Category Archives: Daily Market Update

Daily Market Update – June 10, 2014 (Close)

It’s a Tuesday, so the market is supposed to be going higher, except for the fact that as soon as anyone realizes that such a pattern seems to exist, it begins to break down.

So for the past couple of Tuesdays you wouldn’t have been well served by following that pattern, that like so many doesn’t really have much of a basis in anything logical or rational.

The problem, however, is that while we’ve been talking about that pattern as having been in place for the past couple of months, it actually has many, many years of data behind it lending support to the notion that Tuesdays are far better market days than logic would dictate.

Yesterday was the kind of day that you would have thought would be the logical outcome in a week that really has very little planned news releases or scheduled events. It started quietly in the pre-opening trading and continued that way throughout the session.

Other than the three Federal Reserve Governors that gave talks yesterday and who aren’t generally among the most influential of the various voices, there aren’t even any more such scheduled events the rest of the week to move markets.

To its credit the market did almost set another new high and almost stayed true to its Tuesday self, but probably was more influenced by the nothingness that is supposed to characterize this week.

While I’m always wary of weeks that have lots of scheduled events I think that I get more concerned with these kind of quiet weeks that almost seem to be a sort of vacuum. While scheduled events can and certainly do move markets, they’re usually not the catalysts for anything that’s really sustained.

The reason for that is that the market reacts to data, although sometimes the reaction itself is irrational, but the flow of new data immediately changes the mindset. So often you see conflicting data one day after a market mover and the market responds in a completely different direction, as if the previous data had never existed.

However, in a vacuum there is no data, You’re left with your own insecurities and fears and if anything sets off a reaction it can simply feed on itself with nothing of factual basis coming along the way to counteract the fear.

Not that I expect that to be the case this week, because if I did I would have really been stockpiling cash.

Instead, it’s just another reason to be wary of a market that continues to set new highs but does so in a very tentative manner and with very low volume.

I’m still willing to bring cash reserves down a bit but there aren’t too many positions beckoning. With nearly 100 that I follow it is difficult to make a compelling case as frequently as I would like, but it is getting easier and easier to resist the lure of having money in the bank that wants to go out and have a good time.

Someone has to pay the price when that happens on an indiscriminate basis. It’s often hard enough to have to pay the price when everything seems to be well thought out, but add to that giving in to primal needs and you have some major headaches in the making.

Today, my headache was dealing with a crashing server that started acting up yesterday.

Finally by about 3 PM, after intermittent outages that usually lasted for a minute or so it looks as if the replacement was installed, so hopefully I won’t find myself ranting to myself or incessantly clicking the refresh button tomorrow, although a Wednesday, given its own pattern of slow trading would have been the perfect day to have gotten bogged down.

Daily Market Update – June 10, 2014 (9:30 AM)

It’s a Tuesday, so the market is supposed to be going higher, except for the fact that as soon as anyone realizes that such a pattern seems to exist, it begins to break down.

So for the past couple of Tuesdays you wouldn’t have been well served by following that pattern, that like so many doesn’t really have much of a basis in anything logical or rational.

The problem, however, is that while we’ve been talking about that pattern as having been in place for the past couple of months, it actually has many, many years of data behind it lending support to the notion that Tuesdays are far better market days than logic would dictate.

Yesterday was the kind of day that you would have thought would be the logical outcome in a week that really has very little planned news releases or scheduled events. It started quietly in the pre-opening trading and continued that way throughout the session.

Other than the three Federal Reserve Governors that gave talks yesterday and who aren’t generally among the most influential of the various voices, there aren’t even any more such scheduled events the rest of the week to move markets.

While I’m always wary of weeks that have lots of scheduled events I think that I get more concerned with these kind of quiet weeks that almost seem to be a sort of vacuum. While scheduled events can and certainly do move markets, they’re usually nit the catalysts for anything that’s really sustained.

The reason for that is that the market reacts to data, although sometimes the reaction itself is irrational, but the flow of new data immediately changes the mindset. So often you see conflicting data one day after a market mover and the market responds in a completely different direction, as if the previous data had never existed.

However, in a vacuum there is no data, You’re left with your own insecurities and fears and if anything sets off a reaction it can simply feed on itself with nothing of factual basis coming along the way to counteract the fear.

Not that I expect that to be the case this week, because if I did I would have really been stockpiling cash.

Instead, it’s just another reason to be wary of a market that continues to set new highs but does so in a very tentative manner and with very low volume.

I’m still willing to bring cash reserves down a bit but there aren’t too many positions beckoning. With nearly 100 that I follow it is difficult to make a compelling case as frequently as I would like, but it is getting easier and easier to resist the lure of having money in the bank that wants to go out and have a good time.

Someone has to pay the price when that happens on an indiscriminate basis. It’s often hard enough to have to pay the price when everything seems to be well thought out, but add to that giving in to primal needs and you have some major headaches in the making.

Daily Market Update – June 9, 2014 (Close)

Well this was a strange day.

Vexed by server problems on and off for much of the morning, Trading Alerts sent to Comcast accounts (only those beginning with the letter “R”) getting sent back as spam and a leaking hot tub.

Good thing there was very little planned for this week in the market. I already had my hands full..

As far as planned news, data releases or earnings there won’t be too much going on. Lots of eyes will simply be trained on shares of Apple which begin trading on a post-split basis today.

Following its run much higher after the announcement of the split and increased dividend, it’s hard to argue that substantive product releases or product news were responsible for that climb, so it will be interesting to see how those post-split shares respond to their new affordability, particularly since so many have expected that the actual split will lead to further price appreciation.

Great theories always meet their match in reality.

The week began at yet another new high, although the pre-open is almost at the flat line with absolutely nothing to react to other than some merger and buyout news. But that didn’t matter, because there was enough in the pipeline to make another new high by the time it was all over.

