The Prepared Mind 6.17.2013

“Chance favors the prepared mind.” — Louis Pasteur

I would like to wish a happy Father’s Day to our readers and their fathers.  International affairs once again move to the forefront.  Declines in US and Japanese equity markets were blamed on the failure of the Bank of Japan to announce any new stimulus measures.  U.S. Bonds moved to their highest levels in over a year.  The markets responded to the negative news from overseas and positive domestic news (retail sales and jobs) by showing daily triple digit swings and moves in the Dow Jones Industrial Averages.  Concern about Turkey and Syria added impetus to downward moves on Friday.  The net result was a downward move in the major indexes for the third week out of four.

The Russell 2000 (RUT) was the best performing index for the week – reflecting the relative strength of small cap issues.   The Russell 2000(RUT) lost only 0.34%, down 3.33 points to close at 979.82.   The Dow Jones Industrials (DJIA) closed at 15,070.18 down177.94 points or a loss of 1.17%.  The NASDAQ 100 (NDX) closed at 2,943.86  losing 1.57 % or 47.01 points.  The S&P 500 (SPX) closed at 1,626.738 – down 16.65  points or a loss of  1.01%.  The S&P 100 (OEX) closed at 732.10 – losing 8.50 points or 1.15%.  The VIX and the other volatility indexes reflected continuing concern about the markets and the continuation of fiscal easing last week.  The VIX closed last week at 17.15 – a gain of 2.01 or 13.28%.  The other volatility measurements showed similar volatility moves to the upside.  These volatility measurements are still showing relative strength compared to previous weeks.   The increase in volatility levels is indicative of the growing concern about Fed intervention in U.S. markets. In addition, it indicates growing range of index prices (read volatility) on a daily and weekly basis.  There is definitely a wait and see attitude among traders.  A decrease in options volume reflects continuing concern about the direction of the markets.

 

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

Index

Close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

15,070.18

-177.94

-1.17%

15.00%

15.48% (VXD)

S&P 500 (SPX)

1,626.73

-16.65

-1.01%

14.06%

17.15% (VIX)

NASDAQ 100 (NDX)

2,943.86

-47.01

-1.57%

10.63%

17.28% (VXN)

Russell 2000 (RUT)

979.82

-3.33

-0.34%

15.08%

21.31% (RVX)

S&P 100 (OEX)

732.10

-8.50

-1.15%

13.22%

17.26% (VXO)

CBOE Volatility Index (VIX)

17.15

2.01

13.28%

NA

 

This will be a quiet week for earnings announcements and economic reports.    The focus will be on the FOMC meetings this week.  Investors and traders will be looking for clarification from the Fed about the future of quantitative easing.  They want to know the magnitude and timing of any changes in Fed behavior.  Both the announcement following the meeting and Bernanke’s press conference will be closely watched.  Other announcements with the potential to move the market include Tuesday’s Consumer Price Index announcement and Thursday’s weekly jobless claims.  The jobs reports are showing an increasing ability to move the markets.

This will be another quiet week for earnings announcements.  The next cycle starts in July.  Be aware of this as you begin to establish postions in July and August options.  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 17:

Economic:  June Empire State Manufacturing Survey – 8:30, June Housing Market Index – 10:00.

International Economic:  EU Merchandise Trade – 5:00.

Other: G8 summit

Optionable Earnings: None meeting criteria.

Tuesday June 18:

Economic:  ICSC – Goldman Sachs Store Sales – 7:45, May CPI (Consumer Price  Index)  – 8:30,  May Housing Starts – 8:30, Redbook – 8:55.

International Economic:  Great Britain PPI – 4:30 AM,  Japan Merchandise Trade – 7:50 PM.

Other: FOMC Meeting Begins.

Optionable Earnings:

Symbol

Company Name

June 15  close

IV30

B/A

XEPS
FDS FactSet Research Systems Inc.

$101.98

28.6

B

$1.15

ADBE Adobe Systems Inc.

$43.30

31.7

A

$0.21

 

 

Wednesday June 19:

Economic:  MBA Purchase Applications – 7:00,  EIA Petroleum Status Report – 10:30, FOMC Meeting Announcement – 2:00, FOMC Chairman Press Conference – 2:15.

International Economic: No major reports.

Optionable Earnings: 

Symbol

Company Name

June 15  close

IV30

B/A

XEPS
FDX FedEx Corporation

$99.58

27.5

B

$1.98

RHT Red Hat Inc.

$45.85

44.4

A

$0.22

 

Thursday June 20:

Economic:  Jobless Claims – 8:30, PMI Manufacturing Index Flash – 8:58, Bloomberg Consumer Comfort Index – 9:45, May Existing Home Sales – 10:00, June Philadelphia Fed Survey – 10:00, EIA Natural Gas Report – 10:30.

International Economic:  German PPI – 2:00 AM, EU PMI Composite Flash – 4:00 AM.

Other: Last day of trading for June Options on RUT, SPX, NDX and MNX.

Optionable Earnings:

Symbol

Company Name

June 15  close

IV30

B/A

XEPS
KR Kroger Co.

$35.06

26.4

B

$0.88

PIR Pier 1 Imports Inc.

$24.26

36.0

B

$0.19

ORCL Oracle Corp.

$34.25

28.0

A

$0.85

TIBX Tibco Software Inc.

$21.24

55.8

A

$0.11

 

Friday June 21:

Economic: ECRI Weekly Leading Index – 10:30.

International Economic:  No major reports.

Other:  June Expiration – Quadruple Witching

Optionable Earnings:

Symbol

Company Name

June 15  close

IV30

B/A

XEPS
DRI Darden Restaurants Inc.

$53.28

25.8

B

$1.04

CCL Carnival Corp.

$33.92

23.9

B

$0.06

KMX CarMax Inc.

$46.99

34.0

B

$0.57

 

Monday June 24:

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

International Economic:  No major reports.

Optionable Earnings: None meeting criteria.

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