The Prepared Mind 3.18.2013

“Chance favors the prepared mind.” — Louis Pasteur

The Dow Jones Industrials (DJIA) continued to set new records.  In fact, it set new highs the first four days of the past week and the last four days of the previous week.  Friday’s close ended eight straight days of record closing highs.  The DJIA showed gains for ten consecutive days – behavior not seen since 1996.  The financial media relegated “Fearcasting” to the past, and have donned cheerleading garb and cheering for the market to break the record streak of fourteen straight positive days.  The cheering was joined late last week by Alan Greenspan who declared on “Squawk Box” that he sees no “irrational exuberance” in today’s markets.  He went on to declare the equity markets as “significantly undervalued.”  The focus is now on the S&P 500 which is less than five points from its all-time closing high of 1,565.  Friday’s sell off was in response to a fall in the University of Michigan/Reuters Consumer Sentiment Index and less than positive economic data.  The 0.7% increase for the CPI reflected higher gas and food prices combined with an increase in payroll taxes were cited as the reasons for the lowered consumer confidence.

The broad-based indexes, with the exception of the NASDAQ 100 (NDX), showed gains approaching 1%. The NDX closed at 2,799.41, a loss of 4.70 points or -0.17%.   The Russell 2000 (RUT) led the way gaining 1% to to close at 960.84.  The Dow Jones Industrial Average (DJIA) gained 117.04 points or 0.81%,    The S&P 500 (SPX) closed at 1.560.70, up 9.52 points or a gain of 0.61%.  The S&P 100 (OEX) gained 3.48 points to close 701.75 – plus 0.50%.  The VIX and the other volatility indexes closed at 5 year weekly lows.  Theses lows reflected gains in the overall market.  The VIX closed last week at 11.68, a decrease of 1.29 points or a weekly loss of 10.25%.  Here is a capsule view of last week’s market numbers:

Index

Close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

14,514.11

117.04

0.81%

10.76%

10.08% (VXD)

S&P 500 (SPX)

1,560.70

9.52

0.61%

9.43%

11.30% (VIX)

NASDAQ 100 (NDX)

2,799.41

-4.70

-0.17%

5.20%

12.03% (VXN)

Russell 2000 (RUT)

950.84

9.60

1.02%

11.68%

14.30% (RVX)

S&P 100 (OEX)

701.75

3.48

0.50%

8.53%

10.90%(VXO)

CBOE Volatility Index (VIX)

11.30

-1.29

-10.25%

NA

The market focus will be on the FOMC meeting starting on Tuesday. The format of the meetings and the announcement have changed from previous FOMC.   The Fed now releases economic projections quarterly (March, June, September, and December). Previously, Fed forecasts covered GDP, the PCE price index, and the civilian unemployment rate. The new forecast report will include forecasts for the appropriate timing of the next change in the fed funds rate and the expected fed funds rate at the end of the next two years. Starting this Wednesday, the forecasts will be released at the same time as the FOMC statement at 2:00 EDT. Ben Bernanke will address the forecasts and Fed policy in general in a press conference at 2:30 EDT.  The press conference will be the Fed Chairman’s quarterly explanation of the FOMC’s latest quarterly economic projections. The “introduction of regular press briefings is intended to further enhance the clarity and timeliness of the Federal Reserve’s monetary policy communication,” and to provide additional context for the FOMC’s policy decisions It will be very interesting to see how this new transparency and additional information will affect financial markets.  Be aware of this announcement and its new format. Most traders will refrain from opening new long term positions during the hours leading up to the announcement.

The earnings cycle is very quiet..  .  Companies making earnings announcements are highlighted by Oxford Industries, Williams-Sonoma, Adobe Systems, Lennar, Guess?, FedEx, Oracle, Nike, KB Home, TIBCO Software, and Tiffany & Co.  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.  Continue to be wary of trading any products where there is not adequate liquidity and narrow enough markets.  You should be aware of daily volume and open interest in any products you trade.   I am including a consensus earnings estimate for each stock.  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 March 18:

Economic:  Housing Market Index – 10:00.

Other: European Union Balance of Trade.

Optionable Earnings: None meeting criteria

Tuesday March 19:

Economic:  ICSC-Goldman Sachs Retail Sales – 8:30, Housing Starts – 8:30, Redbook – 8:55

Other:  FOMC Meeting begins.  UK CPI and PPI.

Optionable Earnings:  

Symbol

Company Name

Mar 15 close

IV30

B/A

XEPS

DSW DSW Inc.

$68.54

32.3

B

$0.72

FDS FactSet Research Systems Inc.

$100.48

29.2

B

$1.12

RNF Rentech Nitrogen Partners L.P.

$37.50

32.6

B

$0.81

WAC Walter Investment Management Corp

$42.28

41.5

B

$0.53

ADBE Adobe Systems Inc.

$41.62

25.6

A

$0.20

FRAN Francescas Holdings

$28.19

68.4

A

$0.30

FNV Franco-Nevada Corporation

$47.15

29.1

A

$0.36

WSM Williams-Sonoma Inc.

$45.03

33.2

A

$1.28

 

Wednesday March 20:

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

Other:  FOMC Meeting Announcement – 2:00, FOMC Quarterly Forecasts – 2:00, Fed Chairman Ben Bernanke Press Conference – 2:30.   German PPI, Japanese Industry Index.

Optionable Earnings:

Symbol

Company Name

Mar 15 close

IV30

B/A

XEPS

FDX FedEx Corporation

$108.84

20.5

B

$1.38

LEN Lennar Corp.

$41.94

30.9

B

 
GES Guess? Inc.

$27.41

45.2

A

$0.86

ORCL Oracle Corp.

$36.30

20.2

A

$0.63

 

Thursday March 21:

Economic:  Jobless Claims – 8:30, PMI Manufacturing Index Flash – 8:58, FHFA House Price Index – 9:00, Bloomberg Consumer Comfort Index – 9:45, Exiting Home Sales – 10:00. Philadelphia Fed Survey – 10:00, Leading Indicators – 10:00, EIA Natural Gas Report – 10:30.

Other:  UK Retail Sales.

Optionable Earnings:

Symbol

Company Name

Mar 15 close

IV30

B/A

XEPS

LEN Lennar Corp.

$41.94

30.9

B

 
GES Guess? Inc.

$27.41

45.2

A

$0.86

ORCL Oracle Corp.

$36.30

20.2

A

$0.63

SLW Silver Wheaton Corp.

$30.64

34.3

A

$0.49

TIBX Tibco Software Inc.

$23.86

45.0

A

$0.11

 

Friday March 22:

Economic:  No major announcements.

Optionable Earnings:

Symbol

Company Name

Mar 15 close

IV30

B/A

XEPS

TIF Tiffany & Co.

$69.09

32.6

B

$1.37

 

Monday March 25:

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

Optionable Earnings:

Symbol

Company Name

Mar 15 close

IV30

B/A

XEPS

DG Dollar General Corp.

$48.77

29.8

B

$0.93

 

 

 

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