The Prepared Mind: November 10, 2014

wodehouse By Frank Fahey

An acknowledged master of English prose, P. G. Wodehouse was an English humorist whose body of work includes novels, short stories, plays, poems, song lyrics and numerous pieces of journalism. Current culture attributes the concept of “Money for Nothing” to the 1985 eponymous song by Dire Straits. The title actually comes from a 1928 novel by Wodehouse. The current equity markets are about to make it a “threefer.” Read the book, listen to the song and do not fade the bullish trend. The trend is hard to discount as long as international central banks (the FED, Bank of England, European Central Bank, and the Bank of Japan) continue to provide banks and major corporations easy access to cheap credit.

The trend of all-time closing highs for equity indexes continues. The S&P 500 has closed at a record high while the Dow Jones Industrial Average has had 22 all-time closing highs.   This past Wednesday, all three Dow Jones major averages -industrials, transports and utilities – closed at record highs. The last time this happened was on April 25, 2007. If we include the S&P 500, which also made a new high on Wednesday, we would have to go back to March 1998 to find the last time all four indexes closed at all-time highs on the same day. According to this week’s Barrons Active fund managers are faring badly this year; just one in five money managers is beating his or her benchmark.. This has led many market observers to expect a end of year rally fueled by money managers afraid of being left behind.

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

Index Nov 7 Close Weekly Change % Weekly % YTD Volatility of Index
Dow Jones Industrials (DJIA) 17,573.93 183.41 1.05% 6.02% 12.61%(VXD)
S&P 500 (SPX) 2,031.92 13.87 0.69% 9.93% 13.12% (VIX)
NASDAQ 100 (NDX) 4,150.18 6.05 0.15% 15.54% 14.71% (VXN)
Russell 2000 (RUT) 1,171.70 0.66 0.06% 0.70% 18.14% (RVX)
S&P 100 (OEX) 901.57 5.78 0.65% 9.44% 12.43%(VXO)
CBOE Volatility Index (VIX) 13.12 -0.91 -6.49% NA

 

Volatility indexes and long volatility products continue their downward trend. The long VIX have given back their positive gains from the middle of October. After showing significant drawdowns in mid – October, the short volatility products – XIV and SVXY – have returned to show positive gains for 2014. The December and January VIX futures are showing strength relative to shorter term volatility products. Some analysts have attributed this stength to professional skepticism about the rally of the past two weeks.

 

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

 

Index Ticker 7-Nov Change % Change 31-Oct
CBOE Volatility Index VIX 13.12 (0.91) -6.49% 14.03
VIX November Future VXX4 14.80 (1.00) -6.33% 15.80
VIX December Future VXZ4 15.50 (0.55) -3.43% 16.05
VIX January Future VXF5 16.50 (0.30) -1.79% 16.80
CBOE Short-term Volatility Index VXST 11.13 (2.67) -19.35% 13.80
CBOE 3 Month Volatility Index VXV 15.83 (0.68) -4.12% 16.51
CBOE Mid-term Volatility Index VXMT 17.79 (0.37) -2.04% 18.16
VIX of VIX VVIX 80.44 (13.66) -14.52% 94.10
Long VIX ETP’s
S&P 500 VIX Short Term Futures VXX 29.03 (1.29) -4.25% 30.32
S&P 500 VIX Mid-Tem Futures ETN VXZ 12.53 (0.26) -2.03% 12.79
Short VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 36.61 1.55 4.42% 35.06
Short VIX Short Term Futures ETF SVXY 71.80 2.98 4.33% 68.82

 

It’s a relatively light week with the focus on the consumer sector. Retail sales have been volatile due to Volatility in auto sales and gasoline prices has had a major impact on retail sales. . The JOLTS report will indicate whether there is improvement in job openings. A stable labor market conditions has resulted in steadily improving consumer sentiment. Thursday’s weekly jobless claims can be a market mover if a spike is seen in initial claims. EMU, flash third quarter gross domestic product data will be released this week.. Analysts will be looking for any indication of current of future growth in the Eurozone economy.

 

The earnings cycle for the third quarter has effectively ended. The major exception are earnings announcements in the retail sector. Earnings in the sector include Macys, JC Penney, Dillards, Kohls, Wal-Mart and Nordstroms. Analysts will be listening to the conference calls in an attempt to set expectations for the upcoming holiday season. 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

“Never think that lack of variability is stability. Don’t confuse lack of volatility with stability, ever.”

Nassim Nicholas Taleb

 

Monday November 10:

Economic: Ameritrade IMX – 12:30 PM.

International Economic: No major announcements.

Other: Boston Federal Reserve Bank President Eric Rosengren speech at Washington and Lee University in Lexington, Virginia – 5:10 PM.

Optionable Earnings:

Symbol Company Name Nov 7 Close IV30 B/A XEPS
BID Sothebys $39.10 37.2 B ($0.37)
DDD 3D Systems Corporation $34.91 58.1 B $0.15
EVEP EV Energy Partners, L.P. $29.03 40.4 B $0.25
WWAV WhiteWave Foods Co $37.46 40.4 B $0.26
ACAD ACADIA Pharmaceuticals Inc. $27.94 57.7 A ($0.21)
ATLS Atlas Energy LP $35.84 34.6 A $0.16
ATW Atwood Oceanics, Inc. $37.95 37.0 A $1.54
MCF Contango Oil & Gas Company $36.32 44.5 A $0.25
NPSP NPS Pharmaceuticals, Inc. $27.34 61.4 A $0.01
PRAA Pra Group Inc $62.77 34.1 A $1.11
RAX Rackspace Hosting, Inc. $37.26 55.0 A $0.16

 

 

Tuesday November 11:         

Economic: Veterans Day Observed. Stocks and Futures Open; Bonds Closed. No major announcements.

International Economic: Japan Tertiary Index – 6:50 PM.

Optionable Earnings:

Symbol Company Name Nov 7 Close IV30 B/A XEPS
ACM AECOM Technology Corp $32.78 41.3 B $0.82
DHI D.R. Horton, Inc. $22.94 39.0 B $0.49
INSY Insys Therapeutics Inc $37.37 74.6 B $0.26
QIWI Qiwi PLC $29.95 65.3 B $0.36
FOSL Fossil Group Inc $102.72 41.5 A $1.82
YY YY Inc (ADR) $80.67 56.2 A $0.76

 

 

Wednesday November 12:

Economic: MBA Purchase Applications – 7:00, NFIB Small Optimism Index – 7:30, ICSC – Goldman Sachs Store Sales – 7:45, Redbook – 8:55, Atlanta Fed Business Inflation Expectations – 10:00, Wholesale Trade – 10:00..

International: EMU Industrial Production 5:00 AM, `Bank of England Inflation Report – 5:00 AM.

Other: Philadelphia Federal Reserve Bank President Charles Plosser speech at UBS European Conference in London – 3:00 AM.

Optionable Earnings:

Symbol Company Name Nov 7 Close IV30 B/A XEPS
ADT ADT Corp $36.07 35.4 B $0.49
CSIQ Canadian Solar Inc. $30.57 79.4 B $1.15
EZCH EZchip Semiconductor Ltd $21.20 51.1 B $0.13
M Macy’s, Inc. $59.04 32.1 B $0.51
RICE Rice Energy Inc $27.66 54.3 B ($0.02)
ROK Rockwell Automation $111.77 27.5 B $1.82
WUBA 58.com Inc (ADR) $39.49 61.7 B $0.04
CSCO Cisco Systems, Inc. $25.26 25.8 A $0.48
CYBR Cyberark Software Ltd $33.03 97.6 A $0.00
IMOS ChipMOS Technologies (Bermuda) $21.88 48.7 A $0.48
NTAP NetApp Inc. $43.17 32.1 A $0.53
NTES NetEase, Inc (ADR) $92.80 35.8 A $1.48
XONE ExOne Co $21.36 88.8 A ($0.13)

 

Thursday November 13:

Economic: Weekly Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, JOLTS – 10:00, EIA Petroleum Status Report – 11:00.

International Economic: Germany CPI – 2:00 AM, Japan PPI – 6:50 pm, China Industrial Production – 9:00 PM, China Retail Sales – 9:00 PM.

Other: Minneapolis Federal Reserve Bank President Narayana Kocherlakota speech at Stanford’s State of the West Symposium in California -2:45, Philadelphia Federal Reserve Bank President Charles Plosser on panel discussing the new normal at monetary policy conference in Philadelphia – 12:30 PM

Optionable Earnings:

Symbol Company Name Nov 7 Close IV30 B/A XEPS
HP Helmerich & Payne, Inc. $85.72 39.8 B $1.68
KSS Kohl’s Corporation $56.81 28.2 B $0.76
SBH Sally Beauty Holdings, Inc. $29.43 33.8 B $0.40
VIAB Viacom, Inc. $70.79 27.1 B $1.68
JWN Nordstrom, Inc. $73.68 26.7 A $0.72
SINA SINA Corp $40.64 45.7 A $0.04

 

Friday November 14:

Economic: Retail Sales – 8:30 AM, Import and Export Prices 8:30, University of Michigan Reutters Consumer Sentiment – 9:55, Business Inventories – 10:00, EIA Natural Gas Status Report – 10:30.

International Economic: EMU GDP Flash – 5:00 AM, EMU HICP- 5:00 AM.

Other: St. Louis Federal Reserve Bank President James Bullard speech on US economy and monetary policy, in St. Louis – 9:00 AM.

Optionable Earnings:

Symbol Company Name Nov 7 Close IV30 B/A XEPS
BITA Bitauto Hldg Ltd (ADR) $78.26 75.8 B $0.47

 Monday November 17:

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

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

Optionable Earnings:

Symbol Company Name Nov 7 Close IV30 B/A XEPS
JD JD.Com Inc(ADR) $24.53 65.0 B ($0.05)
TSN Tyson Foods, Inc. $41.53 34.4 B $0.77
A Agilent Technologies Inc $41.37 32.2 A $0.89
JEC Jacobs Engineering Group Inc $47.92 27.1 A $0.86
URBN Urban Outfitters, Inc. $31.16 37.8 A $0.42

 

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