Category: Daily Market Update

 

(see all trades this option cycle)

Daily Market Update – January 29, 2014 (9:15 AM)

When the S&P 500 Futures opened for trading about an hour after the Turkish Central Bank announced a huge 4.5% increase in its overnight lending rate, it rallied sending the futures up about 9 points.

This morning they’re down by almost 10 points.

That’s quite a turnaround.

I’m not really certain what the reason for that reversal is, but the overnight futures aren’t necessarily a good indicator of where the markets will find themselves trading the next day. I really don’t know why I even bother looking at them or why I sometimes get hopeful or fearful.

Today, once again, attention gets turned to the 2 PM release of the FOMC minutes and the key question is whether the taper will continue or be deferred, based on recent employment data and perhaps other factors that may reflect a weaker than expected economy.

It’s hard to know what the impact of recent overseas weakness might be on the Federal Reserve. Things used to be very straightforward, but now everything is connected. These days Turkey matters.and you have to wonder whether a 12% overnight rate might pull some money away from the United STates and into Turkey or all of the other countries that are bound to raise their rates in response to some rate creep here in the US.

I’m glad I don’t have to think about these sort of things.

While I don’t expect much of a surprise in today’s FOMC release, it’s always fascinating to see the initial responses and so often the reversals of those responses, as well as the delayed responses. So often it seems that an hour later, or sometimes the next day is when euphoria or fear set in.

As with the past two weeks I’m hopeful that the market can hold it together long enough to send some reasonable mixture of rollovers and assignments in order to be able to fully participate in next week’s market.

Until then it may be another bumpy ride as the market has been showing continued weakness this morning and likely to erase yesterday’s gains.

The likelihood of executing any new purchases to day is pretty small, as I am already at my lower limit for cash reserves at 20% and besides, it’s a Wednesday, which are usually slow anyway.

For now, I’m content to see how the world deals with a changing interest rate environment and currency fluctuations. Those are two things that I really don’t understand and have always kept my distance from those markets.

Whether the current “crisis” is additive, infectious or simply one in passing will be clear in just a few days.

This is a good time to be a passive observer.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 28, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 28, 2014 (Close)

It’s probably a good thing that Apple stopped being a market leader about 2 years ago.

There was a time, not too long ago, that we really didn’t need an S&P 500. All we needed was an S&P 1, as long as that one stock was Apple. Back then, as went Apple shares so went the rest of the market.

Apple’s volatility has been falling significantly and is well below 1.00, as it gets closer to moving in a discordant manner with the overall market.

With the earnings disappointment comes lots of questions, mostly around company leadership and not around a changing marketplace that is beginning to get saturated with the highest of margin products and finds itself with alternative choices. If ever there was a time for Apple to introduce a new product genre, it’s now. Supporting Apple’s share price will take lots more than share buy backs or financial engineering, but you can certainly expect a lot more noise on that front if the market doesn’t buoy share price higher as it perceives a bargain.

So a pre-market indication of a nearly 8% loss shouldn’t have too much of an impact, other than on the NASDAQ 100. Instead, this morning saw an early reversal of its nice gains created by a disappointing durable goods number, but at least that has some fundamental, although probably not lasting, value.

While earnings are going to be the key story for the week, and for the most part, they have been surprisingly good this week, there is that matter of one last Bernanke led FOMC meeting, which begins today and culminates with the minutes being released tomorrow.

After about 8 years of Bernanke’s leadership it was surprising that some would still find themselves speculating as to whether Friday’s 300 point drop would play a role in any decision by the committee. The difference between economists and traders is pretty apparent if you have to ask that question.

There’s probably not going to be much in the way of impact from this last meeting, but you never know how interpretations of the nuances perceived in the wording of the minutes will impact the market.

With three new positions opened already this week there still may be room for a couple more, but that would bring me to the lowest cash position that I’m willing to hold. At 20% there would still be sufficient reserve to take advantage of any sudden drop.

But then there’s next week and the week after.

The more insidious drops, such as what we may be undergoing right now, are the ones that are more difficult to manage and slowly suck reserves down, leaving you incapable of fully taking advantage of the opportunity when it actually finally arrives.

