Category Archives: Daily Market Update

Daily Market Update – August 25, 2014 (8:30 AM)

Looking back, last week was an odd one.

I don’t really recall the last time that not a single new position was from the Weekend Update playlist, but last Monday’s strong weekly opening saw immediate jumps in the playlist components and made them less desirable.

Couple that with another week of just a few scant new position purchases and there was little opportunity to follow the script.

This week appears to be ready to get off to a moderately positive start as there was no substantive geo-political news over the weekend, no blockbuster comments coming from Jackson Hole and little on the scheduled economic news front to act as a potential challenge.

That all sounds good, especially if your sights are set on a very short term horizon.

With a lot of assignments last week there is cash to take advantage of any opportunities that may appear, but as the week gets ready to open I find myself not particularly interested in too much risk and may be focused more on blue chips, with the possible exception of some earnings related trades, that as usual have elevated risk.

However, because there are so few rollover opportunities as we enter this week and also so few opportunities for assignment to help offset some of the funding necessary for next week, there is reason to try and establish some new weekly positions, as it is true that it takes money to make money.

But as with most of those weekly scripts there has to be room for re-writes that take a measure of what appears before you. At the week’s outset I would love the idea of accumulating more dividends and focusing on blue chips, but that could easily change.

With relatively few positions already in place that are set to expire this Friday, I will probably not spend too much time looking at expanded weekly contracts, whose premiums are severely challenged by the continuing low volatility environment. By the same token, with a number of positions already having contracts expiring at the cycle’s end, I’m not anxious to add to those with four weeks still left to go. However, some of the potential trades for this week, such as McDonalds, which is also ex-dividend, may be better as a monthly trade, to also attempt to capitalize on the possibility for capital appreciation as well.

That’s part of the theme of this week’s playlist, as the majority of the positions have under-performed the S&P 500 over the past two months and may have some capability of making up for those losses, at least in relative terms.

Since it really is a fool’s game to try and time markets or even individual stocks, some of those depressed positions may still need some time to acquit themselves and the monthly contracts may be better suited, despite the low premiums.

It’s always nice to have a plan, it’s just too bad that there is no shortage of factors to alter the plan and no shortage of conflicting considerations in its implementation.

P.S. On a bookkeeping note, if you have shares of Holly Frontier and had sold calls on that position, your contracts have been adjusted by $0.50 to reflect the special $0.50 dividend, that is made on a quarterly regular basis, yet is somehow still “special.” Because of that nature the strike levels are all adjusted to reflect the distribution of that additional dividend, as long as it’s more than $0.125/share..

Holly Frontier will also go ex-dividend on August 28th for its regular $0.32 quarterly dividend, so the threshold price target is $50.82, before any rational person would consider making an early exercise in order to capture the dividend. However, the use of the September 20 option means that a truly rational person would likely want to see a price somewhat greater than $50.82, due to the additional time value remaining in the option, that may make its trading more valuable than capturing a dividend.

                                                                                                                                   

Daily Market Update – August 22, 2014 (8:00 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 outcomes include:

Assignments: BBY, DD, DG, DOW, EBAY, MET

Rollovers:  WAG, WFM

Expirations:   BX, LVS

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

Daily Market Update – August 21, 2014 (Close)

After all of the talk last week about how it was going to be the best performing in the previous 6 weeks, all it took was a single murmuring of some armed conflict to derail that locomotive. Never mind that the reports were never verified.

In a world where there’s not video tape of absolutely everything that goes on, there’s nothing to have confirmed that market rattling news. Nor were there any denials from the other side, though, so above all, it was confusion that reigned and the market hates confusion.

When you’re on edge anything can set you off.

Still, the week acquitted itself very nicely, despite the sell-off to end the week.

Without any real confirmation of everything just escalating into Armageddon, this week, if it ended after just 3 days of trading would have left last week in the dust, even if Friday was excluded from the results.

Now that the fourth trading day is in the record books the dust is even thicker. Much thicker.

