Category Archives: Daily Market Update

Daily Market Update – October 13, 2014 (Close)

Sigh.

What a lousy finish to a totally nondescript kind of day that for a few brief moments after the opening bell looked as if it would have at least held some prospect for a bounce higher.

After 3 weeks of triple digit moves that seem to be getting bigger, the volatility has really climbed and is now at a two year high level, although still not terribly high by historical standards.

There isn’t very much happening this week as far as economic reports go, but lately it has been the injudicious use of words that have made markets move as nerves may be more frayed than is healthy.

This week there aren’t too many scheduled speeches, talks or conferences, so it’s possible that the market may actually focus on fundamentals, like earnings, which start going in full force this week.

But it looks as if that will have to wait until tomorrow, as the market badly deteriorated in the final hour, probably on technical factors or sell programs.

For more than a year each quarterly earnings season has been lead off by strong earnings from the financial sector, especially the big money center banks, but the rest of the market hasn’t necessarily kept up, especially on the retail side.

This year, the laggard is likely to be the energy sector and their forward guidance may be especially critical, while retail may be expected to do better than in the past.

If the focus does turn to earnings this week should be one with much less volatility, but predicting what may happen coming after the past three weeks is probably not a good idea.

This week, with less cash than I would like to have, but still uncertain about whether there i still more declines ahead, I’m not eager to spend much money.

As mentioned in the Weekend in Review, I may be more inclined to look at put sales as a means of entering positions and creating the week’s revenue streams.

However, based on where premiums were headed as the market came to its close on Friday, the volatility may be at that level where it may become possible to start thinking increasingly about DOH trades.

Doing so, though, requires some more nimbleness, in the event that an unwanted assignment looks as if iy may occur.

While I generally look at DOH trades as being short term, depending on where those premiums are and whether they extend to forward week contracts, there m
ay be reason to consider their use in some out of the money expanded contracts.

Further, as earnings season is now also a factor, selective positions may also have their premiums enhanced by earnings, so there may be opportunity for the DOH trades to encompass the earnings enhancement and also take advantage of volatility enhanced time premium.

So this week the trading may be of a very different nature, although as always, once the opening bell rings, all of those well laid out plans may get scuttled.

The real challenge ahead is trying to discern between what seems to be a sea of value from the value traps that just want to suck up your investment dollars.

The way today’s market ended up working out, this time with a really unexpected triple digit loss coming almost entirely in the final 30 minutes, it’s probably a good thing to not have fallen for any “values” today.

So there’s certainly no reason to rush in to commit cash reserves at this point, especially resisting the temptation to get lured in by any single day’s strong move higher, as those tend to occur with great frequency during downtrends and just serve to have you buy at artificially higher prices.

Instead, I would be very happy to create the week’s income from simply selling as many calls as possible on existing positions and would certainly welcome a one day pop higher as the stimulus to do so.

Although this morning’s pre-opening futures showed recovery from last nights early trading and the volatility headed lower, as so often has been the case that strength didn’t last. Today, it lasted about 20 minutes and then just bounced back and forth, alternating between mild losses and mild gains, until the bottom fell out. That should help premiums tomorrow, but I’m reluctant to sell those calls while stocks are moving lower. 

So, tomorrow morning may be like today and be another good one to sit back and see how the trading evolves after the opening bell, while assuming a defensive posture for the rest of the week.

Hopefully tomorrow will at least offer some opportunity to do something other than just watch the back and forth of prices that continue their downward trend.

Daily Market Update – October 13, 2014 (9:00 AM)

After 3 weeks of triple digit moves that seem to be getting bigger, the volatility has really climbed and is now at a two year high level, although still not terribly high by historical standards.

There isn’t very much happening this week as far as economic reports go, but lately it has been the injudicious use of words that have made markets move as nerves may be more frayed than is healthy.

This week there aren’t too many scheduled speeches, talks or conferences, so it’s possible that the market may actually focus on fundamentals, like earnings, which start going in full force this week.

For more than a year each quarterly earnings season has been lead off by strong earnings from the financial sector, especially the big money center banks, but the rest of teh market hasn’t necessarily kept up, especially on the retail side.

This year, the laggard is likely to be the energy sector and their forward guidance may be especially critical, while retail may be expected to do better than in the past.

If the focus does turn to earnings this week should be one with much less volatility, but predicting what may happen coming after the past three weeks is probably not a good idea.

This week, with less cash than I would like to have, but still uncertain about whether there i still more declines ahead, I’m not eager to spend much money.

As mentioned in the Weekend in Review, I may be more inclined to look at put sales as a means of entering positions and creating the week’s revenue streams.

However, based on where premiums were headed as the market came to its close on Friday, the volatility may be at that level where it may become possible to start thinking increasingly about DOH trades.

Doing so, though, requires some more nimbleness, in the event that an unwanted assignment looks as if iy may occur.

While I generally look at DOH trades as being short term, depending on where those premiums are and whether they extend to forward week contracts, there may be reason to consider their use in some out of the money expanded contracts.

Further, as earnings season is now also a factor, selective positions may also have their premiums enhanced by earnings, so there may be opportunity for the DOH trades to encompass the earnings enhancement and also take advantage of volatility enhanced time premium.

So this week the trading may be of a very different nature, although as always, once the opening bell rings, all of those well laid out plans may get sc
uttled.

The real challenge ahead is trying to discern between what seems to be a sea of value from the value traps that just want to suck up your investment dollars.

There’s certainly no reason to rush in to commit cash reserves at this point, especially resisting the temptation to get lured in by any single day’s strong move higher, as those tend to occur with great frequency during downtrends and just serve to have you buy at artificially higher prices.

