The Prepared Mind: September 2, 2014

“Chance favors the prepared mind.” – Louis Pasteur

Strong earnings and robust economic reports trumped international uncertainty.  The lack of fear propelled the S&P 500 to new new all-time intraday and closing highs this week.  The SPX closed above 2,000 for the first time.  New all-time closing highs were reached 4 of the 5 trading days.  Technical analysts declared  it as confirming the the SPX chart as once again bullish.  The past week saw equity only put/call ratios moving to buy signals.  Market breadth remains positive and the breadth indicators remain on buy signals.  The VIX continues to be bullish at levels below 14.

Here is an overview of last week’s market performance:

Index

Aug 29 close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

17,098.45

97.23

0.57%

3.15%

11.37% (VXD)

S&P 500 (SPX)

2,003.37

14.97

0.75%

8.39%

11.98% (VIX)

NASDAQ 100 (NDX)

4,079.90

24.45

0.60%

13.58%

12.71% (VXN)

Russell 2000 (RUT)

1,172.77

13.34

1.15%

0.79%

16.43% (RVX)

S&P 100 (OEX)

889.08

6.29

0.71%

7.92%

10.87% (VXO)

CBOE Volatility Index (VIX)

11.98

0.51

4.45%

NA

 

 

The VIX and related held steady despite continued upward movement in the broad based indexes.  Labor Day officially marks the end of summer for the markets.  The passing of the holiday is a harbinger of expect increased trading volume.

Proponents of calendar effects upon the market point to September as a particularly risky month with a average monthly decrease over the past 75 years.  Traders with a volatility focus appeared to be hesitant to sell more as we head into historically more volatile months.  The expected end of Fed purchases of bonds is providing support for the VIX.

 

Here is an overview of last week for the VIX and related products:

Index

Ticker

8/29 Close

Change

% Change

8/22 Close

CBOE Volatility Index VIX

11.98

0.51

4.45%

11.47

VIX September Future VXU4

13.65

0.17

1.26%

13.48

VIX October Future VXV4

14.50

0.27

1.90%

14.23

VIX November Future VXX4

15.15

0.33

2.23%

14.82

CBOE Short-term Volatility Index VXST

10.00

(0.08)

-0.79%

10.08

CBOE 3 Month Volatility Index VXV

14.27

0.76

5.63%

13.51

CBOE Mid-term Volatility Index VXMT

15.99

0.50

3.23%

15.49

VIX of VIX VVIX

81.11

1.53

1.92%

79.58

Long Vix ETP’s

 

   

 S&P 500  VIX Short Term Futures VXX

28.11

0.41

1.48%

27.70

 S&P 500  VIX Mid-Tem Futures ETN VXZ

12.31

0.12

0.98%

12.19

Short Vix ETP’s

 

   

Daily Inverse VIX Short Term ETN XIV

43.38

(0.68)

-1.54%

44.06

Short VIX Short Term Futures ETF SVXY

85.03

(1.49)

-1.72%

86.52

The coming week will be light on earnings and heavy on economic reports.  The focus will be on employment.  The past few years, “employment week” was characterized by higher implied volatility of options combined with increased movements in the underlying indexes.  The entire trading week prior the Friday employment situation report was marked traders jockeying to protect their portfolios.  The employment effect has not been apparent this year.   The approach of the end of quantitative easing in October has renewed interest in the employment numbers and their impact on Fed policy decisions..  The Fed is not the only bank with the ability to move the markets this coming week.  The Reserve Bank of Australia, the Banks of Canada, England and Japan and the European Central Bank

are meeting this week.  Their monetary policy announcements will the ability to move domestic and international markets.  The primary focus will be upon the ECB and their response to poor economic data in the Eurozone.

 

The earnings cycle is officially over.  I have scanned for stocks announcing earnings the coming week using the following criteria:  Price > 20, 30 Day Implied Volatility > 22, and Average Daily Option Volume > 400 contracts.  It is your responsibility to confirm these earnings dates. Earnings dates can and do change.

 

Trading advice to remember:

  “Chance favors the Prepared Mind.” – Louis Pasteur

“Stock market bubbles don’t grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.” – George Soros

Monday September 1:

Labor Day – U.S. Markets closed.

International Economic:  No major announcements.

