Daily Market Update – January 13, 2014

 

  

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Daily Market Update – January 13, 2014 (9:30 AM)

With one third of January now part of history, history is at risk of not repeating itself this year unless the market does something with the next two weeks.

With earnings season really getting into full swing this week comes word that a 6% increase in comparable period earnings are expected. That alone should help increase the broad market, unless of course there’s an inexplicable shrinking of the market multiple.

But that 6% seems high, unless that’s the result of some optics secondary to share buy backs. Fewer shares can result in increased earnings per share even if net earnings decrease.The only problems is that optics can only take you so far. At some point no one is fooled.

The continuing difficulty exhibited by retail makes it hard to see where improved earnings are coming from unless they are really the result of optics.The last couple of quarters the major money center banks reported nice earnings, but they really didn’t set the tone. Rather, they set investors up for disappointment.

But last year that didn’t really matter. No matter what was going on the market just kept going higher.

While it’s obviously too early to make any conclusions or projections, at least it’s clear that this January isn’t looking at all like the past two years. Looking at some of the really significant price drops among those that disappoint the market with either earnings or guidance the lack broad market strength, thus far, makes you wonder when the other shoe is about to hit.

I suppose first they actually have to be able to sell the shoes, so maybe we’re then safe. Even Family Dollar is struggling.

After a week of a lot of assignments and an end of the monthly cycle this week, I’m hoping for a repeat. Some good earnings reports from the banks this week would at least add some support to the market in a week that isn’t scheduled to have much in the way of market moving news, otherwise.

While the money is available this week, I’m still a little cautious and am not likely to bring cash reserves down as low as they went last week. This week I stand at 40% and am willing to get down to about 25%, which would be 5 to 7 new positions.

However, as nearing mid-week or Thursday, if it appears as if there may be a considerable number of assignments on Friday that may send a signal for a second surge of buying. If the cash is likely to be there, I would rather get premiums reflecting 6 days of time by jumping the gun on the week, rather than waiting for next week’s holiday shortened trading to begin on Tuesday.

Lately, it seems that every day has a challenge.

Today in the pre-open it’s LuLuLemon.

They set the stage for disappointing earnings by reporting that store traffic was low in December. With options expiring next Friday that allows some time for price recovery, which I think will be forthcoming. With a new CEO it’s not unusual to load up on bad news so that their first “clean” quarterly earnings report will have had as much bad news eliminated. The strategy is to always accelerate the negatives and have them reflect on past leadership.

Clearly someone bet wrong on shares on Friday when it went nearly 4% higher on no news on an otherwise flat day in the market.

However, as retailers are getting the bad news out and taking their hits they are becoming more and more attractive, although if any are potential buys this week, as Bed Bath and Beyond, L Brands, Target, Lowes and even Sears are all possible purchases this week, individuals should make certain that retail isn‘t too large of a sector in their portfolios.

Ultimately, I don’t understand how the market can not see the retail situation as reflecting an economy that isn’t as robust as it should be. Hopefully the last Employment SItuation Report was an anomaly and not a foreteller of people’s inability to make discretionary pirchases.

So it’s another weak of selective caution.

 

 

 

 

 

 

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 10, 2014

 * Assumes equal number of shares in positions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Posting of trades is not a recommendation to execute trades

 

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

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

  
 

   

Daily Market Update

 

  

(see all trades this option cycle)

 

Daily Market Update – January 10, 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, BMY, EMC, HFC, JPM, NLY, SBUX, WAG

Rollover: MRO, MSFT, WLT

ExpirationCLF, CSCO

 

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

 

 

 

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 8, 2014

 * Assumes equal number of shares in positions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Posting of trades is not a recommendation to execute trades

 

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

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

  
 

   

Daily Market Update – Close

 

  

(see all trades this option cycle)

 

Daily Market Update – January 9, 2014 (Close)

Much has been said of the ability for January to predict the entire year’s stock market.

In fact, taking it even further, there are those who believe that the first 5 trading days actually have great predictive capacity for determining the outlook for the entire year.

Today marks the 6th trading day of 2014, so it must be time to make some conclusions.

