The Prepared Mind: October 27, 2014

By Frank Fahey

Trick or treat? Last week was a treat for investors in equities. Equity indexes finished Friday with the best week in nearly two years. The past 8 trading days have shown a bullish move unlike any I have observed in 30 years of trading. On Wednesday, October 15, the S&P 500 printed 1820. The SPX has moved nearly 8% over the past eight trading days. It would be tempting discount the specter of deflation, fear of an Ebola, Russian sanctions, ISIS and a global economic slowdown. The worries have not disappeared. The rush to the upside has been so significant that it has been given its own name – the “Bullard Bounce.”

The bounce received the moniker from the president of the Federal Reserve Bank of St. Louis, James Bullard, who suggested that the central bank’s program of quantitative easing might be extended if economic data justified the response. The coming week should provide information allowing us to determine if this will happen. The FOMC is meeting this week. It is expected to announce the end of QE2. It has been expected the Fed funds rate would increase in conjunction with the end of bond buying. Tune in on Wednesday at 2:00 PM Eastern to find out what effect the earlier market sell-off had on Fed policy. Will it be a trick or a treat for market participants.

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

Index Oct 24 Close Weekly Change % Weekly % YTD Volatility of Index
Dow Jones Industrials (DJIA) 16,805.41 425.00 2.59% 1.38% 14.91%(VXD)
S&P 500 (SPX) 1,964.58 77.82 4.12% 6.29% 16.11% (VIX)
NASDAQ 100 (NDX) 4,035.65 232.03 6.10% 12.35% 17.93% (VXN)
Russell 2000 (RUT) 1,116.81 36.57 3.39% -4.02% 20.85% (RVX)
S&P 100 (OEX) 873.33 32.39 3.85% 6.01% 15.75% (VXO)
CBOE Volatility Index (VIX) 16.11 -5.88 -26.74% NA

 

 

The volatility traders had a wild week. @zerohedge pointed out that VIX was down 12% on Friday October 17, down 15.6% on Monday October 20, and down 13.4% on Tuesday October 21. This marks the only time in history that VIX lost 10% or more in three consecutive trading days. Russell Rhoads, Senior Instructor at the Options Institute at the CBOE, reported the last significant trade in VIX options on Friday was the sale of November 20 calls at 1.30 and the purchase of November 24 calls for 0.80. Selling this spread pays off if the VIX remains below 20. It should be noted that we do not know if this opening trade is in anticipation of a down move in the VIX or a hedge of short market positions.

 

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

Index Ticker 10/24 Close Change % Change 10/17 Close
CBOE Volatility Index VIX 16.11 (5.88) -26.74% 21.99
VIX November Future VXX4 16.95 (4.05) -19.29% 21.00
VIX December Future VXZ4 17.05 (2.25) -11.66% 19.30
VIX January ’15 Future VXF5 17.75 (1.65) -8.51% 19.40
CBOE Short-term Volatility Index VXST 14.73 (9.08) -38.14% 23.81
CBOE 3 Month Volatility Index VXV 17.92 (3.33) -15.67% 21.25
CBOE Mid-term Volatility Index VXMT 19.19 (2.43) -11.24% 21.62
VIX of VIX VVIX 104.38 (14.46) -12.17% 118.84
Long VIX ETP’s
S&P 500 VIX Short Term Futures ETN VXX 33.17 (5.41) -14.02% 38.58
S&P 500 VIX Mid-Tem Futures ETN VXZ 13.39 (0.90) -6.30% 14.29
Short VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 32.37 4.04 14.26% 28.33
Short VIX Short Term Futures ETF SVXY 63.43 7.92 14.27% 55.51

 

The focus for the coming week will be the FOMC announcement on Wednesday, Traders’ major concern will be the timing of rate increases. Important economic reports will be released on manufacturing and durable goods. These reports will give a fresh look at the state of the economy.

