The Prepared Mind 8.20.2012

"Chance favors the prepared mind."-- Louis Pasteur

The broad-based indexes were up for the sixth straight week and the 10th time in 11 weeks.   The summer rally has seen an 11% increase since June lows.  This week’s market impetus was provided by Cisco (CSCO) and Apple (AAPL.)  CSCO results exceeded analysts’ expectation and were accompanied by  a75% increase in the dividend.  The news led to a 9% increase in the price of Cisco.

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

Index Close Weekly Change % Weekly % YTD Volatility of  Index
Dow Jones Industrials (DJIA) 13,275.20 67.25 0.51% 8.66% 12.01% (VXD)
S&P 500 (SPX) 1,418.16 12.29 0.87% 12.77% 13.45% (VIX)
NASDAQ 100 (NDX) 2,780.30 57.34 2.11% 22.06% 13.79% (VXN)
Russell 2000 (RUT) 819.89 18.34 2.29% 10.66% 17.98% (RVX)
S&P 100 (OEX) 651.58 5.36 0.83% 14.15% 13.42%(VXO)
CBOE Volatility Index (VIX) 13.45 -1.29 -8.75% NA

I noticed I did not note options expiration the past two expiration cycles.  When I was a floor trader, options expiration was the major monthly event.  There was a palpable increase in energy on the floor as we approached the day.  Expiration was in the front of all trader’s brains.  Expiration has become a non-event for me.  The time horizon for my current strategy set ends well before expiration.  I do not trade weeklies.  By the time expiration comes around I have long since exited any positions I had in the expiring month.  This does not mean I ignore expiration dates.  Time is one of the most important factors in assessing an options strategy.

The coming week will focus upon The release of the FOMC minutes for the July 31-August 1 meeting.  The markets will be primed to respond to any news – real or imagined – about future Fed intervention.  The week starts out with the Chicago Fed National  Activity Index.  This report will give us  an overview of economic growth and inflation.  Housing reports on Wednesday and Thursday are viewed by many as a significant evidence of the state of the economy.  House builder Toll Brothers (TOL) will release earnings before the opening on Wednesday.  Earrings are not expected to be a significant factor this week.

Be disciplined.  Trade with a plan. Know where you will take profits and losses.


“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 August 20:

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

Earnings:  BMO:  Lowes Companies (LOW); AMC: Nordson (NDSN), Tuesday Morning (TUES), Urban Outfitters (URBN).

Tuesday August 21:

Economic:  ICSC Goldman Sachs Retail Store Sales – 7:45, Redbook – 8:55, July Business Inventories – 10:00.

Earnings:  BMO:  Best Buy (BBY0, Barnes & Noble (BKS), DSW (DSW), Medtronic (MDT). Raven Industries (RAVN), Tech Data (TECD); AMC:  Analog Devices (ADI), Aspen Technology (AZPN), Dell (DELL), Intuit (INTU), La-Z-Boy (LZB), Williams-Sonoma (WSM).

Other:  Atlanta Federal Reserve Bank President Dennis Lockhart speaks to the Latin American Chamber of Commerce and World Affairs Council pm “The U.S.  Economic Outlook and Implications for Latin America.”  in Atlanta – 8:45,

Wednesday August 22:

Economic: MBA Purchase Applications – 7:00, July Existing Home Sales – 10:00, EIA Petroleum Status Report – 10:30.

Earnings:  BMO:   American Eagle Outfitters (AEO), Chico’s FAS (CHS), Eaton Vance (EV), Toll Brothers (TOL); AMC:  Dollar Financial (DLLR), Guess? (GES), Hain Celestial (HAIN), HEICO (HEI), Hewlett-Packard (HPQ), International Rectifier (IRF), Krispy Kreme (KKD), Synopsys (SNPS), Tilly’s (TLYS),

Other:  FOMC minutes – 2:00

Thursday August 23:

Economic:  Jobless Claims – 8:30, PMI Manufacturing Index Flash – 9:00, Bloomberg Consumer Confidence Index – 9:45, July New Home Sales – 10:00, June FHFA House Price Index – 10:00, EIA Natural Gas Status Report – 10:30.

Earnings:  Earnings:  BMO:  Big Lots (BIG), Diageo (DEO), Hormel Foods (HRL), Toro (TTC); AMC:  Autodesk (ADSK), (CRM), Micros Systems (MCRS),  Monitor Graphics (MENT), Shoe Carnival (SCVL), Solera Holdings (SLH).

Other: German Chancellor Angela Merkel meets with French President Francois Hollande.

Friday August 24:

Economic: July Durable Goods Orders – 8:30. Reuters/University of Michigan Consumer Sentiment – 9:55, ECRI Weekly Leading Index – 10:30.

Earnings:  BMO: Madison Square Garden (MSG).

Other:  German Chancellor Angela Merkel meets with Greek Prime Minister Antonis Samaras.

Monday August 27:

Economic:  AugustDallas Fed Manufacturing Survey – 8:30.

Earnings:  BMO:  Donaldson Company )DCI), Quanex (NX), Seadrill (SDRL), Tiffany & Co (TIF);  AMC:  Focus Media (FMCN), Phillips- Van Heusen (PVH),

Other:  Cleveland Federal Reserve Bank President Sandra Pianalto speaks to the Newark Area Business Luncheon, in Newark, Ohio – 12.15, Chicago Federal Reserve Bank President  Charles Evans speaks to an MNI seminar in Hong Kong – 6:15.

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