The Prepared Mind: February 2, 2015

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

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

Last week was difficult for the major indices. All of the, with the exception of the Russell 2000 had losses approaching 3%.   The supposed impetus for the declines was fear of weakening economic growth in the US. Friday’s release of US fourth quarter GDP number disappointed investors by coming in at 2.6%. Crude oil has declined in price for seven consecutive months. Bears blame the decline on weakening global economies rather than increased supply. Concerns about Greece and the Ukraine added uncertainty and further downward pressure on the market.

The stock continues to be very volatile with a trading range between the support level of 1990 and the resistance of 2060. Friday’s sell-off created a sleepless weekend for many traders. Monday will let us know if 1990 proves to be the support for the fifth time in the past month. The ATR (Average True Range) is at the highest levels in two years. This leads me to expect the market volatility to continue.  Equity only put/call rations are bearish and are on sell signals. Market breadth signals are bouncing between buy and sell.  The VIX is trading within a range. Indicators are mixed. A move by the SPX out of the trading range will create even more volatile trading ranges.

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

 

Index Jan 30 Close Weekly Change % Weekly % 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17,164.95 (507.65) -2.87% -3.69% 15.84%(VXD)
S&P 500 (SPX) 1,994.99 (56.83) -2.77% -3.10% 16.66% (VIX)
NASDAQ 100 (NDX) 4,144.25 (122.61) -2.87% -2.21% 17.06% (VXN)
Russell 2000 (RUT) 1,163.84 (21.91) -1.85% -3.39% 20.8% (RVX)
S&P 100 (OEX) 875.80 (27.34) -3.03% -3.59% 15.89%(VXO)
CBOE Volatility Index (VIX) 20.97 4.31 25.87% NA

Last week’s 3% decline resulted in a 25% increase in the VIX. There is one trader expected a pullback in the VIX. The trade of the week was the end of day sale on Friday of 10,000 VIX Feb 19/22 call spreads, with the February VIX future at approximately 20.50%, for a credit of 0.96. The trade profits from a February VIX level below 19.96. Trading in The VIX and SPX has been like our Midwest weather; if you don’t like what your are seeing, wait a few minutes.

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

 

Index Ticker 30-Jan 23-Jan Change % Change
CBOE Volatility Index VIX 20.97 16.66 4.31 25.87%
VIX February Future VXF5 21.02 18.37 2.65 14.43%
VIX March Future VXH5 20.25 18.52 1.73 9.34%
VIX April Future VXJ5 20.30 18.87 1.43 7.58%
CBOE Short-term Volatility Index VXST 21.17 16.08 5.09 31.65%
CBOE 3 Month Volatility Index VXV 21.82 19.00 2.82 14.84%
CBOE Mid-term Volatility Index VXMT 21.87 19.82 2.05 10.34%
VIX of VIX VVIX 108.69 96.33 12.36 12.83%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 36.87 32.10 4.77 14.86%
pShares VIX Short Term Futures ETF VIXY 24.55 21.34 3.21 15.04%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 14.15 13.30 0.85 6.39%
Short VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 24.97 29.82 (4.85) -16.26%

 

This week is “Employment week.” The week dad been characterized increased implied volatility levels and daily response to the plethora of employment reports ending with the release of the monthly Employment Situation on Friday morning. The steady improvement in employment levels has removed the historical impact of this week. Given the current skittish nature of the market, any disappointment could lead to an immediate decline. Volatility levels should remain high through Friday’s announcement. Any ratcheting up of global concerns – Ukraine, Greece, ISIS, etc – will work against any easing of volatility levels. The global calendar is full the release purchasing mangers’ indexes for China, Japan, the EMU, the UK and the US.

The earnings cycle continues at an increased pace this week. 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: Sysco, Exxon Mobil, Aflac, Disney, ADM, Gilead Sciences, Emerson Electric, UPS, Allergan. Yum! Brands, Allstate, ADP, Merck, GM, Motorola solutions, Prudential, Southern Co., CME Group, Estee Lauder, Phillip Morris, AON and Marsh & McLennan,    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 a problem cannot be solved, enlarge it.” – Dwight Eisenhower

 

“A pessimist is one who makes difficulties of his opportunities,

an optimist is one who makes opportunities of his difficulties.” – Harry Truman

 

 

Monday February 2:

 

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, Global Manufacturing PMI – 11:00..

