The Prepared Mind: May 18, 2015

 photo SergeiBubka.jpgBy Frank Fahey

“The financial markets generally are unpredictable. So that one has to have different scenarios. The idea that you can actually predict what’s going to happen contradicts my way of looking at the market.” – George Soros

The S&P 500 eked out another new high. The market’s approach to new highs reminds me of Sergei Bubka’s approach to setting new world records in the pole vault. Ukrainian Bubka dominated pole vaulting for over a decade. the majority of his world record attempts were made at 1 cm higher than the existing record (a little less than ½ an inch.) Bubka’s shoe and performance contracts gave him very generous bonuses for new records. As a result, Bubka increased his world records by the minimum allowable difference.

The market continues to frustrate traders – both bulls and bears. It is locked in a trading range benefit neither group.

The November to April trading range for the SPX is 2025 to 2125.    The 2125 level in the SPX continues to be a very strong resistance level. Friday’s close left the SPX very close to the 2125 level. The market has approached 2125 multiple times only to retreat and regroup. Current longer term resistance is at the 2140 to 2150 with 2075 as a short-term support level. Equity put/call ratios are now on sell signals. The ratio increased throughout the week which strengthened the sell signal.    Market breadth indicators continue to be of no assistance. These signals have been vacillating between “maybe” buy and “maybe” sell signals. The VIX is bullish. Amove of the VIX above 17 is regarded as bearish.

 

Here is an overview of the market behavior last week:

Index May 15 Close Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 18272.56 81.45 0.45% 2.52% 12.44% (VXD)
S&P 500 (SPX) 2122.73 6.68 0.32% 3.10% 12.38% (VIX)
NASDAQ 100 (NDX) 4487.58 35.09 0.79% 5.89% 13.89% (VXN)
Russell 2000 (RUT) 1241.07 9.81 0.80% 3.02% 15.32% (RVX)
S&P 100 (OEX) 933.12 2.43 0.26% 2.72% 12.86% (VXO)
CBOE Volatility Index (VIX) 12.86 0.00 0.00% NA

Data Source: OptionVue7

 

The VIX spot and associated products continued to show minimal movement last week. The longer term VIX products – the VXV and the VXMT – showed more strength than might be expected with the SPX setting new highs. This relative strength is an indication of concern about market weakness over the mid-term horizon.

 

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

Indexes Ticker 15-May 8-May Change % Change
CBOE Volatility Index VIX 12.68 12.86 (0.18) -1.40%
VIX May Future VXK5 13.675 14.375 (0.70) -4.87%
VIX June Future VXM5 15.525 15.950 (0.42) -2.66%
VIX July Future VXN5 16.425 16.775 (0.35) -2.09%
CBOE Short-term Volatility Index VXST 10.77 11.32 (0.55) -4.86%
CBOE 3 Month Volatility Index VXV 15.57 15.56 0.01 0.06%
CBOE Mid-term Volatility Index (6 month) VXMT 17.41 17.58 (0.17) -0.97%
VIX of VIX VVIX 80.93 79.44 1.49 1.88%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 20.06 20.61 (0.55) -2.67%
pShares VIX Short Term Futures ETF VIXY 13.35 13.82 (0.47) -3.40%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 11.55 11.61 (0.06) -0.52%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 42.99 41.98 1.01 2.41%
ProShares Short VIX Short Term Future ETF SVXY 84.3 82.45 1.85 2.24%

Data Source: OptionVue7

 

Housing, Manufacturing, the release of FOMC minutes and inflation. Housing has been the most disappointing sector of the economy. Monday brings us the release of the Housing Market Index followed by Tuesday’s release of Housing Starts. Thursday will be the busiest day of the week for economic reports. The most import of these will be Weekly Job Claims and Existing Home Sales. It will be a quiet week for international economic releases.

The Q1 earnings season is over. It will be a week with earnings announcements from major retailers. Earnings announcements include: Home Depot, Wal-Mart, Dick’s Sporting Goods, Target, Williams-Sonoma, Lowe’s, Ross Stores, Gap, Dollar Tree, Best Buy, and Footlocker.  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 18:

 

Economic: Housing Market Index – 10:00.

 

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

 

Other: Chicago Federal Reserve Bank President Charles Evans speech at Swedbank conference in Stockholm – 2:00 AM.

 

Optionable Earnings:

Symbol Company Name May 15 Close IV30 B/A XEPS
A Agilent Technologies Inc $42.05 23.27 A $0.39
TTWO Take-Two Interactive Software, Inc. $24.77 43.77 A $0.10
URBN Urban Outfitters, Inc. $39.31 33.65 A $0.30

 

 

Tuesday May 19:

 

Economic: Housing Starts – 8:30, Redbook – 8:55.

