The Prepared Mind 10.29.2012

From the NPR Basic Jazz Library, a listening favorite of Frank Fahey while he trades during the day.

The Dow Jones Industrial Average (DJIA) was down nearly 2% on weak earnings, even weaker corporate guidance and the looming “fiscal cliff”  The Dow Jones Industrial Average (DJIA) lost 263.60 points to close at 13,107.21  – a loss of 1.77%.  The entire loss for the week took place on Tuesday.  The DJIA lost 243.36 points – a loss of 1.8%.  This was the largest one day loss in 4 months.  The S&P 500 closed at 1,411.94  –  down 21.25 points or -1.48% for the week.   The NASDAQ 100 (NDX) had the best performance of the broad-based indexes. The NDX closed at 2,665.83, a loss of 12.49 points or – 0.47%.  The Russell 2000 (RUT)  closed at 813.36  – a loss of 4.11  points or down 0.50%.  The S&P 100 (OEX) lost 1.57% , or 10.33,  to close at 646.78. The VIX and other volatility indexes reflected the basic market weakness by being up for the week.   The VIX closed last week at 17.80 – a gain of 4.40%.  Volatility measurements for the other indexes showed similar gains.

 

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

Index

Close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

13,107.21

-236.30

-1.77%

7.28%

16.55% (VXD)

S&P 500 (SPX)

1,411.94

-21.25

-1.48%

12.27%

17.80% (VIX)

NASDAQ 100 (NDX)

2,665.83

-12.49

-0.47%

17.03%

19.57% (VXN)

Russell 2000 (RUT)

813.36

-4.11

-0.50%

9.78%

21.12% (RVX)

S&P 100 (OEX)

646.78

-10.33

-1.57%

13.31%

17.86%(VXO)

CBOE Volatility Index (VIX)

17.80

0.75

4.40%

NA

Earnings continue to be the primary focus this week.  The major stocks announcing earnings this week include:  Loews, Honda, Ford, Pfizer. Cummins, MasterCard, Visa, Priceline, American International Group, Exxon Mobil, Kellogg and Chevron. These announcements and associated guidance for the future have the potential to move the market as a whole.  The domestic focus will be on jobs.  It starts with reports Wednesday and Thursday follow by the coup de grace –  the monthly employment numbers on Friday.  In past months, the job reports, in the absence of other reports,  have had the ability to move the markets.  Earnings and employment have the potential to create a “perfect storm.”

The  journalistic style  I characterize as “fearcasting” has returned with a vengeance.  The financial reporting of the past two weeks has focused on negatives, while the positives of the previous three months has been forgotten.  It pays for the trader to be wary.  Trading is a risk/reward business.  The successful trader focuses on both.  My nearly thirty years of professional trading has proven that to ignore either in strategy selection or trade management invites disaster.  When uncertainty prevails, the trade within your own personal risk/reward comfort zone.  Doing nothing or reducing the size of trades is quite often the prudent alternative.  I turned down the audio on CNBC this week.  I replaced the shrill warnings of impending doom with playlists on Spotify – the NPR classical 50 and the NPR Basic Jazz Library.  My focus in option trading is on the effect of movement in price, change in time, and movement in implied volatility on a strategy.  Know the impact of these three factors on your position.

Trade with a plan.  Be wary.  Don’t panic.

 

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 October 29:

Economic:   Personal Income and Outlays – 8:30,  Dallas Fed Manufacturing Survey – 10:30.

Earnings:   BMO:  Armstrong World Industries (AWI), Compass Minerals (CMP), CNA Financial (CNA), Gardner Denver (GDI), Haemonetics (HAE)), Harris (HRS), Loews (L), Lufkin Industries (LUFK),Mercury General (MCY), Sohu.com (SOHU), Unisource Energy (UNS); AMC:  General Cable (BGC), Baidu (BIDU), Cognex (CGNX), Chemed (CHE), Cirrus Logic (CRUS), Eagle Materials (EXP), Flowserve (FLS), FMC (FMC), Herbalife (HLF), Quaker Chemical (KWR), MicroStrategy (MSTR), Regal-Beloit (RBC), Transocean (RIG).

Other:  French President François Hollande meets with  Christine Lagarde, IMF managing director.

