Category Archives: Daily Market Update

Daily Market Update – May 27, 2014 (9:00 AM)

While I don’t like the smaller premiums that are generated on these 4 day trading weeks, I no longer dislike Monday holidays.

There was a time that I harbored some resentment for the market being closed on those Mondays. That was back in the days when such a holiday coincided wiith a day off for me and could have been used to hone some skills back when I couldn’t spend as much time as I wanted glued to the screen and ticker.

These days I can and suddenly, maybe not so surprisingly I like those shortened weeks and actually, on a day like Memorial Day, get a chance to understand and appreciate the reason for the holiday.

So now it’s Tuesday and inexplicably the market starts at another new high. What seems so unusual is that you really don’t see or hear a chorus of people gloating about their returns. The other day it was mentioned that some 70-80% of hedge funds were trailing the S&P 500. While that’s easy to understand if the market is going straight higher, it’s not easy to understand when the market is going lower or bouncing around.

My guess is that lots of hedge funds, after trailing the market in 2013 stopped hedging in anticipation of the need for protection and instead doubled up on the bullish end of things.

Bad timing if that’s the case and it is likely accuate to some degree. It’s not much different fromt the individual investor who waits until the start of the new year to get into last year’s hottest mutual fund.

While normally there would be some degree of euphoria here’s something that should be cause for concern:

That is that while the S&P 500 is going higher the number of new highs is going lower.

That’s just not the way things are supposed to work.

What that indicates is that the advance is really pretty narrow and there just isn’t a lot of participation.

Normally in a market making new highs over and over again everyone is happy because just about everything is moving higher getting swept by a rising tide.

Now, there’s a tide but it’s not doing too much sweeping and only taking a lucky few along for the ride.

I start this week with replenished cash from a decent number of assignments and having sold more new cover last week than in recent memory. On a personal note that leaves me happy, but I’m not overly anxious to plow even the full amount of the regenerated cash back into the market this week.

Oart of that reqason i
s that the reward is reduced as there are only 4 days worth of premiums this week. However, beyond that is that after 2 previous weeks of not seeing much in the way of assignments and some decidely negative trading, I’m not entirely convinced that least week’s positive trading patterns are here to stay.

My initial sense is that the optimism that may be borne of last week’s trading may be for fools.

Of course, like most everything, I’m not fully willing to base everything on that belief that may end up being wrong. So I anticipate making some trades this week in an effort to open some new positions, but I would still prefer to see uncovered positions find coverage and make my weekly income in that manner rather than having to spend very much to generate that income.

As always, we’ll see.

We’ll see if the pre-open futures have any predictive capability for the rest of the day and whether any barains may pop up to cause me to rethink the thriftiness I have planned for the week.



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

The Week in Review will be posted by 6 PM today and the Weekend Update will be posted by noon on Sunday.

Today’s possible outcomes include:

Assignment:  CMCSA, UA

Rollover:  EBAY, IP, MA, MET, SBUX, TXN

Expiration:  EBAY, GM, JPM

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

Daily Market Update – May 22, 2014 (Close)

It still seems very odd to me that the market came off of its large drop on Tuesday and recovered the loss on a Wednesday, but did so ahead of the FOMC statement release and subsequently did little afterward.

While yesterday marked about the 6th consecutive month with no expected surprises in the statement and none delivered, that hasn’t changed the pattern of trading. Hesitancy prior to the release and then incoherent reactions afterward was a fairly predictable pattern.

Yesterday was completely against long established script.

Given the uncertainty that has been permeating the market and the final realization that earnings really haven’t been that great, especially on the retail level, it’s surprising that investors would have gone counter to Tuesday’s large downward move, which itself was already counter to a Tuesday trend.

With the FOMC now out of the way and earnings season slowing down I’m not certain what the next catalyst will be, particularly as the situation in Ukraine also seems to be mitigated, although there is the little matter of a planned election on Sunday, which may bring out some emotions.

There was certainly no catalyst today, but sometimes that’s a good thing.

Depending on your perspective having a market vacation on Memorial Day may either be a good thing or bad thing for investors as the uncertainty that may attend Sunday’s elections makes itself known. Either we will be behind the eight ball having to wait an additional day to react or that additional day would allow some time to calm and digest.