Earnings announcements will continue to be important during the coming week. Nearly 40% of the SP 500 have reported earnings. According to John Butters, an analyst with FactSet , 75% announcing firms have beaten earnings-per-share expectations and 60% have beaten revenue projections. In addition, EPS growth over the previous year has averaged 7.1% and sales 5.1%. The earnings will have the ability to trump global concerns. Earnings include Merck, Allergan, Facebook, Pfixer, DuPont, Express Scripts, MetLife, ADP, Visa, Exelon, Praxair, Starbucks, Public Storage, and Exxon Mobil A number of other stocks with high implied volatility and higher prices will be announcing earnings this week. Equity traders need to know if earnings fall before or after the expiration date of any options traded. 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

“Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.” Bernard Baruch
Monday October 27:

Economic: PMI Services Flash 9:45, Pending Homes Sales Index – 10:00, Dallas Fed Manufacturing Survey – 10:30.

International Economic: Germany PPI – 2:00 AM, China GDP – 10:00 PM. China Retail Sales – 10:00 PM. China Industrial Production – 10:PM.

Other:

Optionable Earnings:

Symbol Company Name Oct 24 Close IV30 B/A XEPS
AGN Allergan, Inc. $183.37 34.6 B $1.76
ARLP Alliance Resource Partners, L.P. $44.25 31.2 B $0.78
AWI Armstrong World Industries, Inc. $48.87 38.2 B $0.92
BEN Franklin Resources, Inc. $52.89 22.3 B $0.92
EXAS EXACT Sciences Corporation $24.00 57.7 B ($0.34)
HUN Huntsman Corporation $24.47 36.0 B $0.54
LGND Ligand Pharmaceuticals Inc. $54.13 58.7 B $0.20
MRK Merck & Co., Inc. $56.63 23.2 B $0.88
STX Seagate Technology PLC $56.52 32.0 B $1.25
AMGN Amgen, Inc. $147.25 27.8 A $2.06
BWLD Buffalo Wild Wings $129.00 42.0 A $1.06
GGP General Growth Properties Inc $24.78 24.0 A $0.32
HIG Hartford Financial Services Group Inc $37.11 22.4 A $0.84
MAS Masco Corporation $22.93 33.9 A $0.31
TMUS T-Mobile Us Inc $27.77 41.0 A $0.03
TWTR Twitter Inc $49.67 68.7 A ($0.27)
UHS Universal Health Services, Inc. $106.58 34.9 A $0.37

 

 

Tuesday October 28:

Economic: ICSC – Goldman Sachs Store Sales – 7:45, Durable Goods Orders – 8:30, Redbook – 8:55, S&P Case-Shiller HPI – 9:00, Consumer Confidence – 10:00, Richmond Fed Manufacturing Index – 10:00, State Street Investor Confidence Index – 10:00.

International Economic: Japan Merchandise Trade – 7:50 PM.

Other: FOMC meeting begins.

Optionable Earnings:

