The Prepared Mind: February 23, 2015

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

“Chance favors the prepared mind.” — Louis Pasteur

The major indexes traded in a narrow range last week as investors monitored negotiations between Greece and its creditors. Late Friday, Greece received an extension from these creditors giving it four month extension meet the requirements of the euro-zone bailout package. Market optimism received a boost from the agreement combined with stabilizing oil prices, increased US bond yields, better than expected European economic growth and reduced fears of a Greek exit from the European Monetary Union.   The agreement is only an extension. It effectively moves the “crisis” out four months. Many analysts believe the extension removes a Greece from the current market volatility equation until summer. European commentators are not expressing the same levels of confidence about the Greek parliament’s resolve to meet the Eurozone requirements.

Friday afternoon’s rally propelled the major indexes to new highs. Financial media optimism went up in lock step with the markets. The NASDAQ Composite (Symbol: COMP) last reached 5,000 in March of 2000. The index closed at 4,955.97 on Friday. The financial media is anxiously awaiting the return of 5,000. Prediction of 6,000 and 7,000 were bandied about by the market mavens. The analysts are comparing apples and oranges. The structure and nature of the index has changed in the past 15 years. The price earnings ratio of the NADAQ Composite was over 100 the last time the index reached 5,000; the current P/E is just north of 21. The composite would be trading over 30,000 if the valuations from March 2000 are overlaid on the 2015 structure. This breathless excitement is nothing more than a media manufactured “So What?”

Here is an overview of the market behavior last week:

 

Index Feb 20 Close Weekly Change % Weekly % 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 18,140.44 121.09 0.67% 1.78% 13.85%(VXD)
S&P 500 (SPX) 2,110.30 13.31 0.63% 2.50% 14..30% (VIX)
NASDAQ 100 (NDX) 4,438.27 60.19 1.37% 4.73% 14.67% (VXN)
Russell 2000 (RUT) 1,227.59 5.32 0.44% 1.90% 17.36% (RVX)
S&P 100 (OEX) 926.53 3.10 0.34% 2.00% 14.05%(VXO)
CBOE Volatility Index (VIX) 14.30 (0.39) -2.65% NA

 

The VIX finished the week at 14.30 – its lowest closing price of 2015.   The VXST also closed at the lowest levels of the year. The cash price and the short term measurements show a lack of fear not reflected in the March futures.   The difference between the VXH5 and the VIX is 2.65. This difference is greater than I would expect with the SPX and other indexes reaching new highs. The longer term volatility indexes and volatility futures appear to share skepticism about the current index price levels.

 

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

Indexes Ticker 20-Feb 13-Feb Change % Change
CBOE Volatility Index VIX 14.30 14.69 (0.39) -2.65%
VIX March Future VXH5 16.95 18.15 (1.20) -6.61%
VIX April Future VXJ5 17.95 18.53 (0.57) -3.10%
VIX May Future VXK5 18.50 18.88 (0.38) -2.01%
CBOE Short-term Volatility Index VXST 11.74 11.76 (0.02) -0.17%
CBOE 3 Month Volatility Index VXV 17.29 18.13 (0.84) -4.63%
CBOE Mid-term Volatility Index VXMT 19.11 19.43 (0.32) -1.65%
VIX of VIX VVIX 85.78 92.74 (6.96) -7.50%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 29.05 30.97 (1.92) -6.20%
pShares VIX Short Term Futures ETF VIXY 19.29 20.69 (1.40) -6.77%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 12.94 13.10 (0.16) -1.22%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 31.29 29.40 1.89 6.43%
ProShares Short VIX Short Term Future ETF SVXY 61.42 57.68 3.74 6.48%

 

This will busy week for economic reports. The market is hitting new highs without support from the housing sector. Any positive news from this sector could propel the market even higher. These reports will provide news on new home sales, existing home sales, pending homes sales augmented by home price data from Case-Shiller and the FHFA. The release of the CPI and revised Q4 GDP will be of particular interest to Fed watchers. Germany will be releasing GDP numbers in addition to consumer and business sentiment surveys. The Greek bailout will be a topic of concern despite the optimism injected by the extension of the eurozone financial lifeline.

The earnings cycle starts winding down 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. Major earnings announcements include: Comcast, Home Depot, Hewlett-Packard, Macy’s, Dollar Tree, Target, Gap, Autodesk, Monster Beverage, Kohl’s and Berkshire Hathaway. 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

 

“One thing I know, that I know nothing. This is the source of my wisdom.” – Socrates
 

Monday February 23

 

Economic: Chicago Fed National activity Index – 8:30, PMI Services Flash – 9:45, Existing Home Sales – 10:00, Dallas Fed Manufacturing Survey – 10:30.

