Daily Market Update – March 24, 2014

 

  

 

Daily Market Update – March 24, 2014 (Close)

It’s another week that seems to be getting ready to start off with a calm opening, although the past three weeks have been anything but calm when it comes to cumulative activity. After the previous few weeks have been done, all after the initial news of trouble in Crimea, markets have ended strongly lower and strongly higher, despite what appeared to be calm beginnings.

My preference, if there’s going to be some tumult, tends to be a down Monday to start the week, especially after lots of assignments.

All in all, despite a little bit of indecision it did turn out to be a pretty calm day without the slightest shred of  real news coming from any source.

With all of that cash now sitting and waiting to be re-deployed the challenge, as always, is not giving into the temptation to do so all at once. There’s nothing worse than catching the top of a single stock, much less the top of a basket of stocks or an entire market, especially when it can be avoided with just a little bit of self-discipline.

A cash reserve of almost 50% creates lots of opportunity, but not all opportunity is good. It’s been a long time since I’ve gone on a spending spree after a week of lots of assignments and I don’t think I’ll be going on one this week either, but I am willing to get down to a 30% cash level. That would be about 10 new positions, although lately the number has been far less. Today’s four new positions was a start, at least and did create some additional cash flow without too much added risk.

As mentioned at last week’s close I will be increasingly looking at the opportunity to  squeeze premiums out of as many positions as possible that are currently uncovered, through the use of strike levels below cost basis. That means a need for greater maintenance of positions, including the possibility of rollovers at a net debit, as may be appropriate to help work a position back toward an acceptable ROI. Doing so is simply a modification of the DOH strategy. Maybe I’ll call it a “mini-DOH.”

As with the DOH strategy it helps to have volatility showing some increasing level in order to make the premium more closely offset the risk of assignment or rollover at a net debit, so not all positions may be created equally in being candidates, although that could change from week to week. As today wore on volatility decreased, so as it turned out the early in the session trades utilizing the April 4, 2014 expiration were better suited than they would have been at the end of the day.

This week I’m not terribly interested in risk other than possibly taking advantage of any position that takes a sudden hit to price that may appear to be overdone or some potential earnings related trades. Otherwise, I think this may be a week to go with reasonably boring stocks, although even those are often at or near their price peaks.

The market’s pre-open trading seemed to indicate that little of market moving potential outside of the markets themselves are knocking on the door. For know, Crimea is quiet, there’s no additional disappointing news coming from China and the coming week has little in the way of important economic reports.

With earnings season near its end and the
new one still a few weeks away it’s almost like being in limbo, but we all know that won’t last. Despite the appearances of quiet and calm the market frequently finds its own reasons for dysfunction and over-reaction.

While I do like to complain about that, it’s that very lack of predictability which creates the volatility that I don’t complain about when it’s developing.

With already eleven positions set to expire this week and having added another two, there is almost nothing thereafter, I would like to populate some of those out weeks with contracts, if only the volatility would make those premiums a little more inviting as the week goes on.

Based on the past year the periodicity between the “mini-VIX” peaks that I pointed out last week to the “maxi peaks” has been about 6 weeks and we just passed a “mini-peak.” If that stays true to form then better premiums may be on the way, but as often is the case, that comes at the expense of better stock prices.

That may re-inforce some caution when looking to spend all of that cash that’s now on the sidelines, although there still may be some time to party between peaks.

It’s those kinds of discussions and analyses that makes me glad I don’t spend more time looking at charts. I couldn’t imagine always talking and thinking like that.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily Market Update – March 24, 2014

 

  

 

Daily Market Update – March 24, 2014 (9:00 AM)

It’s another week that seems to be getting ready to start off with a calm opening, although the past three weeks have been anything but calm when it comes to cumulative activity. After the previous few weeks have been done, all after the initial news of trouble in Crimea, markets have ended strongly lower and strongly higher, despite what appeared to be calm beginnings.

My preference, if there’s going to be some tumult, tends to be a down Monday to start the week, especially after lots of assignments.

With all of that cash now sitting and waiting to be re-deployed the challenge is not giving in to the temptation to do so all at once. There’s nothing worse than catching the top of a single stock, much less the top of a basket of stocks or an entire market, especially when it can be avoided with just a little bit of self-discipline.

A cash reserve of almost 50% creates lots of opportunity, but not all opportunity is good. It’s been a long time since I’ve gone on a spending spree after a week of lots of assignments and I don’t think I’ll be going on one this week either, but I am willing to get down to a 30% cash level. That would be about 10 new positions, although lately the number has been far less.