Symbol Company Name Oct 24 Close IV30 B/A XEPS
AET Aetna Inc $78.75 26.3 B $1.57
AGCO AGCO Corporation $45.00 30.4 B $0.64
ALR Alere Inc $37.86 45.0 B $0.52
AMTD TD Ameritrade Holding Corp. $31.26 24.5 B $0.36
AN AutoNation, Inc. $52.11 31.5 B $0.86
CIT CIT Group Inc. $46.17 25.1 B $0.88
CMI Cummins Inc. $136.36 24.3 B $2.28
CNX CONSOL Energy Inc. $34.78 30.7 B $0.20
COH Coach Inc $35.94 39.1 B $0.45
CVLT CommVault Systems, Inc. $46.70 62.6 B $0.28
DIN DineEquity Inc $83.30 32.7 B $1.07
FCX Freeport-McMoRan Inc $30.96 24.5 B $0.63
GLPI Gaming and Leisure Properties Inc $32.01 27.9 B $0.60
HCA HCA Holdings Inc $71.36 31.8 B $1.17
HOT Starwood Hotels & Resorts Worldwide $78.90 29.6 B $0.65
HRS Harris Corporation $66.77 26.0 B $1.10
MDSO Medidata Solutions Inc $42.52 65.3 B $0.08
MLM Martin Marietta Materials, Inc. $121.48 27.2 B $1.69
MWV MeadWestvaco Corp. $42.00 28.3 B $0.53
NBL Noble Energy, Inc. $58.48 34.6 B $0.37
PCAR PACCAR Inc $60.58 25.3 B $0.96
PH Parker-Hannifin Corporation $116.39 25.3 B $1.66
SAVE Spirit Airlines Incorporated $63.52 43.5 B $0.95
SHW Sherwin-Williams Company $225.81 23.9 B $3.18
SNCR Synchronoss Technologies, Inc. $45.72 58.0 B $0.32
ST Sensata Technologies Holding N.V. $45.82 30.6 B $0.62
TKR Timken Co $41.42 34.4 B $0.65
UTHR United Therapeutics Corporation $128.78 54.6 B $1.84
WDR Waddell & Reed Financial, Inc. $47.28 31.8 B $0.92
WHR Whirlpool Corporation $157.70 31.1 B $3.15
AMC AMC Entertainment Holdings Inc $23.02 39.0 A $0.03
APC Anadarko Petroleum Corporation $92.17 38.3 A $1.31
CHMT Chemtura Corp $23.22 33.4 A $0.29
CHRW C.H. Robinson Worldwide, Inc. $70.61 29.3 A $0.80
EA Electronic Arts Inc. $36.24 45.2 A $0.43
ESRX Express Scripts Holding Co $73.06 26.4 A $1.29
EXP Eagle Materials, Inc. $92.10 37.0 A $1.01
FB Facebook Inc $80.04 41.6 A $0.32
GILD Gilead Sciences, Inc. $107.18 37.3 A $1.64
GPRE Green Plains Inc $32.12 58.0 A $0.89
INVN InvenSense Inc $21.42 70.6 A $0.10
MAR Marriott International Inc $68.43 26.1 A $0.62
MCK McKesson Corporation $198.75 22.0 A $2.74
OI Owens-Illinois Inc $25.67 29.2 A $0.73
PNRA Panera Bread Co $166.74 31.4 A $1.43
SM SM Energy Co. $61.27 53.6 A $1.50
TRN Trinity Industries Inc $36.46 68.7 A $0.84
VRTX Vertex Pharmaceuticals Incorporated $108.09 47.8 A ($0.57)
WDC Western Digital Corp $90.59 32.2 A $2.04
X United States Steel Corporation $36.76 54.8 A $1.17
ZLTQ Zeltiq Aesthetics Inc $23.09 79.8 A ($0.10)

 

Wednesday October 29:

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

International: Bank of England Minutes – 4:30 AM.

Other: FOMC Meeting Announcement – 2:00.

Optionable Earnings:

