The Prepared Mind 7.9.2012

The week and the third quarter started with another display of fireworks and it ended with a boom.   The week started with equities following their strongest June since the 90’s with continued gains .  The post 4th of July markets took back these gains with worries about the world economy, Eurozone finances, the financial sector, and U.S. job growth.  The talking heads are ignoring the fundamentals of the markets.  The markets continue to be driven by news.

We have reached the point where many are positing that bad news is good news for the market, i.e. the Twilight Zone (editor’s addition).   A common theme is whether the numbers are bad enough to inspire the Fed to institute a new round of quantitative easing.  The net result is the market moves on conjecture, not reality.  Intraday market movement has been characterized by gaps followed by reversals.  These moves require the trader to be nimble.

The markets were essentially unchanged for the week.  Last week the Dow Jones Industrial Average closed at 12,772.47  down 107.92 points or a loss of 0.84%.    The SPX ended the week down 7.49 points –  up 2.03% at 1,362.17.  The NASDAQ 100 (NDX) lost 3.53 points or minus 0.13% to close at 2,612.39.    The S&P 100 (OEX) lost 0.58% to close at 620.20. The Russell 2000 (RUT) closed at 807.14 , a gain of 8.65 points – up 1.08%.  The VIX continues to fluctuate between negative and positive sentiment.  This week the VIX returned to end the week near recent lows.  The VIX and the other index volatility measurements were also unchanged.

Here is a capsule view of last week’s market numbers:

Index Close Weekly Change % Weekly % YTD Volatility of  Index
Dow Jones Industrials (DJIA) 12,772.47 -107.92 -0.84% 4.54% 16.12% (VXD)
S&P 500 (SPX) 1,354.68 -7.49 -0.55% 7.72% 17.10% (VIX)
NASDAQ 100 (NDX) 2,612.29 -3.53 -0.13% 14.68% 18.65% (VXN)
Russell 2000 (RUT) 807.14 8.65 1.08% 8.94% 21.78% (RVX)
S&P 100 (OEX) 620.20 -3.63 -0.58% 8.66% 16.70%(VXO)
CBOE Volatility Index (VIX) 17.10 0.03 0.18% NA

The earnings cycle starts up  this week with Alcoa’s (AA) announcement on Monday.  Google announces on Thursday.  On Friday, JP Morgan Chase will announce earnings.  Details of the impact of the recent trading fiasco are expected to be announced in conjunction with the earnings release.  The picture of the state of the U.S. banking industry will be further defined by announcements by Wells Fargo on Friday and Citigroup on Monday, July 13.  Equity analysts are expecting minimal earnings growth this quarter.

China will be announcing CPI and PPI on Sunday.  This announcement, coupled with Japanese Machinery Orders, could have a significant impact on Monday’s market.  Mario Draghi, president of the ECB, has strongly suggested the world economy may be headed for a downward move.  Draghi is speaking again on Monday.  Domestic and foreign markets have the potential to be roiled by the opinions he offers.  I continue to be confused about predicting market reaction to new – good and bad.  We have entered a “Twilight Zone” where good news is bad and bad news is good for the markets.

Be careful.  Be aware.


“Chance favors the Prepared Mind.” – Louis Pasteur

This week’s economic news (All times are Eastern Daylight Time.) Dates and times are subject to change:

Monday July 9:

Economic:  May Consumer Credit – 3:00.

Earnings:    AMC:  Alcoa (AA), PriceSmart (PSMT), A. Shulman (SHLM), WD-40 (WDFC).

Other:  ECB President Mario Draghi speaks on current economic and monetary developments.

Tuesday July 10:

Economic:  ICSC Goldman Sachs Retail Store Sales – 7:45, NFIB Small Business Optimism Index – 7:30, Redbook – 8:55.

Earnings:  BMO:  Helen of Troy (HELE), Hi Tech Pharmacal (HITK), Shaw Group (SHAW), Wolverine World Wide (WWW), Zep (ZEP);  AMC:  ADTRAN (ADTN), Healthcare Services Group (HCSG).

Other:  St. Louis Federal Reserve Pres. James Bullard delivers the OMFIF Golden Series Lecture, in London.

Wednesday July 11:

Economic: MBA Purchase Applications – 7:00, May International Trade – 8:30, May Wholesale Trade/Inventories – 10:00, EIA Petroleum Status Report – 11:00.

Earnings:  AMC:  Marriott International (MAR), Texas Industries (TXI).

Other:   FOMC minutes – 2:00.

Thursday July 12:

Economic:    Jobless Claims – 8:30, June Import and Export Prices – 8:30, Bloomberg Consumer Confidence Index – 9:45, EIA Natural Gas Status Report – 10:30, June Treasury Budget – 2:00.

Earnings:  BMO:  Commerce Bancshares (CBSH), Fastenal (FAST), Infosys (INFY), Progressive Corp. PGR), Washington Federal (WAFD);  AMC:  Google (GOOG), JDA Software (JDAS), Bank of the Ozarks (OZRK), Resources Connection (RCN).

Other: San Francisco Federal Reserve Bank Pres. John Williams speaks to the Community Leaders in Portland, Oregon – 3:40.  Bank of Japan interest rate announcement.

Friday July 13:

Economic: June Producer Price Index – 8:30, Reuters/University of Michigan Consumer Sentiment – 9:55, ECRI Weekly Leading Index – 10:30.

Earnings:  BMO: iGATE (IGTE), JPMorgan Chase (JPM), Webster Financial (WBS), Wells Fargo (WFC).

Other: Atlanta Federal Reserve Bank Pres. Dennis Lockhart speaks to the Mississippi Economic Council – 1:20.

Monday July 16:

Economic:  June Retail Sales – 8:30, Empire State Manufacturing  Survey – 8:30, Business Inventories – 10:00.

Earnings:  AMC:  Citigroup (C), Gannett Co.(GCI); Equity Lifestyles Properties (ELS), ICU Medical (ICUI), JB Hunt Transport Services (JBHT), Lincare Holdings (LNCR), Packaging Corp of America (PKG), Wynn Resorts (WYNN).

Frank Fahey is a mentor with DiscoverOptions, the educational arm of OptionVue Systems.  Inquiries should call 847-816-6610 or email

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