Daily Market Update – Jul 14 ,2014 (9:00 AM)
While there’s not too much economic news scheduled this week it will be a busy one for earnings and possibly international events.
For the most part, however, with the exception of the very initial military advance into Crimea, international events, other than in banking, have been almost completely ignored, even in precious metals markets.
Unless something truly unexpected and horrific happens overseas as everyone seems to have bigger and more destructive weapons and appear to have lost any reluctance in using them, those normal war-like events should be non-events for traders.
So it’s likely that most focus will be on earnings this week and we may live and die by those.
The week gets its start with a surprising earnings boost from Citigroup, which hasn’t found the way to deliver good news in a while and even failed the paint by numbers test necessary for regulators to allow it to initiate a stock buyback or raise the dividend.
A strong Citigroup would be the sort of thing to inspire some market confidence, especially if future strength is projected to be on the revenue side rather than through expense control.
It’s often said that the markets are lead out of their doldrums by the financial sector, although it’s hard to characterize current levels as anything but “near highs,” rather than “doldrums.” However, reports from JP Morgan, Morgan Stanley and Goldman Sachs this week could be just the thing to get the indexes back on track to surpass previous records and maybe take everyone along for the ride and not just select sectors.
This week will likely be very different from last week’s trading approach.
With no big event planned for the week there’s not too much reason to consider early rollovers where possible and instead there’s a greater need to create new positions if weekly income creation is a goal. Any broad market strength could create some opportunirty to sell options on uncovered positions, but new positions are likely to be a primary strategy this week.
With some money to spend thanks to some assignments last week, I’m willing to take cash down to about the 16% level, which could be as many as 6 new positions. As with previous weeks, however, the challenge is trying to find opportunities that aren’t so close to their peak prices or that could conceivably withstand broad market weakness better than the rest of the market.
With the market’s rise having come sector by sector, rather than as a broad wave of advances, it would be wonderful to be able to predict the next sector poised to move higher, but that is likely to be as successful of a venture than attempts to predict anything else, so it’s still better to look for individual positions and where possible, to diversify the selections.
Last week was a counter-example to that simple tenet, as all three new positions were energy related and two of the positions were the same – Chesapeake Energy.
While last week was a good week to not have invested much capital, especially early in the week, and it is difficult establishing diversity if you don’t commit much funds, that lack of diversity isn’t something that I’d want to do on a regular basis.
Hopefully the opportunities this week will be a little more far flung and I would especiually like to add some technology, industrials, healthcare and maybe even finance, despite the morning’s likely boost across that sector from the Citigroup news.
With a nearly triple digit advance in the pre-open market I don’t think that I’ll be rushing in if that is how the opening goes, but unlike other false starts sometimes coming from the pre-open, one that is fueled by the financials may be one that has greater legs, so I may be a little less likely to wait for a fallback from higher levels.
If there will be a party going on I want to be part of it.