Some may even use tomorrow as an opportunity to lighten up a little bit in advance of a long weekend, but that hasn’t been the case for the past couple of years. Uncertainty going into a weekend alone hasn’t been enough to derail bullish sentiment and the fear of missing out on a Monday rally.

Another day like yesterday will have us at another new record and anything is entirely plausible.

Today we did get just a little bit closer to those records. Not too much closer, but we didn’t move any further away.

The pre-open appeared to be pointing to a flat open, but just as yesterday’s pre-open provided absolutely no indication for what was to transpire when the bell rang, today turned out to be no different.

The late Mark Haines always used to say that the pre-open was meaningful of nothing, except when there was a very large move based on some unexpected news. We haven’t really had any of those for a long while. Instead, we’ve gotten fairly accustomed to early gains in the pre-open fading within about an hour or so and moderate losses in the pre-open foretelling nothing.

So this morning is another kind of sit back and watch, with the hope that there wouldn’t be a repeat of the past two weeks when many positions that were rollover candidates saw their prices deteriorate as the markets went much lower.

This week has a large number of rollover candidates as the low volatility continues to make it unappealing to diversify by time of expiration. Hopefully a fair share of those will be assigned or rolled over, as currently appears to be the case.

Unfortunately, despite knowing better, and the past two weeks should have reinforced that knowledge, I continue to count those chickens before their hatched. However, there does seem to be a slightly optimistic tone after yesterday’s trading and thus far, nothing seems to be on the horizon that is likely to upset things.

With Monday being a market holiday, there is a chance that some new purchases may still be made this week in an attempt to get a full week’s premium from call sales, as opposed to just 4 days that would be reflected in the prices. Not what I usually do on Thursdays or Fridays, but it’s my small way of celebrating.

Otherwise, I’d have been perfectly content to see the market keep share prices where they are or a bit higher and execute those rollovers today or tomorrow and simply enjoy a nice three day weekend.

That played out nicely for today as more of those trades were made than is usually the case on a Thursday. Hopefully, tomorrow will bring even more, as a number of positions are uin good shape for either assignment or rollover, as long as those chickens do their job.

Daily Market Update – May 22, 2014 (8:45 AM)

It still seems very odd to me that the market came off of its large drop on Tuesday and recovered the loss on a Wednesday, but did so ahead of the FOMC statement release and subsequently did little afterward.

While yesterday marked about the 6th consecutive month with no expected surprises in the statement and none delivered, that hasn’t changed the pattern of trading. Hesitancy prior to the release and then incoherent reactions afterward was a fairly predictable pattern.

Yesterday was completely against long established script.

Given the uncertainty that has been permeating the market and the final realization that earnings really haven’t been that great, especially on the retail level, it’s surprising that investors would have gone counter to Tuesday’s large downward move, which itself was already counter to a Tuesday trend.

With the FOMC now out of the way and earnings season slowing down I’m not certain what the next catalyst will be, particularly as the situation in Ukraine also seems to be mitigated, although there is the little matter of a planned election on Sunday, which may bring out some emotions.

Depending on your perspective having a market vacation on Memorial Day may either be a good thing or bad thing for investors as the uncertainty that may attend Sunday’s elections makes itself known. Either we will be behind the eight ball having to wait an additional day to react or that additional day would allow some time to calm and digest.

Some may even use tomorrow as an opportunity to lighten up a little bit in advance of a long weekend, but that hasn’t been the case for the past couple of years. Uncertainty going into a weekend alone hasn’t been enough to derail bullish sentiment and the fear of missing out on a Monday rally.

Another day like yesterday will have us at another new record and anything is entirely plausible.

The pre-open appears to be pointing to a flat open, but just as yesterday’s pre-open provided absolutely no indication for what was to transpire when the bell rang, today could be no different.

The late Mark Haines always used to say that the pre-open was meaningful of nothing, except when there was a very large move based on some unexpected news. We haven’t really had any of those for a long while. Instead, we’ve gotten fairly accustomed to early gains in the pre-open fading within about an hour or so and moderate losses in the pre-open foretelling nothing.