Tuesday October 30:

Economic:    ISCS-Goldman Sachs Retail Sales – 7:45, Redbook – 8:55, S&P Case-Shiller Home Price Index 9:00, Conference Board Consumer Confidence – 10:00, State Street Investor Confidence Index – 10:00.

Earnings:  BMO:  Archer-Daniels-Midland (ADM), Automatic Data Processing(ADP), AGCO (AGCO), Allergan (AGN), Affiliated Managers Group (AMG), Ashland (ASH), BP plc (BP), Cardinal Health (CAH), Cummins (CMI), Deutsche Bank (DB), DineEquity (DIN), Delphi Automotive (DLPH), Dorman Products (DORM), Ecolab (ECL), Emerson Electric (EMR), Entergy (ETR), Ford Motor (F), Fresh Del Monte Produce (FDP), HCP (HCP), Johnson Controls (JCI), L-3 Communications (LLL), Medidata Solutions9MDSo), MSC Industrial Direct (MSM), Nu Skin Enterprises (NUS), Penske Automotive (PAG), Pfizer (PFE), Pentair (PNR), Dr. Reddy’s (RDY), Thomson-Reuters (TRI), TransCanada (TRP), TRW Automotive (TRW), Valero Energy (VLO), Waste Management (WM), United States Steel (X);  AMC: Arthur J. Gallagher (AJG), Atlas Pipeline (APL), Aspen Technology (AZPN), Black Box (BBOX), Annies (BNNY),  Cabot (CBT), Seacor Holdings (CKH), Con-Way (CNW),  Charles River Laboratories (CRL), DaVita (DVA), Equinix (EQIX), FEI co. (FEIC), Itron (ITRI), JDA Software (JDAS), Kenexa (KNXA), Quaker Chemical (KWR), NeuStar (NSR), PriceSmart (PSMT), Papa John’s (PZZA), Rogers Corp (ROG), Shutterfly(SFLY), Onyx Pharmaceuticals  (ONXX), Peet’s Coffee & Tea (PEET), Plantronics (PLT), Portfolio Recovery (PRAA), Papa John’s (PZZA), Shutterfly (SFLY), Tanger Factory Outlet Centers (SKT), Seagate Technology (STX), TripAdvisor (TRIP), Universal Health Services (UHS), Ultimate Software (ULTI), Williams CompaniesWMB), Western Union(WU).

Other:   New York Federal Reserve Bank President William Dudley speaks to the Fairfield, Conn., County Business Council – 12:30,  Minneapolis Federal Reserve Bank President Naryana Kocherlakota to speak at the University of Minnesota-Duluth – 8:00 PM.

Wednesday October 31:

Economic:  MBA Purchase Applications – 7:00, ADP Employment Report – 8:15, Employment Cost Index – 8:30, Treasury Refunding Announcement – – 9:00, Chicago PMI – 9:45, EIA Petroleum Status Report – 10:30, Farm Prices – 3:00.

Earnings:  BMO:  Amerigroup (AGP), American Tower (AMT), Arrow Electronic (ARW), Borg Warner (BWA), Cameron International (CAM), Clorox (CLX), DST Systems (DST), Drew Industries (DW), Eaton Corp. (ETN), Exelon (EXC), General Motors (gm), Garmin (GRMN), GlaxoSmithKline (GSK), Hyatt Hotels (H), Harman International (HAR), Hess Corporation (HES),, Hondo Motor (HMC), Iron Mountain (IRM), ITT (ITT), Mastercard (MC), McGraw-Hill (MHP), MSCI (MSCI), Novo Nordisk (NVO), Omnicare (OCR), Phillips 66 (PSX), Rowan (RDC), Elizabeth Arden (RDEN), Polo Ralph Lauren (RL), SCANA (SCG), Southern Co. (SO), SPX (SPW), Steris (STE), Teleflex (TFX), Total SA (TOT), Time Warner Cable (TWC), Wisconsin Energy (WEC), Wright Express (WXS); AMC:  Allstate (ALL), BMC Software (BMC), Coherent (COHR), FARO Technologies (FARO), First Solar (FSLR), Georgia Gulf (GGC),  Hanger Orthopedic (HGR), Innospec (IOSP), MetLife (MET), Murphy Oil (MUR), Oil States International (OIS), Open Text (OTEX), Pioneer Natural Resource (PXD), Sturm Ruger (RGR), Safety Insurance (SAFT), SM Energy (SM), Sovran Self Storage (SSS), Suncor Energy (SU), Hanover Insurance (THG), AMERCO (UHAL), VISA (V).