As mentioned at last week’s close I will be increasingly looking at the opportunity to  squeeze premiums out of as many positions as possible that are currently uncovered, through the use of strike levels below cost basis. That means a need for greater maintenance of positions, including the possibility of rollovers at a net debit, as may be appropriate to help work a position back toward an acceptable ROI. Doing so is simply a modification of the DOH strategy. Maybe I’ll call it a “mini-DOH.”

As with the DOH strategy it helps to have volatility showing some increasing level in order to make the premium more closely offset the risk of assignment or rollover at a net debit, so not all positions may be created equally in being candidates, although that could change from week to week.

This week I’m not terribly interested in risk other than possibly taking advantage of any position that takes a sudden hit to price that may appear to be overdone or some potential earnings related trades. Otherwise, I think this may be a week to go with reasonably boring stocks, although even those are often at or near their price peaks.

The market’s pre-open trading seems to indicate that little of market moving potential outside of the markets themselves are knocking on the door. For know, Crimea is quiet, there’s no additional disappointing news coming from China and the coming week has little in the way of important economic reports.

With earnings season near its end and the new one still a few weeks away it’s almost like being inlimbo, but we all know that won’t last. Despite the appearances of quiet and calm the market frequently finds its own reasons for dysfunction and over-reaction.

While I do like to complain about that, it’s that very lack of predictability which creates the volatility that I don’t complain about when it’s developing.

With already eleven positions set to expire this week and almost nothing thereafter, I would like to populate some of those out weeks with contracts, if only the volatility would make those premiums a little more inviting.

Based on the past year the periodicity between the “mini-VIX” peaks that I pointed out last week to the “maxi peaks” has been about 6 weeks and we just passed a “mini-peak.” If that stays true to form then better premiums may be on the way, but as often is the case, that comes at the expense of better stock prices.

That may re-inforce some caution when looking to spend all of that cash that’s now on the sidelines, although there still may be some time to party between peaks.

It’s those kinds of discussions and analyses that makes me glad I don’t spoend more time looking at charts.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily Market Update – March 21, 2014

 

  

 

Daily Market Update – March 21, 2014 (9:00 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:

 

AssignmentANF, COH, FAST, HFC, INTC, LB ($44), MSFT, TMUS

RolloverAPC, BBY, LB ($47.40), TWTR (put)

ExpirationCHK, FDO, GM, LULU, RIG, WFM

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily Market Update – March 20, 2014 (Close)

 

  

 

Daily Market Update – March 20, 2014 (Close)

After yesterday’s late day swoon following some confusion and maybe too much candor from new Federal Reserve Chairman Janet Yellen, it looks as if the market is willing to forget the brief pseudo-panic and move forward.

After a few years of press conferences in which very little was said that surprised anyone or took the markets for a ride, it was an unexpected reminder of how tentative and fickle prices may be at any moment in time.

The market’s initial reaction to yesterday’s confusion was a good example of the perils of trading at or near historical highs even when there is news to support such highs. When the support is less than compelling it probably doesn’t take too much to see a sudden shift in gear.

What you never know and sometimes sit in fear of, is at what point do you reach a breaking point or when frenzy begins to feed upon itself. In the case of a short squeeze most of us like that kind of self-feeding frenzy, but when the market is heading lower it’s a completely different set of emotions.

However, there was never really a true sense of panic at any time during the 56 minutes or so of reaction and the market did recover nearly half of its very quick loss, so the news can’t be all bad.

At least today, after trading was ended, we were moved a bit further away from any mythical breaking point as the market spent most of the day slowly working its way to a 100 point gain until giving a little back b y the close.

When these kind of things happen, as yesterday’s sell-off as one example, it does have to make everyone watching increase their personal level of unease, even if you can put somewhat of a positive spin on the outcome. Even if the phenomenon is short lived it has to leave at least a little bit of an imprint on people’s minds and maybe a little bit of hesitancy regarding increasing risk levels or the kind of risk taken on.

On the flip side you’ll find those who will now say that some of the uncertainty regarding interest rates may now have been removed and that lifting of uncertainty clears the way for the market to move higher.

Today they were right.

The nice thing is that either of those scenarios will eventually come true. One or the other. Unlike 2011 when the market finished unchanged for the year or when green comes up on the roulette wheel, something is likely to happen and one group will be able to point to their visionary prowess while the other will conveniently ignore their position and pretend to be unwounded and just move forward.

