The Prepared Mind 5.20.2013

“And the beat goes on.” — Sonny and Cher

The beat does continue to go on and the drums are telling us it is a bull market.  How long has it taken for this to be beaten into our collective brains? Good economic news and increasing consumer confidence led to a new round of record highs in the equities.  On Thursday background noise about the possibility of the Fed discontinuing quantitative easy resulted in a 1% sell-off in the leading equity indexes.  The week finished very strongly on Friday with the Conference Board Leading Indicators and the University of Michigan/Reuters Consumer Index hitting multi-year highs.   Market pundits are talking about bears throwing in the towel.  The talk on financial media outlets discussed Dow 16.000, SPX 1,700, and RUR 1,000.  The largest rallies in individual stocks are the result of traders covering short interest in specific stocks.  There was a near absence of the omnipresent “fearcasting”.  Are we starting to see the glimmer of euphoria indicating the last leg of the bull market?

None of the individual equity indexes can be singled out as the star performer for the week.  All of them showed similar gains ranging from 1.5% to 2.0%..   The RUT reflected the focus on small caps by gaining 2.04% – up 19.84 points to close at 994.01.  The Dow Jones Industrials (DJIA) closed at 15,354.40 gaining 1.56% or 235.91 points.  The S&P 500 (SPX) closed at 1,666.12 – up 32.42 points or a gain of 2.04%.  The S&P 100 (OEX) closed at 746.75 – gaining 1.90% or 13.90 points..  The VIX and the other volatility indexes were down slightly for the week.  It appears the different volatility indexes have found a short-term support level.  These levels reflect the current lack of concern about downside risk.  The VIX closed last week at 12.45 – a loss of 0..14 – a weekly loss of 1.11%.  The other volatility measurements showed similar moves of minimal magnitude.  Here is a capsule view of last week’s market numbers:

Index

Close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

15,354.40

235.91

1.56%

17.17%

11.45% (VXD)

S&P 500 (SPX)

1,666.12

32.42

1.98%

16.82%

12.45% (VIX)

NASDAQ 100 (NDX)

3,028.96

47.94

1.61%

13.83%

13.30% (VXN)

Russell 2000 (RUT)

994.01

19.84

2.04%

16.75%

15.94% (RVX)

S&P 100 (OEX)

746.75

13.90

1.90%

15.49%

12.24%(VXO)

CBOE Volatility Index (VIX)

12.45

-0.14

-1.11%

NA

 

 

 

Be prepared for the long Memorial Day weekend.  Wednesday is the big day for the week.   The absence of any significant earnings announcements switches the focus to Ben Bernanke’s congressional update about the economy on Wednesday.  The release of the minutes from the last
Fed meeting will be parsed for direction about the continuation of Fed financial  easing.   In addition, the Bank of Japan will make an announcement on future monetary policy.   The emphasis of the week’s economic reports will be housing.  The Dallas and Kansas City Feds will be releasing surveys on the state of manufacturing in their areas.  .

A number of stocks will be going ex dividend this week.  You must be aware of the dividend ex dates for the stocks you trade.  Any strategy with short in-the-money calls should be examined closely to assess the potential of early assignment of short calls.  Ignorance of the dividend dates may result in creating a taxable event if long stock positions are inadvertently closed, margin or capitals calls to cover short stock positions, or a short position in accounts not approved for these types of positions.  Some examples of the strategies include covered writes, call butterflies, call vertical credit spreads , and call calendars.  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.  Singles and Doulbe – home runs are not needed.

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 20:  

Economic:  Chicago Fed National Activity Index – 8:30.

Other:  Markets closed in Canada, Austria, and Switzerland,

Optionable Earnings:

Symbol Company Name

May 17 close

IV30 B/A XEPS
QIHU Qihoo 360 Technology Co., Ltd.

$40.80

57.0

B

$0.02

URBN Urban Outfitters Inc.

$43.64

35.8

A

$0.29

 

Tuesday May 21:

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

OtherGermany PPI, UK CPI and PPI.

Optionable Earnings:  

Symbol Company Name

May 17 close

IV30 B/A XEPS
AZO AutoZone Inc.

$413.50

24.7

B

$7.22

BBY Best Buy Co. Inc.

