Category Archives: Daily Market Update

Daily Market Update – July 29, 2014 (Close)

While today will be another busy earnings day, having already gotten underway with Pfizer and others, it’s likely to be relatively quiet as it usually is once the FOMC meeting gets underway.

While some additional sanctions on Russia did have some mildly negative impact on the market, ringing it down from an equally mild gain, it was really a quiet day and no surprises were in store, other than from a possible gift from the IRS to companies with significant land holdings used to bury cables, such as for land telephone lines and cable television.

However, the real surprise would be if at 2 PM tomorrow there is some surprise coming from the statement released after the two day meeting. However, increasingly the words are being parsed for the slightest hint of nuance or the appearance of a new word or deletion of an old one, in order to ascertain what is really going on in the minds of those in control of the economy. That could mean some reaction beyond the usual knee-jerk response, which itself was actually missing at least month’s release.

Following a nice recovery from yesterday’s early sell-off there’s reason to believe that records could easily be assaulted again, especially if some of the bigger names come out with earnings. It doesn’t take too much to move the DJIA and this morning both Merck and Pfizer seem to be contributing to the pre-open advance, as they have released their earnings. Verizon and AT&T are also both up strongly, helping to give the DJIA an early lead over the broader S&P 500.

Pfizer, itself, later gave up a nice gain, not because of earnings, but almost the instant it mentioned that it wasn’t giving up on the idea of a blockbuster kind of acquisition, perhaps even another run at Astra Zeneca. Apparently the market didn’t like that kind of aggressiveness particularly with the flurry of concern around so called “inversions” which could include being ineligible for any kind of federal contracting, which could be a huge blow to a company like Pfizer. 

Otherwise, with the early assignment of Texas Instruments in order to capture the dividend that pesky problem of having cash is even greater now. I would still have liked the opportunity to spend some down and would have liked to have to seen another day of some downward moves or at least some flatness while awaiting something that looks appealing.

That downward move didn’t come until the end of the day, but hopefully the day’s earlier purchases in International Paper and Blackstone will still turn out to have been a relative bargain prices.

As with other times that problem of having cash has been the case, I’m not too likely to want to compound that problem by spending it down
just for the sake of spending it down. Last Friday seemed to bring some relative bargains, but the key word is “relative.” Many stocks still look and feel expensive so there has to be a nagging voice somewhere questioning every potential new purchase as being without value.

By the same token everything that looks like a bargain may get the same scrutiny as a 45 year old bachelor. People want validation for their biases. Why in the world hasn’t he never been married? Why would it be so “cheap” when everything else is going higher?

While one may certainly be a lifestyle choice, it would be hard to find anyone other than a short seller who wouldn’t want to see shares higher, so wondering why something hasn’t been participating may be a justified question.

Whereas yesterday I felt willing to jump in without waiting for much validation, in the hopes of picking up some of those seeming bargains, I don’t have that same confidence this morning. With the very strong early moves in some of the DJIA components there may be some early skew to the perception of how the market will actually trade. Those gains just seem to be illusory, very much based on some financial engineering ideas put forth by a tiny player in the communications sector that may have big implications for the likes of the behemoths, Verizon and AT&T.

So while I thought I would revert back to recent style and watch and see how the market’s trend, if any, would develop this morning, sometimes those plans gets scuttled as the opportunities seem to appear.

Sit would turn out, whether due to the new sanctions or not, much of the early rise fueled by the IRS decision died down as investors may have come to the realization that what matters for Verizon and others may have little to no relevance for anyone else and still may have some regulatory and even some further IRS hurdles ahead.

Daily Market Update – July 29, 2014 (9:30 AM)

While today will be another busy earnings day, having already gotten underway with Pfizer and others, it’s likely to be relatively quiet as it usually is once the FOMC meeting gets underway.

The real surprise would be if at 2 PM tomorrow there is some surprise coming from the statement released after the two day meeting. However, increasingly the words are being parsed for the slightest hit of nuance or the appearance of a new word or deletion of an old one, in order to ascertain what is really going on in the minds of those in control of the economy. That could mean some reaction beyond the usual knee-jerk response, which itself was actually missing at least month’s release.

Following a nice recovery from yesterday’s early sell-off there’s reason to believe that records could easily be assaulted again, especially if some of the bigger names come out with earnings. It doesn’t take too much to move the DJIA and this morning both Merck and Pfizer seem to be contributing to the pre-open advance, as they have released their earnings. Verizon and AT&T are also both up strongly, helping to give the DJIA an early lead over the broader S&P 500.

With the early assignment of Texas Instruments in order to capture the dividend that pesky problem of having cash is even greater now. I would still like the opportunity to spend some down and would like to see another day of some downward moves or at least some flatness while awaiting something that looks appealing.

As with other times that problem of having cash has been the case, I’m not too likely to want to compound that problem by spending it down just for the sake of spending it down. Last Friday seemed to bring some relative bargains, but the key word is “relative.” Many stocks still look and feel expensive so there has to be a nagging voice somewhere questioning every potential new purchase as being without value.

By the same token everything that looks like a bargain may get the same scrutiny as a 45 year old bachelor. People want validation for their biases. Why in the world hasn’t he never been married? Why would it be so “cheap” when everything else is going higher?

