The Prepared Mind 5.13.2013

The upward trend continues. The S&P 500 (SPX) and the Dow Jones Industrials (DJIA) set multiple record closes and intraday trading highs.  These markets are confounding the professionals.  A leading technical analyst at one of the major investment banks told me “This market is on crack.”  When I pressed him for more a more detailed analysis he repeated his blunt statement.  The message I carried away from this encounter is that, like crack addicted individual, this market cannot be trusted.  The financial media is very focused on the possibilities of the equity markets.

The headlines in the week’s BARRON’S give us a hint of the confusion afflicting observers of and participants in the financial markets.  Here is a partial list:  “Searching for Signs of a Market Top”, “How to Protect Your Winnings”, “New Leaders Drive the Bull’s Charge”, “Record Dow:  Where’s the Euphoria? We don’t see it yet”, and “The Stock Market is losing its Base of Support”.  Other media outlets are publishing articles with similar and sometimes conflicting sentiments. At times I am reminded by the mantra of one of the best traders I have ever known, “What is the market going to do? It’s going to break as many hearts as possible in the shortest possible time.”  Be wary.

This week’s star performer for the week was the Russell 2000 (RUT).   The RUT reflected the past week’s decision to make small caps the flavor of the week by gaining 2.26% – up 21.49 points to close at 974.17.  The Dow Jones Industrials (DJIA) closed at above 15,000 by closing at 15,118.49 gaining 0.97% or 144.53 points.  The S&P 500 (SPX) closed at 1,633.70 – up 19.28 points or a gain of 1.19%.  The S&P 100 (OEX) closed at 732.85 – gaining 0.99% or 7.20 points..  The VIX and the other volatility indexes were down for the week.  These levels reflect the current lack of concern about downside risk.  The VIX closed last week at 12.59 – a loss  of 0.26 – a weekly loss of 2.02%.  The other volatility measurements showed equal or greater losses.  Here is a capsule view of last week’s market numbers:

Index

Close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

15,118.49

144.53

0.97%

15.37%

11.64% (VXD)

S&P 500 (SPX)

1,633.70

19.28

1.19%

14.55%

12.59% (VIX)

NASDAQ 100 (NDX)

2,981.02

36.43

1.24%

12.03%

14.34% (VXN)

Russell 2000 (RUT)

974.17

21.49

2.26%

14.42%

17.82% (RVX)

S&P 100 (OEX)

732.85

7.20

0.99%

13.34%

11.63%(VXO)

CBOE Volatility Index (VIX)

12.59

-0.26

-2.02%

NA

This earnings cycle has ended.  The emphasis switches to a plethora of economic news this week.  Major reports include:   April Retail Sales, March Business Inventories, April Import Prices, April PPI, April Industrial Production April Capacity Utilization, April CPI, April Housing Starts, May Philadelphia Fed Survey and the April Leading Indicators.  The markets are anxiously awaiting the PPI and CPI numbers. “Speechifying” by members of the Federal Reserve Board will continue this week.  Expect a continuation of parsing of their words by the financial talking heads. These speeches will be closely examined in an attempt to predict future Fed behavior.

 

You must be aware of the dividend ex dates for the stocks you trade.  Any option with short in-the-money calls should be examined closely to assess the potential of early assignment of short calls.  Some examples of the stragies include call butterflies, call vertical credit spreads , and call calendars.  Also 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 May 13:  

Economic:  Retail Sales – 8:30, Business Inventories – 10:00. Ameritrade IMX – 12:30.

Optionable Earnings:

Symbol

Company Name

May 10 close

IV30

B/A

XEPS

SSYS Stratasys Inc.

$82.20

51.7

B

($0.16)

CPA Copa Holdings SA

$129.20

27.6

A

$2.31

DDS Dillard’s Inc.

$86.15

30.7

A

$2.04

IOC Interoil Corp.

$73.56

75.6

A

($0.13)

NTI Northern Tier Energy LP

$25.94

50.7

A

$1.14

POST Posts Holings, Inc.

