The Prepared Mind: February 9, 2015

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

“Chance favors the prepared mind.” — Louis Pasteur

by Frank Fahey

News Flash: The Chicago Board Options Exchange announced on Friday, February 6, that it will expand trading hours for both CBOE Volatility Index (VIX) Index) options and S&P 500 Index (SPX) options, adding more than six hours of additional trading five days a week. The extended hours for VIX options are set to begin Monday, March 2, while the extended hours for SPX options are expected to start on Monday, March 9. The expanded trading hours for VIX and SPX options at CBOE will run Monday through Friday, beginning each day at 2:00 a.m. CT and ending at 8:15 a.m. CT. The 2:00 a.m. CT start in Chicago syncs with the 8:00 a.m. open of trading in London.

Wild swings continue to dominate the market.  The market pundits returned to bullish as Dow Jones Industrials gained nearly 4% , recovering all of the previous week’s losses and then some. The tortured conversations among the financial talking heads were reminiscent of Dorothy’s first conversation with the Scarecrow in The Wizard of Oz:

Dorothy: Now which way do we go?

Scarecrow: Pardon me. That way is a very nice way.

Dorothy: Who said that? Don’t be silly, Toto. Scarecrows don’t talk.

Scarecrow: It’s pleasant down that way, too. That’s funny. Wasn’t he pointing the other way?

Scarecrow: Of course, people do go both ways.

Be very wary of these market pundits. Their attempts to divine direction are no better than the Scarecrow’s ability.   It is important to remember the Scarecrow’ response when Dorothy asked him how he could talk if he did not have a brain. The Scarecrow said. “I don’t know… But some people without brains do an awful lot of talking… don’t they? “

The S&P continues to be very volatile while trading in a range between the support level of 1990 and the resistance of 2065. A week ago the SPX was testing the 1990 support level. This week the SPX will test the 2065 resistance level.   Market technicians are waiting for a breakout to establish a new short-term trend. Market breadth indicators spent the week jumping between buy and sell signals. Current market breadth signals are on buy. The technical focus is on the SPX’s ability to finally close above 2065. Market analyst and technicians have been busy creating scenarios predicated on whether the S&P can or cannot close above 3065.

Here is an overview of the market behavior last week:

Index Feb 6 Close Weekly Change % Weekly % 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17,824.29 659.34 3.84% 0.01% 16.97%(VXD)
S&P 500 (SPX) 2,055.47 60.48 3.03% -0.17% 17.29% (VIX)
NASDAQ 100 (NDX) 4,229.63 85.38 2.06% -0.20% 18.41% (VXN)
Russell 2000 (RUT) 1,205.17 41.33 3.55% 0.04% 21.47% (RVX)
S&P 100 (OEX) 904.06 28.26 3.23% -0.48% 17.27%(VXO)
CBOE Volatility Index (VIX) 17.29 (3.68) -17.55% NA

 

 

 

The VIX futures were remarkably resilient in the face of last week’s rally. The February VIX future closed at nearly a 2 point premium over the cash VIX. The February future expires in 10 days.   And an increased expectation that the February settlement may be higher than current cash levels. This is the most expensive VIX protection has been with the SPX at the upper end of the current trading range.

 

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

Indexes Ticker 6-Feb 30-Jan Change % Change
CBOE Volatility Index VIX 17.29 20.97 (3.68) -17.55%
VIX February Future VXF5 19.17 21.02 (1.85) -8.80%
VIX March Future VXH5 19.55 20.25 (0.70) -3.46%
VIX April Future VXJ5 19.80 20.30 (0.50) -2.46%
CBOE Short-term Volatility Index VXST 14.93 21.17 (6.24) -29.48%
CBOE 3 Month Volatility Index VXV 19.88 21.82 (1.94) -8.89%
CBOE Mid-term Volatility Index VXMT 20.87 21.87 (1.00) -4.57%
VIX of VIX VVIX 101.69 108.99 (7.30) -6.70%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 34.30 36.87 (2.57) -6.97%
pShares VIX Short Term Futures ETF VIXY 22.82 24.55 (1.73) -7.05%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 13.83 14.15 (0.32) -2.26%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 26.65 24.97 1.68 6.73%

 

This domestic focus the coming week is the consumer sector. Traders a wafting to see if Friday’s positive job numbers translate to better number for job openings on Tuesday, retail sales on Wednesday, consumer sentiment on Friday. The announcement garnering the most attention in the international arena will be the Quarterly Inflation Report from the Bank of England. This report will suggestion a direction for future monetary policy from the BOE.

