The Prepared Mind 9.17.2012

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

The markets continued their surge to new highs last week.  The FOMC announced an open ended plan to stimulate the economy and job growth by purchasing $40 billion a month of mortgage backed securities.  The absence of a specific time period with undefined job growth goals has led some pundits to refer to the program as QE Forever.  The Fed has promised to keep iteration of Quantitative Easing in place after the economy has strengthened.  This news, in combination with a German court ruling allowing Germany to participate in the bail-out of the Eurozone, sent equities and indexes to new multi-year highs.

The Dow Jones Industrials reached their highest level since December 10, 2007.  The Dow Jones Industrial Average (DJIA) closed at 13,593.37 – up 286..73 points or a gain of 2.15%. The S&P 500 reached its highest level since December 2007 – closing at 1,465.77 –  up 27.85 points and 1.94%.   The NDX closed at 2,855.23, a gain of 30.12 points or 1.07%.  This performance was helped by positive reaction to Apple’s announcement of the iPhone 5.    The Russell 2000 (RUT) reached all-time highs by closing at 864.70 – up 12.43 or 1.43%.  The S&P 100 (OEX) gained 1.88% to close at 672.82. The VIX and other volatility indexes remained static for the week.  These indexes hovered near unchanged.   The VIX closed this week at 14.51%.  The move was a gain of 0.13 points or 0.90%.  Equity and option volumes jumped in response to short covering.

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

Index Close Weekly Change % Weekly % YTD Volatility of  Index
Dow Jones Industrials (DJIA) 13,593.37 286.73 2.15% 11.26% 13.53% (VXD)
S&P 500 (SPX) 1,465.77 27.85 1.94% 16.55% 14.51% (VIX)
NASDAQ 100 (NDX) 2,855.23 30.12 1.07% 25.35% 15.89% (VXN)
Russell 2000 (RUT) 864.70 12.43 1.46% 16.71% 18.26% (RVX)
S&P 100 (OEX) 672.82 12.41 1.88% 17.88% 14.30%(VXO)
CBOE Volatility Index (VIX) 14.51 0.13 0.90% NA

Rosh Hashanah, the Jewish New Year, will be celebrated September 16-18 and volume may be lighter on Monday.  The markets will have a special interest in the Empire State Manufacturing Index on Monday and Hosing reports on Tuesday and Wednesday.  There is speculation the Bank of Japan may announce quantitative easing on Wednesday.  Earnings announcements will have minimal effect on the market.  Fedex earnings will be announced on Tuesday.  Economists will be looking to Fedex earnings and guidance as an indicator on the current and future state of the economy.

Be disciplined.  Be aware.  Understand what you are trading.  Trade with a plan.  Know where and how 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 17:

Economic:  Empire State Manufacturing Survey – 8:30.

Earnings:  None

Other:  Markets in Japan are closed.

Tuesday September 18:

Economic:   ISCS-Goldman Sachs Retail Sales – 7:45, Current Account (International trade balance in goods, services, and unilateral transfers) – 8:30, Redbook – 8:55. Treasury International Capital – 9:00, NAHB Housing Market Index – 10:00.

Earnings:  BMO: Fed Ex (FDX). Manchester United (MANU).

Other:  Charles Evans , Chicago Federal Reserve President,  speaks to the Bank of Ann Arbor Breakfast Meeting on “Perspectives on Current Economic Issues.” – 8:00.  Richmond Federal Reserve Bank President Jeffrey Lacker speaks to the Money Marketeers of NYU, in New York 6:15.

Wednesday September 19:

Economic: MBA Purchase Applications – 7:00,  Housing Starts – 8:30, EIA Petroleum Status Report – 10:30.

Earnings:  BMO:  AutoZone (AZO), Cracker Barrel Old Country Store (CBRL), General Mills (GIS), ; AMMC:  Adobe Systems (ADBE), AAR (AIR), Apogee Enterprises (APOG), Bed Bath & Beyond(BBBY), Clarcor (CLC), Herman Miller IMLHR), Steelcase (SCS)>

Other:  Bank of Japan policy meeting.  Kansas City Federal Reserve President Esther George to deliver opening remarks at a Kansas City Fed jobs conference – 9:45. Dallas Federal Reserve Bank Pres. Richard Fisher speaks to the Harvard Club of New York City on the “Economic and Monetary Policy Outlook.” – 7:00.

Thursday September 20:

Economic:  Jobless Claims – 8:30, PMI Manufacturing Index Flash – 9:00, Bloomberg Consumer Comfort Index – 9:45, Philadelphia Fed Survey – 10:00, Leading Indicators – 10:00,EIA Natural Gas Status Report – 10:30.

Earnings:  BMO: ConAgra Foods (CAG), Cubic Corp.(CUB), IHS Inc (IHS), Jefferies Group (JEF), CarMax KMX) Scholastic (SCHL), Cintas (CTAS), Oracle (ORCL).

Other: Atlanta Federal Reserve Bank President Dennis Lockhart speaks at the Federal Reserve Bank of Kansas City on the subject, “The Future of Workforce Development” – 9:30,  Cleveland Federal Reserve Bank President Sandra Pianalto speaks at the Miami University Farmer School of Business -5:00, St. Louis Federal Reserve Bank President James Bullard to speak at the University of Notre Dame – 6:30.

Friday September 21:

Economic: Consumer Price Index – 8:30, Retail Sales – 8:30, Industrial Production – 9:15, Reuters University of Michigan Consumer Sentiment 9:55, Business Inventories – 10:00.

Earnings:  BMO:  Darden Restaurants (DRI), KB Home (KBH).

Other: Atlanta Federal Reserve Bank Pres. Dennis Lockhart speaks to the Atlanta Institute of Internal Auditors on “U.S. Economic Outlook and Monetary Policy.”  – 12:40.

Monday September 24:

Economic:  Chicago Fed National activity Index – 8:30, Dallas Fed Manufacturing Survey – 10:30..

Earnings:  BMO:  Cal-Maine Foods (CALM), Carnival Corp. (CCL), Carnival plc (CUK)Lennar(LEN);  MAC:  Paychex (PAYX), Red Hat (RHT),

Other:  Kraft Foods is replaced by United Health Group in Dow Jones Industrial Average.  San Francisco Federal Reserve Bank President John Williams speaks to the S.F. City Club Roundtable – 3:10.

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

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