The market had started this morning up 1.6% for the week and added on another 0.3%. Now only the challenge of some mis-spoken words coming from anyone’s lips that may be attending the Kansas City Federal Reserve’s meeting in Jackson Hole is scheduled to get in the way. If all goes as hoped and no one pulls the rug out then this stands to be the best week in 4 months and again laying claim to even more new closing record highs..

After Bernanke skipping last year’s meeting the eyes are once again focused there as Janet Yellen will be in attendance and is scheduled to deliver prepared remarks tomorrow. I don’t know how long they have been holding that meeting, but I found myself in Jackson Hole some 32 and 33 years ago, both times  in August and don’t remember any Federal Reserve types hanging out in the campground or the Cowboy Bar, but we may have just missed each other. There’s also a chance that I wasn’t paying too much attention,  but it was at least a year later before I had any interest in anything at all.

With attention focusing on the annual event out west the market looks to continue some of the previous three days worth of gains.

What has made this week interesting is that all for but a few minutes after the FOMC statement the market hasn’t really made any attempt to reverse the gains or take any profits.

That’s in fairly sharp contrast to the way the market has very tentatively found its way getting to new high after new high. If you’re a bull you will take comfort in the fact that the climb came bit by bit and had some mild reversals along the way.

“Slow and steady wins the race,” is the basic tenet at play and it should inspire confidence.

Still, despite all of the reasons to remain long in the market, albeit with some cash on the sideline in the event there is an opportunity to capitalize on any mis-steps, it’s clear that there are lots of nerves as there are lots of tender spots around the globe.

For now, none of that matters until it does. Today, it certainly didn’t matter, as it was another day of precious metals and interest rates, the competition, both heading lower.

With only a minimal number of new positions opened this week now comes the critical time to begin planning for the coming week which depends on some assignments to help rejuvenate cash and rollovers to put some discretionary cash into the pile.

While watching the market climb higher and assets growing along with the market, the only really tangible evidence of good times is action and the ability to do the rollovers and sell those options.

Hopefully tomorrow will have its share of good and tangible news, but if not, there’s always a Cowboy Bar around the corner to drown those sorrows.

Daily Market Update – August 21, 2014 (9:00 AM)

After all of the talk last week about how it was going to be the best performing in the previous 6 weeks, all it took was a single murmuring of some armed conflict to derail that locomotive. Never mind that the reports were never verified.

In a world where there’s not video tape of absolutely everything that goes on, there’s nothing to have confirmed that market rattling news. Nor were there any denials from the other side, though, so above all, it was confusion that reigned and the market hates confusion.

When you’re on edge anything can set you off.

Still, the week acquitted itself very nicely, despite the sell-off to end the week.

Without any real confirmation of everything just escalating into Armageddon, this week, if it ended after just 3 days of trading would have left last week in the dust, even if Friday was excluded from the results.

So far, the market is up 1.6% for the week and has only the challenge of some mis-spoken words coming from anyone’s lips that may be attending the Kansas City Federal Reserve’s meeting in Jackson Hole. If all goes as hoped and no one pulls the rug out then this stands to be the best week in 4 months and again within a hair’s breadth of more new records.

After Bernanke skpping last year’s meeting the eyes are once again focused there as Janet Yellen will be in attendance and is scheduled to deliver prepared remarks tomorrow. I don’t know how long they have been holding that meeting, but I found myself in Jackson Hole some 32 and 33 years ago, both times  in August and don’t remember any Federal Reserve types hanging out in the campground or the Cowboy Bar, but we may have just missed each other. There’s also a chance that I wasn‘t paying too much attention,  but it was at least a year later before I had any interest in anything at all.

With attention focusing on the annual event out west the market looks to continue some of the previous three days worth of gains.

What has made this week interesting is that all for but a few minutes after the FOMC statement the market hasn’t really made any attempt to reverse the gains or take any profits.

That’s in fairly sharp contrast to the way the market has very tentatively found its way getting to new high after new high. If you’re a bull you will take comfort in the fact that the climb came bit by bit and had some mild reversals along the way.