The need to continually replenish reserves through assignments becomes  increasingly important as reserves are getting near threshold levels. Hopefully this week, perhaps buoyed by some decent earnings reports lifting the overall market, will reverse a recent trend of disappointments.

Alternatively, rollovers accomplish the same net result, which is to generate income, but do so without the need to re-invent the wheel by finding  new investing opportunities.

Once again, today was a day of watching to see whether the early slightly positive tone could continue past mid-morning. For the first time in 6 trading sessions the market actually finished with a gain. In some cases, that gain, especially in the final hour, as with Texas Instruments, wasn’t wanted as it started to encroach on that $42.80 level that could trigger some early assignments to capture the dividend.

Lately the mid-morning has been a challenge and picking up shares too early in the day has been an example of bad timing swayed by a false promise of a stabilizing market.

With the market now down nearly 4% the question is whether this is just a repeat of previous market drops over the past 21 months that couldn’t go beyond 5% or just an intermediate point in what we all define as a true correction.

Flip a coin and you’re as likely to be right as the next person. Today was a much welcomed respite, despite the fact that we haven’t really seen much in the way of suffering.

I suppose we may all be the investing equivalent of flabby and out of shape, but in that world, I’d rather be in that shape.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 28, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 28, 2014 (9:30 AM)

It’s probably a good thing that Apple stopped being a market leader about 2 years ago.

There was a time, not too long ago, that we really didn’t need an S&P 500. All we needed was an S&P 1, as long as that one stock was Apple. Back then, as went Apple shares so went the rest of the market.

Apple’s volatility has been falling significantly and is well below 1.00, as it gets closer to moving in a discordant manner with the overall market.

With the earnings disappointment comes lots of questions, mostly around company leadership and not around a changing marketplace that is beginning to get saturated with the highest of margin products and finds itself with alternative choices. If ever there was a time for Apple to introduce a new product genre, it’s now. Supporting Apple’s share price will take lots more than share buy backs or financial engineering, but you can certainly expect a lot more noise on that front if the market doesn’t buoy share price higher as it perceives a bargain.

So a pre-market indication of a nearly 8% loss shouldn’t have too much of an impact, other than on the NASDAQ 100. Instead, this morning saw an early reversal of its nice gains created by a disappointing durable goods number, but at least that has some fundamental, although probably not lasting, value.

While earnings are going to be the key story for the week, and for the most part, they have been surprisingly good this week, there is that matter of one last Bernanke led FOMC meeting, which begins today and culminates with the minutes being released tomorrow.

After about 8 years of Bernanke’s leadership it was surprising that some would still find themselves speculating as to whether Friday’s 300 point drop would play a role in any decision by the committee. The difference between economists and traders is pretty apparent if you have to ask that question.

There’s probably not going to be much in the way of impact from this last meeting, but you never know how interpretations of the nuances perceived in the wording of the minutes will impact the market.

With three new positions opened already this week there still may be room for a couple more, but that would bring me to the lowest cash position that I’m willing to hold. At 20% there would still be sufficient reserve to take advantage of any sudden drop.

But then there’s next week and the week after.

The more insidious drops, such as what we may be undergoing right now, are the ones that are more difficult to manage and slowly suck reserves down, leaving you incapable of fully taking advantage of the opportunity when it actually finally arrives.

The need to continually replenish reserves through assignments becomes  increasingly important as reserves are getting near threshold levels. Hopefully this week, perhaps buoyed by some decent earnings reports lifting the overall market, will reverse a recent trend of disappointments.

Alternatively, rollovers accomplish the same net result, which is to generate income, but do so without the need to re-invent the wheel by finding  new investing opportunities.

Once again, today will probably be a day of watching to see whether the early slightly positive tone can continue past mid-morning.

Lately that has been a challenge and picking up shares too early in the day has been an example of bad timing swayed by a false promise of a stabilizing market.

With the market now down nearly 4% the question is whether this is just a repeat of previous market drops over the past 21 months that couldn’t go beyond 5% or just an intermediate point in what we all define as a true correction.

Flip a coin and you’re as likely to be right as the next person.

.

.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 27, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 27, 2014 (Close)

While everyone has been spending their time loving to hate Caterpillar, they may owe an apology to the company for perhaps being what stood between a 300 point down day on Friday and its continuation today, as overseas markets opened the week much lower.

