Category Archives: Daily Market Update

Daily Market Update – April 15, 2014 (9:15 AM)

Yesterday was a really interesting day in the market.

I didn’t get too much done but I did enjoy most of the day as that old adage about a rising tide played true.

After a month or more of disappointing fizzled rallies to start the day the one from yesterday seemed to be the real thing until the final 90 minutes of trading.

It seemed sort of cruel to watch paper gains disappear after putting a nearly a full day but given how the market has been going lately it should have been expected. At least if the deterioration of gains started after only an hour of trading you didn’t feel as if you had that much invested on an emotional level. But to go nearly the whole day and then watch everything disappear is really deflating.

What wasn’t expected was the reversal rally that occurred in the final 30 minutes that restored the market to its highs for the day. That bounce really went against every logical scenario that anyone could have envisioned.

While there was reason to believe that Citigroup’s earnings helped the market get the week off to a good start, there was plenty of reason to believe that some would take the opportunity to take some cash off the table. What there was little reason to believe was that there would be strong and sustained buying going into the close of trading.

Regardless of how you look at things its hard to come up with an interpretation that’s anything other than optimistic. Who in their right mind would rush in to save a market that had a failed effort to break out of its downward trajectory?

The fact that it actually happened that way is what made it such an interesting day. Triple digit gains and losses are a dime a dozen but that late recovery of early gains was really a thing of beauty and rarity.

Even if the pre-open futures aren’t showing much in the way of follow through to the strong close it has to leave an encouraging feeling among those invested or thinking of investing.

I’d like to take some of that encouragement and apply it toward the rest of this holiday shortened week, but I still feel a need to stay on course and hope to secure premiums from existing positions this week instead of depleting cash even further.

My confidence could be supremely restored if I could see a nice assortment of assignments and rollovers on Thursday and toward that end some continuance of yesterday’s strength, even if muted, would be very nice.

While I’m not averse to adding new positions this week it may end up being among those very quiet weeks. With a fair number of expiring positions this week I really would prefer to have any remaining new positions expire at some other time. That may mean looking for new positions later in the week for those that will have their April 25, 2014 options appear only later in the week.

Also, with just a 4 day week, which is now down to 3 days, those premiums are somewhat lower, so there is reason to consider a slightly longer term contract.

For now I’d be happy just adding to the bottom line and letting the tide keep doing its thing as we all try to figure out where exactly the market is getting its cues.

If you haven’t been confused, you just haven’t been paying attention.

That may put you at an advantage.

Daily Market Update – April 14, 2014 (Close)

There was lots of nervousness over the weekend as concerns centered on Russian intentions over eastern Ukraine.

Since that was clearly an identified risk factor during Friday’s trading no one would have blamed traders for really accelerating the selling that was already a follow through to Thursday’s sell-off.

But it didn’t happen that way despite a very large order imbalance that should have driven the market even lower at the close of trading.

I suppose that could be taken as some sort of positive sign, but I’m more focused on personal issues.

Because what also didn’t happen was assignments of shares to help re-supply cash reserves.

When assignments occur I feel emboldened and anxious to recycle that cash and put it to work making more cash. While emboldened on the one hand, I’m also cautious about dipping deeper into reserves when the assignments are fewer than expected.

They couldn’t possibly have been any fewer than this past week, thanks to about a 400 point drop to end the week.

Maybe this week will be different?

While Citigroup, which shamefully couldn’t pass the regulator’s stress tests just a couple of weeks ago has started the pre-market off on a positive note, with what appear to be genuinely good earnings, it will be a matter of wait and see.

I want the market to be able to prove itself worthy of opening new positions, but I think that if it does, I would be much happier being able to sell calls on existing positions. I would rather generate the week’s income stream in that manner instead of by buying new positions, even if there appear to be some bargains after last week’s indiscriminate and somewhat irrational rise and then fall.

As the market does open it will be interesting to see where the volatility moves and whether there is any enhancement of forward week option premiums. If I had the opportunity to find cover for existing positions my preference would be to go out into forward weeks, but a beggar shouldn’t be a chooser. I would happily take what I could get.

As with past weeks I’ll likely watch during the first hour to see whether the Citigroup bump has any legs, as early optimism has frequently given way to an excuse to sell and close positions often after the first hour of trading.