What you can be certain of is that some algorithms are being re-tweaked and certain words in official statements, speeches, or off the cuff remarks will be given new weightings based on yesterday’s comments. That’s despite the fact that there is no definitive intent confirmed in yesterday’s comments. Instead, they’ve been interpreted in any number of ways.

For me, my vision runs out at the end of each week. I just want to get to that endpoint and start wiping off the lenses to see what may be on the next near term horizon , which generally happens to be a week or two away. I’m not thinking ahead to this Fall, nor much less to the Fall of 2015, as those focusing on interest rates have suddenly set their sights.

What my vision didn’t foresee was another onslaught on Walter Energy.

Yesterday it was about 8% higher as news came out that it was ready to bring notes to market following news the previous week that it was granted a further lending facility. Shares took a hit after that news and it was nice to see that the actual announcement of the event was met with some kindness. AS with everything else, Walter Energy gave up most of its gains in the final hour of trading after the Federal Reserve “mis-speak.”

This morning, however, I was stunned to see a large decline in the pre-open. What made this different from other large pre-open price indications was that there was actually heavy volume to support that move, as opposed to a transaction of 100 shares at a ridiculous price.

It took a couple of hours before finally finding the reason behind the drop, having received a link from a subscriber regarding a Bank of America downgrade of the sector, with especially haqrsh words for Walter Energy.

By the close of trading its rop was almost as large as the one taken this past June 2013.

The good news is that the last time it recovered that loss by the second day after.

Hopefully history repeats itself, but today was especially discouraging on that front, while the rest of the day turned out to be fairly pleasant.

With the pre-open trading suggesting that a reasonably calm opening looked likely that provided some level of comfort that yesterday’s sell off wouldn’t do irreparable damage to the ability to see respectable numbers of assignments and rollovers tomorrow.

Thankfully, there is more than Walter Energy.

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily Market Update – March 20, 2014

 

  

 

Daily Market Update – March 20, 2014 (9:30 AM)

After yesterday’s late day swoon following some confusion and maybe too much candor from new Federal Reserve Chairman Janet Yellen, it looks as if the market is willing to forget the brief pseudo-panic and move forward.

After a few years of press conferences in which very little was said that surprised anyone or took the markets for a ride, it was an unexpected reminder of how tentative and fickle prices may be at any moment in time.

The market’s initial reaction to yesterday’s confusion was a good example of the perils of trading at or near historical highs even when there is news to support such highs. When the support is less than compelling it probably doesn’t take too much to see a sudden shift in gear.

What you never know and sometimes sit in fear of, is at what point do you reach a breaking point or when frenzy begins to feed upon itself. In the case of a short squeeze most of us like that kind of self-feeding frenzy, but when the market is heading lower it’s a completely different set of emotions.

However, there was never really a true sense of panic at any time during the 56 minutes or so of reaction and the market did recover nearly half of its very quick loss, so the news can’t be all bad.

When these kind of things happen it does have to make everyone watching increase their level of unease, even if you can put somewhat of a positive spin on the outcome. Even if the phenomenon is short lived it has to leave at least a little bit of an imprint on people’s minds and maybe a little bit of hesitancy regarding increasing risk levels or the kind of risk taken on.

On the flip side you’ll find those who will now say that some of the uncertainty regarding interest rates may now have been removed and that lifting of uncertainty clears the way for the market to move higher.

The nice thing is that either of those scenarios will eventually come true. One or the other. Unlike 2011 when the market finished unchanged for the year or when green comes up on the roulette wheel, something is likely to happen and one group will be able to point to their visionary prowess while the other will conveniently ignore their position and pretend to be unwounded and just move forward.

What you can be certain of is that some algorithms are being re-tweaked and certain words in official statements, speeches, or off the cuff remarks will be given new weightings based on yesterday’s comments. That’s despite the fact that there is no definitive intent confirmed in yesterday’s comments. Instead, they’ve been interpreted in any number of ways.

For me, my vision runs out at the end of each week. I just want to get to that endpoint and start wiping off the lenses to see what may be on the next near term horizon , which generally happens to be a week or two away. I’m not thinking ahead to this Fall, nor much less to the Fall of 2015, as those focusing on interest rates have suddenly set their sights.

With a reasonably calm opening looking likely that provides some level of comfort that yesterday’s sell off won’t do irreparable damage to the ability to see respectable numbers of assignments and rollovers tomorrow.

This is looking like another in a recent series of weeks in which relatively few new positions have been opened. Fortunately there have been a number of existing positions finding cover, even if only briefly for “DOH Trades” but that does help add to returns, little by little.

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