Daily Market Update – January 17, 2014

 

  

(see all trades this option cycle)

 

Daily Market Update – January 17, 2014 (9:00 AM)

The Week in Review will be posted by 7:00 PM tonight and the Week in Review will be published by Monday 12 Noon.

 

Today’s possible trades or outcomes include:

Assignment: MDLZ, MOS, WY

Rollover:   ANF*, CPB, CY, DRI, FAST, LB, LXK, RIG, PM, YUM

Expiration: AGQ, GPS, WFM

* ANF puts are at $35 strike and are currently expected to expire. Otherwise, will look for equivalent opportunity to rollover those puts, preferably to a lower strike price again.

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

 

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 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 16, 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 – January 16, 2014 (Close)

 

  

(see all trades this option cycle)

 

Daily Market Update – January 16, 2014 (Close)

After some nice, but expected, earnings from JP Morgan, Wells Fargo and Bank of America, comes Citigroup to put a damper on the whole thing.

Morgan Stanley reports tomorrow, but isn’t likely to follow along the same path, although it, too, is an example of a high beta big money center bank and could easily have a magnified response to its earnings report. It certainly has seen its share of share gains and has something to give back in the event of disappointment, but it has an essentially different business model from some other sector mates.

At the very least it did get caught up in today’s Citigroup induced downdraft, but not enough to make it an appealing earnings related trade.

Magnified responses may be a theme this earnings season as fundamentals may get more scrutiny and there are lots of stocks that have enjoyed significant climbs in the past 15 months, as the market has carried many along for the ride.

Goldman Sachs, which used to be a favorite of mine, also reported earnings this morning. It usually makes large moves in the days before earnings and then immediately upon the news, but this time was different. It essentially did nothing, but it was mixed news that greeted the street, so perhaps a flat reaction could be justified and even be interpreted as a positive sign of a discerning, rather than emotional market.

The high beta names are going to be especially vulnerable, as Best Buy demonstrated this morning, giving up about 9 months worth of gains in the pre-market.

Lately, both the after-hours and pre-open markets have underestimated the extent of the damage, whereas in the past it was often a place to pick up relative bargains in the aftermath of people over-reacting to bad news and having price moves magnified by low volume and wider than normal spreads.

Seeing some of these big drops it is certainly tempting to want to pick up shares, but that’s where the question of “value trap versus value” enters the picture. For many high beta stocks, especially those that have never demonstrated the ability to recover from a significant price decline, they really need to prove that the fabled story isn’t finally over.

Next week, besides being a holiday shortened trading week is one that has little meaningful economic news scheduled to be released, but will be a busy one for earnings and is more likely to give us some information regarding the economy than the big money center banks are able to do.

Hopefully the next two trading days will allow a good mix of assignments and rollovers, as there may be plenty of opportunity ahead to start thinking about whether some new lower stock prices represent value or trap.

The challenge, as always when a monthly cycle approaches its end, is to get out of the process intact and be able to move forward. With more and more stocks now beginning to offer expanded weekly options there is less need to be so heavily loaded at a monthly option expiration date, such as this Friday.

Instead, the monthly options may wind up being more strategic choices to allow the cushion of time when earnings are due to be announced or when trying to capture a dividend.

Ideally, I would like to see a fairly even distribution of expiration dates between any given day and the coming monthly expiration, but that still proves to be a challenge that is in part dictated by such things as availability and the timing of earnings and dividends, but it would be a nice way to spread risk out in a market that may be prone to sudden moves.

Hopefully, those sudden moves will wait a bit. For now, steady seems to be a nice way to go.

 

  

  

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 16, 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 – January 16, 2014

 

  

(see all trades this option cycle)

 

Daily Market Update – January 16, 2014 (9:30 AM)

After some nice, but expected, earnings from JP Morgan, Wells Fargo and Bank of America, comes Citigroup to put a damper on the whole thing.

Morgan Stanley reports tomorrow, but isn’t likely to follow along the same path, although it, too, is an example of a high beta big money center bank and could easily have a magnified response to its earnings report. It certainly has seen its share of share gains and has something to give back in the event of disappointment, but it has an essentially different business model from some other sector mates.

Magnified responses may be a theme this earnings season as fundamentals may get more scrutiny and there are lots of stocks that have enjoyed significant climbs in the past 15 months, as the market has carried many along for the ride.

Goldman Sachs, which used to be a favorite of mine, also reported earnings this morning. It usually makes large moves in the days before earnings and then immediately upon the news, but this time was different. It essentially did nothing, but it was mixed news that greeted the street, so perhaps a flat reaction could be justified and even be interpreted as a positive sign of a discerning, rather than emotional market.

