Daily Market Update – April 9, 2014 (Close)
Another seemingly flat morning, which basically means nothing and that was certainly the case today and even more so in the latter half of the afternoon as the market closed at its impressive highs.
The late Mark Haines, of CNBC, used to observe that the pre-opening market tended to have very little in common with what occurred subsequently. He often would say that on mornings when there was a decided move in either direction and so often he was right.
Lately the pre-open hasn’t been much of a barometer, In fact, the first 90 minutes of trading haven’t been a very good indicator, either. For anyone looking for themes or patterns there haven’t been many lately, other than the poor predictive capability of the first hour of trading.
Maybe with Alcoa kicking off earnings season last night the consideration of basic fundamentals, especially earnings, will become the theme. The only thing is that was precisely the same kind of hope over the past couple of earnings seasons, as well, and that sort of thing only lasted a week or so. Once the financials were done with their reports the rest didn’t really matter.
Today’s early morning trading appeared fairly listless which isn’t altogether unusual, as this afternoon brings another FOMC minutes release. Most traders don’t really want to commit themselves in a significant way before any major announcement or event, especially if there’s any unknown component that may be released. So they sit and wait, maybe make a few incidental trades here and there, but mostly wait and then suddenly spring into action as the fastest of the systems runs its initial algorithm on the words themselves.
Maybe it’s just another of those signs of getting older, but it seems as if those monthly releases are coming much more quickly than at a monthly pace. Still, the one due today has gotten unusually little attention or mention.
While there wasn’t not likely to be much new in the release that hasn’t stopped knee jerk and delayed reactions alike as the words are parsed and interpreted for meanings that were never intended.
Today’s FOMC release was worth waiting for, but it did seem as if traders had some sense of, if not good news, then at least no news, as the market opened stronger than the futures would have indicated and built on those gains going into the release. Once the FOMC statement was released the markets just added further and didn’t waver or have any second thoughts, as they so frequently do.
While I didn’t expect much in the way of personal activity yesterday I expect even less today, although I wouldn’t mind any other opportunities to sell more call options on uncovered positions and begin looking forward to next week, which already marks the end of the monthly option cycle, which seems to also have come very quickly.
Because earnings reports are now a factor it would be nice to at least squeeze a few more cents out of positions while awaiting the news and using some forward weeks, whose premiums are enhanced a little by the uncertainty of earnings, to give some time cushion in the event of adverse reaction to the news ahead.
Looking forward to next week starts, as usual, with hoping for the rollover or assignment of as many positions as possible and once again, this week has too many positions with contracts set to expire.
As in recent past weeks the holdings aren’t terribly well diversified across the calendar so once again there’s a fair amount riding on the next couple of days. That’s not a position that I like being in and continue to be anxious to see a rise in volatility, as long as it waits until next Monday to begin in earnest.
Just to be clear, markets usually fall when volatility is rising, so let’s get through this week first and see those rollovers and assignments happen. Then the volatility can start to rise and bring with it better prices for all of that reserve cash to be put to use.
If only it was all that easy.
PS: For those interested in something a little different, take a look at “Playing Leapfrog with MolyCorp” which explores another put related strategy that seeks to limit risk and enhance reward, especially with risky kind of positions.