Today, and you can look at this as a positive or a negative, it took until the final hour to reverse what had been a gain of Janet Yellen proportions. But if you are looking for positive or negative signals, the rebound back in the final 30 minutes after losing almost all of the gain has to be some kind of a positive sign. It’s actually hard to remember the last time anything like that had happened.

Usually these surprises leave you poorer.

Someone was optimistic. Whether that lasts until tomorrow may be questionable, but yu have to start and take a stance somewhere.

For those who believe that late last week’s selling was related to raising money from last year’s capital gains in order to meet tax payments, the expectation would be that markets would begin climbing higher as those money raising sales are completed. Of course, it really has to be new money that drives a market higher. It can’t simply be recycling. So if people had to sell stocks to pay their taxes it’s not too likely that on the day after those taxes are paid that they would suddenly have new funds to infuse into the markets.

If the markets do reverse this quick 4% drop it will simply be because the drop itself had neither rational, technical, nor a fundamental basis. It wasn’t even based on fear or uncertainty, so there’s every bit as much reason for it to return to advancing as there is for it continuing to go lower.

Today it just decided to do both. That’s all.

Daily Market Update – April 14, 2014 (9:15 AM)

There was lots of nervousness over the weekend as concerns centered on Russian intentions over eastern Ukraine.

Since that was clearly an identified risk factor during Friday’s trading no one would have blamed traders for really accelerating the selling that was already a follow through to Thursday’s sell-off.

But it didn’t happen that way despite a very large order imbalance that should have driven the market even lower at the close of trading.

I suppose that could be taken as some sort of positive sign, but I’m more focused on personal issues.

Because what also didn’t happen was assignments of shares to help re-supply cash reserves.

When assignments occur I feel emboldened and anxious to recycle that cash and put it to work making more cash. While emboldened on the one hand, I’m also cautious about dipping deeper into reserves when the assignments are fewer than expected.

They couldn’t possibly have been any fewer than this past week, thanks to about a 400 point drop to end the week.

Maybe this week will be different?

While Citigroup, which shamefully couldn’t pass the regulator’s stress tests just a couple of weeks ago has started the pre-market off on a positive note, with what appear to be genuinely good earnings, it will be a matter of wait and see.

I want the market to be able to prove itself worthy of opening new positions, but I think that if it does, I would be much happier being able to sell calls on existing positions. I would rather generate the week’s income stream in that manner instead of by buying new positions, even if there appear to be some bargains after last week’s indiscriminate and somewhat irrational rise and then fall.

As the market does open it will be interesting to see where the volatility moves and whether there is any enhancement of forward week option premiums. If I had the opportunity to find cover for existing positions my preference would be to go out into forward weeks, but a beggar shouldn’t be a chooser. I would happily take what I could get.

As with past weeks I’ll likely watch during the first hour to see whether the Citigroup bump has any legs, as early optimism has frequently given way to an excuse to sell and close positions.

For those who believe that the selling was related to raising money from last year’s capital gains in order to meet tax payments, the expectation would be that markets would begin climbing higher as those money raising sales are completed. Of course, it really has to be new money that drives a market higher. It can’t simply be recycling. So if people had to sell stocks to pay their taxes it’s not too likely that on the day after those taxes are paid that they would suddenly have new funds to infuse into the markets.

If the markets do reverse this quick 4% drop it will simply be because the drop itself had neither rational, technical, nor a fundamental basis. It wasn’t even based on fear or uncertainty, so there’s every bit as much reason for it to return to advancing as there is for it continuing to go lower.

MONDAY:   Early indications show no follow through to late last week, but no bounce back either. My primary goal this week is to raise cash through assignments, sell calls and be better positioned to start the May 2014 cycle, rather than opening too many new positions.

TUESDAY:     Great late recovery yesterday may be the story of the week. That has to inspire some confidence and even more confusion.

WEDNESDAY:  Another impressive previous day’s close, but this time there looks to be early follow through, hopefully enough to bring us closer to rollovers and assignments to round out a diminshed new position week.

THURSDAY:    An early end to the week may get off on a slightly negative note, but after a week of pleasant surprises, anything is possible to end this monthly option cycle.

FRIDAY: