The Prepared Mind 7.16.2012

Stocks traded lower the first four sessions of the week .  This was in response to a dearth of positive new.  The focus was on concern s about the U.S. economy combined with fears of a Chinese hard landing, poor tech sector earnings, and continued Eurozone concerns.  This six day losing streak in the markets (includes two days from the previous week) was ended by a 1.6% rally on Friday.  This apparent change in sentiment was fueled by stronger than expected earnings reports by JPMorgan Chase (JPM) and Wells Fargo (WFC).  These earnings were viewed by many as confirming evidence of the relative financial strength of the U.S. banking system.

The markets were essentially unchanged for the week.  Last week the Dow Jones Industrial Average closed at 12,777.09  up 4.62 points or a gain 0.04%.    The SPX ended the week up 2.10 points –  up 0.16% at 1,356.78.  The NASDAQ 100 (NDX) confirmed weakness in the tech sector with a loss of 27.32 points or minus 1.05% to close at 2.584.97.    The S&P 100 (OEX) gained 0.42% to close at 622.83. The Russell 2000 (RUT) closed at 800.99 , a loss of 6.15 points – down 0.76% 1.08%.  The VIX continues to fluctuate between negative and positive sentiment.  The VIX ended the week at 16.74% to close near its recent lows.  The other index volatility measurements were essentially unchanged for the week.

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

Index Close Weekly Change % Weekly % YTD Volatility of  Index
Dow Jones Industrials (DJIA) 12,777.09 4.62 0.04% 4.58% 15.22% (VXD)
S&P 500 (SPX) 1,356.78 2.10 0.16% 7.89% 16.74% (VIX)
NASDAQ 100 (NDX) 2,584.97 -27.32 -1.05% 13.48% 18.65% (VXN)
Russell 2000 (RUT) 800.99 -6.15 -0.76% 8.11% 21.56% (RVX)
S&P 100 (OEX) 622.83 2.63 0.42% 9.12% 16.08%(VXO)
CBOE Volatility Index (VIX) 16.74 -0.36 -2.11% NA

The intraday volatility is masked by the lack of movement between the closings of the past two weeks.  The difference between Thursday’s low’s and Friday’s close was nearly 2.5%.  This sort of movement requires near constant monitoring of positions.  Be willing to take profits and recenter or reverse positions.  These types of markets require the trader to be nimble and constantly aware.

Another QE?

The main focus of the Week will be Ben Bernanke’s testimony before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday.  Expect him to take Congress to task for playing a game of financial brinkmanship and taking the economy to a “financial cliff.” Financial pundits and traders will engage in constant parsing of his comments to divine whether any fiscal stimulus is on the near horizon.  The earnings cycle is in full force this week.   The beginning of the week starts with announcements from financial sector giants Citigroup (C) on Monday, Goldman Sachs (GS) on Tuesday, and Bank of America (BAC) on Wednesday.  Other earnings announcements include Morgan Stanley, Coca-Cola, Intel, CSX, American Express, QUALCOMM, Google, IBM, Abbott Labs, Microsoft, Intuitive Surgical, Union Pacific, Baxter, Schlumberger, and General Electric.  With expectations low, a number of analysts see a greater chance for upside surprises in this cycle. A more comprehensive list of the companies and associated earnings dates is below.  The guidance provided in the accompanying conference calls will set the tone for future market performance.

I hate to be a broken record.  I continue to be confused about predicting market reaction to news- good and bad.  I feel the price movement is scripted by Allen Funt.  He is famously remembered for saying, ” Remember… when you least expect it… someone… somewhere…… may walk up to you and say, ‘Smile. You’re on Candid Camera.”  His alternative version of the same saying “When you least expect it, expect it” sums up the behavior of today’s markets.

Be careful.  Be aware.

Remember:

“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 16:

Economic:  June Retail Sales – 8:30, Empire State Manufacturing Survey – 8:30, May Manufacturing/Trade Inventories and Sales. – 10:00.

Earnings:    BMO:  Citigroup (C), Gannett Co.(GCI); AMC:  Brown & Brown (BRO), Cintas (CTAS), Equity Lifestyles Properties (ELS), ICU Medical (ICUI), JB Hunt Transport Services (JBHT), Lincare Holdings (LNCR), Packaging Corp of America (PKG).

Other:  Japanese markets closed.

Tuesday July 17:

Economic:  ICSC Goldman Sachs Retail Store Sales – 7:45, June Build/Fax Remodeling Index – 8:00, June Consumer Price Index – 8:30, Redbook – 8:55, June Real Earnings (Avg. Hourly Wages) – 8:30, May Treasury International Capital – 9:00,  June S&P/Experian Consumer Credit Default Index – 9:00, June Industrial Production/Capacity Utilization – 9:15, July NAHB/Wells Fargo Housing Index – 1:00.

Earnings:  BMO:  TD AMERITRADE (AMTD), Comerica (CMA)m, Forest Laboratories (FRX), Goldman Sachs (GS), Johnson & Johnson (JNJ), Coca-Cola (KO), Kansas City Southern (KSU), Mattel (MAT), McMoRan Exploration (MMR), Mosaic (MOS), Omnicom (OMC), Patni Computer (PTI), Charles Schwab (SCHW), State Street (STT), Westamerica Bancorp (WABC);  AMC:  AAR (AIR), Albemarle (ALB), CSX (CSX), Interactive Brokers Group (IBKR), Intel (INTC), MB Financial (MBFI), Pinnacle Financial (PNFP), United Rentals (URI), Wynn Resorts (WYNN), Yahoo (YHOO).

Other:  Federal Reserve Chairman Ben Bernanke to speak before the Senate Banking Committee to give his semi-annual monetary policy testimony – 10:00.. IMF releases its updated World Economic Outlook .report

Wednesday July 18:

Economic: MBA Purchase Applications – 7:00, June Housing Starts – 8:30, EIA Petroleum Status Report – 11:00.

Earnings:  BMO:  Abbott Labs (ABT), AO Smith (AOS), Amphenol (APH),Bank Of America (BAC), BlackRock (BLK), Check Point Software (CHKP), First Republic Bank (FRC), W.W. Grainger (GWW), Hanesbrands (HBI), Honeywell (HON), Northern Trust (NTRS), PNC Financial (PNC), St. Jude Medical (STJ), Stanley Black &Decker (SWK), U.S Bancorp (USB);  AMC:  American Express (AXP), Crown Holdings (CCK), Core Laboratories (CORE),  Cohen & Steers (CNS), eBay (EBAY), F5 Networks (FFIV), International Business Machines (IBM), Kinder Morgan (KMI), Noble Corp. (NE), Newfield Exploration (NFX), Plexus (PLXS), QUALCOMM (QCOM), Stryker (SYK), Universal Forest Products (UFOI), Xilinx (XLNX), Yum! Brands (YUM).

Other: Federal Reserve Chairman Ben Bernanke to speak before the House  Financial Services Committee to give his semi-annual monetary policy testimony 10:00.

Thursday July 19:

Economic:    Jobless Claims – 8:30, Bloomberg Consumer Confidence Index – 9:45, June Existing Home Sales – 10:00. Philadelphia Fed Business Outlook Survey – 10:00, EIA Natural Gas Status Report – 10:30, Beige Book – 2:00.

Earnings:  BMO:  Alliance Data Systems (ADS), Auto Nation (AN), Arbitron (ARB), Baxter International (BX), BB&T (BBT), Quest Diagnostics (DGX), Danaher (DHR), Diamond Offshore Drilling (DO), Ecopetrol (EC), GATX (GMT), Genuine Parts (GPC), Goodrich (GR), Hubbell (HUB.B), Johnson Controls (JCI), US Airways (LCC), Lincoln Electric (LECO),Southwest Airlines (LUV), Monro Muffler Brake (MNRO), Nucor (NUE), Novartis (NVS), Phillip Morris (PM), Pool Corp (POOL), PPG (PPG), Sherwin-Williams (SHW), Snap-on (SNA), Sonoco Products (SON), Safeway (SWY), Travelers Companies (TRV), Textron (TXT), Union Pacific (UNP), VF Corp (VFC), Verizon (VZ); AMC:  Align Technology (ALGN), Acme Packet (APKT), Athenahealth (ATHN), BJ’s Restaurants (BJIR), Badger Meter (BMI), Cubist pharmaceuticals (CBST), Chipotle Mexican Grill (CMG), Capital One (COF), Cytec (CYT), Google (GOOG), Intuitive Surgical (ISRG), NCR (NCR), Microsoft (MSFT), SanDisk (SNDK).

Other:

Friday July 20:

Economic: ECRI Weekly Leading Index – 10:30.

Earnings:  BMO: American Electric Power (AEP), Baker Hughes (BHI), Dover Corp (DOV), IDEXX Labs (IDXX), Ingersoll-Rand (IR), Manpower (MAN), Schlumberger (SLB), Sensient Technologies (SXT).

Other: Monday July 23:

Economic:  Chicago Fed National Activity Index – 8:30.

Earnings:  BMO:  Cal-Maine Foods (VALM), Eaton Corp (ETN), General Electric (GE)Halliburton (HAL), Hasbro (GAS), McDonalds (MCD), RPM International (RPM);  AMC:  Baidu (BIDU), Celanese (CE), Seacor Holdings (CKH), Crane (CR), Gulfmark Offshore (GLF), Jacobs Engineering (JEC), Olin (OLN), Texas Instruments (TXN), United Stationers (USTR), VMware (VMW).

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