The Prepared Mind 11.26.2012

“Chance favors the prepared mind.” — Louis Pasteur

The markets rebounded off of three month lows last week.   The rally was a continuation the previous Friday’s upturn in a response to the aura of bipartisanship.  The focus was on negotiation rather than brinkmanship.  Concerns about European sovereign debt were ignored as the focus remained on Washington. The volume was very low during the shortened trading week leading some market technicians to characterize the market as over bought and hitting resistance.  Follow or ignore the pundits at yoru own risk.

The Dow Jones Industrial Average (DJIA) was up 3.35%, gaining 421.38 points to close at 13,009.68.  The S&P 500 closed at 1,409.15 up nearly 50 points or a gain of 3.62%.   The tech-heavy NASDAQ 100 (NDX) reflected gains in APPLE by closing at 2,639.59, a gain of 105.43 points or plus 4.16%.  The Russell 2000 (RUT) closed at 806.76  – a gain of 32.78 points or up 4.24%.  The S&P 100 (OEX) gained 3.88% , or 24.01  points,  to close 643.04. The VIX and other volatility indexes reflected the major gains in the markets.

The civility between the different political groups in the U.S. Congress lead to across the board decreases in implied volatility.  The VIX closed last week at 15.14 – a decrease of 18.65%.  Volatility measurements for the other indexes showed similar losses compared to the previous week.  The one exception was the VXD – the volatility index for the Dow Jones Industrials.  Multiple sources showed the VXD closing at 18.64%..  This appears to be an incorrect calculation. It is highly unlikely the VXD went up went all other volatility indexes went down.  Luckily this index is not trade in any markets.

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

Index

Close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

13,009.68

421.38

3.35%

6.48%

18.64% (VXD)

S&P 500 (SPX)

1,409.15

49.27

3.62%

12.05%

15.14% (VIX)

NASDAQ 100 (NDX)

2,639.59

105.43

4.16%

15.88%

16.21% (VXN)

Russell 2000 (RUT)

806.76

32.78

4.24%

8.89%

17.85% (RVX)

S&P 100 (OEX)

643.04

24.01

3.88%

12.66%

15.41%(VXO)

CBOE Volatility Index (VIX)

15.14

-3.47

-18.65%

NA

I am still wary.  When I am uncomfortable with a market I reduce my trading size and the length of time I hold a trade.  I need to continually remind myself to not focus on opportunities missed.  I look at reduced size and exposure to the vagaries of the market as risk avoided,  The last encounter with the fiscal cliff led to a sell off of nearly 7% in the broad based indexes.  This was very painful for non-directional or range traders.   Other traders and investors have widely divergent viewpoints.  It is important to trade in one’s own comfort zone.  I do best when I do not worry about buying market bottoms or selling market tops.

There is a plethora of economic announcements this week. Manufacturing numbers from regional federal reserves, housing prices, and consumer confidence are in the forefront.  Rumors from Washington will dominate market sentiment.   Europe will remain the wild card. The quarterly earnings announcements have basically ended.  I have expanded the information to include the previous week’s closing price for each individual equity , the current 30 day implied volatility for the options (IV30), the time of the announcement (Before , After or During), and consensus earnings per share (XEPS.)  I have scanned the pending announcements to include optionable stocks trading above $20 with an implied volatility greater than 20 and average daily volume exceeding 200 contracts.    This information provides crucial first pass information – liquidity and relative price – for those trading earning announcements.   You should confirm any information provided in this blog.  Events, dates and times can and will change.

Trade with a plan.  Know where you will adjust or close positions.  Remain disciplined.

