The Prepared Mind 6.3.2013

Greek Chorus

Bears still dominate the financial news.  Concerns run rampant about the future of quantitative easing.  Treasuries have reached the highest yields in over a year.  This led to the largest weekly losses for treasuries in over a year.  An increase in 30-year mortgage rates has led to concern about the ongoing recovery in housing and other related industry segments.     A narrative running through the CME bond room suggests that the Fed will let yields go to 3% and then work on fine tuning to achieve the desired results in the economy.   In May, gold was down 5.4% and silver was down nearly 8%.  Iron ore is down over 30% in the past four months.  Recent economic reports show China’s economy slowing down.

In between the  news flashes, the greek chorus is reminding us there “needs” to be a correction.  I have not been convinced by these market pundits that the correction has started.  For the second straight week, I would not view the week’s market performance as proof of a correction.

Beware of oracles of doom.  In May we saw the Dow Jones Industrial Average close up for the sixth straight month. The NASDAQ Composite has been up 7 months in a row.  Last Tuesday was the 20th consecutive Tuesday where the equity markets closed up.  Moody’s Investor Services changed its rating of the United States banking system from negative to stable. I have not seen proof the correction has started.   On the other hand, this may be the beginning of the long awaited correction.    The NASDAQ 100 (NDX) was the best performing index for the week.   The NDX closed at 2,981 down 9.26 points or a loss of 0.31%.  The RUT reflected the 17relative strength of small caps by losing only 0.38% – down 3.71 points to close at 981.17.  The Dow Jones Industrials (DJIA) closed at 15,115.57 losing 1.23% or 187.53 points.  The S&P 500 (SPX) closed at 1,630.74 – down 18.86 points or a loss of 1.14%.  The S&P 100 (OEX) closed at 733.63 – losing 8.79 points or 1.18%.  The VIX and the other volatility indexes reflected the “fearcasting” during last week.  The VIX closed last week at 16.30 – a gain of 2.31 or 16.51%.  The other volatility measurements showed similar volatility moves to the upside.  The volatility moves were indicative of the growing bearish sentiment.

 

Here is a capsule view of last week’s market numbers:

 

Index

Close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

15,115.57

-187.53

-1.23%

15.35%

14.23% (VXD)

S&P 500 (SPX)

1,630.74

-18.86

-1.14%

14.34%

16.30% (VIX)

NASDAQ 100 (NDX)

2,981.76

-9.26

-0.31%

12.06%

15.99% (VXN)

Russell 2000 (RUT)

981.17

-3.71

-0.38%

15.24%

21.16% (RVX)

S&P 100 (OEX)

733.63

-8.79

-1.18%

13.46%

15.82%(VXO)

CBOE Volatility Index (VIX)

16.30

2.31

16.51%

NA

 

The emphasis this week will be on jobs culminating with the May jobs report on Friday.  We may see the return of bad news is good news.  Disappointing employment numbers will be seen by many as an indication the Fed will continue to keep their foot on the pedal of easy money.  Strong employment numbers might bode ill for the markets if investors are convinced the end is near for quantitative easing.  I have added major international economic reports to the daily synopes.

During these times of no earnings announcements, it is easy to become oblivious to the impact of future announcements,  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.

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 June 3:

Economic: PMI Manufacturing Index – 8:58, May ISM Manufacturing Index – 10:00, April Construction Spending – 10:00.

International Economic:  EU PMI Manufacturing – 4:00 AM.

Other:   San Francisco Federal Reserve Bank President John Williams discusses paper on inflation targeting at Sveriges Riksbank conference in Stockholm – 7:20.

.Optionable Earnings:

Symbol Company Name

May 31 close

IV30

B/A

XEPS
CBRL Cracker Barrel Old Country Store

$89.47

29.9

B

$0.95

Tuesday June 4:

Economic:  Motor Vehicle Sale, ICSC – Goldman Sachs Store Sales – 7:45, April International Trade – 8:3, Redbook – 8:55.

International Economic:  EU PPI – 5:00 AM.

Other:   Federal Reserve Gov. Sarah Bloom Raskin on panel discussing job creation trends in Washington – 12;30,   Kansas City Federal Reserve Bank President Esther George speech on the economy in Santa Fe, New Mexico – 1:30, Dallas Federal Reserve Bank President Richard Fisher speech on monetary policy to the C.D. Howe Institute in Toronto – 8:00.

Optionable Earnings:

Symbol Company Name

May 31 close

IV30

B/A

XEPS
MFRM Mattress Firm Holding Corp.

$35.96

53.5

A

$0.37

 

 

Wednesday June 5:

Economic:  MBA Purchase Applications – 7:00, ADP Employment Report – 8:15, Q1 Productivity and Costs -8:30, April Factory orders – 10:00, ISM Non-manufacturing Index – 10:00, EIA Petroleum Status Report – 10:30, Beige Book – 2:00.

International Economic: EU GDP – 5:00 AM, EU Retail Sales – 5:00 AM,

Optionable Earnings: 

Symbol Company Name

May 31 close

IV30

B/A

XEPS
JOSB Jos. A Bank Clothiers Inc.

$45.24

43.9

B

$0.29

FRAN Francescas Holdings

$28.64

71.6

A

$0.26

PAY VeriFone Holdings Inc.

$23.51

58.5

A

$0.39

VRA Vera Bradley, Inc.

$23.64

57.5

A

$0.22

 

Thursday June 6:

Economic:  Chain Store Sales, Challenger Job-Cut Report – 7:30, Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, Quarterly Services Survey – 10:00, EIA Natural Gas Report – 10:30.

International Economic:  Bank of England Announcement – 7:00, European Central Bank Announcement – 7:45.

Other:  Federal Reserve Governor Sarah Bloom Raskin speech on revised capital rules to banking conference in Columbus, Ohio – 8:30,  Philadelphia Federal Reserve Bank President Charles Plosser lectures on too-big-to-fail at Boston College – 12:00.

Optionable Earnings:

Symbol Company Name

May 31 close

IV30

B/A

XEPS
JOSB Jos. A Bank Clothiers Inc.

$45.24

43.9

B

$0.29

FRAN Francescas Holdings

$28.64

71.6

A

$0.26

PAY VeriFone Holdings Inc.

$23.51

58.5

A

$0.39

VRA Vera Bradley, Inc.

$23.64

57.5

A

$0.22

 

 

 

Friday June 7:

Economic:  May Employment Situation – 8:30, April  Consumer Credit – 3:00.

International Economic:  German Industrial Production – 6:00 AM.

Other:   Cleveland Federal Reserve Bank President Sandra Pianalto speech on financial stability analysis at joint conference with Fed Board in Washington.  Japan PMI Manufacturing Index – 7:15,

Optionable Earnings: None meeting criteria.

 

Monday June 10:

Economic:  US TD Ameritrade IMX (Investor Movement Index) – 12:30.

International Economic:  Japanese GDP on Sunday June 9, Bank of Japan Announcement,

Other:   EMU PMI Manufacturing Index – 4:00 AM, 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 31 close

IV30

B/A

XEPS
LULU Lululemon Athletica Inc.

$77.94

45.8

A

$0.30

 

 

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