The Prepared Mind: November 17, 2014

"Chance favors the prepared mind." -- Louis Pasteur

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

The S&P 500 (SPX) set three new record highs. For those of you keeping count at home, the highs were numbers 39, 40, and 41 for the years. The financial media mentioned is news as more of an aside rather than breaking news. The markets seem tired. The financial media seems tired. I know traders are tired. The net result was a second week of market consolidation for the equity indexes. The only exception among the major indexes was the NASDAQ 100 which gained nearly 2%. Oil continued its sell off by breaking the $75 per barrel level. Fireworks for the week came from price action in gold. Over the past week gold (GLD) broke through support levels and then staged a modest rally. I prefer to watch rather than trade gold. Enter the realm of precious metal trading at your own risk.

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

Index Nov 14 Close Weekly Change % Weekly % YTD Volatility of Index
Dow Jones Industrials (DJIA) 17,634.74 60.81 0.35% 6.38% 12.82%(VXD)
S&P 500 (SPX) 2,039.82 7.90 0.39% 10.36% 13.31% (VIX)
NASDAQ 100 (NDX) 4,222.79 72.61 1.75% 17.56% 15.16% (VXN)
Russell 2000 (RUT) 1,174.33 2.63 0.22% 0.92% 18.65% (RVX)
S&P 100 (OEX) 906.83 5.26 0.58% 10.08% 12.06%(VXO)
CBOE Volatility Index (VIX) 13.31 0.19 1.45% NA

 

Volatility remains strong in the face of continued market gains. Some traders have posited that the gain in strength in long volatility products is the result of a belief the end of QE has left the equity market without a safety net.   It should be noted the Volatility Futures at the CFE (part of the CBOE) showed minor weakness last week. The November VIX future expires this week. After expiration, the ETP’s will be comprised of December and January 2015 futures. If you follow volatility you should add the VXZ4 and VXF5 to your watch lists.

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

Index Ticker 14-Nov Change % Change 7-Nov
CBOE Volatility Index VIX 13.31 0.19 1.45% 13.12
VIX November Future VXX4 14.35 (0.45) -3.04% 14.80
VIX December Future VXZ4 15.30 (0.20) -1.29% 15.50
VIX January Future VXF5 16.00 (0.50) -3.03% 16.50
CBOE Short-term Volatility Index VXST 11.35 0.22 1.98% 11.13
CBOE 3 Month Volatility Index VXV 15.96 0.13 0.82% 15.83
CBOE Mid-term Volatility Index VXMT 17.73 (0.06) -0.34% 17.79
VIX of VIX VVIX 85.58 5.14 6.39% 80.44
Long VIX ETP’s
S&P 500 VIX Short Term Futures ETN VXX 28.56 (0.47) -1.62% 29.03
S&P 500 VIX Mid-Tem Futures ETN VXZ 12.33 (0.20) -1.60% 12.53
Short VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 36.95 0.34 0.93% 36.61
Short VIX Short Term Futures ETF SVXY 72.50 0.70 0.97% 71.80

 

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 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 Oct 31 Close IV30 B/A XEPS
A Agilent Technologies Inc $41.45 29.3 A $0.50
JD JD.Com Inc(ADR) $27.32 56.3 B ($0.05)
JEC Jacobs Engineering Group Inc $47.48 25.3 A $0.85
TSN Tyson Foods, Inc. $41.18 31.9 B $0.77

Tuesday November 18:         

Economic: ICSC – Goldman Sachs Store Sales – 7:45, PPI-FD – 8:30, Redbook – 8:55, Housing Market Index – 10:00, E-Commerce Retail Sales – 10:00.

International Economic: Bank of Japan Announcement, Great Britain PPI amd CPI – 4:30 AM.

Other: Minneapolis Federal Reserve Bank President Narayana Kocherlakota speech on clarifying monetary policy objectives, in St. Paul, Minn. – 1:30 PM.

Optionable Earnings:

Symbol Company Name Oct 31 Close IV30 B/A XEPS
DKS Dicks Sporting Goods Inc $47.75 36.6 B $0.40
PETM PetSmart, Inc. $72.85 29.3 A $0.95
TJX TJX Companies Inc $63.50 27.0 B $0.85
VIPS Vipshop Holdings Ltd – ADR $24.44 56.1 A $0.06

 

Wednesday November 19:

Economic: MBA Purchase Applications – 7:00, Housing Starts – 8:30, EIA Petroleum Status Report – 10:00.

