Category Archives: Daily Market Update

Daily Market Update – June 5, 2014 (Close)

The ECB announcement, which had been talked about for more than a week, came off as expected and the market appeared to be showing no interest, continuing to trade with a modest upside biaas the announcement was made.

For the most part, modest moves, whether higher of lower have characterized the pre-opening sessions lately, as well as the regular trading sessions, so it appeared as if the ECB had absoluely no impact.

Very little has had an impact on the market as a whole, although individual stocks have been beaten up more than usual lately and have been staying down longer than usual.

Since the ECB news was widely expected, it’s not too surprising that the morning seemed to be showing no impact. In what I can’t quite understand, the overnight deposit rate in the EU is now negative, while the lending rate is down to 0.15%.

The latter is even better than some of those no interest loans from your credit card company, especially since there’s no origination fee. You just have to belong to the EU.

You would think that such low rates would have an incredible stimulatory effect on the economy, but if you look at own own banking experience in the aftermath of the financial meltdowns in 2007 and 2008, that really hasn’t been the case. While our own markets went much higher after easy money became available to the banking system, it wasn’t because of any ensuing economic boom. It’s not too likely that the same kind of market growth will be seen in the European markets and there’s certainly no expectation that multi-national businesses will experience much benefit from increased spending.

So that leaves tomorrow’s Employment Situation Report as the final test for the week that saw another record close on the S&P 500 yesterday and shows no sign of giving up on the climb.

At least that’s what you would have thought, until 10:16 AM, when the market abruptly turned around from it’s morning low point, which had the DJIA down about 20 points and the S&P 500 down 5 points from yesterday’s close.

The conventional wisdom is that this market was once again moved by the casual thoughts of hedge fund manager David Tepper, who said he now had less to worry about, except that those words came almost two hours after the turnaround started. In fact, the S&P went up only another 2 points after his comments and the DJIA went up just another 9 points.

So you can be the judge.

We still do have tomorrow to deal with.

Lately the talk has started looking at the growth in employment from a cynical perspective, beginning to question whether the recent large numbers have been sufficient or at least meaningful.

While I don’t expect much to happen with tomorrow’s announcement, that kind of skepticism can get magnified in the event that the reported number comes in as a disappointment, particularly now that weather is out of the equation.

But none of that changes what has been the goal this week.

What has gotten in the way of achieving the goal have been the tepid moves seen. Ideally, the time to sell new calls is when there is a strong move higher in a stock, but those have been few and far between, as most have simply just showed up this week and are going through the motions.

TOday was a real contra-distinction to the past couple of weeks and it was nice to see any kind of conviction.

With next week’s weekly contracts appearing today a nice move higher was especially welcome in that it more broadly trickled down to the market’s components that have been essentially left out of the party. At least there was some opportunity to take advantage of that strength today and hopefully there will be some mopre tomorrow.

For now, it’s just sitting back and waiting for any sign or any signal.

Daily Market Update – June 5, 2014 (8:45 AM)

The ECB announcement, which had been talked about for more than a week, came off as expected and the market appears to be showing no interest, continuing to trade with a modest upside bias. FOr the most part, modest moves, whether higher of lower have characterized the pre-opening sessions lately, as well as the regular trading sessions.

Very little has had an impact on the market as a whole, although individual stocks have been beaten up more than usual lately and have been staying down longer than usual.

Since the ECB news was widely expected, it’s not too surprising that the morning seems to be showing no impact. In what I can’t quite understand, the overnight deposit rate in the EU is now negative, while the lending rate is down to 0.15%.

The latter is even better than some of those no interest loans from your credit card company, especially since there’s no origination fee. You just have to belong to the EU.

You would think that such low rates would have an incredible stimulatory effect on the economy, but if you look at own own banking experience in the aftermath of the financial meltdowns in 2007 and 2008, that really hasn’t been the case. While our own markets went much higher after easy money became available to the banking system, it wasn’t because of any ensuing economic boom. It’s not too likely that the same kind of market growth will be seen in the European markets and there’s certainly no expectation that multi-national businesses will experience much benefit from increased spending.

So that leaves tomorrow’s Employment Situation Report as the final test for the week that saw another record close on the S&P 500 yesterday and shows no sign of giving up on the climb.

Lately the talk has started looking at the growth in employment from a cynical perspective, beginning to question whether the recent large numbers have been sufficient or at least meaningful.

