The Prepared Mind: November 24, 2014

happy-thanksgivingBy Frank Fahey

The S&P 500 (SPX) and the Dow Jones Industrials (DJIA) continued to make new highs this week with the SPX up 13% from the October 15th lows. Both indexes finished the week at all-time highs. The market has not had 2 consecutive down days since October 15.    The SPX made record highs number 42, 43, 44 and 45 this past week.   This equals the number of record closes for the S&P 500 in 2013, Analysts have pointed to Central Banks as being instrumental for the relentless push upward.

Both the Chinese central bank and the European Central Bank have announced plans to encourage economic growth. The Chinese reduced one-year benchmark rates last week while ECB president Mario Draghi announced the ECB is prepared to expand asset purchases. Both actions will inject liquidity into equity markets. Low prices for crude oil provide further fuel for the bullish move. Market breadth indicators vacillate between buy and sell signals. Equity only out/call ratios are falling every day and remain on buy signals.

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

Index Nov 21 Close Weekly Change % Weekly % YTD Volatility of Index
Dow Jones Industrials (DJIA) 17,810.06 175.32 0.99% 7.44% 12.57%(VXD)
S&P 500 (SPX) 2,063.50 23.68 1.16% 11.64% 12.90% (VIX)
NASDAQ 100 (NDX) 4,248.71 25.92 0.61% 18.28% 14.71% (VXN)
Russell 2000 (RUT) 1,169.95 (4.38) -0.37% 0.54% 18.46% (RVX)
S&P 100 (OEX) 914.78 7.95 0.88% 11.04% 11.24%(VXO)
CBOE Volatility Index (VIX) 12.90 (0.41) -3.08% NA

Volatility remains steady in the face of continued market gains. Short term VIX products were lower while longer term instruments held steady or were higher. January and February 2015 futures were higher as were the CBOE Mid-term Volatility Index (VXMT) and the iPath S&P 500 VIX Mid-Tem Futures ETN. Add the VIX and related products to your watchlists. An understanding of volatility in relationship to changes in price and time will provide a major assist in making strategic trading decisions.

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

Index Ticker 21-Nov Change % Change 14-Nov
CBOE Volatility Index VIX 12.90 (0.41) -3.08% 13.31
VIX December Future VXZ4 14.95 (0.35) -2.29% 15.30
VIX January Future VXF5 16.05 0.05 0.31% 16.00
VIX February Future VXF5 16.80 0.15 0.90% 16.65
CBOE Short-term Volatility Index VXST 10.45 (0.90) -7.93% 11.35
CBOE 3 Month Volatility Index VXV 15.79 (0.17) -1.07% 15.96
CBOE Mid-term Volatility Index VXMT 17.76 0.03 0.17% 17.73
VIX of VIX VVIX 79.34 (6.24) -7.29% 85.58
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 27.92 (0.64) -2.24% 28.56
pShares VIX Short Term Futures ETF VIXY 18.57 (0.49) -2.57% 19.06
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 12.50 0.17 1.38% 12.33
Short VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 37.90 0.95 2.57% 36.95
Short VIX Short Term Futures ETF SVXY 74.34 1.84 2.54% 72.50

U.S. economic reports will be frontload into the beginning of a Thanksgiving holiday shortened trading week. No impact is expected from Tuesday’s release of the GDP. Housing and manufacturing reports dominate the week’s economic news. The Case-Shiller HPI and FHFA House Price Index should answer concerns of the housing market. The release of Durable Goods Orders on Wednesday will provide a window on the manufacturing sector, Germany and the UK join the US in releasing updated Q3 GDP numbers. OPEC is meeting on Thursday to set production quotas. Expect little or no agreement among OPEC member over how to reverse the slide in oil prices.

The earnings cycle for the third quarter has ended. 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

“If you’re on the right side of the issue, just keep driving until you hear glass breaking. Don’t quit.”
T. Boone Pickens

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 Nov 21 Close IV30 B/A XEPS
PANW Palo Alto Networks Inc $109.04 45.3 A ($0.11)
POST Post Holdings Inc $35.88 46.3 A $0.08
QIHU Qihoo 360 Technology Co Ltd $67.55 49.8 A $0.48
WDAY Workday Inc $91.65 44.4 A ($0.34)

 

Tuesday November 25:         

Economic: ICSC – Goldman Sachs Store Sales – 7:45, GDP – 8:30, Corporate Profits – 8:30, Redbook – 8:55, FHFA House Price Index – 9:00, S&P Case-Shiller HPI – 9:00, Consumer Confidence – 10:00, Richmond Fed Manufacturing Index – 10:00, State Street Investor Confidence – 10:00.

International Economic: Germany GDP – 2:00 AM.

Other:

Optionable Earnings:

Symbol Company Name Nov 21 Close IV30 B/A XEPS
CPB Campbell Soup Company $44.71 22.9 B $0.73
CBRL Cracker Barrel Old Country Store $118.85 22.2 B $1.29
DSW DSW Inc. $32.94 48.4 B $0.51
HRL Hormel Foods Corp $54.83 24.1 B $0.64
PLL Pall Corporation $94.29 22.7 B $0.80
SIG Signet Jewelers Ltd. $121.62 28.4 B $0.17
TIF Tiffany & Co. $104.28 33.8 B $0.78
AVAV AeroVironment, Inc. $29.67 47.2 A ($0.11)
ADI Analog Devices, Inc. $51.17 24.5 A $0.68
CTRP Ctrip.com International, Ltd. (ADR) $58.25 50.3 A $0.21
HPQ Hewlett-Packard Company $36.93 25.4 A $1.05
NMBL Nimble Storage Inc $27.11 62.3 A ($0.34)
VEEV Veeva Systems Inc $27.83 54.9 A $0.07

 

Wednesday November 26:

Economic: MBA Purchase Applications – 7:00, Durable Goods Orders – 8:30, Jobless Claims – 8:30, Personal Income and Outlays – 8:30, Bloomberg Consumer Comfort Index – 9:45, Consumer Sentiment – 9:66, New Home Sales – 10:00, Pending Home Sales Index – 10:00, EIA Petroleum Status Report – 10:00.

International: Great Britain GDP – 4:30 AM.

Other:

Optionable Earnings:

Symbol Company Name Nov 21 Close IV30 B/A XEPS
SDRL Seadrill Ltd $20.79 50.8 B $0.68

 

Thursday November 27:

U.S. Thanksgiving – All Markets Closed

International Economic: Germany Unemployment – 3:55, EMU EC Economic Sentiment – 5:00 AM, Germany CPI – 8:00 AM, Japan Household Spending – 6:30 PM, Japan Industrial Production – 6:50 PM.

Other: OPEC meeting

Optionable Earnings: No earnings meeting criteria

Friday November 28:

U.S. Markets Early Close – 1:00 PM ET

Economic: Chicago PMI – 9:45 AM.

International Economic: Germany Retail Sales – 2:00 AM, EMU HICP Flash – 5:00 AM, EMU Unemployment Rate – 5:00 AM.

Optionable Earnings: No earnings meeting criteria

Monday December 1:

Economic: Gallup US Consumer Spending Measure – 8:30, PMI Manufacturing Index – 9:45, ISM Manufacturing Index – 10:00.

International Economic: No major announcements.

Optionable Earnings:

Symbol Company Name Nov 21 Close IV30 B/A XEPS
QUNR Qunar Cayman Islands Ltd $26.05 50.4 A ($0.52)

 

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