The high beta names are going to be especially vulnerable, as Best Buy demonstrated this morning, giving up about 9 months worth of gains in the pre-market.

Lately, both the after-hours and pre-open markets have underestimated the extent of the damage, whereas in the past it was often a place to pick up relative bargains in the aftermath of people over-reacting to bad news and having price moves magnified by low volume and wider than normal spreads.

Seeing some of these big drops it is certainly tempting to want to pick up shares, but that’s where the question of “value trap versus value” enters the picture. For many high beta stocks, especially those that have never demonstrated the ability to recover from a significant price decline, they really need to prove that the fabled story isn’t finally over.

Next week, besides being a holiday shortened trading week is one that has little meaningful economic news scheduled to be released, but will be a busy one for earnings and is more likely to give us some information regarding the economy than the big money center banks are able to do.

Hopefully the next two trading days will allow a good mix of assignments and rollovers, as there may be plenty of opportunity ahead to start thinking about whether some new lower stock prices represent value or trap.

The challenge, as always when a monthly cycle approaches its end, is to get out of the process intact and be able to move forward. With more and more stocks now beginning to offer expanded weekly options there is less need to be so heavily loaded at a monthly option expiration date, such as this Friday.

Instead, the monthly options may wind up being more strategic choices to allow the cushion of time when earnings are due to be announced or when trying to capture a dividend.

Ideally, I would like to see a fairly even distribution of expiration dates between any given day and the coming monthly expiration, but that still proves to be a challenge that is in part dictated by such things as availability and the timing of earnings and dividends, but it would be a nice way to spread risk out in a market that may be prone to sudden moves.

Hopefully, those sudden moves will wait a bit. For now, steady seems to be a nice way to go.

 

 

 

.

 

 

 

 

  

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 15, 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 – January 15, 2014 (Close)

 

  

(see all trades this option cycle)

 

Daily Market Update – January 15, 2014 (Close)

After two diametrically different markets to start this week, each being attributed to remarks from FOMC members, it’s worth noting that in the next three days there are 5 more addresses scheduled by FOMC members, including outgoing Chairman Ben Bernanke.

While some were calling yesterday’s moves a “Key Reversal,” it didn’t really fit that billing, but even then those so designated days don’t always live up to their name and don’t necessarily predict future direction.

Then again, if today’s triple digit gain was foretold by the tape, I apologize, but am happy to do so, as it brings us one day closer to monthly expiration and one day closer to meeting goals.

With Bank of America also reporting good earnings the banks are continuing the same script of the past few quarters and that, too, has signified little as far as predicting the future goes.

There is clearly some nervousness in the market that is reflected in the size of moves in individual stocks as well as some of the intra-day moves being observed without obvious catalysts. While it’s still plausible to consider that some moves are the result of tax related strategies that plausibility shrinks with each day, as each day brings risk of creating a reduction in paper profits that exceeds the tax savings by deferring its payment by 12 months.

Today, for example there were large intra-day moves in Walgreen and Lexmark.

Walgreen was being prepared for a Trading Alert yesterday. Hd it been about 5 minutes earlier it would have come before a segment on CNBC about the stock, which then saw its price move higher and out of range. Later in the early evening it was featured on Jim Cramer’s “Mad Money.”

This morning after its price went higher initially, it came down to yesterday’s price point.

About an hour after the purchase shares fell about $0.40 in a 15 minute span on suddenly heavy volume, clearly someone dumping shares.

Later in the afternoon, Lexmark, which had gone nicely above its $36 strike price during trading also went down about $0.40 in 6 minutes on very heavy volume.

Go figure.

While the bank earnings have been good, Fastenal, which had pre-announced, yet again, a few weeks ago was lower, as it announced its earnings. At least this time it’s pre-open move wasn’t as severe as on previous occasions, whether up or down in direction. Fastenal is a metric of its own and lower sales are never a good sign, especially if their competition, Grainger, announces similar results next Friday.

The opening bell wasn’t as kind to shares, however. I’m still not certain why anyone is surprised when earnings are released following pre-announcement disappointments.

The good news about Fastenal is that it’s so resilient and just keeps hanging in at the $47 level. For those have have been along for the ride over the past 7 months and five bouts of ownership, the return is about 33%, even though shares haven’t budged in price.

Why can’t there be more stocks like that? It’s one of those shares that I would prefer to rollover than to see assigned. It looks as if after this morning’s reaction assignment is not in the cards. Hopefully rollover is, but the way things go, Friday is still an eternity away.

