Category Archives: Daily Market Update

Daily Market Update – June 23, 2014 (9:00 AM)

Based on the economic calendar it looks as if this may be a quiet week as the new monthly option cycle begins. Not only is there little of importance, but maybe because this is the first week of summer, there’s just very little in general. A big part of that is that not a single Federal Reserve Governor is giving a speech this week, so there is less likelihood of having someone in a position to actually impact policy saying something that’s either a slip of the tongue or gets to be mis-interpreted by anyone with a nervous finger or algorithm.

In addition, earnings season is pretty much at its end as the next season will get set to begin in about two weeks. While any given company can do as Intel did a couple of weeks ago and unexpectedly announce improved guidance that can propel markets or severely diminished guidance to shock markets, it’s not too likely that will happen.

Unless there are some real unforeseen surprises the only thing that may upset the market will be continued unraveling in Iraq and a significant rise in oil prices.

While growing US energy production makes us less hostage to oil, the reality is that our prices are still part of a worldwide market and if supply dries up in a world that’s increasingly thirsty for crude oil it will drive up our prices, as well, and slow things down on our end. While it would take a while for that to really show up on our economy the fears would begin immediately and could easily dampen the enthusiasm that Janet Yellen rekindled last week when she made it pretty clear that stocks were the way to go for now.

Not in so many words, but if you live in a world where the choice is between stocks and bonds, she gave little reason to believe that interest rates would be heading higher in 2014. Considering that much of the stock market weakness in 2014 has been related to the 10 year rate approaching 3%, you can draw a conclusion that if rates stay low then the market has reason to keep moving up even as Federal Reserve tapering continues.

This week I’m holding more cash than in about 3 months.

The combating forces this week are much like they seem to be most every week.

With the market at more new highs and with so many stocks near their personal highs just how much do you believe that the pattern keeps continuing?

Any effort in second guessing the forward movement of the market has proven wrong and I’ve definitely been on that side of things. Despite being pessimistic about the ability of the market to continue that pattern that hasn’t meant hibernating and completely abdicating the need to participate.

With money, but not to burn, in hand, I don’t envision this week being any different in terms of my willingness to let some of it go and try to generate some revenue.

The past few weeks have been relatively slow ones in opening new positions, but I expect this one will be somewhat more active, as I’m willing to take cash down to about 25%. As a defensive move I wouldn’t be completely adverse to seeking July contracts instead of weekly ones, but with volatility still so low and the short term prospects seeming positive, it’s hard to justify tying up assets.

In hindsight I may believe differently, but for the moment it makes more sense to live for today.

With that said, but already having a number of positions set to expire this week, there may at least be some reason to look for a little diversification, perhaps toward next week’s shortened trading contracts.

In addition to that bit of defensiveness I wouldn’t mind continuing to look for dividend opportunities although those two will frequently find their stocks at or near their yearly highs.

But given all of these considerations none of them, nether individually nor in combination, have been unique. They have been the ones faced nearly early week for about the past two years.

That makes it a little easier to approach this coming week.

Daily Market Update – June 20, 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.

The possible outcomes today include:

Assignments: BX, CY, CY, FAST, GME, IP, LO, MET, RIG

Rollovers: LB, LOW

Expiration:  DRI, WY

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

Daily Market Update – June 19, 2014 (Close)

With the market getting a nice boost from Janet Yellen during her press conference, as it seemed as if interest rates would continue to stay low until at least the end of 2014, all that needs to be done now is maintain those gains to be able to end the June 2014 option cycle in good position.

While it’s never a good idea to begin spending the money that may never materialize it again is the question of where the next catalyst is going to come from. Of course, the question of when is also important, especially since it can pop up at any moment.

The precious metals, for example, showed today just how true that can be. Why it elected to do so on such a delayed basis is pretty unclear, if you’re like most others that are some how trying to associate it with yesterday’s news. More likely it’s associated with world instability that is heading toward a crescendo, rather than an interlude.

With another S&P 500 record close being established yesterday and with volatility, as expected, hitting another new low, it’s hard to envision anything adversely impacting the current path, even though any rational person should know better.

The old expression “don’t fight the Fed” has lots of truth to it and gives reason to believe that there will be some continuation of market strength.

The challenge, if there are widespread assignments this Friday is to know just how strongly to embrace a market that just doesn’t seem to know how to give anything back.

With potentially lots of money available for re-investment you have to wonder just how aggressively to throw it back into the market at these levels and place it at risk.

In many ways it’s not much different from inheriting a big chunk of money. Usually the worst thing to do is to go and put it all at one time to work. While doing so may mean having the good fortune of entering at a market low, it could also have the bad luck of entering at a market high.

There are probably very few people, despite the recent endorsement by the Federal Reserve, who would consider the market to be at it lows and would probably believe that we are closer to near term highs than we are to near term lows.

So that has to color any ideas of how that money, if it is indeed realized this Friday, gets used beginning next week.

Basically, I’m not expecting a wild spending spree, but I would like to see some more activity than over the past few weeks, although I would like to get back to one of my goals of reducing the total number of open positions, as well as the number of uncovered positions.

With the FOMC statement out of the way the only known remaining challenge for the week is tomorrow’s quadruple witching day.

Unlike 20 or more years ago when the process wasn’t as orderly as it is these days, those were really frightening days and huge moves were expected.

These days they tend to be pretty tame, but the slightest little snfu could have really magnified effects that quickly ripple through the markets.

As a precursor to tomorrow, today looks to get off to a sedate start and there’s no good reason to overlook opportunities that may occur today because eyes are on tomorrow’s expiration.

I don’t expect too much action today, but you never know and so having learned to never be surprised, it seemed as if today there was some opportunity to add shres of MasterCard and maybe, more importantly, close the SInclair Broadcasting position.