 

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

 

Optionable Earnings:

Symbol Company Name May 15 Close IV30 B/A XEPS
CMCM Cheetah Mobile Inc (ADR) $28.85 76.72 B ($0.02)
DKS Dicks Sporting Goods Inc $55.66 26.66 B $0.53
RRGB Red Robin Gourmet Burgers, Inc. $74.30 42.23 B $0.88
ADI Analog Devices, Inc. $63.40 25.72 A $0.72
ADSK Autodesk, Inc. $58.98 33.11 A $0.14
CSC Computer Sciences Corporation $67.28 35.35 A $1.20
ETSY Etsy Inc $20.60 66.12 A $0.03
QIHU Qihoo 360 Technology Co Ltd $57.74 56.06 A $0.34
SQM Sociedad Quimica y Minera de Chile $21.34 42.07 A $0.30

 

 

Wednesday May 20:

 

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

 

International Economic: China Industrial Production 1:30 AM, China Retail Sales – 1:30 AM, Germany CPI – 2:00 AM, EMU GDP Flash – 5:00 AM, EMU Industrial Production – 5:00 AM.

 

Other: Chicago Federal Reserve Bank President Charles Evans speech on the economy, monetary policy, and structural reform, in Munich – 3:00 AM.

 

Optionable Earnings:

Symbol Company Name May 15 Close IV30 B/A XEPS
LOW Lowe’s Companies, Inc. $72.26 22.24 B $0.74
CRM salesforce.com, inc. $72.88 52.12 A $0.01
NTAP NetApp Inc. $35.96 29.85 A $0.55
WSM Williams-Sonoma, Inc. $75.72 31.08 A $0.44

 

 

Thursday May 21:

 

Economic: Weekly Jobless Claims – 8:30, Vhicago Fed National Activity Index – 8:30, Bloomberg Consumer Comfort Index – 9:45, Philadelphia Fed Business Outlook Survey – 10:00,Exiting Home Sales – 10:00, Leading Indicators – 10:00, EIA Natural Gas Report – 10:30, Kansas City Fed Manufacturing – 11:00.

 

International: Japan PPI – 7:50 PM.

 

Other:

 

Optionable Earnings:

Symbol Company Name May 15 Close IV30 B/A XEPS
AAP Advance Auto Parts, Inc. $149.86 27.87 B $2.51
BKE Buckle Inc $44.47 27.70 B $0.77
DLTR Dollar Tree, Inc. $76.97 27.15 B $0.74
GPS Gap Inc $38.16 25.71 A $0.55
HPQ Hewlett-Packard Company $33.70 29.20 A $0.86
INTU Intuit Inc. $103.82 23.64 A $2.58
JMEI Jumei International Holding Ltd $26.68 81.08 A $0.08
ROST Ross Stores, Inc. $99.36 25.61 A $1.28
TFM The Fresh Market Inc $34.57 37.82 A $0.49

 

 

Friday May 22:

 

Economic: Consumer Price Index – 8:30.

International Economic: No major announcements.

 

Other: Federal Reserve Chair Janet Yellen speech on the economic outlook in Providence, Rhode Island – 1:00 PM.

 

Optionable Earnings:

Symbol Company Name May 15 Close IV30 B/A XEPS
ANN Ann Inc $38.20 40.65 B $0.33
FL Foot Locker, Inc. $61.30 26.17 B $1.23
HIBB Hibbett Sports, Inc. $47.01 30.62 B $1.14

 

Monday May 25:

 

US Holiday: Memorial Day – Markets Closed

 

Tuesday May 26:

 

Economic: Durable Goods Orders – 8:30, FHFA House Price Index – 9:00, S&P Case-Shiller HPI – 9:00, New Home Sales – 10:00. Consumer Confidence – 10:00. Richmond Fed Manufacturing Index – 10:00, Dallas Fed Manufacturing Survey – 10:30.

 

International Economic: No major announcements.

 

 

Other: Richmond Federal Reserve Bank President Jeffrey Lacker speech on financial stability, in Baton Rouge, LA – 7:10 PM.

 

Optionable Earnings:

Symbol Company Name May 15 Close IV30 B/A XEPS
NMBL Nimble Storage Inc $25.30 43.58 A ($0.34)
TDW Tidewater Inc. $27.98 67.06 A $0.60
WDAY Workday Inc $90.85 40.53 A ($0.33)

 

 

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