The Prepared Mind: December 9, 2013

It would be easy to assume nothing happened last week if we looked at the Friday to Friday moves of the major equity indexes and volatility indexes.  Per usual, “Employment Week” provided its typical thrill ride amusement. Lennon and McCartney summed up last week’s action in “Helter Skelter.”

When I get to the bottom I go back to the top of the slide

Where I stop and I turn and I go for a ride

Till I get to the bottom and I see you again

Last week was a “Helter Skelter” week.    The major indexes rollercoasted across the charts in anticipation of Fridays Employment Situation number.  The culmination of the ride was a 1% jump upwards after Friday’s release of the employment numbers.  The VIX and RVX (see below) behave in similar manner, with the VIX having a 15% range from 13 to just over 15.  The question remaining for the coming weeks is “Are the markets on the ride or off the ride?”  Negotiations in Washington over a January budget agreement will determine the answer to that question.

RVX options debuted last week.  This product has the potential to become a very good trading vehicle.  The CBOE announced the beginning of trade of options on the CBOE Russell 2000 Volatility Index. The calculation of the RVX Index is based on the CBOE Volatility Index (VIX Index) methodology applied to RUT options.    The options will be based on futures on the CBOE Russell 2000 Volatility Index (futures ticker: VU.)  The futures started trading on November 18, 2013 while the options started trading this past week on Tuesday, December 3.  Low volume levels were low and made it difficult to determine liquidity.  I expect volume levels to increase and market widths decrease in the future.

The market ended a week of wild gyrations with only moderate moves.  Here is a capsule view of last week’s market numbers:

Index

Close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

16,020.20

-66.21

-0.41%

22.25%

12.85% (VXD)

S&P 500 (SPX)

1,805.09

-0.72

-0.04%

26.57%

13.79% (VIX)

NASDAQ 100 (NDX)

3,504.26

16.44

0.47%

31.69%

14.85% (VXN)

Russell 2000 (RUT)

1,129.28

-10.96

-0.96%

33.92%

17.83% (RVX)

S&P 100 (OEX)

805.75

-0.61

-0.08%

24.61%

12.74% (VXO)

CBOE Volatility Index (VIX)

13.79

0.09

0.66%

NA

 

Santa Claus rally or not?  The consensus answer among market mavens after Friday’s positive monthly employment numbers appears to be a resounding yes.  Market mavens are expecting a continuation of the upward trend as industry professionals balance their portfolios for the year end.  The highpoint for the week will be the release of November retail sales numbers on Thursday.  A boost in Auto Sales is expected to help the number which may be tempered by a late Thanksgiving.  These numbers are viewed by many as an indicator of consumer confidence in the economy.  Expect increased activity and volatility as we approach Thursday.  The consensus number is an increase of 0.5%.

This while be yet another week in the lull in earnings announcements.  The retail sales announcement on Thursday can and will effect individual equities.  I scan the announced earnings for the week using the following criteria:  Price > 20, 30 Day Implied Volatility > 20, and Average Daily Option Volume > 200 contracts.  The earnings meeting these criteria are sorted by date below. It is your responsibility to confirm the earnings dates. They can and do change.  You will notice that a stock may move in one direction on the earnings announcement and then move in the opposite direction during the conference call.  Be aware of the earnings date for any equity options you may trade.

Trading advice to remember:

  “Chance favors the Prepared Mind.” – Louis Pasteur

“A public-opinion poll is no substitute for thought.” – Warren Buffett

Monday December 9:

Economic:  TD Ameritrade IMX – 12:30.

International Economic:  Japan GDP – 6:50 PM Sunday December 8, China PPI and CPI – 8:30 PM Sunday December 8, German Industrial Production – 6:00 AM.

Other:  Richmond Federal Reserve Bank President Jeffrey Lacker speech to economic outlook conference in Charlotte, North Carolina – 12:30, St Louis Federal Reserve Bank President James Bullard speech on the economy in St. Louis – 12:50, Dallas Federal Reserve Bank President Richard Fisher speech on banking trends in Chicago – 2:15, Dallas Federal Reserve Bank President Richard Fisher respondes to questions on the economy in Chicago – 6:30.

Optionable Earnings:   

Symbol

Company Name

December 6 Close

IV30

B/A

XEPS

PVH PVH Corp

$130.76

35.2

A

$2.26

 

Tuesday December 10:

Economic:  NFIB Small Business Optimism Index – 7:30, ICSC-Goldman Store Sales – 7:45, Redbook – 8:55, JOLTS – 10:00, Wholesale Trade – 10:00.

International Economic:  China Industrial Production, Breat Britain Industrial Production – 4:30, Italy GDP – 5:00 AM, Japan PPI – 8:50 PM.

Optionable Earnings:

Symbol

Company Name

December 6 Close

IV30

B/A

XEPS

AZO AutoZone, Inc.

$460.00

24.5

B

$5.26

HDS HD Supply Holdings Inc

$20.72

46.4

B

$0.36

LDOS Leidos Holdings Inc

$41.39

31.1

B

$0.40

TOL Toll Brothers Inc

$32.74

34.8

B

$0.42

HRB H & R Block Inc

$28.54

30.9

A

($0.37)

 

Wednesday December 11:

Economic:  MBA Purchase Applications – 7:00,  EIA Petroleum Status Report – 10:30, Treasury Budget – 2:00.

International Economic:  Germany CPI – 2:00.

Optionable Earnings: 

Symbol

Company Name

December 6 Close

IV30

B/A

XEPS

JOY Joy Global Inc.

$55.53

37.5

B

$1.11

MW The Men’s Wearhouse, Inc.

$51.13

34.9

A

$0.87

VRA Vera Bradley, Inc.

$23.98

52.1

A

$0.34

 

Thursday December 12:

Economic:  Jobless Claims – 8:30, Retail Sales – 8:30, Import and Export Prices  – 8:30,  Bloomberg Consumer Comfort Index – 9:45, Business Inventories  – 10:00,  Quarterly Services Survey – 10:00, EIA Natural Gas Report – 10:30.

International Economic:  EU Industrial Production – 5:00,

Other: 

Optionable Earnings: 

Symbol

Company Name

December 6 Close

IV30

B/A

XEPS

CIEN Ciena Corporation

$23.26

63.1

B

$0.17

CTB Cooper Tire & Rubber Co

$23.89

55.7

B

$0.54

LULU Lululemon Athletica inc.

$70.62

48.0

B

$0.41

ADBE Adobe Systems Incorporated

$55.04

33.3

A

$0.19

RH Restoration Hardware Holdings Inc

$74.02

60.3

A

$0.28

 

Friday December 13:

Economic: Producer Price Index (PPI) – 8:30.

International Economic: China Producer and Import Price Index – 3:15 AM.

Optionable Earnings:  None meeting criteria.

Monday December 16:

Economic:  Empire State Manufacturing Survey – 8:30, Productivity and Costs – 8:30, PMI Manufacturing Index – 8:59, Treasury International Capital – 9:00, Industrial Production – 9:15.

International Economic: China PMI Flash Manufacturing Index – 9:45 PM Sunday,   EU PMI Composite  Flash – 4:00 AM.

Optionable Earnings:   None meeting criteria.

 

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