 

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

 

Optionable Earnings:

 

Symbol Company Name Jan 30 Close IV30 B/A XEPS
PBI Pitney Bowes Inc. $24.05 37.8 B $0.51
SYY SYSCO Corporation $39.90 35.6 B $0.41
XOM Exxon Mobil Corporation $87.58 27.1 B $1.33
ADVS Advent Software, Inc. $42.50 43.8 A $0.27
APC Anadarko Petroleum Corporation $80.14 40.4 A $0.82
HIG Hartford Financial Services Group Inc $39.57 26.1 A $0.93
OI Owens-Illinois Inc $23.05 34.2 A $0.46
RCII Rent-A-Center Inc $35.33 48.2 A $0.63

 

 

Tuesday February 3:

 

Economic: Motor Vehicle Sales, Gallup US ECI (Economic Confidence Index) – 8:30, Redbook – 8:55. Factory Orders – – 10:00.

 

International Economic: EMU PPI – 5:00 AM, Japan PMI Composite – 8:35, China PMI Composite – 8:45 PM.

 

Other: St. Louis Federal Reserve Bank President James Bullard speech and panel discussion on monetary policy in Newark, Delaware – 10:00, Minneapolis Federal Reserve Bank President Narayana Kocherlakota speech on goal-based monetary policy in St. Paul. – 12:45.

 

Optionable Earnings:

 

Symbol Company Name Jan 30 Close IV30 B/A XEPS
ADM Archer Daniels Midland Company $47.92 30.9 B $0.91
AET Aetna Inc $93.61 28.1 B $1.22
AGCO AGCO Corporation $43.64 31.5 B $0.65
AN AutoNation, Inc. $60.57 36.5 B $0.92
BP BP plc (ADR) $38.75 29.9 B $0.82
CNC Centene Corp $110.78 37.1 B $1.70
EMR Emerson Electric Co. $56.88 34.5 B $0.73
ETN Eaton Corporation PLC $64.19 29.0 B $1.20
HCLP Hi-Crush Partners LP $32.30 60.6 B $0.95
LYB LyondellBasell Industries NV $77.77 39.7 B $2.13
MNK Mallinckrodt PLC $108.74 35.8 B $1.57
NOV National-Oilwell Varco, Inc. $53.26 39.2 B $1.60
R Ryder System, Inc. $86.24 31.2 B $1.59
SPR Spirit AeroSystems Holdings, Inc. $45.18 39.9 B $0.77
ST Sensata Technologies Holding N.V. $49.92 27.6 B $0.52
UPS United Parcel Service, Inc. $100.42 23.0 B $1.25
AEC Associated Estates Realty Corporation $25.55 23.4 A $0.33
ATW Atwood Oceanics, Inc. $27.53 42.7 A $1.44
CBL CBL & Associates Properties, Inc. $20.88 25.6 A $0.65
CHRW C.H. Robinson Worldwide, Inc. $73.31 32.0 A $0.76
CMG Chipotle Mexican Grill, Inc. $714.53 37.9 A $3.77
DIS Walt Disney Co $93.22 23.3 A $1.08
EW Edwards Lifesciences Corp $129.28 34.5 A $0.94
EXP Eagle Materials, Inc. $71.02 42.6 A $1.01
GCI Gannett Co., Inc. $31.76 30.2 A $1.01
GILD Gilead Sciences, Inc. $104.18 38.4 A $2.27
IACI IAC/InterActiveCorp $60.71 36.9 A $0.75
MYGN Myriad Genetics, Inc. $38.34 62.4 A $0.35
NSR Neustar Inc $26.64 41.5 A $0.84
TTWO Take-Two Interactive Software, Inc. $30.09 45.6 A $1.33
UNM Unum Group $31.43 26.2 A $0.88
WYNN Wynn Resorts, Limited $152.97 40.6 A $1.44

 

Wednesday February 4:

 

Economic: MBA Purchase Applications – 7:00, ADP Employment Report – 8:15, Gallup US Job creation Index – 8:30, PMI Services Index – 9:45, ISM non-Manufacturing Index – 10:00, EIA Petroleum Status Report – 10:30. Global Composite PMI – 11:00.