While one may certainly be a lifestyle choice, it would be hard to find anyone other than a short seller who wouldn’t want to see shares higher, so wondering why something hasn’t been participating may be a justified question.

Whereas yesterday I felt willing to jump in without waiting for much validation, in the hopes of picking up some of those seeming bargains, I don’t have that same confidence this morning. With the very strong early moves in some of the DJIA components there may be some early skew to the perception of how the market will actually trade. Those gains just seem to be illusory, very much based on some financia
l engineering ideas put forth by a tiny player in the communications sector that may have big implications for the likes of the behemoths, Verizon and AT&T.

So I think that I want to revert back to recent style and watch and see how the market’s trend, if any, will develop this morning, as they may come to the realization that what matters for Verizon may have little to no relevance for anyone else and still may have some regualtory and IRS hurdles ahead.

Daily Market Update – July 28, 2014 (Close)

This has the potential to be a busy week.

For the first time in a little while there’s some market moving news that may be at hand as both the FOMC statement is released and the Employment Situation Report ends the week.

In-between are about 140 of the S&P 500 companies reporting earnings.

So far, though, as far as the morning that is set to begin the week’s trading goes, it appears to be a relatively quiet start to the week and that’s exactly what today ended up being.

Unless you owned shares of Family Dollar Stores.

I recently spoke about “serendipity” as a factor in outcomes. The Family Dollar Story is a perfect example, as it received an unexpected buyout offer this morning.

For those that remember, just about two months ago a DOH trade was made on a lot of FDO and a regular call sale made on another lot. At the time I felt good about making those trades on that Friday, but at the close of trading came word that Carl Icahn had taken a position and shares shot up higher in the after hours.

Then, just as suddenly, I didn’t feel very good about those trades.

After some manipulation that took advantage of some enhanced premiums associated with earnings, we were able to prevent those positions from being assigned at such a low price, only to watch shares subsequently fall and then see their most recent calls expire this Friday, without being rolled over.

I usually am not terribly happy when I can’t get a rollover trade, but in the case of FDO the premiums were just so low that the costs of closing out the option positions in order to open new ones on Friday were really just too high to have made it worthwhile.

Serendipity.

This morning came word of a buyout from a different suitor.

While there may be some more value to be wrung out of shares, as the original suitor may still be in the mix, I was ready to close the position without concern for whatever more may be on the table and did so in the pre-opening hours.

Little events, such as the sale of calls or the inability to sell calls and such varied outcomes.

Unless you have the ultimate in inside information, you can only ascribe being on the right side of those events as “luck.”

When a gift like this appears and you think about the luck involved to still be in a position to profit from that luck, it seems greedy to want to press for even more luck, or try to engage in some kind of passive arbitrage as third parties may or may not battle it out.

Hopefully there will be more of that luck to go around this week, with or without Family Dollar.

With some assignments last week and the Family Dollar surprise added to it, cash reserves are way up and the market closed on the downside last Friday.

That’s a combination that I tend to like. Better yet, there’s no indication of a bounce higher this morning, so if inclined to pick up shares there may still be some prices in line with Friday’s close.

With some positions set to expire this week, but not too many, there isn’t the same kind of reluctance as last week, to pick up new positions with contracts expiring the same week. Even though that’s what was done last week, it wasn’t really a preference, it was just that forward week premiums were so low.

This week volatility is very slightly elevated so we’ll see how those forward week premiums look once the option markets open for trading.

With cash in hand I don’t mind making some purchases to bring those levels down. The past few weeks have been very quiet on that end, but luckily the combination of new cover, rollovers and the occasional purchase here and there have done reasonably well at a time that the market has been moving higher in a halting fashion.

As opposed to the past couple of months where I’ve waited to see how trading would go during the first 30 minutes or so, this week I may be inspired to pick up any relative bargains on the early side of the day.

Other than FDO, today was a fairly sedate day, just another with little to no movement and little to no insight into where the market may be going or into what may be leading the market to whatever direction it will be heading.

With money still in hand after only two purchases today, I wouldn’t mind some more opportunities presenting themselves tomorrow or later in the week.

With the two large events scheduled to begin at the week’s mid-point, where feasible, as was done just a few weeks ago, again in a serendipitous fashion, I will look for opportunities to execute early rollovers.

MONDAY:  A potentially busy week ahead with still lots of earnings, an FOMC release and the Employment Situation Report to close the week. The morning, however, appears to be off to a quiet start

TUESDAY:     More earnings today and FOMC begins their meeting. Market usually doesn’t commit or make big moves prior to meeting, but there’s little reason to believe that there will be anything earth shattering coming tomorrow

WEDNESDAY:  Will Twitter propel the market? Not likely, as most will likely be waiting for FOMC statement release before commiting too much. No surprises are expected this afternoon, but since when does reality get a say in decisions?

THURSDAY:    What a difference a day and the day can make. The market appears to be ready to open on a large down note. How much better that generally is on a Monday rather than a Thursday becomes pretty clear as assessing rollover and assignment probabilities.

FRIDAY:  Some follow-up to yesterday’s plunge looks likely, at least before the looming Employment Situation Report which is more likely to exacerbate than to help things, if there is any reaction in store