At a time when earnings may actually matter nothing speaks more loudly than a company that gets dirt under their fingernails and is actually making profits, particularly if those profits have some tie to China.

Thank you, Caterpillar. That was the most unnerving 3% market drop ever.

Not really, but memory is short and when it comes to the past only yesterday really matters.

However, with recent news of a deterioration in the Chinese economy also comes a deterioration of the emphasis that the Chinese economy has had on Caterpillar’s fortunes. For the past couple of years Caterpillar’s reliance on China has been overly exaggerated and shares have been adversely impacted well out of proportion to the company’s exposure when bad news was reported.

That link may now take a little bit of a break, but it’s still likely that Caterpillar’s detractors will still help keep a floor on shares as earnings news becomes dated.

In a way, I’m happy to see the good performance this morning, but I was hoping to be able to pick up shares below $85 on earnings news.

In the big picture, I’d rather see Caterpillar add some stability to the market than brood over losing an opportunity to pick up shares.

The market’s inconsistencies never cease to amaze me. In this case, besides the China thesis being conveniently being discarded, some may remember that barely a weak ago the Caterpillar CEO, Doug Oberhelman was being broadly pilloried, for among other things accusations that he engaged in share buy backs at too high prices specifically to prop up share price.

Yet today the market applauds the announcement of a new $10 billion share buyback as Caterpillar is hitting recent highs.

The only lesson to be learned is that it doesn’t really pay to pay attention.

This week will be one that is likely to be entirely defined by earnings and may see a number of gyrations as the numbers come across. Although there will be an FOMC meeting and minutes released on Wednesday, it’s likely to be the third consecutive meeting with little to no real impact on the market.

We start this week with prices looking much better, but the market’s stability at the opening today may actually just muddle the picture. I would have preferred some continuing weakness, albeit in a slow and methodical way. The problem with abrupt changes is that you really don’t have any inkling of whether there is reason to keep going in the same direction. Are you seeing an aberration or the beginning of a trend?

By the time you often feel comfortable enough to answer that question it’s likely to be too late.

While I like to exercise caution I don’t like to be frozen in place and always feel a need to put idle funds to work, as best as possible.

This week, however, just as the prior week, I didn’t see as many assignments as I would have expected and am sitting with a smaller cash reserve than usual to start the week.

For those that do have cash in reserve the question is whether you want to risk the strategic build up of that pile at a time when it isn’t clear where the direction is going.

I’m not very willing to go below 20%, which would mean on the order of 5 new positions this week.

Looking at those positions that are set to expire this Friday I’m encouraged that there’s a chance to replenish reserves, but that’s how I felt the previous two weeks, as well. As we get closer to the end of the week and the likelihood of assignments looks better, that may loosen up some of my inhibitions.

To start this week I’m mindful that several trading days last week started off on a positive note, but turned around fairly quickly and decidedly. So while encouraged by the morning’s trend, it’s probably best to wait to see if the commitment is really there once the bell rings.

While there may be some room for some more speculative trades this week, specifically earnings related, it’s probably a good idea to focus again on dividends and more staid stories.

Sometimes excitement is totally unnecessary.

.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 27, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this mo
nthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 27, 2014 (9:15 AM)

While everyone has been spending their time loving to hate Caterpillar, they may owe an apology to the company for perhaps being what stood between a 300 point down day on Friday and its continuation today, as overseas markets opened the week much lower.

At a time when earnings may actually matter nothing speaks more loudly than a company that gets dirt under their fingernails and is actually making profits, particularly if those profits have some tie to China.

Thank you, Caterpillar. That was the most unnerving 3% market drop ever.

However, with recent news of a deterioration in the Chinese economy also comes a deterioration of the emphasis that the Chinese economy has had on Caterpillar’s fortunes. For the past couple of years Caterpillar’s reliance on China has been overly exaggerated and shares have been adversely impacted well out of proportion to the company’s exposure when bad news was reported.

That link may now take a little bit of a break, but it’s still likely that Caterpillar’s detractors will still help keep a floor on shares as earnings news becomes dated.

In a way, I’m happy to see the good performance this morning, but I was hoping to be able to pick up shares below $85 on earnings news.

