The Prepared Mind: May 26, 2015

By Frank Fahey

“People who don’t take risks generally make about two big mistakes a year.  People who do take risks generally make about two big mistakes a year.” Peter F. Drucker

My positions are the smallest they have been in months. I am out of most of my June positions. However, anemic option volume and trading interest made it very difficult to open new positions in July. I did not want to force the trades for the new cycle.   The lack of movement and volume in the markets is not unlike the “calm before the storm.” At times like this I find it prudent to rein in my desire to trade and relegate myself to the role of observer.   This lack of movement has created a sense of foreboding where I feel the market is getting ready to move violently in either direction.

The VIX closed at the lowest levels since December. The move to new all-time highs has created support for the SPX at 2120 – last week’s resistance level. The next level of support is at 2070 to 2075. Market breadth and other technical indicators are moving sideways. Equity only put/call ratios flirt with sell signals while market breadth signals are barely a buy.

Here is an overview of the market behavior last week:

Index May 22 Close Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 18232.02 (40.54) -0.22% 2.29% 12.59% (VXD)
S&P 500 (SPX) 2126.06 3.33 0.16% 3.26% 12.13% (VIX)
NASDAQ 100 (NDX) 4527.08 39.50 0.88% 6.79% 13.23% (VXN)
Russell 2000 (RUT) 1249.12 8.05 0.65% 3.69% 15.25% (RVX)
S&P 100 (OEX) 934.08 0.96 0.10% 2.83% 12.6% (VXO)
CBOE Volatility Index (VIX) 12.13 (0.73) -5.68% NA

Data Source: OptionVue7

It was a quiet week for major indexes. These indexes churned mildly higher with the VIX and related volatility products moving lower. Anemic volume and minimal range were variously blamed on the holiday weekend or the upcoming summer doldrums,

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

Indexes Ticker 22-May 15-May Change % Change
CBOE Volatility Index VIX 12.13 12.68 (0.55) -4.34%
VIX June Future VXM5 14.425 15.525 (1.10) -7.09%
VIX July Future VXN5 15.725 16.425 (0.70) -4.26%
VIX August Future VXQ5 16.375 17.025 (0.65) -3.82%
CBOE Short-term Volatility Index VXST 9.6 10.77 (1.17) -10.86%
CBOE 3 Month Volatility Index VXV 14.48 15.57 (1.09) -7.00%
CBOE Mid-term Volatility Index (6 month) VXMT 16.72 17.41 (0.69) -3.96%
VIX of VIX VVIX 75.98 80.93 (4.95) -6.12%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 18.68 20.06 (1.38) -6.88%
pShares VIX Short Term Futures ETF VIXY 12.42 13.35 (0.93) -6.97%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 11.16 11.55 (0.39) -3.38%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 46.09 42.99 3.10 7.21%
ProShares Short VIX Short Term Future ETF SVXY 90.32 84.3 6.02 7.14%


Manufacturing, housing and consumers dominate domestic news this week. Durable Goods Orders lead-off on Tuesday. Housing moves to the forefront with price information from the FHFA and Case-Shiller along with reports on new home sales and pending sales of existing homes. Analysts are interested in whether or not this week’s housing reports will confirm last week’s surge in housing permits and starts. Traders in the US indexes will be positioning themselves for “Employment Week” and the associated release of a wide range of domestic employment reports. The week ends with Friday’s release of the revised US GDP. First quarter revised GPP numbers will be released for Spain, Italy and the UK.

It will be another quiet week for earnings. Earnings announcements include: Autozone, Tidewater, Popeyes, Toll Brothers, Movado, Michael Kors, Chico’s, Tiffany, Costco, Sanderson Farms, Deckers Outdoor. GameStop, Genesco, and Big Lots.  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

“Unless you’re running scared all the time, you’re gone.” Michael C. Lynch

“To win without risk is to triumph without glory.” Pierre Corneille

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: Great Britain CPI & PPI– 4:30 AM, Japan GDP 7:50 PM.