 

International: Germany PMI Composite 3:55 AM, EMU PMI Composite – 5:00 AM

 

Other: Cleveland Federal Reserve Bank President Loretta Mester speech to Ohio Bankers League economic summit in Columbus, Ohio – 12:45.

 

Optionable Earnings:

 

Symbol Company Name Jan 30 Close IV30 B/A XEPS
CTSH Cognizant Technology Solutions Corp $55.48 34.1 B $0.59
GM General Motors Company $33.16 30.1 B $0.84
GWPH GW Pharmaceuticals PLC- ADR $74.86 51.5 B ($0.91)
HAIN Hain Celestial Group Inc $54.62 39.6 B $0.53
HUM Humana Inc $149.62 33.9 B $1.16
LVLT Level 3 Communications, Inc. $50.05 34.8 B $0.34
MPC Marathon Petroleum Corp $90.01 36.7 B $1.47
MRK Merck & Co., Inc. $62.09 24.0 B $0.85
MSI Motorola Solutions Inc $63.83 28.3 B $1.03
RL Ralph Lauren Corp $170.03 30.8 B $2.53
SE Spectra Energy Corp. $33.40 26.5 B $0.32
WHR Whirlpool Corporation $203.95 35.4 B $3.17
BKD Brookdale Senior Living, Inc. $34.07 31.1 A ($0.51)
CBG CBRE Group Inc $32.99 30.2 A $0.69
CNW Con-way Inc $41.59 39.7 A $0.45
DATA Tableau Software Inc $80.50 57.5 A ($0.02)
FOX Twenty-First Century Fox, Inc. $32.57 29.9 A $0.44
FOXA Twenty-First Century Fox Inc $33.85 30.2 A $0.41
GMCR Keurig Green Mountain Inc $127.98 53.1 A $0.89
GPRE Green Plains Inc $23.34 78.4 A $0.97
IRBT iRobot Corporation $33.00 57.3 A $0.30
LCI Lannett Company, Inc. $50.11 55.1 A $1.06
LNC Lincoln National Corporation $51.48 30.4 A $1.48
NXPI NXP Semiconductors NV $79.87 45.2 A $1.18
ORLY O’Reilly Automotive Inc $192.65 28.6 A $1.67
PAA Plains All American Pipeline, L.P. $48.90 30.6 A $0.59
PAGP Plains GP Holdings LP $26.47 39.9 A $0.14
PRU Prudential Financial Inc $76.96 31.9 A $2.38
SU Suncor Energy Inc. (USA) $28.91 39.2 A $0.45
UA Under Armour Inc $72.80 44.1 A $0.39
YUM Yum! Brands, Inc. $74.27 31.1 A $0.65

 

 

Thursday February 5:

 

Economic: Chain Store Sales, Challenger Job-Cut Report – 7:30, Gallup US Payroll to Population – 8:30, International Trade – 8:30, Weekly Jobless Claims – 8:30, Productivity and Costs – 8:30, Bloomberg Consumer Comfort Index – 9:45, EIA Natural Gas Report – 10:30.

International: Germany Manufacturers’ Orders – 2:00 AM, Bank of England Announcement – 7:00 AM,

 

Other: Boston Federal Reserve Bank President Eric Rosengren speech on the U.S. experience with QE, in Frankfurt – 5:00 AM.

 

Optionable Earnings:

 