So this morning is another kind of sit back and watch, with the hope that there woun’t be a repeat of the past two weeks when many positions that were rollover candidates saw their prices deteriorate as the markets went much lower.

This week has a large number of rollover candidates as the low volatility continues to make it unappealing to diversify by time of expiration. Hopefully a fair share of those will be assigned or rolled over, as currently appears to be the case.

Unfortunately, despite knowing better, and the past two weeks should have reinforced that knowledge, I continue to count those chickens before their hatched. However, there does seem to be a slightly optimistic tone after yesterday’s trading and thus far, nothing seems to be on the horizon that is likely to upset things.

With Monday being a market holiday, there is a chance that some new purchases may still be made this week in an attempt to get a full week’s premium from call sales, as opposed to just 4 days that would be reflected in the prices. Not what I usually do on Thursdays or Fridays, but it’s my small way of celebrating.

Otherwise, I’d be perfectly content to see the market keep share prices where they are or a bit higher and execute those rollovers today or tomorrow and simply enjoy a nice three day weekend.

Daily Market Update – May 21, 2014 (Close)

It seems as if we had an FOMC Statement just yesterday, but this afternoon was the scheduled release of the latest iteration.

While there weren’t too many expectations for any substantive kind of change in language, tone or intent, you never know how the market interprets status quo, much less change, so anything is always possible.

In addition to the immediate, knee jerk reactions to the minutes as the words are flash parsed by algorithms that scan the printed text, there is always the next wave or reaction minutes later as well as the following day for some more rational, or less rational thought to take hold.

Yesterday was an interesting day as it was really the first time that there was some widespread concern about retail sales despite having had at least 6 months of warning signs that the economy wasn’t reflecting some of that good news coming from the Jobs Numbers and Employment Situation Reports.

That disconnect seemed so obvious yet had been completely ignored. You would expect that increased employment would lead to increased discretionary spending at all levels of the chain. It just seems incongruous that only the higher levels of the retail chain seem to be thriving in what is thought to be an improving environment. Today’s earnings report from Tiffanys just adds to that observation that something is amiss.

That realization was poorly timed because it took one of our Tuesdays, which invariably see the market go higher and just wasted it on all of the concerns about the economy not reflected consumer optimism and more importantly, consumer spending.

Following yesterday’s triple digit loss it wasn’t too terribly surprising to see some early bounce back prior to the opening bell, but what was surprising was to see that early advance just continue to strengthen through the day and leading up to the 2 PM release of the FOMC statement. While I thought that any advance wasn’t likely to be sustained and especially unlikely to be potent the market is always full of surprises. Usually FOMC days tend to have tentative trading leading up to the report, but not today.

Additionally, there was almost no reaction to the release. Certainly not an immediate one, although about 6 minutes later the market did add on to its already substantial gains that offset Tuesday’s losses.

As with recent past weeks with Wednesday rolling around my thoughts were turned toward possible rollovers, which were definitely in short supply the past week. However, as opposed to last week, unless there is some real surprise in today’s FOMC, there isn’t too much reason to suspect a repeat of the deterioration seen during the latter half of last week that took so many positions out of contention for rollovers.

With the market now within even more easy striking distance of another new high and seeing how often it has shown resilience, it’s noteworthy how nervous traders appear to be. The immediate historical precedence would have you being optimi
stic for another scaling of the wall and overcoming any short term selling pressure.

However, the best reason those nerves is the breakdown of the high momentum names, as that has its own historical precedence. That history is one that has been tied to leading to an overall market decline.

That can’t be lost on some traders, especially the ones that have been around for a while and have been in up and down markets.

Not that there is any parallel, but we are now in that same period as between 1982 and 1987.

During that time the market just went straight higher and many drawn into the market, but as investors and brokers, had no idea that markets could go down, after a 5 year run.

Well, now its 2009 to 2014. That same 5 year run and there is a generation that may be unaware that the  downside even exists.

On a positive note when so many start talking about the downside, the risk and the disappointments it becomes a less likely scenario. It’s almost always when you don’t see it coming that it happens, so I hope those warnings keep coming and caution becomes more the norm.