Category Archives: Daily Market Update

Daily Market Update – April 2, 2014 (Close)

This morning the futures gave up some of their early gain, which was very muted, to begin with, as ADP released its jobs report.

After years of the report being held back because it wasn’t ready for prime time, it’s still not entirely clear how much the ADP report portends for the Employment Situation Report that comes later in the week.

Lately that hasn’t mattered because the market has almost always gone higher with the release of the Employment Situation Report and has gone higher for the entire week of the report, as well. So far, this week the market is already up 1.5% after just two days, so there’s lots of cushion to keep the latter pattern continuing by the time the week is ready to close its books.

The statistical case, however, is stronger for the Friday outcome than for the weekly outcome, although it’s not something that I plan to test this week.

Expectations for Friday’s report are pretty high and this morning’s ADP report was nothing terribly exciting, but it did suggest that weather was no longer at play in the economy, although that may not be the case once earnings season re-starts in just a week, as the quarter being reported is certain to show the influence of unusually bad weather everywhere.

As with so many things when expectations are high it’s so easy to set yourself up for disappointment. But as far as those employment numbers have gone in the past 20 months, even disappointment has largely been met with a higher moving market.

To a large degree that’s because of the perverse mindset that had become established where bad news was good. In this case bad news about employment was interpreted as meaning continued Quantitative Easing, which itself was widely believed to be the root cause for the market’s appreciation.

With Janet Yellen’s confirmed dovish tone this week it’s likely that disappointment in this week’s report won’t find a mate in a market decline.

If the report had been issued just two week’s ago after Yellen’s words were interpreted by some to have been hawkish, any disappointment would likely have been met by a significant market decline. But this time around the fears just aren’t there and instead there’s the belief that any disappointment may be met with less tapering and by consequence, more easing.

So what to do?

For now, despite only 3 new positions this week, I’m content to watch shares go higher, if that’s what they need to do. It would be even better if they would take my shares, especially those uncovered, along for the ride. But, I’m still not ready to chase. When the market gets to a point that it climbs 1.5% or more for the week it’s pretty hard to keep up if using a covered call strategy.

The good thing is that the market doesn’t usually do that week in and week out, although 2013 seemed that way.

This year has been different, despite closing at another new high yesterday. The path higher has been very different and a much better one for the sale of covered options.

Of course, after having said that this morning the day ended with yet another new high in the S&P 500 and the DJIA just missed posting its first new high for 2014.

While I expected today to be a slow trading day, I don’t think that will be the case for the final two days of the week and am hopeful of having a good combination of rollovers and assignments. While I would love to see another week such as last week when a fair number of rollovers could be done on Thursday, thereby making Friday less hectic, I don’t think that will be the case this week.

Still, if I had to choose, I’d take hectic over boring and especially over sitting in desperation and unable to make trades because of a sinking market on expiration Friday.

I expected yesterday to be a slow day, as well, and was a little surprised by the activity that ensued, so who knew what today may have had in store? With money still in hand any respite in the move higher, especially in positions that I can get a week and a half premium by using April 11 expirations may be very enticing.

I’m only human, so will see if they can be resisted if they happen to pop up.

As it would turn out most of that money is still right where it belongs and will now likely stay safe until next week as preperations for a busy couple of days ahead will begin.

Note: If you haven’t seen it, I posted an article that looked at the rollover trade executed in Bristol Myers Squibb yesterday, dissecting out the rationale for having done so in an effort to retain the dividend.

Daily Market Update – April 2, 2014 (9:00 AM)

This morning the futures gave up some of their early gain, which was very muted, to begin with, as ADP released its jobs report.

After years of the report being held back because it wasn’t ready for prime time, it’s still not entirely clear how much the ADP report portends for the Employment Situation Report that comes later in the week.

Lately that hasn’t mattered because the market has almost always gone higher with the release of the Employment Situation Report and has gone higher for the entire week of the report, as well. So far, this week the market is already up 1.5% after just two days, so there’s lots of cushion to keep the latter pattern continuing by the time the week is ready to close its books.

The statistical case, however, is stronger for the Friday outcome than for the weekly outcome, although it’s not something that I plan to test this week.

Expectations for Friday’s report are pretty high and this morning’s ADP report was nothing terribly exciting, but it did suggest that weather was no longer at play in the economy, although that may not be the case once earnings season re-starts in just a week, as the quarter being reported is certain to show the influence of unusually bad weather everywhere.

As with so many things when expectations are high it’s so easy to set yourself up for disappointment. Bit as far as those employment numbers have gone in the past 20 months, even disappointment has largely been met with a higher moving market.