While I don’t expect much to happen with tomorrow’s announcement, that kind of skepticism can get magnified in the event that the reported number comes in as a disappointment, particularly now that weather is out of the equation.

But none of that changes what has been the goal this week.

What has gotten in the way of achieving the goal have been the tepid moves seen. Ideally, the time to sell new calls is when there is a strong move higher in a stock, but those have been few and far between, as most have simply just showed up this week and are going through the motions.

With next week’s weekly contracts appearing today any nice move higher that more broadly trickles down to the market’s components may finally offer that opportunity.

For now, it’s just sitting back and waiting for any sign or any signal.

Daily Market Update – June 4, 2014 (Close)

With the exception of the monthly release of the FOMC statement, Wednesdays tend to be quiet trading days. Even the ADP employment statistics don’t do very much to shake up the market and today seemed to be no exception in the early morning and stayed true to that path.

At different times over the years different economic statistics have had acute importance. There was a time when it was the money supply. Then there was a time when it was the trade deficit. Inflation rate was once an important measure and so on and on.

This week there are still two potentially big events to come, but I don’t think that either will have too much of an impact, yet there’s very little reason to chance that belief.

A real contrarian would believe that all of the negative sentiment going around, even as we hit new highs, can be nothing more than a signal to commit even more to the long side.

While the crowd usually isn’t right, there has to be the realization that sometimes even the crowd gets it right.

How unusual is it that a market that continually reaches new highs does so on such consistently light volume?

This morning looked to get off to a mildly negative start and it wasn’t  too likely that the market would commit very strongly in either direction in advance of the ECB announcement and then the Employment Situation Report.

As the morning started, I didn’t think that it too unlikely that I’d be adding any new positions this week, although I believed that to be the case yesterday, as well. The difference is that today was Wednesday and that tends to be a slow trading day for me, as well as for the markets. For many positions the new option contracts don’t come out until tomorrow and the premium for just three days, especially in a low volatility environment makes it very difficult to justify taking on the risk. For a 7 day contract? Perhaps. But 3 days? Not likely.

One thing that caught my interest yesterday was a report by Goldman Sachs on commodities, which have basically been the bane of my recent existence.

They are shifting to a more bullish stance on commodities and they have been an influential voice in the past, although not always right and not always right away. Certainly not today.

This time, though, I hope they’re right and soon, too.

Not only for the direct impact on commodity prices, but also on the indirect impact which would be reflected in increasing industrial activity and economic growth.

Not much happens overnight, but if anything, I’m patient and hopeful that this t
ime Goldman has gotten it right. If they have, it’s not too likely that the current stock market has anticipated that kind of growth and that could be a catalyst to go even higher, as it’s otherwise difficult to see what the catalyst would be.

This morning, as for the past 2 days, I was hopeful for some opportunities to find new cover for some positions, but as the market has been so quiet and trading within such a narrow range, there haven’t been too many of those opportunities, so it has been a very slow week, made sustainable only by last week’s rollovers.

As with most event driven markets, that situation could easily change tomorrow or Friday, or on both days. Hopefully, the week will be one that finds no disappointment in the awaited reports and some of the market’s climb higher trickles down to more stocks and carries them along for a change.

Too many have been left behind and the market has been very unforgiving while holding grudges for far too long.

Daily Market Update – June 4, 2014 (9:00 AM)

With the exception of the monthly release of the FOMC statement, Wednesdays tend to be quiet trading days. Even the ADP employment statistics don’t do very much to shake up the market and today seems to be no exception.

At different times over the years different economic statistics have had acute importance. There was a time when it was the money supply. Then there was a time when it was the trade deficit. Inflation rate was once an important measure and so on and on.

This week there are still two potentially big events to come, but I don’t think that either will have too much of an impact, yet there’s very little reason to chance that belief.

A real contrarian would believe that all of the negative sentiment going around, even as we hit new highs, can be nothing more than a signal to commit even more to the long side.

While the crowd usually isn’t right, there has to be the realization that sometimes even the crowd gets it right.

This morning looks to get off to a mildly negative start and it’s not too likely that the market would commit very strongly in either direction in advance of the ECB announcement and then the Employment Situation Report.

At the moment, I think that it’s unlikely that I’ll be adding any new positions this week, although I believed that to be the case yesterday, as well. The difference is that today is Wednesday and that tends to be a slow trading day for me, as well as for the markets. For many positions the new option contracts don’t come out until tomorrow and the premium for just three days, especially in a low volatility environment makes it very difficult to justify taking on the risk. For a 7 day contract? Perhaps. But 3 days? Not likely.

