The Prepared Mind: August 19, 2013

“Chance favors the prepared mind.” — Louis Pasteur

The fearcasters are back.  A major on-air personality spent all Friday afternoon shrilling warning us that the end was upon us.  The markets were down for the third straight day and, according to her in-depth analysis, this was proof positive a major sell-off was beginning.  Any disagreement with her view was met with a scoffing disbelief.  Is she right?  I do not know.   She might be right, but the evidence of the end of this bull market is not compelling. The markets did end the week down significantly.  In the context of this year’s market run-up the behavior may have seemed ominous.  When I look at last week’s market movement in a larger context, the sell- off appears to be the result of normal market behavior.  The decline is moderate and orderly with an absence of panic behavior or volume.  The major indexes were down from 1.43% to 2.50%.  However, the markets are down only 3% from historic all-time highs.

Let’s review what other market observers are saying. Market watchers placed the blame on a wide range of factors. Unrest in Egypt and poor sales number and earnings guidance from multiple domestic retailers were the most often cited culprits.  The timing of the tapering of Fed bonds purchases is every bit as likely an impetus in the downward move.   The addition of lackluster earnings and guidance combined with ho-hum manufacturing numbers added to a lack of buying support.  Be wary of financial prophets. Trade what the markets will give you.  Do not rely on others’ opinions are their certainties of market direction.   It is the individual’s responsibility to balance their personal risk and reward.  Trade and invest according to your own risk/reward comfort zone.

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

Index

Close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

15,081.47

-344.04

-2.23%

15.09%

13.37% (VXD)

S&P 500 (SPX)

1,655.83

-35.59

-2.10%

16.10%

14.37% (VIX)

NASDAQ 100 (NDX)

3,073.91

-44.66

-1.43%

15.52%

14.73% (VXN)

Russell 2000 (RUT)

1,020.97

-26.05

-2.49%

19.92%

18.37% (RVX)

S&P 100 (OEX)

742.38

-13.89

-1.84%

14.81%

13.37% (VXO)

CBOE Volatility Index (VIX)

14.37

0.96

7.16%

NA

FOMC minutes will be release Tuesday.  Ignore than at your own peril.  Housing is the major focus this week.  Investors are concerned about the impact of the recent rise in mortgage rates on the housing recovery.  Continued recovery in will impact multiple sectors of the economy.  The most important factor accompanying a housing recovery is the growth in consumer confidence as homes recover lost value.  The PMI Manufacturing Index Flash on Thursday will considered by many as a signal of the future strength in manufacturing.

The last two weeks of August are characterized by low volume as many traders go on vacation.  Market movements are often exacerbated as the B Team monitors and adjusts perceived market risk.  I often found myself wondering  if individual late August moves are the result of market structural underpinnings or the product of the fears of traders whose primary responsibility is to not “screw up” while more senior traders are on vacation.

Remember:

  “Chance favors the Prepared Mind.” – Louis Pasteur

“I don’t know if they were men or women fans running naked across the field. They had bags over their heads.” –  Famous market analyst Yogi Berra

This week’s economic news (All times are Eastern Daylight Time.) Events, dates and times are subject to change:

Monday August 19:

Economic:  No major announcements.

International Economic:  Japan GDP – 7:50 PM Sunday night, Japan All Industry Index – 12:30 AM.

Optionable Earnings:

Symbol

Company Name

August 16 close

IV30

B/A

XEPS

PWRD Perfect World Co., Ltd. (ADR)

$20.13

67.1

A

$0.33

URBN Urban Outfitters, Inc.

$40.28

38.2

A

$0.48

 

Tuesday August 20:

Economic:  ICSC – Goldman Sachs Store Sales – 7:45, Retail Sales – 8:30, Chicago Fed National Activity Index – 8:30,  Redbook – 8:55.

International Economic:  German PPI – 2:00 AM.

Optionable Earnings: 

Symbol

Company Name

August 16 close

IV30

B/A

XEPS

BBY Best Buy Co., Inc.

$30.81

48.4

B

$0.12

DKS Dicks Sporting Goods Inc.

$51.41

34.0

B

$0.75

HD The Home Depot, Inc.

$75.14

25.4

B

$1.19

TJX The TJX Companies, Inc.

$50.77

23.4

B

$0.63

ADI Analog Devices, Inc.

$47.83

22.0

A

$0.54

INTU Intuit Inc.

$63.83

23.4

A

($0.08)

 

 

 

Wednesday August 21:

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

International Economic: China PMI Flash Manufacturing Index – 9:45 PM.

Other:  FOMC Minutes – 2:00.

Optionable Earnings: 

Symbol

Company Name

August 16 close

IV30

B/A

XEPS

EV Eaton Vance Corp

$39.45

27.7

B

$0.56

EXXI Energy XXI (Bermuda) Limited

$26.33

39.4

B

$0.45

LOW Lowe’s Companies, Inc.

$43.85

29.2

B

$0.79

PETM PetSmart, Inc.

$74.00

25.9

B

$0.86

TOL Toll Brothers Inc

$32.33

41.5

B

$0.27

HPQ Hewlett-Packard Company

$25.95

49.2

A

$0.87

LTD L Brands Inc

$60.07

26.4

A

$0.60

HAIN The Hain Celestial Group, Inc.

$73.29

35.4

A

$0.62

 

Thursday August 22:

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

International Economic: German PMI Composite 3:30 AM, European Union Composite Flash – 4:00 AM.

Other:  Dallas Federal Reserve Bank President Richard Fisher speech to the U.S. manufacturing summit in Orlando – 2:00.

Optionable Earnings: 

Symbol

Company Name

August 16 close

IV30

B/A

XEPS

ANF Abercrombie & Fitch Co.

$48.85

51.3

B

$0.29

BIG Big Lots, Inc.

$34.61

41.3

B

$0.25

PLCE Children’s Place Retail Stores, Inc.

$53.14

36.2

B

($0.54)

DLTR Dollar Tree, Inc.

$51.28

28.8

B

$0.57

GME GameStop Corp.

$47.69

49.4

B

$0.04

SHLD Sears Holdings Corp

$41.73

57.0

B

NA

ADSK Autodesk, Inc.

$36.04

35.7

A

$0.31

SALE RetailMeNot Inc

$32.26

58.1

A

$0.13

ROST Ross Stores, Inc.

$64.89

25.1

A

$0.93

GPS The Gap Inc.

$43.51

28.4

A

$0.64

 

 

Friday August 23:

Economic: Consumer Sentiment – 9:55, New Home Sales – 10:00.

International Economic:  German GDP – 2:00 AM, Great Britain GDP – 4:30 AM. 5h

Other:  Federal Reserve Vice Chair Janet Yellen will chair panel discussions at the Kansas City Fed symposium, Jackson Hole, Wyoming.

Optionable Earnings:

Symbol

Company Name

August 16 close

IV30

B/A

XEPS

ANN Ann Inc

$31.57

47.2

B

$0.65

FL Foot Locker, Inc.

$34.61

34.0

B

$0.49

HIBB Hibbett Sports, Inc.

$59.05

28.2

B

$0.38

 

Monday August 26:

Economic:  Durable Goods Orders – 8:30, Dallas Fed Manufacturing Survey – 10:30.

International Economic: 

Optionable

Earnings:

 

 

 

 

 

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