Tuesday September 2:

Economic:  Gallup US Consumer Spending Measure, PMI Manufacturing Index – 10:00, ISM Manufacturing Index – 10:00, Construction Spending – 10:00, Global Manufacturing PMI – 11:00. Gallup US ECI – 1:00..

International Economic:  Japan PMI Composite – 9:35PM, China PMI Composite – 9:45PM..

Optionable Earnings: 

Symbol

Company Name

Aug 29 Close

IV30

B/A

XEPS

CONN

CONN’S, Inc.

$44.73

68.9

A

$0.74

 

Wednesday September 3:

Economic:  Motor Vehicle Sales, MBA Purchase Application – 7:00, ICSC Goldman Sachs Retail Sales – 7:45, ADP Employment Report – 8:15, Gallup US Job Creation Index – 8:30, Redbook, 5:55, Factory Orders – 10:00, Beige Book – 2:00.

International:   Bank of Japan Announcement, EMU Retail Sales – 5:00 AM..

Optionable Earnings:

Symbol

Company Name

Aug 29 Close

IV30

B/A

XEPS

AVAV

AeroVironment, Inc.

$31.35

50.2

B

($0.08)

GIII

G-III Apparel Group, Ltd.

$83.80

43.2

B

$0.16

NAV

Navistar International Corp

$37.83

39.4

B

$0.82

TOL

Toll Brothers Inc

$35.46

25.0

B

$0.46

HRB

H & R Block Inc

$33.56

25.2

A

($0.41)

PVH

PVH Corp

$117.46

32.2

A

$1.43

 

Thursday September 4:

Economic:  Chain Store Sales, Challenger Job-Cut Report – 7:30, Gallup US Payroll to Population – 8:30, International Trade – 8:30 Weekly Jobless Claims – 8:30, Productivity and Costs – 8:30, PMI Services Index – 9:45, ISM Non-Manufacturing Index – 10:00,  EIA Natural Gas Status Report – 10.30, EIA Petroleum Status Report – 10:30.

International Economic:  Germany Manufacturer’s Orders  – 2:00 AM, European Central Bank (ECB) Announcement – 7:45 AM.

Other:  Federal Reserve Gov. Jerome Powell speech to NYU Money Marketeers – 6:15, Minneapolis Federal Reserve Bank President Narayana Kocherlakota town hall forum in Helena, Montana – 9:00.                                    

Optionable Earnings: 

Symbol

Company Name

Aug 29 Close

IV30

B/A

XEPS

CIEN

Ciena Corporation

$20.47

52.0

B

$0.20

JOY

Joy Global Inc.

$63.09

27.9

B

$0.86

MBLY

Mobileye NV

$44.35

58.3

B

$0.04

MEI

Methode Electronics Inc.

$33.19

57.5

B

$0.40

MFRM

Mattress Firm Holding Corp

$56.52

46.3

B

$0.60

PAY

VeriFone Systems Inc

$34.88

44.3

B

$0.25

AMBA

Ambarella Inc

$32.82

53.2

A

$0.19

COO

The Cooper Companies, Inc.

$162.98

29.5

A

$1.91

LOCO

El Pollo LoCo Holdings Inc

$31.65

64.4

A

$0.17

 

Friday September 5:

Economic:  Employment Situation – 8:30.

International Economic: Germany 2:00 AM, EMU GDP – 5:00 AM.

Other:  Philadelphia Federal Reserve Bank President Charles Plosser speech on the economic outlook, Amelia Island, Florida – 10:15, Boston Federal Reserve Bank President Eric Rosengren speech to New Hampshire and Vermont Bankers Association in Boston 3:45 PM.

Optionable Earnings:  No major announcements.

Monday September 8:

Economic:  TD Ameritrade IMX = 12:30PM.

International Economic: Germany Merchandise Trade – 2:00 AM, Bank of Japan Minutes – 7:50 PM.

Optionable Earnings: 

Symbol

Company Name

Aug 22 Close

IV30

B/A

XEPS

BKS

Barnes & Noble, Inc.

$23.67

52.8

B

($0.68)

BURL

Burlington Stores Inc

$35.95

44.2

B

($0.09)

PANW

Palo Alto Networks Inc

$82.26

45.3

A

($0.11)

 

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