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: Loews, FMC, CVS, Coca-Cola, PG&E, MetLife, Whole Foods, PepsiCo, Mosaic, Lorillard, Time Warner, Cisco, CBS, Kellogg, Apache, DTE Energy and Exelon.    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 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 Feb 6 Close IV30 B/A XEPS
CYOU Changyou.Com Ltd (ADR) $29.25 57.9 B $0.13
DO Diamond Offshore Drilling Inc $33.83 66.7 B $0.66
GOLD Randgold Resources Ltd. (ADR) $85.13 40.7 B $0.78
HAS Hasbro, Inc. $56.13 28.7 B $1.22
MAS Masco Corporation $25.59 34.1 B $0.20
SOHU Sohu.com Inc $57.23 47.5 B ($0.46)
TE TECO Energy, Inc. $21.78 22.7 B $0.21
CCK Crown Holdings, Inc. $48.06 26.6 A $0.48
CSC Computer Sciences Corporation $63.45 53.5 A $1.12
KS KapStone Paper and Packaging Corp. $30.71 50.2 A $0.44
NBIX Neurocrine Biosciences, Inc. $34.42 55.5 A ($0.24)
NTES NetEase, Inc (ADR) $115.88 37.0 A $1.58
TDW Tidewater Inc. $31.58 51.9 A $0.96

 

 

 

Tuesday February 10:

 

Economic: Redbook – 8:55. NFIB Small Business Optimism Index – 9:30, JOLTS ( Labor Department’s Job Openings and Labor Turnover Survey) – 10:00 AM, Wholesale Trade – 10:00.

 

International Economic: Great Britain Industrial Production – 4:30.

 

Other: Richmond Federal Reserve Bank President Jeffrey Lacker speech on education and economic growth, in Raleigh, North Carolina – 8:20 AM.

 

Optionable Earnings:

 

Symbol Company Name Feb 6 Close IV30 B/A XEPS
ACM Aecom $27.49 44.0 B $0.59
CDW CDW Corp $35.46 32.7 B $0.51
HOT Starwood Hotels & Resorts Worldwide $74.60 31.8 B $0.77
KKR KKR & Co. L.P. $24.69 25.6 B $0.41
MLM Martin Marietta Materials, Inc. $117.60 31.6 B $0.85
NILE Blue Nile Inc $31.79 57.2 B $0.44
PCG PG&E Corporation $58.06 23.6 B $0.54
RAI Reynolds American, Inc. $69.45 22.2 B $0.87
REGN Regeneron Pharmaceuticals Inc $413.87 36.9 B $2.08
SAVE Spirit Airlines Incorporated $77.38 48.3 B $0.77
SEE Sealed Air Corp $41.97 31.5 B $0.47
TAP Molson Coors Brewing Company $78.21 33.7 B $0.67
WYN Wyndham Worldwide Corporation $83.48 27.0 B $0.86
AKAM Akamai Technologies, Inc. $60.49 42.5 A $0.53
CERN Cerner Corporation $67.01 27.8 A $0.43
NCR NCR Corporation $26.54 40.0 A $0.80
PXD Pioneer Natural Resources $158.59 44.8 A $0.98
SGEN Seattle Genetics, Inc. $32.57 50.9 A ($0.26)
THOR Thoratec Corporation $36.17 46.2 A $0.11
VSAT ViaSat, Inc. $57.74 46.8 A $0.16

 

Wednesday February 11:

 

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

 

International Economic: Bank of England Inflation Report – 5:30, Japan Machine Orders – 6:50 PM, Japan PPI – 6:50.

 

Other: Dallas Federal Reserve Bank President Richard Fisher speech on monetary policy, in New York – 8:00 AM.