 

International Economic: No major reports.

 

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 20 Close IV30 B/A XEPS
AER AerCap Holdings N.V. $43.72 30.3 B $1.32
AWI Armstrong World Industries, Inc. $53.89 39.7 B $0.28
AXL American Axle & Mfg $25.14 29.8 B $0.54
CTB Cooper Tire & Rubber Co $36.86 33.9 B $0.62
DISH DISH Network Corp $77.56 39.7 B $0.43
DNOW NOW Inc $24.60 55.4 B $0.30
AGU Agrium Inc. (USA) $108.64 24.1 A $0.64
OKE ONEOK, Inc. $47.50 37.1 A $0.37
OKS Oneok Partners LP $44.57 36.1 A $0.58
ROSE Rosetta Resources Inc. $23.06 70.5 A $0.32
THC Tenet Healthcare Corp $44.69 41.7 A $1.20
TXRH Texas Roadhouse Inc $36.83 38.8 A $0.26

 

 

Tuesday February 24:

 

Economic: Redbook – 8:55, S&P Case-Shiller Home Price Index – 9:00, Consumer Confidence – 10:00, Richmond Fed Manufacturing Index -10:00, State Street Investor Confidence Index – 10:00.

 

International Economic: Germany GDP – 2:00 AM, EMU HICP – 5:00 AM, China PMI Flash Manufacturing – 8:45PM.

 

Other: Federal Reserve Chair Janet Yellen semi-annual monetary policy testimony to Senate Banking Committee, in Washington – 10:00 AM.

 

Optionable Earnings:

Symbol Company Name Feb 20 Close IV30 B/A XEPS
ALKS Alkermes Plc $71.96 47.5 B ($0.04)
CBRL Cracker Barrel Old Country Store $134.41 27.0 B $1.60
CLDX Celldex Therapeutics, Inc. $21.38 66.8 B ($0.35)
CRZO Carrizo Oil & Gas, Inc. $52.45 47.3 B $0.32
DPZ Domino’s Pizza, Inc. $101.75 32.6 B $0.93
EXAS EXACT Sciences Corporation $25.75 53.4 B ($0.39)
GTLS Chart Industries, Inc. $32.40 65.1 B $0.60
IPXL Impax Laboratories Inc $40.11 43.8 B $0.11
M Macy’s, Inc. $63.00 25.4 B $2.42
PCRX Pacira Pharmaceuticals Inc $115.63 54.9 B $0.19
RLGY Realogy Holdings Corp $47.24 32.5 B $0.19
SAFM Sanderson Farms, Inc. $81.73 42.3 B $2.75
SPWR SunPower Corporation $27.38 57.3 B $0.25
TOL Toll Brothers Inc $37.57 27.8 B $0.30
UTHR United Therapeutics Corporation $155.72 42.2 B $2.19
VRX Valeant Pharmaceuticals Intl Inc $169.13 30.4 B $1.29
WLK Westlake Chemical Corporation $67.39 41.2 B $1.38
AWAY HomeAway, Inc. $30.78 57.4 A $0.05
CBI Chicago Bridge & Iron Company $41.67 45.9 A $1.43
CENX Century Aluminum Co $22.16 60.3 A $0.66
CLR Continental Resources, Inc. $48.00 53.3 A $0.56
DWA Dreamworks Animation Skg Inc $20.38 62.9 A ($3.15)
DYN Dynegy Inc $28.31 44.8 A $0.96
FMI Foundation Medicine Inc $48.77 32.1 A ($0.53)
FSLR First Solar, Inc. $48.41 59.0 A $0.77
HPQ Hewlett-Packard Company $38.38 29.6 A $0.91
JAZZ Jazz Pharmaceuticals PLC $170.80 38.8 A $2.14
LC LendingClub Corp $22.04 63.4 A ($0.03)
LQ La Quinta Holdings Inc $21.85 35.2 A $0.06
NFX Newfield Exploration Co. $32.78 47.4 A $0.43
QEP QEP Resources Inc $22.79 47.3 A $0.26
RRC Range Resources Corp. $52.02 50.2 A $0.22
SLCA U.S. Silica Holdings Inc $33.03 62.5 A $0.71
SM SM Energy Co $48.96 66.4 A $1.12
TXTR Textura Corp $26.71 62.3 A ($0.09)

 

 

Wednesday February 25:

 

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

.