“Slow and steady wins the race,” is the basic tenet at play and it should inspire confidence.

Still, despite all of the reasons to remain long in the market, albeit with some cash on the sideline in the event there is an opportunity to
capitalize on any mis-steps, it’s clear that there are lots of nerves as there are lots of tender spots around the globe.

For now, none of that matters until it does.

With only a minimal number of new positions opened this week now comes the critical time to begin planning for the coming week which depends on some assignments to help rejuvenate cash and rollovers to put some discretionary cash into the pile.

While watching the market climb higher and assets growing along with the market, the only really tangible evidence of good times is action and the ability to do the rollovers and sell those options.

Hopefully the next two days will have its share of good and tangible news, but if not, there’s always a Cowboy Bar around the corner to drown those sorrows.

Daily Market Update – August 20, 2014 (Close)

After two strong days that found the market reveling in the absence of any significant geo-political news, it appeared that this morning is going to get off to a flat start, but that didn’t last too long.

A flat start wouldn’t have been unusual on the morning of a scheduled FOMC statement release, especially one that’s expected to continue a year long string of fairly benign and inconsequential restatements of policy.

Where there may be some excitement is in Jackson Hole, where on Friday Federal Reserve Chairman Janet Yellen will be making some remarks at the annual retreat of the Kansas City Federal Reserve.

While she probably won’t say anything intended to excite anyone or catch anyone off guard, it’s usually a case of interpretation or sometimes an off the cuff remark or less than perfectly crafted answer to a question.

Sometimes, however, insights into a thought process can take people off guard or start speculation running wild as to the true beliefs that may underlie the public demonstration of idea s and beliefs.

While Janet Yellen is considered to be “dovish,” the new Vice-Chairman, the influential and highly regarded Stanley Fischer is considered to be a “hawk.” However, after some surprising dovish comments by Fischer in a recent speech in Sweden it should probably come as no surprise that  regardless of how any of these economists may be pigeon-holed they will still act based upon data, despite some potential for philosophical bias. However, our expectations have little flexibility for anything that deviates from those expectations.

Coming on Friday, those remarks may have some impact on a day that we can also reasonably expect something to happen on the Russia – Ukraine front. Either of those could move the markets which by now had started the morning within about 1% of their highs and finished the day brushing up right against those highs.

That’s an amazing turnaround from barely a week ago when suddenly everyone had discovered the concept of volatility and were all agog about the 30% and higher increase in volatility in the course of just a few days.

Looking at volatility now, which generally moves inversely with the market, you wonder where all of the noise has gone and why no one is pointing to the 30+% reduction in volatility in the past few days.

Over the next few days as we digest the FOMC and await the Jackson Hole meeting there isn’t much in the way of expectation for any significant activity. The first few days of this week have already seen the S&P 500 advance 1.3% on top of last week’s 1.2%. Add another 0.3% today and now we’re on track for the best week in 4 months. Up until last Friday’s sell-off that week was headed toward being the best in the previous 6 weeks, but ended up just missing that distinction.

But we’ll see.

Thus far, despite the strong advance higher the existing portfolio positions are still keeping pace, which gets to be very challenging once that advance gets to or exceeds the 1% level. That was certainly the case last week when existing positions badly trailed the index .

Any opportunity to generate additional portfolio income would help to keep pace with the market, but the low volatility is making it hard to justify the sale of calls on some positions, as the premiums are just so low that the offer such little income or protection in exchange for ceding some advance in share value.

As long as the market is moving higher and taking most positions along with it there’s little reason to accept a pittance and receive little in return, but as we’ve seen time and time again, all of the environment that you see around you can change in an instant.

All it takes is a mis-placed word here or there in a prepared text or a casual comment. Or maybe just another rumor of conflict or peace coming out of some corner of the world that most of us have never considered, but has suddenly set the world back into the glory days of  the cold war that we thought we had won.

In the meantime there’s no reason to not enjoy the move higher, although you might enjoy things even more if our collective expectations come under attack.