Symbol Company Name Oct 24 Close IV30 B/A XEPS
ALKS Alkermes Plc $45.28 45.1 B ($0.12)
ALLY Ally Financial Inc $21.66 31.1 B $0.41
AMED Amedisys Inc $21.94 48.9 B $0.17
CG The Carlyle Group LP $29.72 33.7 B $0.46
ETN Eaton Corporation PLC $62.74 26.2 B $1.23
EXC Exelon Corporation $34.88 22.1 B $0.70
GRMN Garmin Ltd. $54.23 34.0 B $0.72
GT The Goodyear Tire & Rubber $20.97 40.6 B $0.71
HES Hess Corp. $82.22 32.1 B $1.07
IACI IAC/InterActiveCorp $62.28 35.5 B $0.50
MTH Meritage Homes Corp $37.82 37.3 B $0.90
PSX Phillips 66 $76.12 29.3 B $1.69
RL Ralph Lauren Corp $161.18 29.2 B $2.05
RYAM Rayonier Advanced Materials Inc $28.83 59.4 B $0.58
SEE Sealed Air Corp $33.00 33.7 B $0.46
SODA Sodastream International Ltd $21.19 74.4 B $0.51
SPWR SunPower Corporation $31.21 62.0 B $0.23
TEL TE Connectivity Ltd $55.30 26.3 B $1.00
WLP WellPoint Inc $119.77 28.8 B $2.27
AEM Agnico Eagle Mines Ltd (USA) $29.24 47.8 A $0.15
AKAM Akamai Technologies, Inc. $54.53 44.5 A $0.46
ARII American Railcar Industries, Inc. $69.78 58.1 A $0.99
ARRS Arris Group Inc $26.87 47.3 A $0.65
CAR Avis Budget Group Inc. $52.45 52.9 A $1.80
CAVM Cavium Inc $45.51 52.1 A $0.22
CENX Century Aluminum Co $26.46 55.9 A $0.51
CJES C&J Energy Services Inc $20.68 49.1 A $0.34
CNW Con-way Inc $43.16 37.9 A $0.75
CRUS Cirrus Logic, Inc. $21.09 48.0 A $0.47
DWA Dreamworks Animation Skg Inc $23.74 58.1 A $0.04
EQIX Equinix Inc $197.73 31.7 A $0.88
FBHS Fortune Brands Home & Security Inc $41.56 35.1 A $0.56
FFIV F5 Networks, Inc. $114.57 39.9 A $1.22
FMC FMC Corp $58.18 25.0 A $0.96
HBI Hanesbrands Inc. $108.94 32.9 A $1.72
KS KapStone Paper and Packaging Corp. $28.07 58.4 A $0.67
LGCY Legacy Reserves LP $23.44 47.4 A $0.13
LNC Lincoln National Corporation $49.74 28.6 A $1.42
MEOH Methanex Corporation (USA) $57.24 36.4 A $0.65
MET Metlife Inc $50.41 25.3 A $1.38
MIC Macquarie Infrastructure Company $67.29 26.5 A $0.45
MUR Murphy Oil Corporation $53.04 29.8 A $1.09
NE Noble Corporation PLC $20.78 39.9 A $0.56
OII Oceaneering International $65.50 29.9 A $1.13
PPC Pilgrim’s Pride Corporation $26.50 53.8 A $0.85
RRC Range Resources Corp. $68.61 34.8 A $0.36
SCI Service Corporation International $21.83 31.3 A $0.24
SFLY Shutterfly, Inc. $42.60 55.8 A ($1.17)
SIMO Silicon Motion Technology Corp. $25.20 55.4 A $0.39
SLCA U.S. Silica Holdings Inc $50.64 62.2 A $0.68
SPN Superior Energy Services, Inc. $25.71 40.7 A $0.55
SU Suncor Energy Inc. (USA) $34.66 27.7 A $0.79
TRLA Trulia Inc $46.09 65.4 A $0.37
TTWO Take-Two Interactive Software, Inc. $22.56 42.1 A ($0.75)
VECO Veeco Instruments Inc. $32.50 43.9 A ($0.24)
VGR Vector Group Ltd $21.69 25.1 A $0.15
VPRT VistaPrint Limited $55.25 58.7 A $0.45
WLL Whiting Petroleum Corp $63.40 48.1 A $1.25
WMB Williams Companies, Inc. $53.10 35.1 A $0.22
WPZ Williams Partners L.P. $50.47 24.3 A $0.33
WTW Weight Watchers International, Inc. $28.50 82.5 A $0.49

 

Thursday October 30:

Economic: Weekly Jobless Claims – 8:30, GDP – 8:30, Bloomberg Consumer Comfort Index = 9:45, EIA Natural Gas Status Report – 10.30

International Economic: France Business Climate Indicator – 2:45, EMU PMI Composite Flash – 4:00 AM.