One thing that caught my interest yesterday was a report by Goldman Sachs on commodities, which have basically been the bane of my recent existence.

They are shifting to a more bullish stance on commodities and they have been an influential voice in the past, although not always right.

This time, I hope they’re right.

Not only for the direct impact on commodity prices, but also on the indirect impact which would be reflected in increasing industrial activity and economic growth.

Not much happens overnight, but if anything, I’m patient and hopeful that this time Goldman has gotten it right. If they have it’s not too likely that the current stock market has anticipated that kind of growth and that could be a catalyst to go even higher, as it’s otherwise difficult to see what the catalyst would be.

This morning,
as for the past 2 days, I’m hopeful for some opportunities to find new cover for some positions, but as the market has been so quiet and trading within such a narrow range, there haven’t been too many of those opportunities, so it has been a very slow week, made sustainable only by last week’s rollovers.

As with most event driven markets, that situation could easily change tomorrow or Friday, or on both days. Hopefully, the week will be one that finds no disappointment in the awaited reports and some of the market’s climb higher trickles down to more stocks and carries them along for a change.

Daily Market Update – June 3, 2014 (Close)

For a change, this week seems to have a lot of news, but that doesn’t mean that much is expected to happen.

The biggest news yesterday was that the once really important ISM Manufacturing Index had to be corrected twice in one day due to an error in the calculation. There’s probably not too much reason that should happen, but neither the original release nor the revisions had much of an impact on the market which traded very lazily throughout the day, although did close at record highs once again.

With today being a Tuesday the reasonable expectation would be that the market would move higher. That’s especially expected because its also a week that contains the release of the Employment Situation Report, which has its own pattern.

However, as the morning’s futures  were shaping up, it looked as if Tuesday might not be paying too much attention to the playbook and hard as it may be to believe this Tuesday ended without setting a new record.

Still, it’s hard to discount the fact that yesterday was another new high, although it continued the incremental pattern of just adding a little more onto the top of the pile.

What’s needed to inspire confidence is blowing through the top. While on the surface that might seem as an open invitation to then plumb the depths, instead it usually encourages additional buying behavior.

The same isn’t necessarily the case in a downward moving market and one that is seemingly inflicting “death by a thousand cuts.” In that kind of case a large sell-off on top of all of those incremental losses, also called a “capitulation” is thought to be necessary to herald turning the corner and moving higher again.

Ultimately, it’s those slow gains or losses that create nervousness and despite the low level of volatility suggesting that the expectations of any kind of blow-out is low, there is quite a bit of nervousness. The low trading volume is one reflection of people not jumping in and eager to participate.

I’m in that camp and am reluctant to embrace the climbs higher and higher.

I saw a great statistic about 30 minutes from the end of yesterday’s close that may have altered somewhat by the close, but was telling.

“….another new record high close imminent for the S&P 500, with 41% of NYSE stocks advancing and 42% below their 50-day moving averages.”

 Where’s the good news in that unless you are lucky enough to be holding those select stocks that are actually moving higher?

In essence, the higher moving market is somewhat of an illusion and that’s why you’re not seeing or hearing anyone beating their chests proclaiming to have conquered or bested the market.

So that reluctance to embrace the climb higher is likely to be manifested by limited new purchases this week, as that seems to be the “new normal.”

Back when the market was rising and everything was going along for the ride it wasn’t unusual to have 10 or more new purchases in a single week, due to the prevalence of assignments.

But now, the market continued to rise, but is leaving many stocks behind and so the need to replace assigned positions is lessened for now.

As long as rollovers can get executed that’s not an issue, in fact, it is preferable. It allows income generation while still being able to keep reserves in the event of real opportunity. However, conceptually, the behavior isn’t encouraging for market prospects as a whole.

A healthy market is firing on all cylinders. This one is very tentative and I much prefer functioning in a market with clarity, even if that clarity points lower.

Again, today was the kind of day that I was more interested in finding any opportunity to sell new options on existing positions, although I wouldn’t have wanted to completely ignore any apparent opportunity that may have come along, but not many did.

Just as well, I wasn’t overly eager to spend too much along the way, anyway.

That may be the closest anyone gets to a “win-win” in this market.