 

 

Optionable Earnings:

 

Symbol Company Name Feb 6 Close IV30 B/A XEPS
AFSI AmTrust Financial Services Inc $53.05 36.5 B $1.22
AOL AOL, Inc. $43.97 51.2 B $0.55
ARMH ARM Holdings plc (ADR) $50.11 36.9 B $0.27
CG The Carlyle Group LP $26.49 40.8 B $0.41
CSTE Caesarstone Sdot-Yam Ltd $63.09 45.8 B $0.54
GNRC Generac Holdings Inc. $45.36 46.6 B $0.78
MDLZ Mondelez International Inc $36.26 26.8 B $0.43
MOS Mosaic Co $49.79 22.7 B $0.86
OC Owens Corning $39.13 35.9 B $0.42
TWX Time Warner Inc $79.98 24.2 B $0.95
VOYA Voya Financial Inc $40.26 24.4 B $0.75
ZTS Zoetis Inc $43.40 26.9 B $0.36
ACHC Acadia Healthcare Company Inc $61.17 36.2 A $0.46
AEM Agnico Eagle Mines Ltd (USA) $34.56 54.4 A $0.06
AMAT Applied Materials, Inc. $23.96 39.5 A $0.27
BIDU Baidu Inc (ADR) $216.80 35.8 A $1.60
CAKE Cheesecake Factory Inc $52.91 28.3 A $0.60
CPA Copa Holdings, S.A. $116.30 46.2 A $1.96
CSCO Cisco Systems, Inc. $27.26 25.6 A $0.45
CSOD Cornerstone OnDemand, Inc. $33.30 61.0 A ($0.24)
CTL Centurylink Inc $38.43 26.3 A $0.63
FEYE FireEye Inc $36.52 67.4 A ($0.83)
MET Metlife Inc $48.98 25.5 A $1.38
NTAP NetApp Inc. $38.79 29.3 A $0.60
NU Northeast Utilities System $56.28 22.3 A $0.69
NVDA NVIDIA Corporation $20.48 34.5 A $0.29
OII Oceaneering International $55.62 36.7 A $0.99
PNRA Panera Bread Co $172.40 32.4 A $1.82
PPC Pilgrim’s Pride Corporation $26.10 54.0 A $0.72
SCSS Select Comfort Corp. $31.55 55.7 A $0.23
SKX Skechers USA Inc $61.63 48.9 A $0.43
TAL TAL International Group, Inc. $41.92 33.4 A $0.96
TRIP Tripadvisor Inc $70.58 49.6 A $0.30
TSLA Tesla Motors Inc $220.99 48.5 A $0.13
TSO Tesoro Corporation $85.37 39.7 A $1.48
WFM Whole Foods Market, Inc. $53.38 40.4 A $0.45

 

Thursday February 12:

 

Economic: Weekly Jobless Claims – 8:30, Retail Sales – 8:30, Bloomberg Consumer Comfort Index – 9:45, Business Inventories – 10:00, EIA Natural Gas Report – 10:30.

