The Prepared Mind: January 26, 2015

By Frank Fahey

The US indices rallied last week on the announcement by Mario Draghi, president of the European Central Bank, of an ECB 1.1 trillion dollar bond buying program. The program, which runs until September 2016, will buy $67 billion of assets per month. The goal of the program is to infuse capital into the system while simultaneously reducing the high bond yields which are strangling the budgets of members of the European Monetary Union such as Spain, Italy, and Greece. Another goal is to spur growth by effectively devaluing the euro. The markets rose in anticipation of Draghi’s announcement and followed through with more gains afterwards. The NASDAQ 100 (NDX) led the charge with a gain of 3.29% followed by the S&P 500 (SPX) with a gain of 1.6%. All the major indices, with the exception of the NDX remain down for 2015.

 

The stock continues to be very volatile with a trading range between the support level of 1990 and the resistance of 2060. Technical analyst see support at 1975 (the October 2015 low) and 2090 (the 2015 high and all-time high.) Equity only put/call rations remain bullish. The trend in the VIX confirms a bullish sentiment. Market breadth indicators are solidly neutral with daily swings to mildly bullish or bearish.

 

Here is an overview of the past week’s market behavior:

Index Jan 23 Close Weekly Change % Weekly % 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17,672.60 161.03 0.92% -0.84% 15.84%(VXD)
S&P 500 (SPX) 2,051.82 32.40 1.60% -0.34% 16.66% (VIX)
NASDAQ 100 (NDX) 4,266.86 136.08 3.29% 0.68% 17.06% (VXN)
Russell 2000 (RUT) 1,185.75 11.99 1.02% -1.57% 20.8% (RVX)
S&P 100 (OEX) 903.14 13.34 1.50% -0.58% 15.89%(VXO)
CBOE Volatility Index (VIX) 16.66 (4.29) -20.48% NA

 

The “Striking Price “in this week’s Barron’s is about the VIX. Stephen Sears’ column, “Volatility Gauges’ Outlooks Differ,” discusses S&P500 statistical volatility compared to implied volatility as measured by the VIX. Sears is predicting

a volatile VIX despite a stable SPX. Read this column if you have an opportunity

 

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

Index Ticker 23-Jan 16-Jan Change % Change
CBOE Volatility Index VIX 16.66 20.95 (4.29) -20.48%
VIX February Future VXF5 18.37 20.12 (1.75) -8.70%
VIX March Future VXH5 18.52 20.02 (1.50) -7.49%
VIX April Future VXJ5 18.87 20.07 (1.20) -5.98%
CBOE Short-term Volatility Index VXST 16.08 21.48 (5.40) -25.14%
CBOE 3 Month Volatility Index VXV 19.00 21.15 (2.15) -10.17%
CBOE Mid-term Volatility Index VXMT 19.82 21.59 (1.77) -8.20%
VIX of VIX VVIX 96.33 111.32 (14.99) -13.47%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 32.10 35.47 (3.37) -9.50%
pShares VIX Short Term Futures ETF VIXY 21.34 23.55 (2.21) -9.38%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 13.30 13.83 (0.53) -3.83%
Short VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 29.82 30.41 (0.59) -1.94%

 

 

The highlights of the week are the Fed’s FOMC meeting and the Greek presidential election. Repercussions of the election should be seen in the overnight trading of the E-mini on Globex. This reaction will carry over to Monday’s trading in Europe and the United States. The FOMC meets on Tuesday and Wednesday with a subsequent announcement on Wednesday afternoon. Traders will be looking for a sign indicated the timing of the Fed’s first rate increase. The full slate of economic reports will be release on housing and manufacturing. Economists have been debating the effect of slowing global growth on the US GDP which will be release before the market opens on Friday.

This will be a very important week for earnings. OptionVue provides a column for the date of earnings announcements. Use it. OptionVue tools and charts assist you in determining the effect of these announcements on the historic stock prices and implied volatility of the options. Earnings announcements include: Texas Instruments, Microsoft, AT&T, P&G, #M, Pfizer, Caterpillar, Amgen, Freeport-McMoRan, DuPont, Apple, Facebook, Biogen Idec, QUALCOMM, Abbott Labs, Google, Visa, Baxter, Ford, Amazon, Lilly, MasterCard, and Chevron.,    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

 

“Take your losses quickly and don’t brood about them. Try to learn from them
but mistakes are as inevitable as death” – Jesse Livermore

 

“The unsuccessful investor is best friends with hope, and hope skips along life’s path hand in hand
with greed when it comes to the stock market.” – Jesse Livermore

 

 

Monday January 26:

 

Economic: PMI Services Flash – 9:45, Dallas Fed Manufacturing Survey – 10:30.