$25.90

59.8

B

$0.25

DKS Dicks Sporting Goods Inc.

$52.35

30.6

B

$0.48

MNRO Monro Muffler Brake Inc.

$44.49

33.6

B

$0.25

RRGB Red Robin Gourmet Burgers Inc.

$49.22

46.9

B

$0.65

TDW Tidewater Inc.

$56.80

29.0

B

$0.61

TJX TJX Companies Inc.

$50.76

21.0

B

$0.52

ADI Analog Devices Inc.

$46.50

20.3

A

$0.52

INTU Intuit Inc.

$59.85

24.7

A

$2.85

NTAP Network Appliance Inc.

$38.46

37.2

A

$0.54

 

Wednesday May 22:

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

Other:  Federal Reserve Chairman Ben Bernanke will testify on the outlook for the U.S. economy before the Joint Economic Committee of Congress – 10:00, FOMC minutes – 2:00.  Bank of Japan issues interest-rate decision

Optionable Earnings: 

Symbol Company Name

May 17 close

IV30 B/A XEPS
LOW Lowes Companies Inc.

$42.76

28.5

B

$0.51

TOL Toll Brothers Inc.

$36.13

33.2

B

$0.07

GES Guess? Inc.

$29.69

41.9

A

$0.08

HPQ Hewlett-Packard Co.

$21.36

42.9

A

$0.85

LTD L Brands, Inc.

$50.49

26.7

A

$0.16

PETM Petsmart Inc.

$69.18

29.2

A

$0.95

SMTC Semtech Corp.

$36.28

31.4

A

$0.38

WDAY Workday, Inc.

$67.21

44.8

A

($0.23)

 

 

Thursday May 23:

Economic:  Weekly Jobless Claims – 8:30, PMI Manufacturing Index Flash – 8:58, FHFA House Price Index – 9:00, Bloomberg Consumer Comfort Index – 9:45, April New Home Sales- 10:00, EIA Natural Gas Report – 10:30, Kansas City Fed Manufacturing Index – 11:00..

Other:  UK GDP, China Flash Manufacturing PMI.

Optionable Earnings:

Symbol Company Name

May 17 close

IV30 B/A XEPS
AAP Advance Auto Parts Inc.

$85.42

27.4

B

$1.61

ALKS Alkermes Inc.

$30.33

48.2

B

$0.18

DLTR Dollar Tree Stores Inc.

$49.75

28.6

B

$0.57

GME GameStop Corp.

$38.05

48.7

B

$0.40

RL Polo Ralph Lauren Corp.

$184.80

29.6

B

$1.30

ROST Ross Stores Inc.

$64.88

25.2

B

$1.07

SHLD Sears Holdings Corporation

$57.54

53.6

B  
PLCE The Childrens Place Retail Stores Inc.

$50.22

38.7

B

$0.62

GPS Gap Inc.

$40.59

30.5

A

$0.69

CRM Salesforce.com

$46.15

38.8

A

($0.01)

WSM Williams-Sonoma Inc.

$55.11

31.3

A

$0.36

 

 

 

 

Friday May24:

Economic:  April Durable Goods Orders – 8:30, 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:

Symbol Company Name

May 17 close

IV30 B/A XEPS
ANF Abercrombie & Fitch Co.

$53.32

48.0

B

($0.05)

FL Foot Locker Inc.

$36.40

28.7

B

$0.87

 

 

Monday May 27:

Memorial Day – All U.S. Markets Closed

 

Tuesday May 28:

Economic:  S&P Case-Shill Home Price Index – 9:00, Consumer Board Consumer Confidence -10:00, Richmond Fed Manufacturing Index – 10:00, State Street Investor Confidence  Index – 10:00, Dallas Fed Manufacturing Survey – 10:30.

Other:   

Optionable Earnings:

Symbol Company Name

May 17 close

IV30 B/A XEPS
SDRL Seadrill Limited

$39.90

25.3

B

$0.61

TIF Tiffany & Co.

$76.49

29.4

B

$0.53

CPRT Copart Inc.

$36.68

46.3

A

$0.50

ENS EnerSys

$48.78

28.7

A

$0.78

PVH Phillips-Van Heusen Corp.

$118.04

27.2

A

$1.37

 

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