International: Bank of England Minutes – 4:30 AM, Japan Merchandise Trade – 6:50 PM, China PMI Flash Manufacturing – 8:45 PM.

Other: FOMC Minutes – 2:00.

Optionable Earnings:

Symbol Company Name Oct 31 Close IV30 B/A XEPS
CPA Copa Holdings, S.A. $111.76 37.6 A $2.00
CRM salesforce.com, inc. $63.16 35.7 A ($0.01)
CSTM Constellium NV $20.86 47.8 B $0.41
GMCR Keurig Green Mountain Inc $153.91 46.2 A $0.78
JMEI Jumei International Holding $24.11 66.2 A $0.13
LB L Brands Inc $77.05 25.0 A $0.40
LOW Lowe’s Companies, Inc. $58.61 23.7 B $0.58
MNK Mallinckrodt PLC $86.96 39.7 B $1.34
WSM Williams-Sonoma, Inc. $68.39 31.7 A $0.63

Thursday November 20:

Economic: CPI – 8:30, Weekly Jobless Claims – 8:30, PMI Manufacturing Index Flash – 9:45, Bloomberg Consumer Comfort Index – 9:45, Philadelphia Fed Survey – 10:00, Existing Home Sales – 10:00, EIA Natural Gas Status Report – 10:30.

International Economic: German PPI – 2:00 AM, EMU PMI Composite Flash – 4:00 AM, Great Britain CBI Industrial Trends Survey – 6:00 AM.

Other: Federal Reserve Gov. Daniel Tarullo speech to The Clearing House Assoc. in New York – 7:45, Cleveland Federal Reserve Bank President Loretta Mester speech on forward guidance, in London – 1:30 PM, San Francisco Federal Reserve Bank President John Williams on panel at Bank of Korea conference on rebalancing macroeconomic growth, in Seoul – 8:30 PM.

Optionable Earnings:

Symbol Company Name Oct 31 Close IV30 B/A XEPS
ADSK Autodesk, Inc. $59.31 38.0 A $0.11
ARUN Aruba Networks, Inc. $21.61 53.4 A $0.08
BBY Best Buy Co Inc $35.49 44.8 B $0.24
CYBX Cyberonics, Inc. $51.31 61.9 B $0.59
DLTR Dollar Tree, Inc. $61.99 22.8 B $0.65
GME GameStop Corp. $44.46 58.7 A $0.62
GPS The Gap Inc. $39.24 26.2 A $0.78
INTU Intuit Inc. $90.44 23.9 A ($0.34)
JKS JinkoSolar Holding Co., Ltd. $21.25 73.5 B $0.71
MBLY Mobileye NV $47.39 63.7 B $0.00
MENT Mentor Graphics Corp $21.87 33.1 B $1.00
PLCE Childrens Place Inc $51.10 36.5 B $1.80
ROST Ross Stores, Inc. $82.56 24.5 A $0.87
SPLK Splunk Inc $67.36 61.5 A ($0.35)
TFM The Fresh Market Inc $39.12 46.0 A $0.28
ZOES Zoe’s Kitchen Inc $32.42 61.8 A $0.03

 

Friday November 21:

Economic: Kansas City Fed Manufacturing – 11:00 AM.

International Economic: No major announcements.

Optionable Earnings:

Symbol Company Name Oct 31 Close IV30 B/A XEPS
ANN Ann Inc $37.77 36.2 B $0.70
FL Foot Locker, Inc. $55.67 29.3 B $0.78

 

Monday November 24:

Economic: Chicago Fed National Activity Index – 8:30, PMI Services Flash – 9:45, Dallas Fed Manufacturing Survey – 10:30.

International Economic: No major announcements.

Optionable Earnings:

Symbol Company Name Oct 31 Close IV30 B/A XEPS
PANW Palo Alto Networks Inc $109.60 45.0 A ($0.11)
QIHU Qihoo 360 Technology Co Ltd $71.20 49.2 A $0.48
WDAY Workday Inc $94.20 41.9 A ($0.34)

 

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