International Economic: No major reports.

 

Other: Federal Reserve Chair Janet Yellen semi-annual monetary policy testimony to House Financial Services Committee, in Washington – 10:00 PM.

 

Optionable Earnings:

Symbol Company Name Feb 20 Close IV30 B/A XEPS
CHK Chesapeake Energy Corporation $20.40 41.7 B $0.25
CLH Clean Harbors Inc $52.74 42.7 B $0.31
DIN DineEquity Inc $111.77 33.1 B $1.14
DLTR Dollar Tree, Inc. $76.70 25.5 B $1.15
HFC HollyFrontier Corp $41.17 37.2 B $0.31
LL Lumber Liquidators Holdings Inc $67.44 75.0 B $0.76
LOW Lowe’s Companies, Inc. $72.29 24.8 B $0.44
MGA Magna International Inc. (USA) $103.95 29.3 B $2.24
MWE Markwest Energy Partners LP $61.39 39.5 B $0.31
OCR Omnicare, Inc. $76.89 25.0 B $0.95
RY Royal Bank of Canada $61.79 25.4 B $1.31
STRZA Starz $31.40 37.7 B $0.52
TGT Target Corporation $76.68 24.1 B $1.46
TJX TJX Companies Inc $67.82 22.5 B $0.90
UVE Universal Insurance Holdings, Inc. $23.16 46.1 B ($0.54)
AGO Assured Guaranty Ltd. $26.29 34.7 A $0.69
AR Antero Resources Corp $41.28 47.9 A $0.23
AVGO Avago Technologies Ltd $110.90 40.3 A $1.78
BMRN BioMarin Pharmaceutical Inc. $104.19 40.6 A ($0.59)
CEMP Cempra Inc $29.19 66.3 A ($0.46)
CLVS Clovis Oncology Inc $75.16 45.5 A ($1.14)
CRM salesforce.com, inc. $62.81 35.7 A $0.00
CXO Concho Resources Inc $118.37 42.0 A $0.85
DXCM DexCom, Inc. $63.04 50.0 A ($0.03)
ESV ENSCO PLC $30.02 44.3 A $1.38
GPOR Gulfport Energy Corporation $43.61 56.7 A $0.01
LB L Brands Inc $90.03 23.5 A $1.81
MDVN Medivation Inc $105.96 56.1 A $1.21
MELI Mercadolibre Inc $130.50 47.5 A $0.83
MMLP Martin Midstream Partners L.P. $30.14 38.1 A $0.50
QVCA Liberty Interactive Group $29.24 27.8 A $0.48
RGR Sturm, Ruger & Company $43.15 42.4 A $0.42
SFM Sprouts Farmers Market Inc $37.74 30.5 A $0.09
WDAY Workday Inc $91.87 39.6 A ($0.34)
WLL Whiting Petroleum Corp $39.64 71.6 A $0.52

 

 

Thursday February 26:

 

Economic: Consumer Price Index – 8:30, Durable Goods Orders – 8:30, Weekly Jobless Claims – 8:30, FHFA House Price Index – 9:00, Bloomberg Consumer Comfort Index – 9:45, EIA Natural Gas Report – 10:30, Kansas City Fed Manufacturing Index – 11:00.

International: Germany Unemployment – 3:55 AM, EMU Economic Sentiment 0 5:00..

 

Other: Atlanta Federal Reserve Bank President Dennis Lockhart speech on preparing for take off, at Atlanta Fed banking conference, in Atlanta – 12:40 PM.

 

Optionable Earnings:

Symbol Company Name Feb 20 Close IV30 B/A XEPS
AKRX Akorn, Inc. $47.93 50.7 B $0.46
AMCX AMC Networks Inc $69.23 33.1 B $1.02
BUD Anheuser Busch Inbev SA (ADR) $122.74 28.0 B $1.44
CM Canadian Imperial Bank of Commerce $74.79 24.3 B $1.99
CNP CenterPoint Energy, Inc. $21.61 23.4 B $0.26
DDD 3D Systems Corporation $30.65 63.0 B $0.20
EXH Exterran Holdings, Inc. $32.35 58.8 B $0.37
EXLP Exterran Partners, L.P. $23.09 46.4 B $0.30
HSNI HSN, Inc. $68.04 30.9 B $1.19
KSS Kohl’s Corporation $68.37 26.7 B $1.80
LTM Life Time Fitness, Inc. $58.62 38.3 B $0.69
MBLY Mobileye NV $35.08 53.5 B $0.00
NSM Nationstar Mortgage Holdings Inc $28.65 61.4 B $0.95
NTI Northern Tier Energy LP $21.97 32.0 B $0.59
TASR TASER International, Inc. $27.16 56.6 B $0.10
TD Toronto-Dominion Bank $43.54 23.3 B $0.94
VC Visteon Corp $100.59 26.0 B $1.18
WAC Walter Investment Management Corp $21.28 100.2 B $0.64
WNR Western Refining, Inc. $42.19 34.0 B $1.02
ACAD ACADIA Pharmaceuticals Inc. $36.80 54.2 A ($0.26)
ADSK Autodesk, Inc. $61.46 34.8 A $0.13
AEGR Aegerion Pharmaceuticals, Inc. $26.52 71.3 A $0.05
AIRM Air Methods Corp $45.29 53.6 A $0.45
AL Air Lease Corp $38.90 29.6 A $0.60
BCEI Bonanza Creek Energy Inc $29.03 70.8 A $0.31
BLOX Infoblox Inc $20.46 66.2 A ($0.14)
CSU Capital Senior Living Corporation $24.29 28.6 A $0.06
GEVA Synageva Biopharma Corp $102.87 59.2 A ($1.69)
GPS Gap Inc $41.07 27.6 A $0.74
HLF Herbalife Ltd. $33.87 97.2 A $1.16
LYV Live Nation Entertainment, Inc. $25.42 37.0 A ($0.40)
MNST Monster Beverage Corp $121.13 32.9 A $0.59
MTZ MasTec, Inc. $20.57 49.1 A $0.35
NLNK NewLink Genetics Corp $41.03 152.9 A $0.35
NMBL Nimble Storage Inc $25.31 61.0 A ($0.34)
OLED Universal Display Corporation $35.81 56.5 A $0.29
OUT Outfront Media Inc $29.83 23.5 A $0.23
OVTI OmniVision Technologies, Inc. $26.86 29.1 A $0.14
ROST Ross Stores, Inc. $96.92 25.2 A $1.11
SPLK Splunk Inc $68.06 59.5 A ($0.38)
SWN Southwestern Energy Company $27.52 40.8 A $0.52

 

 

Friday February 27:

 

Economic: GDP – 8:30, Chicago PMI – 9:45, University of Michigan Consumer Sentiment – 10:00, Pending Home Sales Index – 10:00, Farm Prices – 3:00..

 

International Economic: France PPI – 2:45, Great Britain GDP, 4:30, Germany CPI – 8:00.

 

Other: New York Federal Reserve Bank William Dudley speech to monetary policy forum, in New York, Cleveland Federal Reserve Bank President Loretta Mester speech to monetary policy forum, in New York, Federal Reserve Vice Chair Stanley Fischer , ECB Vice President Vitor Constancio and Bank of Japan Deputy Gov. Hiroshi Nakaso on panel at monetary policy forum, in New York.

 

Optionable Earnings:

Symbol Company Name Feb 20 Close IV30 B/A XEPS
CLMT Calumet Specialty Products Partners, $25.67 39.2 B $0.06
NRG NRG Energy Inc $25.34 40.5 B $0.93
NSAM NorthStar Asset Management Group $22.88 34.9 B $0.20
RDC Rowan Companies PLC $24.88 38.5 B $0.91

 

Monday March 2

 

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

 

International Economic: EMU PMI – 4:00 AM.

 

 

Optionable Earnings:

Symbol Company Name Feb 20 Close IV30 B/A XEPS
BID Sothebys $44.00 33.2 B $1.24
EMES Emerge Energy Services LP $55.57 67.8 B $1.13
ENDP Endo International PLC $84.99 40.7 B $1.12
JKS JinkoSolar Holding Co., Ltd. $21.50 66.5 B $0.90
RSPP RSP Permian Inc $28.67 54.7 B $0.22
SSYS Stratasys Ltd $62.59 52.8 B $0.41
MTDR Matador Resources Co $23.72 64.2 A $0.19
MYL Mylan Inc $57.22 28.8 A $1.04
PANW Palo Alto Networks Inc $137.91 42.7 A ($0.13)
SLXP Salix Pharmaceuticals, Ltd. $150.74 24.1 A ($0.29)

 

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