International: Germany CPI – 2:00 AM, EMU Industrial Production 5:00 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 Feb 6 Close IV30 B/A XEPS
AAP Advance Auto Parts, Inc. $160.16 34.3 B $1.49
AB AllianceBernstein Holding LP $24.99 31.9 B $0.51
APA Apache Corporation $68.37 35.6 B $0.78
BG Bunge Ltd $91.47 26.1 B $2.48
BWA BorgWarner Inc. $58.31 30.1 B $0.75
CAB Cabelas Inc $56.65 43.1 B $1.35
CCE Coca-Cola Enterprises Inc $43.19 27.8 B $0.56
CVE Cenovus Energy Inc (USA) $20.46 47.2 B $0.16
DBD Diebold Inc $32.33 31.8 B $0.52
DPS Dr Pepper Snapple Group Inc. $77.36 26.4 B $0.87
GNC GNC Holdings Inc $42.23 44.2 B $0.58
INCY Incyte Corporation $75.25 46.8 B ($0.14)
K Kellogg Company $67.03 25.0 B $0.92
MHFI McGraw Hill Financial Inc $95.88 22.0 B $0.90
MPEL Melco Crown Entertainment Ltd $25.63 40.2 B $0.27
NLSN Nielsen Hldg NV $43.98 27.2 B $0.75
PBF PBF Energy Inc $28.61 46.4 B $0.77
PNK Pinnacle Entertainment, Inc $22.73 50.8 B $0.29
SFLY Shutterfly, Inc. $44.83 49.3 B $2.66
SHPG Shire PLC (ADR) $228.42 30.0 B $2.66
SNI Scripps Networks Interactive, Inc. $71.69 28.3 B $0.94
TIME Time Inc $25.51 38.7 B $0.78
WWAV WhiteWave Foods Co $34.76 40.2 B $0.27
AIG American International Group Inc $51.62 22.1 A $1.08
ALNY Alnylam Pharmaceuticals, Inc. $91.15 58.5 A ($0.66)
CBS CBS Corporation $56.00 30.0 A $0.77
CYBR Cyberark Software Ltd $36.82 88.7 A $0.01
DLR Digital Realty Trust, Inc. $74.18 27.1 A $1.25
DVA DaVita HealthCare Partners Inc $76.77 22.3 A $0.88
KN Knowles Corp $22.90 64.5 A $0.31
KRFT Kraft Foods Group Inc $66.93 27.2 A $0.73
LOGM LogMeIn Inc $48.83 58.5 A $0.13
QLIK Qlik Technologies Inc $29.41 54.7 A $0.21
RGC Regal Entertainment Group $21.47 30.9 A $0.31
RIO Rio Tinto plc (ADR) $47.44 36.9 A $2.49
SSTK Shutterstock Inc $61.21 61.8 A $0.20

 

Friday February 13:

 

Economic: Import and Export Prices – 8:30, University of Michigan/Reuters Consumer Sentiment, Farm Prices – 3:00.

 

International Economic: Germany GDP Flash – 2:00 AM, EMU GDP Flash – 5:00 AM, EMU Merchandise Trade – 6:00.

 

 

Optionable Earnings:

 

Symbol Company Name Feb 6 Close IV30 B/A XEPS
CPN Calpine Corporation $22.16 31.4 B ($0.11)
EXC Exelon Corporation $36.60 26.0 B $0.51
IPG Interpublic Group of Companies Inc $20.86 30.9 B $0.57
NGLS Targa Resources Partners LP $46.29 40.3 B $0.60
RRGB Red Robin Gourmet Burgers, Inc. $77.77 50.1 B $0.69
SJM J M Smucker Co $113.33 22.0 B $1.50
TRGP Targa Resources Corp $96.65 51.5 B $0.59
TRP TransCanada Corporation (USA) $47.18 29.2 B $0.57
VFC VF Corp $70.24 32.5 B $0.99
VTR Ventas, Inc. $79.37 22.6 B $1.13

 

Monday February 16:

 

US Holiday – Presidents’ Day: All US Markets Closed

 

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:

 

Tuesday February 17:

 

Economic: Empire State Manufacturing Survey – 8:30, Housing Market Index – 10:00, E-Commerce Retail Sales – 10:00.

 

International Economic:

 

Other: Philadelphia Federal Reserve Bank President Charles Plosser speech on the economic outlook and monetary policy in Philadelphia – 12:45.

 

Optionable Earnings:

 

Symbol Company Name Feb 6 Close IV30 B/A XEPS
GPC Genuine Parts Company $95.95 23.8 B $1.07
VDSI VASCO Data Security International, $23.34 97.9 B $0.20
A Agilent Technologies Inc $39.53 37.1 A $0.41
CF CF Industries Holdings, Inc. $299.60 28.0 A $5.02
DVN Devon Energy Corp $65.00 35.5 A $1.09
FLS Flowserve Corp $58.08 33.6 A $1.13
FOSL Fossil Group Inc $97.12 43.1 A $3.10
O Realty Income Corp $53.35 24.7 A $0.66
RAX Rackspace Hosting, Inc. $47.28 46.6 A $0.19
TEX Terex Corporation $24.19 45.8 A $0.68
XEC Cimarex Energy Co $112.29 49.0 A $0.85

 

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