$45.64

25.2

A

$0.27

SCTY Solarcity Corporation

$26.47

88.7

A

($0.36)

 

Tuesday May 14:

Economic:   NFIB Small Business Optimism Index – 7:30, ICSC-Goldman Sachs Retail Sales – 8:30,  , Import and Index Prices – 8:30, Redbook – 8:55.

OtherPhiladelphia Federal Reserve Bank President Charles Plosser speech on the economic outlook to SNS in Stockholm – 2:00 AM.

Optionable Earnings:  

Symbol

Company Name

May 10 close

IV30

B/A

XEPS

A Agilent Technologies Inc.

$43.16

31.0

A

$0.67

VIPS Vipshop Holdings Limited

$33.76

80.7

A

$0.00

EXP Eagle Materials Inc.

$70.73

37.2

A

$0.40

 

Wednesday May 15:

Economic:  MBA Purchase Applications – 7:00, Producer Price Index (PPI) – 8:30, Empire State Manufacturing Survey – 8:30, Treasury International Capital – 9:00, Industrial Production – 9:15, Housing Market Index – 10:00, E-Commerce Retail Sales – 10:00, EIA Petroleum Status Report – 10:30.

Other:

Optionable Earnings:

Symbol

Company Name

May 10 close

IV30

B/A

XEPS

CSC Computer Sciences Corp.

$48.83

37.1

B

$0.97

DE Deere & Co.

$92.19

22.0

B

$2.74

M Macy’s Inc.

$46.45

24.7

B

$0.53

CSCO Cisco Systems Inc.

$20.83

25.9

A

$0.45

JACK Jack in the Box Inc

$37.17

26.7

A

$0.31

NTES Netease.com Inc.

$58.57

36.3

A

$1.17

 

Thursday May 16:

Economic:  Consumer Price Index (CPI) – 8:30, Housing Starts – 8:30. Weekly Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, Philadelphia Fed Survey – 10:00, EIA Natural Gas Report – 10:30.

Other:  Philadelphia Federal Reserve Bank President Charles Plosser speech on the economic outlook in Milan – 3:45 AM,  Boston Federal Reserve Bank President Eric Rosengren speech on the impact of austerity on monetary policy, in Milan – 7:45,   Dallas Federal Reserve Bank President Richard Fisher speech on monetary policy at NABE energy conference in Houston, Texas – 9:00,  Federal Reserve Bank Gov. Sarah Bloom Raskin speech on prospects for recovery to National Economists Club in Washington – 12:30,   San Francisco Federal Reserve Bank President John Williams speech on the economy in Portland, Oregon – 2:30.

Optionable Earnings:

Symbol

Company Name

May 10 close

IV30

B/A

XEPS

ALKS Alkermes Inc.

$29.91

48.0

B

$0.18

FLO Flowers Foods Inc.

$32.42

28.7

B

$0.41

KSS Kohl’s Corp.

$48.21

28.1

B

$0.59

ADSK Autodesk Inc.

$39.75

34.2

A

$0.35

JWN Nordstrom Inc.

$58.49

21.4

A

$0.76

SINA Sina Corp.

$57.54

46.0

A

($0.11)

VSAT ViaSat Inc.

$56.52

42.9

A

($0.17)

 

 

 

 

Friday May17:

Economic:  University of Michigan/Reuters Consumer Sentiment – 9:55, Leading Indicators – 10:00.

Other:   Minneapolis Federal Reserve Bank President Narayana Kocherlakota on panel on monetary policy and financial regulation at the University of Chicago Booth School – 1:45

Optionable Earnings: None meeting criteria

 

 

Monday May 20:

Economic:  TD Ameritrade IMX – 12:30.

Optionable Earnings:

Symbol

Company Name

May 10 close

IV30

B/A

XEPS

MBT Mobile Telesystems OJSC

$20.26

24.6

B

 
QIHU Qihoo 360 Technology Co., Ltd.

$38.88

51.7

B

$0.02

URBN Urban Outfitters Inc.

$43.39

33.8

A

$0.29

 

 

 

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