However, as opposed to the gains of last Thursday and Friday, this was back to the earlier pattern of a timid gain.

After a week that saw more assignments than new positions opened for the first time in a little while my cash reserves have risen above where they opened the previous week and despite the increasing highs, I am willing to spend some of that down but I think it’s time to be also increasingly selective.

Over the past month it has been clear that the advancing market isn’t taking everything along as the number of new highs isn’t keeping up with the overall market, as is usually the case when there is broad market strength.

In what is becoming a broken record, my preference again this week would be to find opportunities to sell calls on existing, yet uncovered positions and roll over as much as possible if assignments aren’t likely.. Again, with a fair number of positions set to expire this week I would like to diversify by date of contract expiration, but with volatility so low it’s hard to justify the additional time for the low additional premiums that result.

Ideally, with also a number of positions set to expire next week as the monthly contract ends, it would be nice to begin finding contracts for June 27, 2014 and beyond, but those opportunities are sparse, all falling victim to the low volatility environment.

With stock prices still so high and premiums so low there is a skew of the risk-reward proposition such that the risk attenuation offered by selling calls is decreased relative
to the risk associated with buying shares at or near their highs.

The response to that challenge is to either look for positions that haven’t participated as much in the market rally and by extension don’t have as much to fall or give back or look for those that have participated and may have higher premiums in reflection of the increased risk below.

Tough call, but like most everything going an all or none route is probably not a good idea, so there may be reason to look at the extremes when thinking about how to redeploy some cash until the market makes a real statement and does something more than just tentative moves higher.

Stocks to watch this week include Family Dollar Stores, following news after Friday’s close that Carl Icahn had taken a large stake.

Fortunately, the DOH traded shares were rolled over on Friday, but with the low volatility it was difficult getting a trade with a net credit without going out quite a bit in time. Even then the net credit was not because of the additional time, but because earnings were to be released that week. With the announcement on Friday there was likely to be greater volatility built into the premium so it wasn’t unusual to discover there were some be greater rollover opportunities than there were this past Friday.

What I had hoped to do and what became possible was to rollover the $60 lot that expires next week, specifically to try and either capture the dividend or to get some additional premium in the event of early assignment and then move on with some new found and unexpected cash. Then came the opportunity to do the same with the $65 call that was created last Friday as part of a rollover.

In the first case by rolling up from $60 to $65 there was the need to take on a $4.10 debit, but iof shares are assigned early after tomorrow’s clse, which is likely if FDO stays welss above the strike, there will be an additional $0.90 squeezed out of the trade, although the $0.39 dividend won’t be captured.

For the re-rollover of the $65 contract that additional premium squeezed out was $0.50 in return for likely giving up the dividend, although with a $66.50 strike it may be a little less likely to be assigned early at the current levels.

All in all, it was an unusual trading day to go along with the rest of the day’s events, but at least now I can soak away, because the hot tub repair guy has got it all under control.

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

There’s very little planned for this week.

As far as planned news, data releases or earnings there won’t be too much going on. Lots of eyes will simply be trained on shares of Apple which begin trading on a post-split basis today.

Following its run much higher after the announcement of the split and increased dividend, it’s hard to argue that substantive product releases or product news were responsible for that climb, so it will be interesting to see how those post-split shares respond to their new affordability, particularly since so many have expected that the actual split will lead to further price appreciation.

Great theories always meet their match in reality.

The week begins at yet another new high, although the pre-open is almost at the flat line with absolutely nothing to react to other than some merger and buyout news.

After a week that saw more assignments than new positions opened for the first time in a little while my cash reserves have risen above where they opened the previous week and despite the increasing highs, I am willing to spend some of that down but I think it’s time to be also increasingly selective.

Over the past month it has been clear that the advancing market isn’t taking everything along as the number of new highs isn’t keeping up with the overall market, as is usually the case when there is broad market strength.

In what is becoming a broken record, my preference again this week would be to find opportunities to sell calls on existing, yet uncovered positions. Again, with a fair number of positions set to expire this week I would like to diversify by date of contract expiration, but with volatility so low it’s hard to justify the additional time for the low additional premiums that result.

Ideally, with also a number of positions set to expire next week as the monthly contract ends, it would be nice to begin finding contracts for June 27, 2014 and beyond, but those opportunities are sparse, all falling victim to the low volatility environment.

With stock prices still so high and premiums so low there is a skew of the risk-reward proposition such that the risk attenuation offered by selling calls is decreased relative to the risk associated with buying shares at or near their highs.

The response to that challenge is to either look for positions that haven’t participated as much in the market rally and by extension don’t have as much to fall or give back or look for those that have participated and may have higher premiums in reflection of the increased risk below.

Tough call, but like most everything going an all or none route is probably not a good idea, so there may be reason to look at the extremes when thinking about how to redeploy some cash until the market makes a real statement and does something more than just tentative moves higher.

Stocks to watch this week include Family Dollar Stores, following news after Friday’s close that Carl Icahn had taken a large stake.

Fortunately, the DOH traded shares were rolled over on Friday, but with the low volatility it was difficult getting a trade with a net credit without going out quite a bit in time. Even then the net credit was not because of the additional time, but because earnings were to be released that week. WIth the announcement on Friday there is likely to be greater volatility built into the premium so there may be greater rollover opportunities than there were this past Friday.

Today we’ll look to see whether there may be some opportunity to rollover the $60 lot that expires next week, specifically to try and either capture the dividend or to get some additional premium in the event of early assignment and then move on with some new found and unexpected cash.

Daily Market Update – June 6, 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 outcomes include:

Assignments:  JPM, MET

Rollovers:  FDO, GPS, LOW

Expirations:  BMY, BMY, EBAY, HFC,

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