 

International Economic: Germany IFO Survey – 4:00 AM.

 

Other: Greek election on Sunday January 25.

 

Optionable Earnings:

 

Symbol Company Name Jan 23 Close IV30 B/A XEPS
DHI D.R. Horton, Inc. $23.69 38.7 B $0.35
NSC Norfolk Southern Corp. $106.09 28.5 B $1.64
STX Seagate Technology PLC $63.94 32.3 B $1.36
ASH Ashland Inc $119.45 22.9 A $1.43
PKG Packaging Corp Of America $82.53 24.7 A $1.16
SANM Sanmina Corp $23.29 52.9 A $0.54
SIMO Silicon Motion Technology Corp. $26.22 57.3 A $0.32
TXN Texas Instruments Incorporated $54.97 22.9 A $0.69
ZION Zions Bancorporation $25.27 27.6 A $0.43

 

 

Tuesday January 27:

 

Economic: Durable Good Orders – 8:30, Redbook – 8:55, S&P Case Shiller HPI – 9:00, New Home Sales – 10:00,

Consumer Confidence 10:00, Richmond Fed Manufacturing Index – 10:00, State Street Investor Confidence – 10:00.

 

International Economic: No major announcements.

 

Other: FOMC Meeting Begins

 

Optionable Earnings:

 

Symbol Company Name Jan 23 Close IV30 B/A XEPS
AAL American Airlines Group Inc $55.59 43.6 B $1.51
CAT Caterpillar Inc. $86.82 24.5 B $1.55
CIT CIT Group Inc. $45.08 25.2 B $0.93
COH Coach Inc $38.25 37.9 B $0.66
DOV Dover Corp $72.04 25.8 B $0.95
FCX Freeport-McMoRan Inc $20.02 49.3 B $0.37
GLW Corning Incorporated $23.72 26.7 B $0.38
LXK Lexmark International Inc $39.75 40.4 B $1.16
NUE Nucor Corporation $44.85 24.4 B $0.55
PH Parker-Hannifin Corporation $122.99 25.6 B $1.55
PII Polaris Industries Inc. $136.84 32.5 B $1.94
SNV Synovus Financial Corp. $25.64 25.2 B $0.35
WAT Waters Corporation $115.91 33.1 B $1.89
AAPL Apple Inc. $112.40 33.9 A $1.68
AMGN Amgen, Inc. $159.57 24.8 A $2.05
CNI Canadian National Railway (USA) $69.52 24.1 A $0.84
EA Electronic Arts Inc. $49.36 36.8 A $0.82
ILMN Illumina, Inc. $193.89 34.0 A $0.78
JNPR Juniper Networks, Inc. $22.05 35.0 A $0.20
OTEX Open Text Corporation (USA) $58.39 35.9 A $0.99
VMW VMware, Inc. $82.15 36.4 A $0.80
WDC Western Digital Corp $105.29 32.3 A $2.10
X United States Steel Corporation $22.71 60.8 A $0.88
YHOO Yahoo! Inc. $48.89 46.9 A $0.19

 

 

Wednesday January 28:

 

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

 

International: Japan Retail Sales – 6:50 PM.

 

Other: FOMC Meeting Announcement – 2:00.

 

Optionable Earnings:

 