Instead, I would be very happy to create the week’s income from simply selling as many calls as possible on existing positions and would certainly welcome a one day pop higher as the stimulus to do so.

This morning’s pre-opening futures are showing recovery from last nights early trading and the volatility is heading lower, but it’s not too likely that will impact option premiums that at Friday’s close were exceptionally high for a number of out of favor stocks in equally out of favor sectors.

So this morning may be a good one to sit back and see how the trading evolves after the opening bell, while assuming a defensive posture for the rest of the week.

MONDAY:  A generally quiet week, but lately words have been mopre meaningful than actual data. Strong earnings reports starting this week with banks could be the thing the markets need.

TUESDAY:     A very disappointing market day yesterday and, as a result, not a single trade to show for the effort. The effort to move higher lasted about 20 minutes and quickly gave way to uncertainty, before completely falling apart in the final hour. This morning seems tentative, at best.

WEDNESDAY: Despite yesterday’s decent finish to trading and Intel’s decent earning’s report, the market looks to be back to the path it had established nearly 4 weeks ago and is headed toward another triple digit down day, based on the opening futures.

THURSDAY:   Yesterday’s attempt to rally going into the close was a positive sign, but this morning’s futures point to another triple digit move lower. Even Goldman Sachs’ better than expected earnings are met with an initial sharp move lower this morning and does nothing to buoy markets.

FRIDAY:   Hang on, as the fourth week of triple digit moves comes to its end. FInally. But who knows what next week brings. For one, I’d like to see some sanity, which is marked by normal sized moves in either direction, rather than the “new normal” sized moves and give traders a chance to more rationally look at their positions.







Daily Market Update – October 10, 2014 (8:30 AM)

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

The following are possible outcomes for today:

Assignments:  none

Rollovers:  EMC

Expirations: WFM, DOW, GPS, HAL

The following were ex-dividend this week: GPS (10/6 $0.22), CPB (10/8 $0.31), DRI (10/8 $0.55), CHK (10/10 $0.09), FCX (10/10 $0.31)

There are currently no ex-dividend positions for next week

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

Daily Market Update – October 9, 2014 (Close)

It’s almost a little eerie when one day can go down 272 points and the next day can go up 274 points.

Of course when the third day see prospects of a 300 point decline it gets a little tiresome. Even if you do like the idea of volatility rising the process can really be painful.

While yesterday’s rebound was definitely welcome there’s still no escaping the historical significance of such large upward moves. They tend to occur during market downtrends and aren’t generally parts of the building blocks that take markets higher in a sustained fashion.

The October 2007 to March 2009 period was filled with those kind of days and if you can remember back to those days how many times did you think “finally, we’re done with all of the selling”?

There was a lot of talk about how yesterday represented a “key reversal” day.

That’s one where the market opens lower than the previous day, then moves to a new low, before reversing course to close higher than the previous day’s high.

There was a lot of talk about it because many see it as a very bullish sign, although like so many such signs it’s not as valid as many would like to believe. In fact, Thomas Bulkowski, who extensively studies chart patterns has reported that about 51% of the time that a key reversal occurs during a market downtrend, such as we’re currently experiencing, the trend continues downward after the  key reversal.

I don’t know if he’s right, but somebody is wrong when it comes to the significance of the exalted key reversal.

Still, yesterday was welcome as we head into the final days of the week and always hopeful for some combination of assignments and rollovers.

One of those hopes, The Gap, got dashed yesterday after the close, as its CEO unexpectedly announced hos retirement, saying he was unable to commit anew to the time being asked of him.

That’s a very bizarre reason, but more bizarre has been the immediate reaction to the announcement, particularly considering that there was nothing terribly spectacular about the CEO or his performance. If anything, during his reign, The Gap has been incredibly inconsistent in its performance and certainly not a stellar retail performer.

The market may be reacting to uncertainty over the real reasons for his sudden departure. The after hours response came before The Gap released its monthly same store sales, which were flat, but did indicate an increase in expenses, which ordinarily would probably have caused some drop in shares in the aftermarket. However, in the past, The Gap has typically made initial 5% moves in either direction upon same store sales, although often quickly reversing the initial reactions. This time, it’s a 10% move in the absence of significant same store sales news.

So that will be one to watch and weather as we await the real story.

For the morning there didn’t appear to be a follow through forthcoming to yesterday’s gains, although precious metals were showing a large bounce after prolonged selling. As often is the case, there’s no readily apparent reason for doing so other than the possibility that those inclined to trade precious metals suddenly believe that the selling was overdone, perhaps buoyed a bit by yesterday’s FOMC.

While I would have liked to see the same thing in today’s equity market, it’s a good thing that I didn’t hold my breath. I would have been happy with some stability in  prices and simply a little respite from a large move opposite to yesterday’s in an effort to see those positions set to expire tomorrow either be assigned or rolled over.

That wasn’t asking for too much, but today’s sell off was really over the top and again had no real reason for being, no matter how much people point once again at Martio Draghi for calling for economic reform from European leaders.

So while I was hoping to get some rollovers either done today or be in better position to do so, it was a repeat of last Thursday when the possibility was also made less likely.

Last week Friday’s strong gain salvaged the week, but I’m not so positive about the same happening tomorrow, as today was beginning to feel a little more like a blow off kind of sale, but still didn’t reach that level.

As far as rollovers go,  you may have noticed that with, what may be a temporary increase in volatility, I’ve taken the opportunity to take advantage of some improving premiums in forward weeks by rolling over to periods other then the next coming week. That offers a little extra bit of diversification and reduces dependency on a single week, which can easily be subject to a sudden adverse price movement.

With a few positions already set to expire next week, I may look for tomorrow’s rollover opportunities beyond that monthly cycle end date to further add to that spreading of risk, if possible.

December anyone?