An interesting article takes a statisticians’s view of the topic and is somewhat better than the more superficial mentions of how January may impact the remainder of the year. Unfortunately, this short and undated article appears to be about 10 years old and hasn’t considered the past tumultuous trading period, but still offers some meaningful insights. I’ve tried contacting the author to see if he has an update and will share the information, if he does respond.

However, I can tell you that his conclusions, when looking at those past years in hindsight, have been well founded.

In a nutshell, he believes that January is an effective predictor for the rest of the year, especially if January is a month that moves higher. What may be more useful, however, is what occurs when January moves lower.

In that case the correlation falls apart. The market could move lower or higher, as opposed to a greater likelihood of only moving higher. The belief expressed in that article was that during such a period moving in and out of stocks was an appropriate strategy.

For me, that’s like music to my ears, especially if the first 5 days.of 2014, which have been similar to the first 5 days of 2011, would result in a repeat of 2011.

That was an odd year, only in that the market ended the year unchanged.

It was a year punctuated by ups and downs in an alternating rhythm. As a result, it was also a year that saw a significant spike in volatility and, therefore, option premiums.

To be fair, the opinion expressed by the author specifically avoided the idea that the first 5 days of the month have any real meaning. He looked at the entire month of January, but taken together with the comments being tossed around about those first 5 days, it at least warrants some attention.

Thus far, the first 5 days haven’t set the world on fire, although the 6th day’s pre-market is pointing mildly higher and although not likely, tomorrow’s Employment Situation Report could create a large move in either direction.

Still, the very thought that a stock picker’s market may be on the horizon, one in which stocks are actually distinguished from one another on the basis of price performance, is a great and overdue situation.

If that is truly on the horizon that would mean less opening of new positions and more rollovers of existing positions, as the increased volatility would offer premiums more worthwhile, even when strike prices are more of a distance from current prices.

That’s not really the situation right now and hasn’t been so for much of 2013.

What’s also very appealing is that when markets do have such alternating currents it tends to be easier to find new positions worthy of purchase. Instead of a market where everything just moves higher imagine a world where there are tides and you can coincide moving in and out of positions with the flow of those tides.

That’s not really a dream, it’s more of a hope for the return of what used to be what we thought were regular markets.

For now my hope is that this negative tone takes a break.

While the market did recover on this 6th day, the retailers, other than Macys, are having a really hard time and that can never be very good. Even Macys owed its good fortune to the way the market reacted to news of widespread layoffs.

That’s certainly not nice or good.

 

 

 

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 8, 2014

 * Assumes equal number of shares in positions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Posting of trades is not a recommendation to execute trades

 

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

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

  
 

   

Daily Market Update

 

  

(see all trades this option cycle)

 

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

Much has been said of the ability for January to predict the entire year’s stock market.

In fact, taking it even further, there are those who believe that the first 5 trading days actually have great predictive capacity for determining the outlook for the entire year.

Today marks the 6th trading day of 2014, so it must be time to make some conclusions.

An interesting article takes a statisticians’s view of the topic and is somewhat better than the more superficial mentions of how January may impact the remainder of the year. Unfortunately, this short and undated article appears to be about 10 years old and hasn’t considered the past tumultuous trading period, but still offers some meaningful insights. I’ve tried contacting the author to see if he has an update and will share the information, if he does respond.

However, I can tell you that his conclusions, when looking at those past years in hindsight, have been well founded.

In a nutshell, he believes that January is an effective predictor for the rest of the year, especially if January is a month that moves higher. What may be more useful, however, is what occurs when January moves lower.

In that case the correlation falls apart. The market could move lower or higher, as opposed to a greater likelihood of only moving higher. The belief expressed in that article was that during such a period moving in and out of stocks was an appropriate strategy.

For me, that’s like music to my ears, especially if the first 5 days.of 2014, which have been similar to the first 5 days of 2011, would result in a repeat of 2011.

That was an odd year, only in that the market ended the year unchanged.

It was a year punctuated by ups and downs in an alternating rhythm. As a result, it was also a year that saw a significant spike in volatility and, therefore, option premiums.