In fact, tomorrow is also an eternity away, as I wanted to sell calls on shares such as Eli Lilly today, but it doesn’t offer expanded options and the only choices available were either a paltry premium for this week or a paltry premium next month, due to having fewer strike selections and being in-between strikes.

For the rest of the week I’ll still be looking for some places to spend money, as I’m still willing to take cash reserves a little lower, especially if it looks as if a fair number may be assigned or rolled over on Friday.

The first of the potentially market moving speeches is at 12:50 PM today and the second comes well after the market’s close, so there may be some tentativeness in trading up until those speeches and perhaps a little flurry after the first then becoming tentative over concerns about what may be said in the after hours.

But then there’s another speech prior to the market’s open, so there may be offsetting messages, leading up to Ben Bernanke at 11:10 AM.

By Friday at 12:30 no one is really going to care what Jeffrey Lacker has to say, as these monthly ending option cycles tend to have lives of their own and aren’t likely to turn on a dime.

With the month now at the midway point the DJIA is less than 200 points from its all tie record, yet everyone was spooked by Monday’s 1% decline. You can easily make a case for momentum continuing to pull the market forward, but it will either be helped out or battled back by earnings.

While I’m not expecting the 6% improved earnings, at least on a share adjusted basis, I also don’t expect any great surrender, either, so there’s still likley to be some personal spending ahead.

Hopefully, a strong finish to the week will see to it that there are sufficient assignments to fuel that kind of folly.

  

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 15, 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 15, 2014 (10:00 AM)

After two diametrically different markets to start this week, each being attributed to remarks from FOMC members, it’s worth noting that in the next three days there are 5 more addresses scheduled by FOMC members, including outgoing Chairman Ben Bernanke.

While some were calling yesterday’s moves a “Key Reversal,” it didn’t really fit that billing, but even then those so designated days don’t always live up to their name and don’t necessarily predict future direction.

With Bank of America also reporting good earnings the banks are continuing the same script of the past few quarters and that, too, has signified little as far as predicting the future goes.

There is clearly some nervousness in the market that is reflected in the size of moves in individual stocks as well as some of the intra-day moves being observed without obvious catalysts. While it’s still plausible to consider that some moves are the result of tax related strategies that plausibility shrinks with each day, as each day brings risk of creating a reduction in paper profits that exceeds the tax savings by deferring its payment by 12 months.

While the bank earnings have been good, Fastenal, which had pre-announced, yet again, a few weeks ago is lower, as it announced its earnings. At least this time it’s pre-open move wan’t as severe as on previous occasions, whether up or down in direction. Fastenal is a metric of its own and lower sales are never a good sign, especially if their competition, Grainger, announces similar results next Friday.

The opening bell wasn’t as kind to shares, however. I’m still not certain why anyone is surprised when earnings are released following pre-announcement disappointments.

The good news about Fastenal is that it’s so resilient and just keeps hanging in at the $47 level. For those have have been along for the ride over the past 7 months and five bouts of ownership, the return is about 33%, even though shares haven’t budged in price.

Why can’t there be more stocks like that? It’s one of those shares that I would prefer to rollover than to see assigned. It looks as if after this morning’s reaction assignment is not in the cards. Hopefully rollover is, but the way things go, Friday is still an eternity away.

For the rest of the week I’ll still be looking for some places to spend money, as I’m still willing to take cash reserves a little lower, especially if it looks as if a fair number may be assigned or rolled over on Friday.

The first of the potentially market moving speeches is at 12:50 PM today and the second comes well after the market’s close, so there may be some tentativeness in trading up until those speeches and perhaps a little flurry after the first then becoming tentative over concerns about what may be said in the after hours.

But then there’s another speech prior to the market’s open, so there may be offsetting messages, leading up to Ben Bernanke at 11:10 AM.

By Friday at 12:30 no one is really going to care what Jeffrey Lacker has to say, as these monthly ending option cycles tend to have lives of their own and aren’t likely to turn on a dime.

With the month now at the midway point the DJIA is less than 200 points from its all tie record, yet everyone was spooked by Monday’s 1% decline. You can easily make a case for momentum continuing to pull the market forward, but it will either be helped out or battled back by earnings.

While I’m not expecting the 6% improved earnings, at least on a share adjusted basis, I also don’t expect any great surrender, either, so there’s still likley to be some personal spending ahead.

Hopefully, a strong finish to the week will see to it that there are sufficient assignments to fuel that kind of folly.

 

 

 

 

 

 

 

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 14, 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