The Prepared Mind 1.14.2013

“Chance favors the prepared mind.” — Louis Pasteur

It was a week of contradictions. Domestic and international equity markets moved sideways last week despite indexes reaching five year highs for the second straight week.  In addition, the equity markets saw the second largest weekly influx of capital of all time.  The net result was not a continuation of the rally, but rather a holding pattern in anticipation of a full week of economic reports and corporate earnings,

Small cap stocks again outperformed the big caps last week. The RUT closed at 880.19,a gain of 0.48% on top of last week’s gain of 5.75%.  The Dow Jones Industrial Average (DJIA) gained 53.22 points, or 0.40%, to close at 13,488.43.  The S&P 500 closed at 1,472.05, up 5.58 points or a gain of 0.38%.  The S&P 100 (OEX) gained 0.48%, or 3.19 points, to close 6647.88.  The NDX closed at 2,748.26, a gain of 23.77 points or 0.87%. The VIX and other volatility indexes reflected a cosmic sigh of relief. The VIX closed the week at 5 year lows.   The VIX closed last week at 13.36, a decrease of 0.47 points or a weekly loss of 3.40%.  The cash VIX reflects a lack of concern about market volatility in the short term. The other volatility indexes reflected the same lack of concern and reflected similar movement for the week.  Here is a capsule view of last week’s market numbers:

Index Close Weekly Change % Weekly % YTD Volatility of  Index
Dow Jones Industrials (DJIA) 13,488.43 53.22 0.40% 2.93% 12.36% (VXD)
S&P 500 (SPX) 1,472.05 5.58 0.38% 3.22% 13.36% (VIX)
NASDAQ 100 (NDX) 2,748.26 23.77 0.87% 3.28% 15.87% (VXN)
Russell 2000 (RUT) 880.19 4.01 0.46% 3.38% 16.69% (RVX)
S&P 100 (OEX) 667.88 3.19 0.48% 3.29% 13.32%(VXO)
CBOE Volatility Index (VIX) 13.36 -0.47 -3.40% NA

Economic reports will have the ability to move the market this coming week.  The focus will be on inflation when December CPI and PPI are announced on Tuesday and Wednesday, respectively.  These reports will provide guidance for Fed behavior in the short term.  A number of regional Fed officials will be speaking this week.  Market pundits will parse these speeches in conjunction with the CPI, PPI numbers and regional Fed Manufacturing Indexes.

Q4 earnings announcements start in earnest this week and continue for the next three week.  I have scanned stocks with upcoming earnings using the following criteria:  Price > 20, 30 Day Implied Volatility > 20, and Average Daily Option Volume > 200 contracts.  Be wary of trading in equities where there is not adequate liquidity and narrow enough markets.  You should be aware of daily volume and open interest in the products you trade.

It is your responsibility to know the contract specifications of any product you trade.  These specifications are available at the websites for the individual exchanges.  Time is one of the most important variables in option trading.  The Options Industry Council provides an expiration calendar.  I use it multiple times per day.     The 2013 Calendar is available at http://www.optionsclearing.com/about/publications/expiration-calendar.jsp.  Print it out and put it on your bulletin board.

Stick with your plan.    Remain disciplined.  Remain on top of market news and movers.  Do not chase profits and disregard risk.

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 January 14:

Economic:  None scheduled.

Other:  San Francisco Federal Reserve Bank President John C. Williams keynote speech to the SEMI ISS 2013 Industry Strategy Symposium – 11:55, Atlanta Federal Reserve Bank President Dennis Lockhart speech on the economic outlook to the Rotary Club of Atlanta – 12:40, Federal Reserve Chairman Ben Bernanke speaks at University of Michigan in a conversation with Ford School Dean Susan M. Collins on monetary policy and the U.S. economy – 4:30.

Earnings:

Symbol

Company Name

Jan 11 close

IV30

B/A

XEPS

PPG PPG Industries Inc.

