing to put them at risk of assignment or put them more in need of maintenance to prevent assignment, but I do want to see those premiums and dividends pile up.

Maybe tomorrow or maybe through the good graces of Mario Draghi.

Daily Market Update – November 3, 2014 (8:30 AM)

After all of the tumult in October when the dust finally settled the month was 2% higher and we begin November at all time highs again.

What is interesting, to me, at least, is that we are in the same position as last year at this time.

Back in November 2013, by and large, hedge funds were severely underperforming a market that would end the year about 30% higher. There was lots of speculation that those hedge funds would either be faced with closing shop or letting it ride for the remaining two months and fueling the market through substantial bets that followed the year long momentum.

Those final 2 months saw a 5% increase, but that was just barely higher than the rate for the previous 10 months. However, before the role of hedge funds attempting to rescue their performances is discounted, the market trend turned almost immediately once the new year started.

With 2 months left to go in 2014 we may again see desperate hedge funds taking off their hedges in hopes of playing catch-up and either continuing the market in its current momentum or propelling it forward.

Or they could just close up shop.

Last week saw the bubble burst for those who pinned their hopes on Quantitative Easing being delayed, yet the market ignored the disowning of the fuel that pushed it forward and pushed it forward even more.

That wasn’t expected by many and the initial response by the market seemed to be confusion rather than full speed ahead. But even more surprising was the news from the Bank of Japan. While all eyes were on the ECB and Mario Draghi, little was expected from Japan.

This morning there doesn’t appear to be any follow through, but there rarely is to big events from the previous week, even if just a single trading day earlier.

Instead, this week focuses on the elections and the Employment Situation Report.

Most already expect control of the Senate to shift to Republicans, so you wouldn’t expect too much impact on Wednesday’s markets, but lately even the expected seems to come as a surprise and instead of being discounted as those sort of things usually have been, instead they are celebrated the following day.

Unless there is some surprise or unless the final verdict is delayed due to the need for run-off elections, the expectation is that mid-week should see some advances, but there are still the hurdles of Monday and Tuesday that have to be dealt with.

While I’m not adverse to opening some new positions this week I still would much prefer taking advantage of any potential market strength to sell calls on existing posit
ions.

That has been the aim for a while, but has been difficult to do, especially as the motive isn’t being reinforced with low volatility, It’s hard to think about putting positions at risk of assignment when the reward is so low, or that assignment would leave that position having significantly under-performed the market for the duration of its holding period.

However, I am increasingly looking at using lower than cost strike prices and accepting assignment in cases where the sum total of premiums and dividends leaves an assigned position in profit territory, solely for the purpose of raising cash reserves, as opposed to using them as “DOH Trades” to help accumulate dividends with the intention of seeing those sold option positions expire.

Like those hedge funds that may be ready to go all in, I’d love to do the same, but not so much with new cash, only with existing idle assets.

Where the opportunities may arise, I may be more willing to put them at risk of assignment or put them more in need of maintenance to prevent assignment, but I do want to see those premiums and dividends pile up.

Daily Market Update – October 31, 2014 (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 trading outcomes include:

Assignments:  none

Rollovers:  DOW, EMC,  WFM

Expirations:   BX, GM

The following stocks were ex-dividend this week: Ford (10/29 $0.12)

The following stocks are ex-dividend next week: INTC (11/5 $0.22), WLT (11/6 $0.01)

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