Symbol Company Name Jan 23 Close IV30 B/A XEPS
ADT ADT Corp $34.67 36.6 B $0.49
AME AMETEK, Inc. $49.29 28.5 B $0.62
ANTM Anthem Inc $142.86 23.6 B $1.72
BIIB Biogen Idec Inc $353.65 34.0 B $3.74
CVLT CommVault Systems, Inc. $48.15 45.3 B $0.14
EMC EMC Corporation $28.54 22.5 B $0.59
HES Hess Corp. $72.07 33.2 B $0.32
IP International Paper Co $55.18 24.6 B $0.62
MDC M.D.C. Holdings, Inc. $24.91 31.6 B $0.46
MWV MeadWestvaco Corp. $45.76 24.6 B $0.44
RDWR Radware Ltd. $22.87 44.9 B $0.23
ROK Rockwell Automation $108.52 27.8 B $1.49
RYAM Rayonier Advanced Materials Inc $21.64 59.0 B $0.60
TUP Tupperware Brands Corporation $62.72 35.4 B $1.53
TXT Textron Inc. $43.46 31.6 B $0.74
ALB Albemarle Corporation $59.55 30.4 A $1.01
ATK Alliant Techsystems Inc. $128.22 30.6 A $2.89
CAVM Cavium Inc $60.27 47.9 A $0.23
CLB Core Laboratories N.V. $106.59 46.3 A $1.54
CMPR Cimpress NV $74.51 56.8 A $1.47
CRUS Cirrus Logic, Inc. $25.11 48.3 A $0.61
CTXS Citrix Systems, Inc. $60.05 30.3 A $0.80
FB Facebook Inc $77.65 36.4 A $0.33
FTNT Fortinet Inc $31.43 38.7 A $0.08
HOLX Hologic, Inc. $29.51 33.6 A $0.36
JEC Jacobs Engineering Group Inc $39.60 28.9 A $0.78
LRCX Lam Research Corporation $80.86 32.4 A $1.12
LVS Las Vegas Sands Corp. $53.97 33.7 A $0.81
MLNX Mellanox Technologies, Ltd. $45.77 55.1 A $0.19
MUR Murphy Oil Corporation $48.11 35.4 A $0.28
NOW ServiceNow Inc $66.14 48.6 A ($0.27)
QCOM QUALCOMM, Inc. $71.91 29.8 A $1.12
QRVO Qorvo Inc $70.61 38.5 A $1.06
RKT Rock-Tenn Company $64.00 32.5 A $0.90
SWFT Swift Transportation Co $28.58 41.4 A $0.48
TSCO Tractor Supply Company $79.73 35.1 A $0.76
VAR Varian Medical Systems, Inc. $88.25 25.2 A $0.87
VRTX Vertex Pharmaceuticals Inc. $127.30 49.5 A ($0.61)

 

 

 

 

Thursday January 29:

 

Economic: Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, Pending Home Sales Index – 10:00, EIA Natural Gas Report – 10:30.

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

 

Optionable Earnings:

 

