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Daily Market Update – January 7, 2014 (Close)

Yesterday was an interesting day in the market.

Trading volume was unusually light for the first Monday of the New Year and the early rally disappeared fairly quickly.

What was interesting was how much the thesis that the cold weather was going to impact on walk-in sales at retailers, including grocery stores, Starbucks and others, carried wright throughout the day.

With no other news, in this case, only opinion, that family of stocks felt their own deep freeze yesterday.

Whether the thesis is true or not, and it certainly does make sense, the impact won’t be reported until the next earnings season, which begins in April. The greatest likelihood is that very few are going to remember that thesis when April earnings rolls around and if true, those stocks are likely to suffer again.

Now, if only I would be able to remember that when the time comes.

In the meantime there’s plenty more to think about.

Yesterday evening Janet Yellen was confirmed as the next Chairman of the Federal Reserve.

This Friday is the first release of an Employment Situation Report for 2014 and for which Yellen can play a role in leading the newly configured and hawkish voting membership. Yellen herself doesn’t assume the Chairmanship until February 1, 2014.No doubt that a strong report would bring pressure to increase the size of the taper from its current $10 billion each month. Even though the hawks won’t represent a voting block of sufficient proportion to effect policy, the wording of the FOMC minutes are parsed each month and the market often reacts to sentiment as much as it does to reality.

So we’ll see what Friday brings. With so many positions set to expire on Friday I’m hoping for a non-event or a modest rise higher as it would be nice to get some more cash in hand for greater flexibility going forward.

While waiting there’s still not much reason to go counter to January history.

I’m currently at the lowest cash level in many months and still willing to go down a bit further, perhaps to 20%. That would mean considering an additional two or so new purchases for the week if the opportunities present themselves. But even if not adding many new positions there is still enough upside potential in covered and uncovered positions to take advantage of any modest rally, so I wouldn’t be adverse to that possibility.

It otherwise promises to be a non-event driven week and the low volume may very well continue as even traders get cold when arctic winds blow. The prospects of low volume sometimes introduces opportunism and artificially large moves as big traders in essence are able to manipulate the market, often using the option market as their vehicle.

Those sort of things always seem to correct themselves for the rest of us who may get caught in the vortex as it’s all happening and then just as suddenly see the reversals occurring after the big boys have made their money.

While waiting for a sign to spend more money staying warm sounds like a good strategy right now.

While yesterday was interesting today was even more so, since nothing really happened and the market simply sustained a tripe digit gain all through the session.

While I liked the action the only galling part of the day was seeing the reversal in shares of Verizon, that goes ex-dividend tomorrow, as it went its own way apart from the rest of its tiny sector and made it very unlikely that the dividend will be collected tomorrow. As usual, the galling part was because there was no news to account for the very strong movement in the shares. In all likelihood it was simply strong buying pressure in order to capture the dividend on a day that the market was already climbing higher.

Ultimately, it makes no sense for people to bid up shares in order to capture a dividend that will simply be taken from the share price and taxed, to boot, but everyone likes the idea of getting dividends. even when it simply is a case of moving assets from one bucket to another.

Maybe that’s why I haven’t bought Verizon in years.

So if someone would kindly remind me when April earnings season is about to begin to stay away from today’s cold weather victims, please ralso emind me to also stay away from Verizon.

I’ll probably remember on my own, but it never hurts to have a gentle reminder.

 

 

 

 

 

 

 

   

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 OTP Sector Distribution* as of January 7, 2014

 * Assumes equal number of shares in positions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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