To be fair, the opinion expressed by the author specifically avoided the idea that the first 5 days of the month have any real meaning. He looked at the entire month of January, but taken together with the comments being tossed around about those first 5 days, it at least warrants some attention.

Thus far, the first 5 days haven’t set the world on fire, although the 6th day’s pre-market is pointing mildly higher and although not likely, tomorrow’s Employment Situation Report could create a large move in either direction.

Still, the very thought that a stock picker’s market may be on the horizon, one in which stocks are actually distinguished from one another on the basis of price performance, is a great and overdue situation.

If that is truly on the horizon that would mean less opening of new positions and more rollovers of existing positions, as the increased volatility would offer premiums more worthwhile, even when strike prices are more of a distance from current prices.

That’s not really the situation right now and hasn’t been so for much of 2013.

What’s also very appealing is that when markets do have such alternating currents it tends to be easier to find new positions worthy of purchase. Instead of a market where everything just moves higher imagine a world where there are tides and you can coincide moving in and out of positions with the flow of those tides.

That’s not really a dream, it’s more of a hope for the return of what used to be what we thought were regular markets.

 

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 8, 2014

 * Assumes equal number of shares in positions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Posting of trades is not a recommendation to execute trades

 

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

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

  
 

   

Daily Market Update – Close

 

  

(see all trades this option cycle)

 

Daily Market Update – January 8, 2014 (Close)

This morning’s ADP jobs data ahead of Friday’s Employment Situation Report was a good one. It was the best report in over a year.

Today was also the 5th anniversary of my retirement.”

The correlation between the ADP and Employment Report two isn’t as good as ADP would have had you believe when it started releasing the data a number of years ago, however, it does carry weight, especially at times when the Employment Situation Report, released two days later was deemed important.

If today had been two months ago the response to the ADP statistics would have been negative, as it would have fired worries about the official government report and how that could have given the Federal Reserve reason to begin the taper of their Quantitative Easing.

With the end of the world not having occurred as the FOMC announced the initiation of the taper last month, much of the fear is gone.

Now there’s nothing to get traders worried in the employment numbers.. Mostly because there’s some reasonable assurance that regardless of the official numbers there will be no policy change coming in its near term aftermath.

Not only is the Chairmanship in transition, but it’s too early to increase the taper before there’s been an opportunity to assess its initial implementation. So it’s likely that Friday will be a non-event.

That would be just fine with me, as many positions are set to expire on that date.

What will be an event, at least for individual stocks, is the start of yet another earnings season tomorrow.

If the Federal Reserve has been right about the economy it would be reasonable to start expecting better earnings and that would be expected to lead to some multiple expansion of the market. That means higher prices, as long as you believe in the relationship between price and earnings.

Of course, that assumes that the market hasn’t already been anticipating the expanded multiples associated with an improving economy.

Going forward, I’m inclined to discount the market discount.

I discount the market’s ability to forecast the future much as the market completely discounted today’s FOMC minutes. And in this case, when I say “discounted,” what I mean is “ignored.”

I think that if earnings are actually improving, and the simple act of so many having bought back shares alone, will increase earnings per share, then shares will move higher on the news.

The market had been pointing toward a mildly higher opening but that devolved pretty quickly after the opening bell. It’s really not clear that the drop actually signifies anything, especially in the day after a triple point gain. There are so many swirling and competing theories that try to explain investor behavior in January, especially with regard to tax related behavior, that anything is possible.

I especially think that there’s lots of reason to cash in on big winners now, thereby giving 16 months until the tax bill and ensuring that the paper profits become realized. That’s a damper to markets.

Had 2013 been a typical year or a losing year the dynamic would be entirely different right now with tax related selling in high gear to close out the year and greater buying to start the year.

I’m still of the belief that buying will pick up even though I continue to want to exercise some caution. While at a low level on cash reserves and wanting to see it get replenished at week’s end, I’m anxious to again put that money back to use.

That’s recycling at its best, even better than recycling myself out of “retirement.”

 

 

 

 

 

 

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 8, 2014

 * Assumes equal number of shares in positions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Posting of trades is not a recommendation to execute trades

 

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

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