In the big picture, I’d rather see Caterpillar add some stability to the market than brood over losing an opportunity to pick up shares.

This week will be one that is likely to be entirely defined by earnings and may see a number of gyrations as the numbers come across.

We start this week with prices looking much better, but the market’s stability at the opening today may actually just muddle the picture. I would have preferred some continuing weakness, albeit in a slow and methodical way. The problem with abrupt changes is that you really don’t have any inkling of whether there is reason to keep going in the same direction. Are you seeing an aberration or the beginning of a trend?

By the time you often feel comfortable enough to answer that question it’s likely to be too late.

While I like to exercise caution I don’t like to be frozen in place and always feel a need to put idle funds to work, as best as possible.

This week, however, just as the prior week, I didn’t see as many assignments as I would have expected and am sitting with a smaller cash reserve than usual to start the week.

For those that do have cash in reserve the question is whether you want to risk the strategic build up of that pile at a time when it isn’t clear where the direction is going.

I’m not very willing to go below 20%, which would mean on the order of 5 new positions this week.

Looking at those positions that are set to expire this Friday I’m encouraged that there’s a chance to replenish reserves, but that’s how I felt the previous two weeks, as well. As we get closer to the end of the week and the likelihood of assignments looks better, that may loosen up some of my inhibitions.

To start this week I’m mindful that several trading days last week started off on a positive note, but turned around fairly quickly and decidedly. So while encouraged by the morning’s trend, it’s probably best to wait to see if the commitment is really there once the bell rings.

While there may be some room for some more speculative trades this week, specifically earnings related, it’s probably a good idea to focus again on dividends and more staid stories.

Sometimes excitement is totally unnecessary.

.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 24, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 24, 2014 (Close)

The Weekend Update (with updated prices) is now posted and the Week in Review will be posted by noon on Sunday:

.

Access prior Daily Market Updates by clicking here

OTP Sector Distribution* as of January 24, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

 

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

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

The Weekend Update will be posted by 7 PM (EST) tonight and the Week in Review will be posted by noon on Sunday:

Today’s possible outcomes, include:

Assignment:  CHK, LLY

Rollover:  CSCO, HFC, LOW, MOS, MRO

Expiration:  LULU, WAG, WLT

Trades, if any, will be attempted to be made before 3:30 PM (EST), where possible.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 23, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 23, 2014 (Close)

What a day, but at least it was another good day to be Carl Icahn.

Oh, to be Carl Icahn.

While the market was getting everyone’s attention by being down more than 200 points at its lowest, just 30 minutes before the closing bell, Carl Icahn was sitting pretty.

eBay, the newest in the Icahn family, as we would find out later, was widely expected to have a throw away earnings report this quarter and analysts were expecting shares to fall 5% or more.

This was a company that barely two months ago was widely derided, yet like Caterpillar, which equally caught slings from everyone, just kept moving higher, at a time when the overall market was beginning to lose its way.

But I also thought that eBay would likely see shares fall at earnings and welcomed the idea, because that would bring it back to rollover price territory and eBay has been a great stock for that kind of play.

Instead, eBay took the opportunity to time the announcement of Carl Icahn having picked up a stake in the company and wanting two board seats for his less than 1% share of ownership.

Shares, of course, responded as they usually do when Icahn gets involved and went wildly higher in the after market, although settling down by the pre-open market this morning, yet heading in a direction opposite that of the broad market, which was looking to open trading with a triple digit loss.

Of course, he also owns Apple and has added another billion or so, timed perfectly with shares moving higher. Apple happens to report earnings next week.

Then there’s Netflix. Despite having sold of portion of his shares to take immense profits a few months ago, Icahn still owns about 4% of a company that just reported earnings and saw its shares climb 17% in the pre-open.

And then there’s the rest of us. The people who are unable to move a stocks price by virtue of a Tweet, although I must say I still get a thrill when I see an option sale executed and my trade represents 100% of the day’s volume at that moment in time.

For just that moment in time, I am the market.

Still, not quite Carl Icahn territory.

What is fascinating is that there is reportedly so much cash on the sidelines.

Carl Icahn has it. Companies have record amounts of cash even after record buybacks and reportedly there is still lots of money wallowing away in bonds or money markets.