Remember:

  “Chance favors the Prepared Mind.” – Louis Pasteur

This week’s economic news (All times are Eastern Daylight Time.) Events, dates and times are subject to change:

Monday November 26:

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

Other:

Earnings:

Symbol

Company Name

Nov 16 close

IV30

B/A

XEPS

SDRL Seadrill Limited

$38.88

22.1

B

$0.67

Tuesday November 27:

Economic:  ISCS – Goldman Sachs Retail Sales – 7:45, Durable Goods Orders – 8:30, Redbook – 8:55, S&P Case-Shiller Home Price Index (HPI) – 9:00, Conference Board Consumer Confidence – 10:00, FHFA House Price Index – 10:00, Richmond Fed Manufacturing Index – 10:00, State Street Investor Confidence – 10:00.

Other:  Dallas Federal Reserve Bank President Richard Fisher speaks at the Hyman Minsky Conference on Financial Instability – 6:00 AM,  Atlanta Federal Reserve Bank Pres. Dennis Lockhart speaks to the Levy Institute Hyman Minsky Conference on Financial Stability – 6:30 AM, .Federal Reserve Chairman Ben Bernanke to deliver brief welcoming remarks at the National College Fed Challenge Finals – 8:30.

Earnings:

Symbol

Company Name

Nov 16 close

IV30

B/A

XEPS

ADI Analog Devices Inc.

$40.11

26.5

A

$0.57

CPRT Copart Inc.

$30.25

25.2

A

$0.36

FMCN Focus Media Holding Ltd.

$24.31

39.1

A

$0.57

GMCR Green Mountain Coffee Roasters Inc.

$27.77

100.3

A

$0.47

 

Wednesday November 28:

Economic:  MBA Purchase Applications – 7:00, New Home Sales – 10:00, EIA Petroleum Status Report – 10:30, Beige Book – 2:00.

 

Other:   Cleveland Federal Reserve Bank President Sandra Pianalto scheduled to speak to the Global Interdepence Center forum on “The Global Financial Crisis: Lessons from Japan” along with Christian Noyer, Governor of the Bank of France, Federal Reserve Governor  Daniel Tarullo speaks delivers the Yale School of Management Leaders Forum Lecture on the “Regulation of Foreign Banking Organizations” -12:15.

Earnings: 

Symbol

Company Name

Nov 16 close

IV30

B/A

XEPS

ANN AnnTaylor Stores Corp.

$34.06

50.1

B

$0.74

GES Guess? Inc.

$24.21

51.4

A

$0.44

JOSB Jos. A Bank Clothiers Inc.

$48.24

41.3

B

$0.55

WDAY Workday, Inc.

$51.95

54.6

B

-$0.56

 

Thursday November 29:

Economic:  Chain Store Sales, Gross Domestic Product (GDP) – 8:30, Jobless Claims – 8:30, Corporate Profits – 8:30, Bloomberg Consumer Comfort Index – 9:45Pending Home Sales Index – 10:00, EIA Natural Gas Report – a0:30m Kansas City Fed Manufacturing Index – 11:00.

Other:  Dallas Federal Reserve Bank Pres. Richard Fisher speaks at the Goethe University of Frankfurt, Germany, at the “Monetary and Fiscal Challenges in the United States and the Euro Area” 

Earnings:

Symbol

Company Name

Nov 16 close

IV30

B/A

XEPS

KR Kroger Co.

$24.65

24.0

B

$0.43

TIF Tiffany & Co.

$61.23

35.3

B

$0.62

ULTA Ulta Salon Cosmetics & Fragrance Inc

$90.52

39.3

A

$0.56

 

 

Friday November 30:

Economic:  Personal Income and Outlays – 8:30, Chicago PMI – 9:45, Farm Prices – 3:00. 

Other:  Minneapolis Federal Reserve Bank Pres. Naryana Kocherlakota speaks in Boston at the Boston Fed and Boston University Conference on Macro-Finance Linkages – 5:00.

Earnings: 

Symbol

Company Name

Nov 16 close

IV30

B/A

XEPS

BIG Big Lots Inc.

$27.61

47.1

B

-$0.24

 

 

Monday December 3:

Economic:   PMI Manufacturing Index = 8:45, ISM Manufacturing Index – 10:00, Construction Spending – 10:00

Earnings: None meeting criteria

 

 

 

 

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