That one is all speculative, in that it is a good, solid company that has lots of growth ahead of it, but it may fall prey to some short term pressure if the Supreme Court decision, which may come as early as today opr tomorrow, finds in favor of Aereo, the start up that captures broadcast television transmissions and charges people for the use of their mobile device.

With the contract ending tomorrow and worth the chance that an adverse decision could come tomorrow, it just wasn’t worth a roll of the dice.

Sometimes you just have to take your profits and live for another day.

Note: Price updates will be delayed today

Daily Market Update – June 19, 2014 (8:30 AM)

With the market getting a nice boost from Janet Yellen during her press conference, as it seemed as if interest rates would continue to stay low until at least the end of 2014, all that needs to be done now is maintain those gains to be able to end the June 2014 option cycle in good position.

While it’s never a good idea to begin spending the money that may never materialize it again is the question of where the next catalyst is going to come from. Of course, the question of when is also important, especially since it can pop up at any moment.

With another S&P 500 record close being established yesterday and with volatility, as expected, hitting another new low, it’s hard to envision anything adversely impacting the current path, even though any rational person should know better.

The old expression “don’t fight the Fed” has lots of truth to it and gives reason to believe that there will be some continuation of market strength.

The challenge, if there are widespread assignments this Friday is to know just how strongly to embrace a market that just doesn’t seem to know how to give anything back.

With potentially lots of money available for re-investment you have to wonder just how aggressively to throw it back into the market at these levels and place it at risk.

In many ways it’s not much different from inheriting a big chunk of money. Usually the worst thing to do is to go and put it all at one time to work. While doing so may mean having the good fortune of entering at a market low, it could also have the bad luck of entering at a market high.

There are probably very few people, despite the recent endorsement by the Federal Reserve, who would consider the market to be at it lows and would probably believe that we are closer to near term highs than we are to near term lows.

So that has to color any ideas of how that money, if it is indeed realized this Friday, gets used beginning next week.

Basically, I’m not expecting a wild spending spree, but I would like to see some more activity than over the past few weeks, although I would like to get back to one of my goals of reducing the total number of open positions, as well as the number of uncovered positions.

With the FOMC statement out of the way the only known remaining challenge for the week is tomorrow’s quadruple witching day.

Unlike 20 or more years ago when the process wasn’t as orderly as it is these days, those were really frightening days and huge moves were expected.

These days they tend to be pretty tame, but the slightest little snfu could have really magnified effects that quickly ripple thr
ough the markets.

As a precursor to tomorrow, today looks to get off to a sedate start and there’s no good reason to overlook opportunities that may occur today because eyes are on tomorrow’s expiration.

I don’t expect too much action today, but you never know.

Daily Market Update – June 18, 2014 (Close)

With nothing noteworthy this morning it looks as if the market may be in a state of suspended animation until 2 PM when the FOMC statement is released.

In the few seconds afterward computers will scan the statement for any changes in wording or the frequency of certain words and may trigger buy or sell programs that can then, moments later, seem like they were the wrong initial decisions.

So sane people sit back and wait to see what’s left as things begin to settle.

And that is exactly the way the script was enacted, except that there wasn’t too much of a knee-jerk and that’s because there was really no material difference in the words or wording in the release.

At precisely 2 PM the market started moving higher and then took a little breather until about 10 minutes into the press conference, when the prepared statement was completed.

What was clear was that unless the FOMC moved the needle away from their $10 Billion in monthly tapering, perhaps adjusting in one direction or another by the loose $5 Billion so many were focused upon, there shouldn’t have been much reason to see any kind of marked reaction to the release.

Today’s post – 2 PM activity was nicely enhanced by the Chairman’s press conference, an activity started by Ben Bernanke, in his desire to make the thoughts behind the decisions to be more transparent.

Off hand, I can’t recall any slips of the tongue or inadvertent comments made by Bernanke during any of those press conferences that got the markets to over-react or misinterpret intent, but Janet Yellen may be remembered for a while for some misunderstandings during her first press conference.

But perhaps as with Ben Bernanke, who likely was part of some similar responses, that too will eventually be forgotten. But for now, the memory of that first Yellen press conference as Federal Reserve Chairman is still too fresh, so there is a continued expectation for some sort of slip and there are those who are standing ready to sell if they sense the slightest bit of negativity.

So far this has been a fairly dull week with extraordinarily little variance and range in trading. While that may change tomorrow and perhaps even on Friday, due to the quadruple witching, the bigger picture of low variation still seems to be intact, as there continues to be an absence of any catalyst to shake things up. Even with market movement coming out during today’s events, they’re not likely to have much lasting impact.

Even tomorrow may be an entirely different story.

For the past two years nothing has really had a substantive impact for more than a handful of trading sessions. While the early stages of conflict in Crimea got the market a little nervous for a few days, so far events in Iraq have done nothing to convince people to secure some profits and watch from the sidelines.

Even the revised GDP late last month did nothing to detract from the pervasive optimism that characterizes this market and the belief that there is very little risk for a reversal of fortune. With only expectations for economic growth going forward, even if only at a slow pace, there’s little reason to expect anything other than the current path.

So today is more of the same. Unless some screaming opportunity comes along, this being a Wednesday, the likelihood of adding a new position is small. This being an FOMC Wednesday makes it even smaller.

In the event that today’s events move the market strongly forward any chance to sell options on uncovered positions would be a well received gift. That market strength would also be a nice way to feel more secure about seeing sufficient assignments this Friday to be in a good position to start off the July 2014 option cycle with cash in hand.

With that in mind it now remains an exercise in sanity and patience for the next two days.