To a large degree that’s because of the perverse mindset that had become established where bad news was good. In this case bad news about employment was interpreted as meaning continued Quantitative Easing, which itself was widely believed to be the root cause for the market’s appreciation.

With Janet Yellen’s confirmed dovish tone this week it’s likely that disappointment in this week’s report won’t find a mate in a market decline.

If the report had been issued just two week’s ago after Yellen’s words were interpreted by some to have been hawkish, any disappointment would likely have been met by a significant market decline. But this time around the fears just aren’t there and instead there’s the belief that any disappointment may be met with less tapering and by consequence, more easing.

So what to do?

For now, despite only 3 new positions this week, I’m content to watch shares go higher, if that’s what they need to do. It would be even better if they would take my shares, especially those uncovered, along for the ride. But, I’m still not ready to chase. When the market gets to a point that it climbs 1.5% or more for the week it’s pretty hard to keep up if using a covered call strategy.

The good thing is that the market doesn’t usually do that week in and week out, although 2013 seemed that way.

This year has been different, despite closing at another new high yesterday. The path higher has been very different and a much better one for the sale of covered options.

While I expect today to be a slow trading day, I don’t think that will be the case for the final two days of the week and am hopeful of having a good combination of rollovers and assignments.

I expected yesterday to be a slow day, as well, and was a little surprised by the activity that ensued, so who knows what today may yet bring? With money still in hand any respite in the move higher, especially in positions that I can get a week and a half premium by using April 11 expirations may be very enticing.

I’m only human, so will see if they can be resisted if they happen to pop up.

Daily Market Update – April 1, 2014 (Close)

This morning the futures are off to the same kind of start that we had yesterday.

Trading was pointing slightly higher and suggested a mildly stronger opening. That alone would have been nice except for the fact that lately these kind of positive openings have had a hard time maintaining themselves.

What no one expected, however, was that during some prepared comments and appearances later in the day Janet Yellen would remove any question about whether she is dovish or not.

With a long body of work and official positions, when she was initially considered as a possible successor to Ben Bernanke, she couldn’t escape the moniker “dove.” Given that long and documented history, it’s surprising that anyone would have any doubts about where her heart and intellect stood.

But somehow markets still found a reason to get worried when she may have mis-spoken during her first press conference as Federal Reserve Chairperson and the whispers were that she wasn’t anywhere near as dovish as we all thought. If you believe that our market rally has been closely tied to an accommodative Federal Reserve than you had good reason to worry, but still not good reason to be worried.

As a result the market plunged and then quickly reversed when someone must have realized that it would be unlikely if she suddenly changed a lifetime of opinions.

She seemingly finally put those fears to rest yesterday as she did what Federal Reserve Chairs before her had never done. She acted like a politician, photo opportunities and all, during a highly visible and orchestrated visit that was supposed to reflect the need to maintain and create jobs. 

You couldn’t possibly have been more direct in getting a message across and it really was unlike anything her predecessors had done or said before, preferring to cloak their thoughts in various layers of obfuscation.

What was nice was that the boost given to the market that now is comforted to know that they won’t be abandoned by the Federal Reserve, even while tapering is proceeding, is that the gain lasted throughout the entire trading session and didn’t fade after the first hour of trading.

I don’t know if there will be another unexpected catalyst this morning, but I hope not, as I would like to get at least a few more new purchases done without wondering whether something has gone up too much and would I be chasing the shares if I bought them.

Yesterday, much of what was on the drawing board would have required chasing and that’s usually a certain formula for disappointment. Since there’s never a shortage of unexpected disappointment, there’s probably little need to add some expected disappointment to the mix.

While yesterday would have turned out to have been a good day to buy early, as the opening gain was mild before Yellen’s comments, I think that this morning will continue the strategy of sitting back and just seeing what kind of legs the morning’s open will have.

Hopefully some of those opportunities will appear and perhaps will be in positions with expanded options choices.

Ultimately, today would turn out to be very different from so many recent days that have preceded it in that the market simply had a nice modest gain at the open and just marched in place all through the day.

While the expectation is that this week will be a net positive, since it is an Employment Situation Report week, a little diversification in expirations would still be nice, in the event that the week falls short and leaves expired contracts behind.

As usually is the case, the reality may end up being very different from the theory. Ultimately, whatever looks good is good enough for me.

Daily Market Update – April 1, 2014 (9:00 AM)

This morning the futures are off to the same kind of start that we had yesterday.

Trading was pointing slightly higher and suggested a mildly stronger opening. That alone would have been nice except for the fact that lately these kind of positive openings have had a hard time maintaining themselves.

What no one expected, however, was that during some prepared comments and appearances later in the day Janet Yellen would remove any question about whether she is dovish or not.

