The Prepared Mind: September 8, 2014

“Chance favors the prepared mind.” – Louis Pasteur

Domestic markets continue to ignore concerns outside of the United States.  The S&P 500 (SPX) closed Friday at a record high.  Three of the previous days saw new intraday highs for the SPX .  The Dow Jones Industrials were up 0.23% , it’s second highest close of all time.  Mario Draghi, president of the European Central Bank, announced further easing of interest rates instead of the expected quantitative easing or bond buying program.  Analysts expect continued weakening of the EMU economies will force the ECB to implement quantitative easing.  Expectations are this QE will provide additional impetus to markets outside the Euro zone, particularly export and yield stocks.

Technical analyst spent last week describing the market as “tired.”  The past week saw equity only put/call ratios remaining on buy signals.  Last week’s bullish market breadth has been weakening.  Any further weakening of market breadth will produce sell signals

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

Index

Sep 5 close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

17,137.36

38.91

0.23%

3.38%

11.50% (VXD)

S&P 500 (SPX)

2,007.71

4.34

0.22%

8.62%

12.09% (VIX)

NASDAQ 100 (NDX)

4,087.09

7.19

0.18%

13.78%

13.24% (VXN)

Russell 2000 (RUT)

1,169.70

-3.07

-0.26%

0.52%

16.88% (RVX)

S&P 100 (OEX)

890.48

1.40

0.16%

8.09%

10.41% (VXO)

CBOE Volatility Index (VIX)

12.09

0.11

0.92%

NA

 

 

The VIX and related short-term products showed gains for the week.   The volatility futures and the longer dated volatility products were down slightly.  The long VIX products showed weakness due to an inability of the VIX  to show a sustained moved to the upside.  The short volatility products showed the opposite behavior.  The VXX is down over 35% this year, while the short volatility products, the XIV and SVXY, are up nearly 30% for the year.

 

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

 

Index

Ticker

Sep 5 Close

Change

% Change

August 29 Close

CBOE Volatility Index VIX

12.09

0.11

0.92%

11.98

VIX September Future VXU4

13.20

(0.45)

-3.30%

13.65

VIX October Future VXV4

14.20

(0.30)

-2.07%

14.50

VIX November Future VXX4

15.25

0.10

0.66%

15.15

CBOE Short-term Volatility Index VXST

10.27

0.27

2.70%

10.00

CBOE 3 Month Volatility Index VXV

14.08

(0.19)

-1.33%

14.27

CBOE Mid-term Volatility Index VXMT

15.88

(0.11)

-0.69%

15.99

VIX of VIX VVIX

77.33

(3.78)

-4.66%

81.11

Long Vix ETP’s

 

   

 S&P 500  VIX Short Term Futures ETN VXX

27.45

(0.66)

-2.35%

28.11

 S&P 500  VIX Mid-Tem Futures ETN VXZ

12.12

(0.19)

-1.54%

12.31

Short Vix ETP’s

 

   

Daily Inverse VIX Short Term ETN XIV

44.38

1.00

2.31%

43.38

Short VIX Short Term Futures ETF SVXY

87.01

1.98

2.33%

85.03

The coming week will be continue to be light on earnings.  The focus will be on one of the most important sectors of our economy – the consumer sector.  Last week’s auto sales were stronger than expected.   Retail sales have been weak the last two months running counter to consumer sentiment numbers.  Will Friday’s retail sales reflect stronger economic numbers and consumer confidence and break the trend?  The NFIB Small Business Index will be released on Tuesday before the opening with consumer sentiment numbers released on Friday morning.  The indexes are viewed as leading indicators of the overall state of the economy.

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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 8:

Economic:  TD Ameritrade IMX = 12:30PM.

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

Optionable Earnings:  None meeting criteria,

Tuesday September 9:                                                     

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

International Economic:  Great Britain Industrial Production and Merchandise Trade –  4:30 AM,  Japan Machine Orders and PPI – 7:50 PM.

Other:  Federal Reserve Gov. Daniel Tarullo testifies on Wall Street reform before the Senate Banking Committee along with FDIC Chair Martin Gruenberg, SEC Chair Mary Jo White and others – 10:00.

Optionable Earnings: 

Symbol

Company Name

Sep 5  Close

IV30

B/A

XEPS

BKS

Barnes & Noble, Inc.

$23.76

53.4

B

($0.68)

BURL

Burlington Stores Inc

$37.30

46.2

B

($0.09)

PANW

Palo Alto Networks Inc

$87.26

46.7

A

($0.11)

 

Wednesday September 10:

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

International:   China CPI = Producer Price Index – (:30 PM.

Optionable Earnings:

Symbol

Company Name

Sep 5  Close

IV30

B/A

XEPS

VRA

Vera Bradley, Inc.

$20.78

47.7

B

$0.19

FIVE

Five Below Inc

$41.32

55.5

A

$0.14

MW

The Men’s Wearhouse, Inc.

$55.14

34.0

A

$1.06

RH

Restoration Hardware Holdings Inc

$80.74

57.0

A

$0.67

 

Thursday September 11:

Economic:  Weekly Jobless Claims – 8:30, Quarterly Services Survey – 10:00, EIA Natural Gas Status Report – 10.30.

International Economic:  Germany CPI – 2:00 AM, France CPI – 2:45 AM.

Optionable Earnings: 

Symbol

Company Name

Sep 5  Close

IV30

B/A

XEPS

LE

Lands’ End, Inc.

$33.46

57.7

B

$0.17

LULU

Lululemon Athletica inc.

$39.04

48.8

B

$0.29

ULTA

Ulta Salon, Cosmetics & Fragrance, Inc.

$99.59

48.9

A

$0.82

 

Friday September 12:

Economic:  Retail Sales – 8:30, Import and Export Prices – 8:30, University of Michigan/Reutters Consumer Sentiment – 9:55, Business Inventories – 10:00.

International Economic:  EMU Industrial Production – 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:

Symbol

Company Name

Sep 5  Close

IV30

B/A

XEPS

DRI

Darden Restaurants, Inc.

$47.83

26.5

B

$0.32

 .

Monday September 15:

Economic:  Empire State Manufacturing Survey – 8:30, Industrial Production – 9:15,

International Economic:  EMU Merchandise Trade – 5:00 AM.

Optionable Earnings:  None meeting criteria

 

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