Symbol Company Name Jan 30 Close IV30 B/A XEPS
APO Apollo Global Management LLC $25.05 36.4 B $0.38
CDK CDK Global Inc $45.65 35.1 B $0.32
CHTR Charter Communications, Inc. $152.09 45.2 B ($0.23)
CI CIGNA Corporation $109.62 28.2 B $1.65
CMI Cummins Inc. $142.70 31.6 B $2.50
DLPH Delphi Automotive PLC $69.17 27.5 B $1.26
DNKN Dunkin Brands Group Inc $46.96 30.3 B $0.47
EL Estee Lauder Companies Inc $71.97 26.6 B $1.05
ETR Entergy Corporation $89.90 22.6 B $0.82
GRUB GrubHub Inc $34.81 58.3 B $0.09
ICE Intercontinental Exchange Inc $204.87 28.4 B $2.54
KORS Michael Kors Holdings Ltd $72.53 45.9 B $1.34
LAZ Lazard Ltd $46.01 34.0 B $1.05
LGF Lions Gate Entertainment Corp. (USA) $28.73 39.5 B $1.05
MMP Magellan Midstream Partners, L.P. $77.30 33.2 B $0.93
NUS Nu Skin Enterprises, Inc. $42.17 72.8 B $0.81
PRGO Perrigo Company PLC $154.00 31.5 B $1.78
SNN Smith & Nephew plc (ADR) $36.34 47.4 B $0.51
SNY Sanofi SA (ADR) $47.00 25.1 B $0.89
TDC Teradata Corporation $45.00 39.0 B $0.83
TEVA Teva Pharmaceutical Industries Ltd $57.56 27.0 B $1.29
USG USG Corporation $30.85 39.2 B $0.38
VMC Vulcan Materials Company $71.34 32.2 B $0.25
ATHN athenahealth, Inc $143.26 49.5 A $0.19
ATVI Activision Blizzard, Inc. $20.75 46.5 A $0.84
BWLD Buffalo Wild Wings $182.74 42.6 A $1.08
CME CME Group Inc $86.22 24.4 A $0.93
EXPE Expedia Inc $86.57 42.0 A $0.86
FLT FleetCor Technologies, Inc. $141.26 39.7 A $1.30
GPRO GoPro Inc $50.84 82.1 A $0.62
GRA W. R. Grace & Co $85.01 27.5 A $0.62
IMPV Imperva Inc $42.86 74.3 A ($0.47)
LNKD LinkedIn Corp $223.04 49.6 A $0.65
LOCO El Pollo LoCo Holdings Inc $26.79 54.5 A $0.03
MCK McKesson Corporation $219.53 24.8 A $2.62
OLN Olin Corporation $25.18 31.1 A $0.22
OUTR Outerwall Inc $63.98 52.4 A $2.44
SWIR Sierra Wireless, Inc. (USA) $38.13 66.8 A $0.19
SYMC Symantec Corporation $25.60 31.3 A $0.43
TPX Tempur Sealy International Inc $54.99 49.2 A $0.84
TWTR Twitter Inc $36.68 70.9 A ($0.21)
UBNT Ubiquiti Networks Inc $26.25 78.5 A $0.44
YELP Yelp Inc $52.93 68.1 A $0.07

 

 

Friday February 6:

 

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 Industrial Production – 2:00 AM, Great Britain Merchandise Trade – 4:30 AM.

Other: Atlanta Federal Reserve Bank President Dennis Lockhart speech on monetary policy and the economic outlook, in Naples, Florida – 12;45.

 

Optionable Earnings:

 

Symbol Company Name Jan 30 Close IV30 B/A XEPS
AAN Aaron’s, Inc. $32.39 36.9 B $0.36
AON Aon PLC $91.18 26.7 B $1.85
AXL American Axle & Manufact. Holdings $24.81 34.4 B $0.54
BPL Buckeye Partners, L.P. $73.33 33.9 B $0.88
CBOE CBOE Holdings, Inc $65.62 23.5 B $0.66
MCO Moody’s Corporation $92.35 25.9 B $0.94
UFS Domtar Corp (USA) $38.51 34.9 B $0.90

 

 

Monday February 9:

 

Economic: TD Ameritrade IMX – 12:30 AM.

 

International Economic: Germany Merchandise Trade – 2:00 AM, Japan Tertiary Index – 6:50 PM, China CPI and PPI – 8:30 PM.

 

Optionable Earnings:

 

Symbol Company Name Jan 30 Close IV30 B/A XEPS
CYOU Changyou.Com Ltd (ADR) $27.71 59.7 B $0.08
DO Diamond Offshore Drilling Inc $30.73 65.1 B $0.65
GOLD Randgold Resources Ltd. (ADR) $83.06 40.8 B $0.78
HAS Hasbro, Inc. $55.77 27.6 B $1.26
MAS Masco Corporation $25.42 34.3 B $0.19
SOHU Sohu.com Inc $56.37 48.0 B ($0.46)
CCK Crown Holdings, Inc. $44.33 25.3 A $0.48
KS KapStone Paper and Packaging Corp. $30.60 51.8 A $0.46
NTES NetEase, Inc (ADR) $109.17 36.7 A $1.58
TDW Tidewater Inc. $28.52 58.6 A $0.96

 

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