Optionable Earnings:

Symbol Company Name Oct 24 Close IV30 B/A XEPS
ABC AmerisourceBergen Corp. $77.44 22.4 B $1.05
APD Air Products & Chemicals, Inc. $129.52 30.3 B $1.62
APO Apollo Global Management LLC $23.02 37.6 B $0.39
ATK Alliant Techsystems Inc. $130.84 30.7 B $2.94
BG Bunge Ltd $83.96 24.4 B $1.90
BWA BorgWarner Inc. $56.52 29.8 B $0.79
CAH Cardinal Health Inc $76.45 22.5 B $0.97
CI CIGNA Corporation $92.27 26.2 B $1.81
CME CME Group Inc $81.20 22.1 B $0.82
COP ConocoPhillips $70.00 23.0 B $1.24
CRR CARBO Ceramics Inc. $52.77 64.2 B $0.77
CTRX Catamaran Corp (USA) $41.74 37.2 B $0.56
CVRR CVR Refining LP $24.64 29.1 B $0.61
EPD Enterprise Products Partners L.P. $38.23 28.4 B $0.37
FCN FTI Consulting, Inc. $37.06 42.0 B $0.41
GBX Greenbrier Companies Inc $62.98 57.1 B $1.02
GEL Genesis Energy, L.P. $49.41 29.8 B $0.35
GG Goldcorp Inc. (USA) $22.33 35.3 B $0.18
GNC GNC Holdings Inc $39.89 47.1 B $0.74
GTLS Chart Industries, Inc. $47.91 56.1 B $0.88
HAR Harman International Industries $95.95 40.6 B $1.12
HST Host Hotels and Resorts Inc $22.55 22.3 B $0.32
IDCC InterDigital, Inc. $43.38 53.0 B $0.20
INCY Incyte Corporation $54.95 50.0 B $0.02
IRM Iron Mountain Incorporated $34.78 29.2 B $0.39
IVZ Invesco Ltd. $37.80 25.0 B $0.62
JCI Johnson Controls Inc $42.76 24.5 B $1.01
LLL L-3 Communications Holdings, Inc. $114.43 33.8 B $1.00
LNKD LinkedIn Corp $202.62 52.0 B $1.18
MA Mastercard Inc $74.09 22.1 B $0.78
MDC M.D.C. Holdings, Inc. $26.36 31.2 B $0.50
MGM MGM Resorts International $22.36 34.0 B $0.06
MOS Mosaic Co $42.44 23.2 B $0.61
MPC Marathon Petroleum Corp $84.53 30.3 B $2.32
NI NiSource Inc. $41.28 23.2 B $0.16
NOV National-Oilwell Varco, Inc. $73.65 31.5 B $1.55
PBF PBF Energy Inc $24.05 42.8 B $1.03
PBI Pitney Bowes Inc. $24.50 39.1 B $0.46
PCRX Pacira Pharmaceuticals Inc $104.13 55.8 B ($0.01)
RGLD Royal Gold, Inc USA) $66.60 36.9 B $0.29
STRZA Starz $30.37 34.6 B $0.51
TEVA Teva Pharmaceutical Industries Ltd $53.60 25.6 B $1.23
THRM Gentherm Inc $42.23 63.6 B $0.43
TWC Time Warner Cable Inc $140.93 28.3 B $1.90
UPL Ultra Petroleum Corp. $23.05 49.0 B $0.53
USAC Usa Compression Partners LP $24.45 30.0 B $0.13
CCI Crown Castle International Corp. $84.29 24.8 A $0.27
DGI DigitalGlobe Inc $29.14 44.9 A $0.01
EGN Energen Corporation $62.30 41.4 A $0.44
EMES Emerge Energy Services LP $93.94 84.2 A $0.88
EMN Eastman Chemical Company $78.00 26.0 A $7.80
EXPE Expedia Inc $79.84 49.3 A $1.62
FLR Fluor Corporation (NEW) $64.61 25.9 A $1.10
FLT FleetCor Technologies, Inc. $138.47 36.3 A $1.27
GDOT Green Dot Corporation $21.86 63.0 A $0.25
GPRO GoPro Inc $79.15 82.0 A $0.00
IMPV Imperva Inc $30.81 78.0 A ($0.63)
LYV Live Nation Entertainment, Inc. $23.50 39.7 A $0.38
MCHP Microchip Technology Inc. $40.34 31.7 A $0.64
MELI Mercadolibre Inc $107.40 50.2 A $0.64
MHK Mohawk Industries, Inc. $135.32 30.5 A $2.42
MTZ MasTec, Inc. $26.80 47.3 A $0.53
MYL Mylan Inc $50.43 34.9 A $1.14
NEM Newmont Mining Corp $22.00 32.1 A $0.18
OIS Oil States International, Inc. $60.04 30.6 A $0.97
OUTR Outerwall Inc $57.00 46.4 A $1.14
SAM Boston Beer Co Inc $223.06 33.5 A $2.35
SGEN Seattle Genetics, Inc. $35.60 54.4 A ($0.25)
TPX Tempur Sealy International Inc $57.20 47.0 A $0.89
TRMB Trimble Navigation Limited $29.65 37.6 A $0.34
TSO Tesoro Corporation $65.29 39.6 A $2.07
TSRA Tessera Technologies, Inc. $26.57 35.1 A $0.71

