Daily Market Update – September 10, 2015 (Close)
Yesterday was a really disappointing day, even if your portfolio ended up in relative out-performance.
The idea that we could put together consecutive large moves higher was taken off the table after a tease of an open and then a gradual decline that ended up picking up lots of speed into the close.
There really was no reason for the opening strength nor for the closing weakness.
This morning the futures were pointing to a flat open.
It was hard to know what to make of that and after today’s close, it’s still hard to know what to make of any of it.
After our market’s decline yesterday, overseas markets, first in Asia and now in Europe went into sharp decline.
It’s hard to know whether they did so in reaction to our market or whether they are continuing in being the stick that stirs our markets.
For most of the summer we’ve been in an unusual position of having overseas markets tell us where to go and we haven’t been able to find any reason to return the relationship to the one that we used to know as being more normal.
Maybe the realization that our economy is in good shape and likely to get better while the rest of the world is floundering, and maybe the fact that our markets still offer the best combination of value and safety would be enough to get things back to normal.
But for now, it doesn’t look as if anything will serve as the catalyst to get more rational action going, unless of course the FOMC finally decides to do what they’ve been telegraphing for so long and finally raise interest rates against the advice of nearly everyone outside of the United States.
With only a single position set to expire this week and now just i day remaining, I’m reasonably satisfied with the combination of new call sales, rollovers and dividends for the week and don’t expect to find any reason to spend any money on new positions this week.
I’m especially glad to have rolled over the two Best Buy lots, which go ex-dividend tomorrow. They were each rolled over in the past two weeks, despite being weeks before their expiration dates, simply to squeeze additional time premium in the face of a good chance at early assignment to capture tomorrow’s dividend.
The seep in the money $33.50, now expiring October 23, 2015 has a good chance of being assigned early, but the $37 options may not be, although I’d prefer if they were, at this point.
With yesterday’s action only serving to introduce even more uncertainty I would like to continue a focus on trying to find a way to use volatility to squeeze out some more premium from existing positions and not think too much about adding new positions, even while they continue to look so bargain priced.
Neither of those goals are always so easy, but at least this and last week have offered some reasonable opportunities to take advantage of the market.
Hopefully, that volatility that we’ve been seeing will continue, but will do so in a way that there’s not much in the way of net change in the market. For now, as you often see in the early phase of a volatility spike is that the market declines. It’s in that period where the volatility stays at a relatively higher level and settles into a higher range that there begin to come good opportunities to find attractive premiums and enhanced income streams.
For now, I hope we fall into that narrow range and don’t have the kind of moves higher of the kind of large moves that we’ve seen. Those are just too prone to lead to tumbles and those are just too precipitous to be able to defend against and they leave you in a state of shell shock for far too long.
As is usually the case, there’s something good about consolidation in prices. Forming a base that gives the market someplace to return to and stay with some degree of confidence is a good thing. The same tends to be the case with volatility, as well. With volatility having spiked to the 50 level and come down by nearly 50%, a small further climb to the 30 level would be a nice place to settle in for a while. That may still take a small amount of market pain, but could end up being a very good place for a while.