At the moment it seems as if only investor activists and those share buybacks are able to maintain the market at these levels.. Whether its Dan Loeb, David Einhorn or Carl Icahn, the reality is that that are relatively few people that can create substantive movements in shares and even they have limited resources.

At the moment, Carl Icahn is involved in as many companies as can be imagined. It’s hard to envision him doing much more without dropping some other positions. Of course, a victory as with Netflix opens up lots of other opportunities and his continuing stake there could easily fuel more activity elsewhere.

Yet these high profile stock stories are bound to have a natural limit, just as share buybacks have their limits and are actually a poor use of money when shares are already so high, as has been the practice of companies such as Cisco and IBM.

So I keep asking myself what will propel the market forward and I keep having a difficult time coming up with an answer. But somehow the market has kept right on going, even when the fundamentals haven’t warranted the rise.

What is somewhat telling, and may confirm the role of Quantitative Easing, is that the market hasn’t been the same since the initiation of the taper has been announced.

The next challenge may simply be the announcement of an increase in the taper, thereby reducing the amount that the Federal Reserve introduces into the market.

At that point we may get back to the quandary of whether good news is bad and bad news is good.

In the meantime, earnings are relatively straightforward and guidance even more so.

Today, it was obvious that bad news was bad news. It takes more than Netflix to be a reflection of an economy that’s turning around..

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 23, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 23, 2014 (9:30 AM)

Oh, to be Carl Icahn.

eBay, was widely expected to have a throw away earnings report this quarter and analysts were expecting shares to fall 5% or so.

This was a company that barely two months ago was widely derided, yet like Caterpillar, which equally caught slings from everyone, just kept moving higher, at a time when the overall market was beginning to lose its way.

But I also thought that eBay would likely see shares fall at earnings and welcomed the idea, because that would bring it back to rollover price territory and eBay has been a great stock for that kind of play.

Instead, eBay took the opportunity to time the announcement of Carl Icahn having picked up a stake in the company and wanting two board seats for his less than 1% share of ownership.

Shares, of course, responded as they usually do when Icahn gets involved and went wildly higher in the after market, although settling down by the pre-open market this morning, yet heading in a direction opposite that of the broad market, which was looking to open trading with a triple digit loss.

Of course, he also owns Apple and has added another billion or so, timed perfectly with shares moving higher. Apple happens to report earnings next week.

Then there’s Netflix. Despite having sold of portion of his shares to take immense profits a few months ago, Icahn still owns about 4% of a company that just reported earnings and saw its shares climb 17% in the pre-open.

And then there’s the rest of us. The people who are unable to move a stocks price by virtue of a Tweet, although I must say I still get a thrill when I see an option sale executed and my trade represents 100% of the day’s volume at that moment in time.

For just that moment in time, I am the market.

Still, not quite Carl Icahn territory.

What is fascinating is that there is reportedly so much cash on the sidelines.

Carl Icahn has it. Companies have record amounts of cash even after record buybacks and reportedly there is still lots of money wallowing away in bonds or money markets.

At the moment it seems as if only investor activists and those share buybacks are able to maintain the market at these levels.. Whether its Dan Loeb, David Einhorn or Carl Icahn, the reality is that that are relatively few people that can create substantive movements in shares and even they have limited resources.

At the moment, Carl Icahn is involved in as many companies as can be imagined. It’s hard to envision him doing much more without dropping some other positions. Of course, a victory as with Netflix opens up lots of other opportunities and his continuing stake there could easily fuel more activity elsewhere.

Yet these high profile stock stories are bound to have a natural limit, just as share buybacks have their limits and are actually a poor use of money when shares are already so high, as has been the practice of companies such as Cisco and IBM.

So I keep asking myself what will propel the market forward and I keep having a difficult time coming up with an answer. But somehow the market has kept right on going, even when the fundamentals haven’t warranted the rise.

What is somewhat telling, and may confirm the role of Quantitative Easing, is that the market hasn’t been the same since the initiation of the taper has been announced.

The next challenge may simply be the announcement of an i
ncrease in the taper, thereby reducing the amount that the Federal Reserve introduces into the market.

At that point we may get back to the quandary of whether good news is bad and bad news is good.

In the meantime, earnings are relatively straightforward and guidance even moreso.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 22, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle