The Prepared Mind: May 11, 2015

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

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

It was a volatile week. Janet Yellen issued a comment at the beginning of the week warning about lofty stock market valuations. This warning led to an immediate sell-off. The major indexes looked like they were on their way to taking a standing eight count. Weaker than expected payroll growth was bad news which was good news for the market. The perception that the Fed cannot or will not raise rates until a least September led to a sudden market reversal with on Thursday and Friday. The end of week rise left most of the major indexes at levels approaching previous closing highs.

The indexes are range

 

The November to April trading range for the SPX is 2025 to 2125.    The 2120 to 2125 level in the SPX continues to be a very strong resistance level. The market has approached this level multiple times only to retreat and regroup. Current longer term support is at the 2140 to 2150 with 2070 as a short-term support level. Equity put/call ratios are now on sell signals.   Market breadth indicators continue to vacillate between buy and sell signals. The VIX is moving towards bearish with close above the 20 day moving

 

Here is an overview of the market behavior last week:

Index May 8 Close Weekly Change % Weekly % 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 18191.11 167.05 0.93% 2.07% 13.54% (VXD)
S&P 500 (SPX) 2116.10 7.81 0.37% 2.78% 12.86% (VIX)
NASDAQ 100 (NDX) 4452.49 (17.85) -0.40% 5.06% 13.54% (VXN)
Russell 2000 (RUT) 1231.26 4.97 0.41% 2.20% 17.53% (RVX)
S&P 100 (OEX) 930.69 4.60 0.50% 2.45% 12.57% (VXO)
CBOE Volatility Index (VIX) 12.86 0.16 1.26% NA

Data Source: OptionVue7

 

The VIX spot and associated products showed minimal movement last week. The VIX was up small with VIX futures down smaller. The VIX has historically held value until the release of employment numbers before the market opening on Friday. Last week was an anomaly with both the VIX and the showing gains for the week. The CBOE announce plans to begin a trade in VIX Weekly Futures in July. Options on the futures are expected shortly after,

 

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

Indexes Ticker 8-May 24-Apr Change % Change
CBOE Volatility Index VIX 12.86 12.70 0.16 1.26%
VIX May Future VXK5 14.375 14.475 (0.10) -0.69%
VIX June Future VXM5 15.950 15.975 (0.03) -0.16%
VIX July Future VXN5 16.775 16.825 (0.05) -0.30%
CBOE Short-term Volatility Index VXST 11.32 11.77 (0.45) -3.82%
CBOE 3 Month Volatility Index VXV 15.56 15.38 0.18 1.17%
CBOE Mid-term Volatility Index (6 month) VXMT 17.58 17.52 0.06 0.34%
VIX of VIX VVIX 79.44 79.64 (0.20) -0.25%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures VXX 20.61 20.81 (0.20) -0.96%
pShares VIX Short Term Futures ETF VIXY 13.82 13.70 0.12 0.88%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 11.61 11.72 (0.11) -0.94%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 41.95 41.82 0.13 0.31%
ProShares Short VIX Short Term Future ETF SVXY 82.45 81.96 0.49 0.60%

Data Source: OptionVue7

 

It will be a quiet week for domestic economic reports. The biggest news of the week will be Monday’s release of the will carry more clout this week. The release of April retail sales will provide, yet another opportunity, to see if bad news is good news. The UK will release Industrial Production figures on Tuesday. Wednesday will have a full slate of reports. The UK will release their Labour Market Report, while the Eurozone, Germany, France, and Italy will release Q1 numbers for GDP. In addition, China will be releasing April Industrial Production and Retail Sales on Wednesday. Recent Chinese reports have pointed to a weakening economy. This weakness has left many investors skittish.   Any impact these releases have on international equity markets will flow to the US markets.

The Q1 earnings season officially ends this week. This is the week when many of the major retailers announce earnings. Earnings announcements include: Dean Foods, Sotheby’s, Rackspace, FMC, McKesson, Zebra, Ralph Lauren Cisco, Macy’s, JC Penney, Symantec, Dillard’s, Jack in the Box, Kohl’s and Nordstrom.  OptionVue provides information on the effect of individual earnings announcements on the historic stock price and the pre and post earnings implied volatility of the options. I have provided a list of major earning announcements along with Friday’s closing price and implied volatility, time of announcement, and expected earning range. The selected stocks are the result of a scan for stocks announcing earnings in 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. The date and time of earnings announcements can and do change.

 

Trading advice to remember:

 

“Chance favors the Prepared Mind.” – Louis Pasteur

 
“Maturity, one discovers, has everything to do with the acceptance of ‘not knowing.” ― Mark Z. Danielewski

 

“Risk means ‘shit happens’ or ‘good luck” ― Toba Beta, Betelgeuse Incident: Insiden Bait Al-Jauza

 

“Just because they disagree, doesn’t mean you ain’t right.” ― Toba Beta, Master of Stupidity

 

 

Monday May 11:

 

Economic: Labor Market Conditions Index – 10:00.

 

International Economic: Bank of England Announcement – 7:00 AM.

 

Optionable Earnings:

Symbol Company Name May 8 Close IV30 B/A XEPS
ACT Actavis PLC $287.30 25.49 B $3.84
AER AerCap Holdings N.V. $48.35 25.93 B $1.28
BID Sothebys $43.64 26.01 B $0.00
CMRX Chimerix Inc $35.67 52.02 B ($0.59)
ENDP Endo International PLC $86.33 32.33 B $1.07
GWPH GW Pharmaceuticals PLC- ADR $110.12 50.60 B ($1.23)
ICPT Intercept Pharmaceuticals Inc $268.61 62.48 B ($1.75)
MBLY Mobileye NV $44.98 45.13 B $0.03
SSYS Stratasys Ltd $34.97 54.94 B $0.12
W Wayfair Inc $28.55 71.70 B ($0.36)
DEPO Depomed Inc $23.64 51.99 A $0.07
IMOS ChipMOS Technologies (Bermuda) Ltd $23.30 34.27 A $0.33
IPXL Impax Laboratories Inc $44.45 47.20 A $0.20
JUNO Juno Therapeutics Inc $44.44 82.93 A ($0.35)
MR Mindray Medical International Ltd $30.96 40.31 A $0.38
OMER Omeros Corporation $21.21 68.22 A ($0.63)
RAX Rackspace Hosting, Inc. $53.60 42.66 A $0.20
RTRX Retrophin Inc $22.46 64.69 A ($0.50)
TEP Tallgrass Energy Partners LP $48.85 25.95 A $0.34
XON Intrexon Corp $42.12 65.30 A ($0.01)
YY YY Inc (ADR) $65.42 50.54 A $0.75

 

 

Tuesday May 12:

 

Economic: Redbook – 8:55, NFIB Small Business Optimism – 9:00, JOLTS – 10:00.

 

International Economic: China Industrial Production and Retail Sales, Great Britain Industrial Production – 4:30.

 

Other: San Francisco Federal Reserve Bank President John Williams’ speech on the economic outlook, in New York – 12:45 PM.

 

Optionable Earnings:

Symbol Company Name May 8 Close IV30 B/A XEPS
ACM Aecom $31.60 44.00 B $0.54
IOC InterOil Corporation (USA) $51.93 48.39 B ($0.58)
PAH Platform Specialty Products Corp $27.33 31.95 B $0.22
GDDY Godaddy Inc $24.81 43.74 A $0.22
RSPP RSP Permian Inc $27.12 50.67 A $0.18
Z Zillow Group Inc $92.85 49.31 A ($0.38)

 

 

Wednesday May 13:

 

Economic: MBA Mortgage Applications – 7:00, Retail Sales – 8:30, Import and Export Prices – 8:30, Atlanta Business Inflation Expectations- 10:00. Business Inventories – 10:00, EIA Petroleum Status Report – 10:30.

 

International Economic: Germany CPI & GDP Flash – 2:00 AM, EMU GDP – Flash – 5:00 AM, EMU Industrial Production – 5:00 AM, European Central Bank Minutes – 7:00 AM.

 

Other:

Symbol Company Name May 8 Close IV30 B/A XEPS
KSS Kohl’s Corporation $73.36 27.17 B $0.57
PERY Perry Ellis International, Inc. $24.05 36.19 B $0.62
PLCE Childrens Place Inc $68.65 31.65 B $0.83
QIWI Qiwi PLC $27.89 49.18 B $0.30
ANET Arista Networks Inc $64.95 42.50 A $0.31
EXP Eagle Materials, Inc. $84.09 30.25 A $0.74
JWN Nordstrom, Inc. $76.78 22.97 A $0.71
LOCO El Pollo LoCo Holdings Inc $26.76 47.09 A $0.17
SYMC Symantec Corporation $24.98 27.95 A $0.37

 

 

Optionable Earnings:

 

Thursday May 14:

 

Economic: Weekly Jobless Claims – 8:30, PPI-Final Demand – 8:30, Bloomberg Consumer Comfort Index – 9:45, EIA Natural Gas Report – 10:30.

 

International: Japan PPI – 7:50 PM.

 

Other:

Symbol Company Name May 8 Close IV30 B/A XEPS
DDS Dillard’s, Inc. $128.81 31.86 A $2.83

 

 

Optionable Earnings:

 

Friday May 15:

 

Economic: Empire State Manufacturing Survey 8:30, Industrial Production 9:15, University of Michigan/Reuters Consumer Sentiment – 10:00, E-Commerce Retail Sales – 10:00.

International Economic: No major announcements.

 

Optionable Earnings: None meeting criteria.

 

 

Monday May 18:

 

Economic: Housing Market Index – 10:00.

 

International Economic: No major announcements.

 

Optionable Earnings:

Symbol Company Name May 8 Close IV30 B/A XEPS
A Agilent Technologies Inc $41.80 22.89 A $0.39
TTWO Take-Two Interactive Software, Inc. $24.33 37.93 A $0.10
URBN Urban Outfitters, Inc. $40.66 32.18 A $0.32

 

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