The Prepared Mind 4.8.2013

“Chance favors the prepared mind.”

Last week was a mixed bag.  The focus was on the Bank of Japan’s plan to double their monthly purchases of JGB’s, a mixed bag of US employment reports, and bellicose rumblings from the Korean peninsula.  Small-cap stocks, as tracked by the Russell 2000 (RUT) were down nearly 3%.  Large cap stocks are conflicted.  While essentially unchanged, the S&P 500 (SPX) has a string of 12 consecutive days of being able to trade in the same direction on consecutive days.  Bulls and Bears interpreted the market behavior and response to economic and political winds in a predictable manner.  Each said the market behavior for the week supported their individual theories for the future.  The bulls characterize any downdraft in response to news as “an excuse to have a little bit of a selloff.” Bears, of course, use the same data as proof positive the sky is falling.

The broad-based indexes, with the exception of the RUT, all showed modest losses. The NDX closed at 2,771.75, a loss of 46.94 points or -1.67%.  Much of the loss can be attributed to F% (FFIV) tumbling nearly 20%.  The Russell 2000 (RUT) closed at 922.03 losing 27.44 points or a loss of 2.89%.  The Dow Jones Industrial Average (DJIA) lost 13.29 point or -0.09%,    The S&P 500 (SPX) closed at 1,553.28 down 15.91 points or a loss of 1.01%.  The S&P 100 (OEX) lost 4.98 points to close at 699.49 – a loss of 0.71%..  The VIX and the other volatility indexes were up  for the week.  At times the cash volatility indexes were up strongly.   Theses volatility levels reflected market concern about the state of the economy and North Korea.  The VIX closed last week at 13.92, gain of 1.22  or a weekly gain of 13.92%.  Here is a capsule view of last week’s market numbers:

Index

Close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

14,565.25

-13.29

-0.09%

11.15%

12.54% (VXD)

S&P 500 (SPX)

1,553.28

-15.91

-1.01%

8.91%

13.92% (VIX)

NASDAQ 100 (NDX)

2,771.75

-46.94

-1.67%

4.16%

15.52% (VXN)

Russell 2000 (RUT)

922.03

-27.44

-2.89%

8.29%

18.20% (RVX)

S&P 100 (OEX)

699.49

-4.98

-0.71%

8.18%

13.87%(VXO)

CBOE Volatility Index (VIX)

13.92

1.22

9.61%

NA

 

Any number of announcements will have the ability to move the markets.  All eyes will be on North Korea.  It remains to be seen how far they are willing to take their current posturing, North Korea has the 5th largest standing army in the world.  They do not need nuclear weapons to create chaos.  Additional focus will on Ben Bernanke’s speech on Monday, the release of the FOMC minutes on Wednesday, weekly jobless claims on Thursday, and the meeting of European Finance Ministers on Friday.  Eurozone and Japanese markets remain a wild card.  New guidance from companies in advance of scheduled earnings announcements can have the potential to spook the US market.

The earnings season kicks off this week with Alcoa (AA) announcing on Monday after the markets close.  In addition to Alcoa, the announcements include:  Zep, Pep Boys, Family Dollar, Bed Bath & Beyond, CarMax, JB Hunt, and JPMorgan Chase. IMPORTANT: Earnings announcements start trickling in this week with a full slate of announcements the following weeks.  These announcements can increase the prices and implied volatility of individual options. You should be aware of the earnings date for any equities you trade.   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.  It is your responsibility to confirm the earnings dates. 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 April 8:

Economic:  None scheduled.

Other: Fed Chairman Ben Bernanke gives speech at the Atlanta Fed’s financial-markets conference on “Maintaining Financial Stability: Holding a Tiger by the Tail.” German Industrial Production

Optionable Earnings:

Symbol

Company Name

April 5 close

IV30

B/A

XEPS

AZZ AZZ incorporated

$46.28

39.9

B

$0.49

AA Alcoa

$8.24

34.0

A

$0.10

Tuesday April 9:

Economic:   NFIB Small Business Optimism Index – 7:30, ICSC-Goldman Sachs Retail Sales – 8:30, Redbook – 8:55 , Wholesale Trade – 10:00.

Other:  Richmond Fed President Jeffrey Lacker speaks about “Ending Too Big to Fail Is Going to Be Hard Work” at Global Society of Fellows conference at University of Richmond. UK Industrial Production, China PPI, Chia CPI.

Optionable Earnings:  None meeting criteria

Wednesday April 10:

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

Other:  Minutes from Fed March FOMC meeting released.  French Industrial Production

Optionable Earnings:

Symbol

Company Name

April 5 close

IV30

B/A

XEPS

KMX CarMax Inc.

$41.11

35.4

B

$0.45

STZ Constellation Brands Inc.

$48.25

42.7

B

$0.45

FDO Family Dollar Stores Inc.

$59.50

34.4

B

$1.22

FAST Fastenal Co.

$49.35

29.7

B

$0.37

TITN Titan Machinery Inc

$26.36

53.5

B

$0.90

BBBY Bed Bath & Beyond Inc.

$64.67

36.5

A

$1.68

 

Thursday April 11:

Economic:  Chain Store sales, Jobless Claims – 8:30, Import and Export Prices – 8:30, Bloomberg Consumer Comfort Index – 9:45, EIA Natural Gas Report – 10:30.

Other: 

Optionable Earnings: None meeting criteria

 

 

Friday April 12:

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

Other:  EU finance ministers meet in Dublin.  Eurozone Industrial Production

Optionable Earnings:

Symbol

Company Name

April 5 close

IV30

B/A

XEPS

WFC Wells Fargo & Company

$37.42

20.7

B

$0.87

JPM JPMorgan Chase & Co

$47.49

23.1

B

$1.36

INFY Infosys Technologies Ltd.

$52.55

43.3

B

$0.74

 

 

Monday April 15:

Economic:  Empire State Manufacturing – 8:30, Treasury International Capital – 9:00, Housing Market index – 10:00.

Optionable Earnings:

Symbol

Company Name

April 5 close

IV30

B/A

XEPS

C Citigroup Inc.

$42.77

29.3

B

$1.22

 

 

 

 

 

 

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