The Prepared Mind 7.8.2013

“Chance favors the prepared mind.” — Louis Pasteur

The holiday shortened trading week was a tug-of-war in anticipation of Friday jobs report.  A better than anticipated non-farm payrolls number led to the bulls finally besting the bears on Friday. Egyptian turmoil and the certainty of a military coup led  to a dampening of expectations at the beginning of the week.   On Thursday, both the Bank of England and the ECB announced a continuation of low interest rates.  Mario Draghi, European Central Bank president stated that rates would remain at current or lower levels “for an extended period of time.” This lead to a rally in European equities which carried over to the U.S. markets on Friday.  The international and domestic markets are entering a period where good news is once again bad news and vice versa.

The U.S. equity indexes showed gains for the second straight week.  The Russell 2000(RUT) was the strongest index last week by closing above 1,000.  The RUT gained 3.40%, up 33.09 points to close at 1,005.58 .  The Dow Jones Industrial Average (DJIA) closed above 15,000 –   up 226.24 points or a gain of 1.52%.  The NASDAQ 100 (NDX) closed at 2,963.22, gaining 1.84% or 53.62 points.  The S&P 500 (SPX) is trading back above 1,600 closing at 1,631.89 – up 25.61 points or a gain of 1.59%.  The S&P 100 (OEX) closed at 732.91 – gaining 12.29 points or 1.71%.  The VIX and the other volatility indexes reflected lessening concern about the equity and bond markets.  The VIX closed last week at 14.89 – a loss of 1.97 or 11.68%.  The other volatility measurements showed similar volatility moves to the downside.  There were still significant buyers of VIX options despite the downward move in the VIX cash index.

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

 

Index

Close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

15,135.84

226.24

1.52%

15.50%

13.47% (VXD)

S&P 500 (SPX)

1,631.89

25.61

1.59%

14.42%

14.89% (VIX)

NASDAQ 100 (NDX)

2,963.22

53.62

1.84%

11.36%

14.91% (VXN)

Russell 2000 (RUT)

1,005.58

33.09

3.40%

18.11%

18.17% (RVX)

S&P 100 (OEX)

732.91

12.29

1.71%

13.35%

14.62% (VXO)

CBOE Volatility Index (VIX)

14.89

-1.97

-11.68%

NA

 

The economic announcement for the week will be the release on Wednesday of the FOMC minutes from the previous Fed meeting.  Traders are hoping to be able to divine the timing of the slowing down of Fed intervention.  Every economic announcement is subject to the same scrutiny.  Friday’s job reports resulted in multiple reactions within the same trading day.  At first good news was bad news, and then it was good news.  This sort of market behavior shows unease on the part of economists, strategists, and traders alike.

The earnings cycle officially starts on Monday July 8 with the announcement by Alcoa (AA.)  The main body o announcements will take place the following three weeks. Be aware of the impact of earnings as you begin to establish positions in July and August options.   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 July 8:

Economic:  TD Ameritrade IMX – 12:30, Consumer Credit – 3:00.

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

Optionable Earnings:

Symbol

Company Name

July 5 close

IV30

B/A

XEPS

AA Alcoa

$7.81

31.2

A

$0.07

 

Tuesday July 9:

Economic:  NFIB Small business Optimism – 7:30, ICSC – Goldman Sachs Store Sales – 7:45, Redbook – 8:55,  JOLTS (JOLTS report is the Labor Department’s Job Openings and Labor Turnover Survey. The headline number is job openings)  – 10:00.

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

Optionable Earnings: None meeting criteria.

 

Wednesday July 10:

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

International Economic: Bank of Japan Announcement,

Other:  Federal Reserve Chairman Ben Bernanke speech on history of Federal Reserve policy to NBER Summer Institute in Boston – 4:10.

Optionable Earnings: 

Symbol

Company Name

July 5 close

IV30

B/A

XEPS

ADTN ADTRAN Inc.

$25.08

47.3

B

$0.15

FDO Family Dollar Stores Inc.

$63.32

32.2

B

$1.03

FAST Fastenal Co.

$45.29

30.9

B

$0.41

YUM Yum! Brands Inc.

$71.12

27.9

A

$0.54

 

Thursday July 11:

Economic:  Chain Store Sales, Weekly Jobless Claims – *:30, Import and Export Prices – 8:30, Bloomberg Consumer Comfort Index – 9:45, EIA Natural Gas Report – 12:00.

Other: Federal Reserve Gov. Daniel Tarullo , Treasury Under Secretary for Domestic Finance Mary Miller, and FDIC Chair Martin Gruenberg testify before Senate Banking Committee on systemic risk – 11:00.

Optionable Earnings:  None meeting criteria.

Friday July 12:

Economic: PPI (Producer Price Index) – 8:30., University of Michigan/ Reuters Consumer Sentiment – 9:55.

International Economic:  EU Industrial Production – 5:00 AM.

Other:  Federal Reserve Bank Presidents of Philadelphia, Charles Plosser, and St. Louis, James Bullard, on panel discussing economic outlook in Jackson Hole, Wyoming – 2:45, San Francisco Federal Reserve Bank President John Williams speech on moderation in monetary policy, in Vancouver, British Colombia – 5:15.

Optionable Earnings:

Symbol Company Name July 5 close

IV30

B/A

XEPS

INFY Infosys Technologies Ltd.

$40.54

54.1

B

$0.69

JPM JPMorgan Chase & Co

$52.77

22.5

B

$1.41

WFC Wells Fargo & Company

$41.22

20.9

B

$0.92

 

Monday July 15:

Economic:  Retail Sales – 8:30, Empire State Manufacturing Survey – 8:30, Business Inventories – 10:00

Optionable Earnings:

Symbol Company Name July 5 close

IV30

B/A

XEPS

C Citigroup Inc.

$47.67

27.9

B

$1.16

 

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