Other:  San Francisco Federal Reserve President John Williams speaks to the New York Forecasters Club on monetary policy and the economy.

Thursday November 1:

Economic:  Motor Vehicle Sales, Chain Store Sales, Challenger Job-Cut Report – 7:30, Jobless Claims – 8:30, Productivity and Costs – 8:30, PMI Manufacturing Index -8:58, Bloomberg Consumer Comfort Index – 9:45, ISM Manufacturing Index – 10:00, Construction Spending – 10:00, EIA Natural Gas Status Report – 10:30.

Earnings:  BMO:  Atlas Air Worldwide (AAWW), Barrick Gold (ABX), Ansys (ANSS), Apache (APA), Alliant Techsystems (ATK), BCE (BCE), Berry Petroleum (BRY), CBOE Holdings (CBOE), CIGMA (CI), Catamaran (CTRX), Estee Lauder (EL), Chart Industries ((GTLS), Holly Energy (HEP), Hornbeck Offshore (HOS), ICON plc (ICLR), Imperial Oil (IMO), Kellogg (K), Littelfuse (LFUS), Mednax (MD), Marathon Petroleum( MPC), MWI Veterinary (MWIV), Royal Dutch Shell CL A (RDS>A), Royal Dutch Shell  CL B (RDS>B), Spectra Energy (SEP), Standex (SXI), Teradata (TDC), Trex (TREX), Unit Corp (UNT)< United Therapeutics (THR), Vulcan Materials (VMC), Watson Pharmaceuticals (WPI), Exxon Mobil (XOM):  AMC:  Advisory Board (ABCO), American international Group (AIG), , Amerisafe (AMSF), Black Hills (BKH), Chesapeake Energy (CHK), Curtiss-Wright (CW), Dresser-Rand (DRC), Dril-Quip (DRQ), Edison International (EIX), Fluor (FLR), Gulfport Energy (GPOR), Hain Celestial (HAIN), HeartWare International (HTWR), World Fuel (INT), Jazz Pharmaceuticals (JAZZ), Linkedin (LNKD), Las Vegas Sands (LVS), Mohawk Industries (MHK), Mettler-Toledo (MTD), Navigators Group (NAVG), Newmont Mining (NEM), National Fuel Gas (NFG), Blue Nile (NILE), Open Table (OPEN)< Priceline (PCLN), Boston Beer (SAM), Starbucks (SBX), Texas Petrochemicals (TPGG), Warnaco (WRC), Yelp (YELP).

Other:  Boston Federal Reserve Bank President Eric Rosengren speaks at Babson College’s Stephen D. Cutler Center for Investments and Finance, Wellesley, Mass.

Friday November 2:

Economic:   Employment Situation – 8:30, Factory Orders – 10:00, University of Michigan/Reuters Consumer Sentiment – 8:55.

Earnings:  BMO:  Beam (BEAM), Chevron (CVX), Gartner (IT), Kubota (KUB), Madison Square Garden (MSG), Stratasys(SSYS), United States Cellular (USM).

Other:  San Francisco Federal Reserve Bank Pres. John Williams seaks to a Fed Community Leaders Luncheon in Salt Lake City.

Monday November 5:

Economic:   ISM Non-Manufacturing Index – 10:00.

Earnings:   BMO:  American states Water (AWR), HSBC Holdings (HBC), Humana (HUM), InterContinental Exchange (ICE), Pharmacyclics (PCYC), Transocean (RIG), Rockwell Automation (ROK)Sohu.com (SOHU), Sysco (SYY),;  AMC:  Andersons (ANDE), American Science and Engineering (ASEI), CF Industries CF), Churchill Down (CHDN), Covance (CVD), Consolidated Edison (ED), EOG Resources (EOG), Express Scripts (ESRX), Franklin Electric (FELE), SBA Communications (SBAC), Tesla Motors (TSLA)Walter Industries (WLT), Weight Watcher’s (WTW), Zillow (Z).

 

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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