With a long body of work and official positions, when she was initially considered as a possible successor to Ben Bernanke, she couldn’t escape the moniker “dove.” Given that long and documented history, it’s surprising that anyone would have any doubts about where her heart and intellect stood.

But somehow markets still found a reason to get worried when she may have mis-spoken during her first press conference as Federal Reserve Chairperson and the whispers were that she wasn’t anywhere near as dovish as we all thought. If you believe that our market rally has been closely tied to an accommodative Federal Reserve than you had good reason to worry, but still not good reason to be worried.

As a result the market plunged and then quickly reversed when someone must have realized that it would be unlikely if she suddenly changed a lifetime of opinions.

She seemingly finally put those fears to rest yesterday as she did what Federal Reserve Chairs before her had never done. She acted like a politician, photo opportunities and all, during a highly visible and orchestrated visit that was supposed to reflect the need to maintain and create jobs. 

You couldn’t possibly have been more direct in getting a message across and it really was unlike anything her predecessors had done or said before, preferring to cloak their thoughts in various layers of obfuscation.

What was nice was that the boost given to the market that now is comforted to know that they won’t be abandoned by the Federal Reserve, even while tapering is proceeding, is that the gain lasted throughout the entire trading session and didn’t fade after the first hour of trading.

I don’t know if there will be another unexpected catalyst this morning, but I hope not, as I would like to get at least a few more new purchases done without wondering whether something has gone up too much and would I be chasing the shares if I bought them.

Yesterday, much of what was on the drawing board would have required chasing and that’s usually a certain formula for disappointment. Since there’s never a shortage of unexpected disappointment, there’s probably little need to add some expected disappointment to the mix.

While yesterday would have turned out to have been a good day to buy early, as the opening gain was mild before Yellen’s comments, I think that this morning will continue the strategy of sitting back and just seeing what kind of legs the morning’s open will have.

Daily Market Update – March 31, 2014 (Close)

Nothing much happened over the weekend and so the markets continue with their non-committal trading in the pre-open to begin this week. That’s a pattern that has been going on for a while, even though as the days have unfolded there have been large, but usually alternating directional moves, including on intra-day bases.

Today was one of those days, but at least this time the cause was readily identifiable.

And better yet, it was higher and never even made a serious attempt at reversing itself. No nervousness, no profit taking. Just everyone going along for the ride.

It was a very dovish sounding Federal Reserve Chairman Janet Yellen, who during the course of a scheduled presentation made it clear that the Federal Reserve was going nowhere and would be a continued partner in assuring an economic recovery.

Otherwise we would have been held hostage to another weekend of no news and nothing to convince the markets of the need to move anywhere.

While Secretary of State Kerry did have an unscheduled and lengthy meeting with his Russian counterpart on Sunday, it seemed that the results of that meeting were the source of any non-committal sentiment this morning. I listened to the press conference and wasn’t really certain of what had been said and certainly there was no suggestion of accomplishment nor failure of those discussions, that could have served as catalysts for this morning.

Faced with lots of positions set to expire this week and coupled with a dearth of assignments last week, I’m a little more reluctant than usual to dip into reserves in order to open new positions. That money is there for real and screaming opportunities and there aren’t many of those, although their beginnings are becoming more evident, despite some advances in  last Friday’s trading. Sitting near all time highs, even with a slight hint of optimism to start the week isn’t enough of a motivator to dig too deeply, at least until seeing some evidence of stability and not the early positive opens that gave way to late morning selling, as we’ve been seeing lately.

Although this is also an Employment Situation Report week and that usually means a net positive for the weekly performance, it’s difficult to take that information and use it as a counter to common sense.

With so many expirations set for this week, this seems to be another week to consider looking for those opportunities that have expanded weekly options in an effort to diversify expiration dates.

As with last week I would like to see additional uncovered positions get their coverage and add to the week’s income stream. Where appropriate, that mean mean more DOH trades, as they have helped of late in having existing positions outperform the weekly market. If your goal is additional weekly premium income then it’s worth the additional attention that’s needed and the aggravation that may ensue when those shares mat suddenly spike. As long as they don’t do so immediately before expiration there’s always hope and even then there may be some.

This morning I planned to continue the strategy of sitting back a bit and watching to see how sentiment develops and where it may take us. As it turned out it took us higher and never looked back.

With cash reserves up to 37%, I was willing to get down to about 25%, which would have meant only as many as 4 tor 6 new positions for the week. However, with the market jumping quickly and early there weren’t too many opportunities to grab much. But having rolled over a nice number of positions last week I’ve already met income objectives for this week, so there wasn’t not as much additional reason to extend the portfolio, certainly not in order to chase income.

Sometimes that’s a luxury to begin the week, but you can’t necessarily blame anyone for wanting even more