 

Friday October 31:

Economic: Personal Income and Outlays = 8:30, Employment Cost Index – 8:30, Chicago PMI – 9:45, University of Michigan/Reuters Consumer Sentiment – 9:55.

International Economic: No major announcements.

Optionable Earnings:

Symbol Company Name Oct 24 Close IV30 B/A XEPS
ABBV AbbVie Inc $59.52 24.3 B $0.77
AON Aon PLC $81.58 26.6 B $1.13
BUD Anheuser Busch Inbev SA (ADR) $107.75 23.7 B $1.50
CBOE CBOE Holdings, Inc $56.96 22.5 B $0.54
CHTR Charter Communications, Inc. $156.04 29.9 B ($0.05)
COMM Commscope Holding Company $23.03 50.1 B $0.57
HLT Hilton Worldwide Holdings Inc $24.04 39.8 B $0.16
LM Legg Mason Inc $50.58 28.2 B $0.33
MMP Magellan Midstream Partners, $81.26 31.8 B $0.66
MSG The Madison Square Garden Co $64.60 31.9 B $0.32
NEE NextEra Energy Inc $97.80 22.7 B $1.54
NS NuStar Energy L.P. $65.02 37.6 B $0.60
NWL Newell Rubbermaid Inc. $34.49 23.9 B $0.55
SPR Spirit AeroSystems Holdings, Inc. $37.73 42.0 B $0.75

 

Monday November 1:

Economic: Motor Vehicle Sales, Gallup US Consumer Spending Measure – 8:30, PMI Manufacturing Index – 9:45, ISM Manufacturing Index – 10:00, Construction Spending – 10:00, Global Manufacturing PMI – 11:00.

International Economic: No major announcements.

Other: Dallas Federal Reserve Bank President Richard Fisher speech to the Shadow Open Market Committee, in New York – 12:40 PM>

Optionable Earnings:

Symbol Company Name Oct 24 Close IV30 B/A XEPS
EEP Enbridge Energy Partners, L.P. $36.54 26.7 B $0.29
HNT Health Net, Inc. $48.15 43.6 B $0.73
SOHU Sohu.com Inc $43.51 45.3 B ($1.29)
AGU Agrium Inc. (USA) $86.38 23.4 A $0.50
AR Antero Resources Corp $48.44 36.2 A $0.33
CYH Community Health Systems $56.44 40.7 A $0.75
HLF Herbalife Ltd. $51.23 103.6 A $1.52
LCI Lannett Company, Inc. $49.30 48.9 A $0.93
MR Mindray Medical International Ltd $29.28 42.7 A $0.43
MRO Marathon Oil Corporation $34.73 28.0 A $0.63
TDW Tidewater Inc. $36.12 37.8 A $1.07
THC Tenet Healthcare Corp $58.09 42.1 A $0.10
VNR Vanguard Natural Resources, LLC $26.32 41.6 A $0.27

 

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