$141.77

23.2

B

$1.53

 

Tuesday January 15:

Economic:  ICSC-Goldman Sachs Store Sales – 7:45, December Producer Price Index (PPI) – 8:30, December Retail Sales – 8:30, January Empire State Manufacturing Survey – 8:30, Redbook – 8:55, November Business Inventories – 10:00.

Other:  Boston Federal Reserve Bank President Eric Rosengren speech on the economic outlook – 8:00, Minneapolis Federal Reserve Bank President Narayana Kocherlakota speech on Fed actions and the macroeconomy to the Financial Planners Association of Minnesota – 8:50, Philadelphia Federal Reserve Bank President Charles Plosser speech on the economic outlook to the 34th Annual Economic Seminar Rochester, NY – 9:30

Earnings:

Symbol

Company Name

Jan 11 close

IV30

B/A

XEPS

LLTC Linear Technology Corp.

$36.17

23.7

A

$0.40

LEN Lennar Corp.

$41.02

34.8

B

$0.43

FRX Forest Laboratories Inc.

$37.30

25.1

B

-$0.13

ADTN ADTRAN Inc.

$20.99

43.8

B

$0.07

 

Wednesday January 16:

Economic:  MBA Purchase Applications – 7:00, December Consumer Price Index(CPI) – 8:30, November Treasury International Capital – 9:00, December Industrial Production – 9:15, January Housing Market Index – 10:00, EIA Petroleum Status Report – 10:30, Beige Book – 2:00.

Other: Minneapolis Federal Reserve Bank President Narayana Kocherlakota speech on Fed actions and the macroeconomy (repeat of Jan. 15 speech) – 10:00, Dallas Federal Reserve Bank President Richard Fisher speech on too big to fail to the Committee for the Republic in Washington – 6:30.

Earnings:

Symbol

Company Name

Jan 11 close

IV30

B/A

XEPS

EBAY eBay Inc.

$53.00

33.0

A

$0.69

GS Goldman Sachs Group Inc.

$137.37

23.4

B

$3.31

JPM JPMorgan Chase & Co

$46.15

20.7

B

$1.20

BK The Bank of New York Mellon Corporation

$26.83

21.8

B

$0.54

CMA Comerica Inc.

$32.10

24.5

B

$0.64

NTRS Northern Trust Corp.

$52.41

22.4

B

$0.75

 

Thursday January 17:

Economic:  December Housing Starts – 8:30, Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, January Philadelphia Fed Survey – 10:00, EIA Natural Gas Report – 10:30.

Other:  Atlanta Federal Reserve Bank President Dennis Lockhart interview at a business forum in New York – 12:05.

Earnings:

Symbol

Company Name

Jan 11 close

IV30

B/A

XEPS

FAST Fastenal Co.

$46.50

25.3

B

$0.33

UNH Unitedhealth Group Inc.

$53.11

21.8

B

$1.20

INTC Intel Corp.

$21.80

24.5

A

$0.45

HDB HDFC Bank Ltd.

$40.38

28.1

A NA
APH Amphenol Corp.

$67.85

23.9

B

$0.90

ASML ASML Holding NV

$64.67

33.1

B

$0.77

BBT BB & T Corp.

$30.54

21.4

B

$0.70

XLNX Xilinx Inc.

$36.00

23.8

A

$0.37

C Citigroup Inc.

$42.83

28.9

B

$0.88

COF Capital One Financial Corp.

$62.87

25.3

A

$1.63

FCX Freeport-McMoRan Copper & Gold Inc.

$35.60

28.8

B

$0.80

 

Friday January 18:

Economic:  Reuter’s/University of Michigan Consumer Sentiment – 9:55.

Other:  Philadelphia Federal Reserve Bank President Charles Plosser speech on the economic outlook at New Jersey Economic Leadership Forum – 9:30.

Earnings:

Symbol

Company Name

Jan 11 close

IV30

B/A

XEPS

SLB Schlumberger Limited

$73.25

23.1

B

$1.09

JCI Johnson Controls Inc.

$31.49

24.9

B

$0.51

 

Monday January 21

All Markets Closed – Martin Luther King Jr. Day.

 

 

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