Other: Federal Reserve Vice Chair Stanley Fischer speech on the Fed and the global economy in Tel Aviv – 12:30 PM, Richmond Federal Reserve Bank President Jeffrey Lacker speech on financial stability, in Baton Rouge, LA – 7:10 PM.


Optionable Earnings:

Symbol Company Name May 22 Close IV30 B/A XEPS
WUBA Inc (ADR) $77.76 54.98 B ($0.28)
NMBL Nimble Storage Inc $25.95 43.35 A ($0.34)
TDW Tidewater Inc. $27.79 62.86 A $0.60
WDAY Workday Inc $91.82 40.46 A ($0.33)


Wednesday May 27:


Economic: MBA Mortgage Applications – 7:00, Redbook = 8:55.

International Economic: Germany PPI 2:00 AM, Bank of England Minutes – 4:30 AM.

Optionable Earnings:

Symbol Company Name May 22 Close IV30 B/A XEPS
DSW DSW Inc. $35.38 39.91 B $0.91
KORS Michael Kors Holdings Ltd $61.33 40.29 B $0.91
TIF Tiffany & Co. $86.90 27.61 B $0.69
TOL Toll Brothers Inc $37.75 24.10 B $0.37
PANW Palo Alto Networks Inc $160.14 34.05 A ($0.18)
PLKI Popeyes Louisiana Kitchen Inc $56.34 35.00 A $0.53


Thursday May 28:

Economic: Weekly Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, Pending Home Sales Index – 10:00, EIA Natural Gas Report – 10:30, EIA Petroleum Status Report – 10:30, Farm Prices – 3:00..

International Economic: EMU European Central Bank Minutes – 6:00 AM. Bank of Japan Announcement – 10:40 PM.

Other: San Francisco Federal Reserve Bank President John Williams speech to banking supervision conference, in Singapore – 2:00 AM, Minneapolis Federal Reserve Bank President Narayana Kocherlakota speech on monetary policy, in Helena, Montana – 2:45 PM.

Optionable Earnings:

Symbol Company Name May 22 Close IV30 B/A XEPS
ANF Abercrombie & Fitch Co. $20.76 51.59 B ($0.34)
GLNG Golar LNG Limited (USA) $49.69 50.40 B ($0.07)
JKS JinkoSolar Holding Co., Ltd. $28.67 56.58 B $0.46
OA Orbital ATK Inc $76.59 28.74 B $1.10
SAFM Sanderson Farms, Inc. $83.96 31.99 B $3.50
TECD Tech Data Corp $60.72 32.70 B $0.69
AVGO Avago Technologies Ltd $129.59 42.67 A $1.83
BLOX Infoblox Inc $25.70 55.43 A ($0.13)
GME GameStop Corp. $40.77 38.88 A $0.58
SPLK Splunk Inc $69.35 47.24 A ($0.49)
ULTA Ulta Salon, Cosmetics & Fragrance $152.25 38.74 A $0.92
VEEV Veeva Systems Inc $27.94 49.42 A $0.08

Friday May 29:

Economic: GDP – 8:30, Corporate Profits – 8:30. University of Michigan/Reuters Consumer Sentiment – 10:00.

International Economic: Germany GDP – 2:00 AM.

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

Optionable Earnings:

Symbol Company Name May 22 Close IV30 B/A XEPS
BIG Big Lots, Inc. $45.96 40.46 B $0.59


Monday June 1:

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: Germany Retail Sales – 2:00 AM, EMU PMI Manufacturing Index – 4:00 AM.

Other: Boston Federal Reserve Bank President Eric Rosengren speech in Hartford, Connecticut – 9:05 AM.

Optionable Earnings:

Symbol Company Name May 22 Close IV30 B/A XEPS
NGL NGL Energy Partners LP $30.30 27.61 B $0.77
PVH PVH Corp $105.82 29.89 A $1.38


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