Daily Market Update – April 21, 2014 (Close)
After two weeks of really unexpected action that began with Janet Yellen introducing a sense of optimism that restored market confidence, that itself was abruptly lost the following day, the market appeared at an impasse as the week’s trading was set to begin.
While today turned out to be a sea of calm, in-between Janet Yellen’s push forward there was an immediate reversal and then a sustained rise higher and anything but calm.
In essence, none of the past two weeks had made any sense, at all, as it all came in the absence of news. Even the sudden rise after Yellen’s dovish comments, that turned around the initial weakness of two weeks ago, shouldn’t have really engendered much of a reaction.
Where was the surprise? Where was the news?
But trying to dissect what may have been irrational behavior and is now long in the past is probably even more irrational and certainly pointless. If your strategy is to understand irrational behavior and then plan for its repeat, your logic may be terribly strained.
Watching the pre-open futures showed a slow deterioration from its earlier very modestly high levels making you believe that it may be waiting for some real news before making a committed move in either direction, or just taking a brief moment to assess where it is at and where it is heading, as there’s no signpost. Since there’s not much on the economic front this week, that may have to come from earnings, although many of the heavy hitters have already announced, but certainly others, such as Microsoft, later this week, can still move markets.
As the day came to an end it was clear that the impasse won as the market stayed in a very tight range through almost the entire day, other than a short time below the break-even point.
After a couple of weeks with very few assignments, at least there were some rollovers to fuel cash flow, but not much added to fuel new purchases. At about 28% I am willing to get down to about 20%, which means perhaps 4 new positions to start the new monthly cycle. After the day was over that might leave only one trade left to go for the week, but I don’t like to commit to being restrained as events may still unfold.
Until proven othgerwise for another week I’m still primarily focused on the hope of obtaining cover for non-income producing positions and entertaining the fantasy of reducing the total number of existing positions by week’s end.
As with recent previous weeks, with volatility still fairly low, there hasn’t been very much justification for using expanded options, so this week has lots of expiring positions. Ideally, new positions would try to utilize an expanded weekly expiration, if available, just to add some diversification into the mix, but that generally becomes a secondary goal to actually generating the option income.
Like a lot of things in life, the intention may be there, but the execution is sometimes lacking.
AS the morning may get off to an ambivalent start, this will probably be another week to sit back and see how the market sustains itself. Last week the market broke from a nearly two month pattern and didn’t see early trading gains evaporate after the first hour.
Somehow, I don’t think we’re going to see the same kind of upward movement that gave us last week’s gains, that were the best in almost a year. Treading water to start the week may be a healthy market reaction to feeling lost. On the other hand, it does appear as if the pattern of teasing with a correction and then quickly bouncing back and creating new highs is still intact, as last week began that correction to the failed correction process.
Of those two, I’d much rather see a lost market tread water for a while, consolidating gains and having orderly and sporadic profit taking. For most of 2014 that’s been a very good formula for personal growth, even while the market hasn’t necessarily kept up.
Since I’m not really my market’s keeper, I care only about the personal growth side of things so I would definitely welcome a quiet and lackluster kind of week that has most other people complaining or bored.
I live for that kind of boredom and after last week would welcome its return.
Today was a good start toward that goal.