Symbol Company Name Jan 23 Close IV30 B/A XEPS
ALLY Ally Financial Inc $20.63 32.2 B $0.39
ALXN Alexion Pharmaceuticals, Inc. $180.32 36.0 B $1.17
APD Air Products & Chemicals, Inc. $144.32 24.7 B $1.49
BABA Alibaba Group Holding Ltd $104.00 35.0 B $0.62
BC Brunswick Corporation $52.17 32.4 B $0.27
BEAV B/E Aerospace Inc $60.67 32.5 B $0.77
BX The Blackstone Group L.P. $35.71 23.1 B $0.95
CAM Cameron International Corporation $44.38 39.1 B $1.20
CELG Celgene Corporation $123.71 30.2 B $0.88
CHKP Check Point Software Technologies $79.99 23.7 B $0.98
COP ConocoPhillips $65.30 29.4 B $0.62
CRR CARBO Ceramics Inc. $33.93 79.4 B $0.64
CSH Cash America International Inc $21.77 46.6 B $0.43
DGX Quest Diagnostics Inc $72.01 25.2 B $1.05
DOW Dow Chemical Co $45.36 25.7 B $0.68
HAR Harman International Industries $98.88 43.0 B $1.30
HOG Harley-Davidson Inc $65.62 28.6 B $0.33
HP Helmerich & Payne, Inc. $64.27 44.5 B $1.57
HSY Hershey Co $110.78 25.1 B $1.07
LLL L-3 Communications Holdings, Inc. $128.25 23.8 B $2.19
MJN Mead Johnson Nutrition CO $99.95 25.4 B $0.87
MTH Meritage Homes Corp $33.02 37.0 B $1.03
NDAQ NASDAQ OMX Group, Inc. $46.54 22.6 B $0.74
OXY Occidental Petroleum Corporation $78.86 28.0 B $0.76
PHM PulteGroup, Inc. $20.93 34.8 B $0.41
PSX Phillips 66 $67.31 34.9 B $1.33
PSXP Phillips 66 Partners LP $72.47 39.0 B $0.38
RCL Royal Caribbean Cruises Ltd $85.13 30.9 B $0.41
RGLD Royal Gold, Inc USA) $75.09 39.0 B $0.29
RYL Ryland Group Inc $35.96 36.9 B $0.96
SWK Stanley Black & Decker, Inc. $93.87 22.9 B $1.54
TKR Timken Co $42.03 30.3 B $0.61
TMO Thermo Fisher Scientific Inc. $127.00 22.3 B $1.94
TWC Time Warner Cable Inc $146.09 37.9 B $2.10
VIAB Viacom, Inc. $68.61 26.2 B $1.30
VLO Valero Energy Corporation $48.00 33.9 B $1.17
WCC WESCO International, Inc. $69.28 30.3 B $1.49
ZMH Zimmer Holdings, Inc. $118.35 31.0 B $1.70
ALGN Align Technology, Inc. $58.01 43.8 A $0.49
AMZN Amazon.com, Inc. $310.32 42.3 A $0.22
BOFI BofI Holding, Inc. $84.78 28.8 A $1.20
BRCM Broadcom Corporation $42.33 28.3 A $0.70
DECK Deckers Outdoor Corp $78.44 50.5 A $4.50
EMN Eastman Chemical Company $72.48 31.1 A $1.54
GDOT Green Dot Corporation $20.01 61.2 A $0.12
GOOGL Google Inc $537.30 23.8 A $5.86
HA Hawaiian Holdings, Inc. $25.90 48.4 A $0.38
HBI Hanesbrands Inc. $113.04 28.7 A $1.45
INFA Informatica Corporation $38.49 33.6 A $0.43
LEG Leggett & Platt, Inc. $44.49 26.2 A $0.44
N NetSuite Inc $106.42 43.3 A ($0.25)
RHI Robert Half International Inc. $58.84 28.9 A $0.61
SWI SolarWinds Inc $49.23 44.8 A $0.40
SYNA Synaptics, Incorporated $67.25 52.6 A $0.99
UIS Unisys Corporation $27.26 55.9 A $1.82
V Visa Inc $257.60 24.0 A $2.50

 

 

Friday January 30:

 

Economic: GDP – 8:30, Employment Cost Index – 8:30, Chicago PMI – 9:45, University of Michigan/Reuters Consumer Sentiment, Farm Prices – 3:00.

 

International Economic: Germany Retail Sales – 2:00 AM, France PPI – 2:45 AM, EMU HICP Flash – 5:00 AM.

 

Optionable Earnings:

 

Symbol Company Name Jan 23 Close IV30 B/A XEPS
ABBV AbbVie Inc $62.98 25.8 B $0.85
BEN Franklin Resources, Inc. $54.22 23.8 B $0.96
BERY Berry Plastics Group Inc $33.12 38.1 B $0.26
CVX Chevron Corporation $108.92 26.1 B $1.65
HMC Honda Motor Co Ltd (ADR) $31.28 24.1 B $0.55
IR Ingersoll-Rand PLC $64.74 23.8 B $0.70
LEA Lear Corporation $99.70 28.1 B $2.06
LM Legg Mason Inc $55.48 23.6 B $0.97
MA Mastercard Inc $84.38 24.5 B $0.67
MAN ManpowerGroup Inc. $68.61 30.5 B $1.44
MAT Mattel, Inc. $28.41 40.9 B $0.98
NS NuStar Energy L.P. $60.09 33.1 B $0.52
NWL Newell Rubbermaid Inc. $38.10 22.6 B $0.49
TSN Tyson Foods, Inc. $41.10 30.6 B $0.72

 

 

 

Monday January 26:

 

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

 

International Economic: Germany PMI Manufacturing Index – 3:55 AM, EMU PMI Manufacturing Index – 4:00 AM.

 

Optionable Earnings:

Symbol Company Name Jan 23 Close IV30 B/A XEPS
PBI Pitney Bowes Inc. $24.39 34.1 B $0.51
SYY SYSCO Corporation $40.69 27.2 B $0.41
XOM Exxon Mobil Corporation $92.87 22.7 B $1.31
APC Anadarko Petroleum Corporation $81.52 37.4 A $0.83
OI Owens-Illinois Inc $24.23 31.7 A $0.56
RCII Rent-A-Center Inc $34.48 43.6 A $0.63

 

 

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