The Prepared Mind 9.4.2012

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

The markets waffled around all week as traders waited for Ben Bernanke’s Friday speech from Jackson Hole.  What he gave us was:  “We should not rule out the further use of such policies if economic conditions warrant…[and] the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor-market conditions in a context of price stability.”  The markets had a difficult time parsing the meaning of his statements.  First his comments were good, then they were bad, and then were finally followed by another “whoops we were wrong to the upside.” The market focus has switched from waiting for Bernanke’s direction to, once again, concern about the Eurozone.  ECB President Mario Draghi was originally scheduled to speak in Jackson Hole on September 1.  He cancelled this speech citing the pressures of work at home.

The three month uptrend in the indexes stalled last week.  The indexes are still meeting resistance near the levels of the 4 to 7 year highs.  The different indexes show small gains or losses.  The expectations for QE3 were amped up a bit on Friday resulting in a daily 0.5% increase.  The S&P 500 closed at 1,406.58 – a loss of 4.55 points or 0.32%.  Last week the Dow Jones Industrial Average (DJIA) closed at 13,090.84 – down 67.13 points or loss of 0.51%. The NASDAQ 100 (NDX)  lost 5.81 points or – 0.21% to close at 2,772.24.  This performance was the result of continued strength by Apple.    The Russell 2000 (RUT) was the gainer for the week closing at 812.09 – down 2.90 points or -0.36%.  The S&P 100 (OEX) lost 0.41% to close at 646.41. The VIX and other volatility indexes confirmed the market belief that the volatility has been trading too low.    Two weeks ago, the VIX traded at its lowest level since June 2007 – 13.45%.  The VIX closed this week at 17.47%, a move of 2.29 points or over 15%.  The closing numbers for the other volatility indexes reflected concern over the state of the markets – domestic and international.    Equity and option volumes continued to trade at yearly lows.  This lack of volume concerns many market participants.

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

Index Close Weekly Change % Weekly % YTD Volatility of  Index
Dow Jones Industrials (DJIA) 13,090.84 -67.13 -0.51% 7.15% 15.89% (VXD)
S&P 500 (SPX) 1,406.58 -4.55 -0.32% 11.85% 17.47% (VIX)
NASDAQ 100 (NDX) 2,772.24 -5.81 -0.21% 21.71% 18.35% (VXN)
Russell 2000 (RUT) 812.09 2.90 0.36% 9.61% 21.56% (RVX)
S&P 100 (OEX) 646.41 -2.63 -0.41% 13.25% 16.32%(VXO)
CBOE Volatility Index (VIX) 17.47 2.29 15.09% NA

The coming shortened trading week will focus on Thursday’s news from the European Central Bank With Friday’s U.S.August employment reports equally important, The state of the U.S. economy and the impending “fiscal cliff” will provide a backdrop to these announcements.  Earnings are not expected to be a significant factor this week.

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

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 September 3:

All U.S. Markets Closed – Labor Day

Tuesday September 4:

Economic:  U.S. Auto Sales, PMI Manufacturing Index – 9:00, ISM Manufacturing Index – 10:00. Construction Spending – 10:00.

Earnings:  BMO:  Campbell Soup (CPB), Quanex (NX), Smithfield Foods (SFD);  BMO: Guideware Software (GWRE). Pep Boys (PBY).

Other:

Wednesday September 5:

Economic: MBA Purchase Applications – 7:00, ISCSI-Goldman Sachs Retail Sales – 7:45, Productivity and cost – 8:30, Redbook – 8:55.

Earnings: BMO:  Conns (CONN), Dollar General (DG), G-III Apparel (GIII), Hi Tech Pharmacal (HITK), Navistar (NAV), Sycamore Networks (SCMR);  AMC:  ABM Industries (ABM), AeroVironment (AVAV), H&R Block (HRB), Men’s Wearhouse (MW), Verifone (PAY), Verint Systems (VRNT).

Thursday September 6:

Economic:  Challenger Job-Cut Report 7:30, ADP Employment Report – 8:15, Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, ISM Non-Manufacturing Survey -10:00,  EIA Natural Gas Status Report – 10:30, EIA Petroleum Status Report – 10:30.

Earnings:  BMO:  Layne Christensen (LAYN), National Beverage (FIZZ),;  AMC:  Infoblox (BLOX), Bazaarvoice (BV), The Copper Industries (COO), Mattress Firm Holding (MFRM), Ulta Salon Cosmetics & Fragrance (ULTA).

Other:  European Central Bank Governing Council meets.

Friday September 7:

Economic: Monster Employment Index, Employment Situation – 8:30.

Earnings:  Brady Corp. (BRC), Lululemon Athletica (LULU), Piedmont Natural Gas (PNY).

Monday September 10:

Economic:  Consumer Credit – 3:00.

Earnings:  BMO:  John Wiley & Sons (JW.A), Sasol (SSL), Titan Machinery (TITN); AMC: Casey’s General Stores (CASY), Five Below (FIVE), Pharmacyclics (PCYC), .

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