The Prepared Mind: October 26, 2015

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

“Chance favors the prepared mind.” — Louis PasteurBy Frank Fahey

By FrankFahey

“Wall Street people learn nothing and forget everything” – Benjamin Graham

With apologies to Paul Simon, this week should be titled “Still bullish after all these years.” The S&P 500 has advanced over 11% since September 29. This three week run upwards is one of the strongest I have seen in thirty years of trading. This week the NDX was up 4% with three other indexes – the SPX, OEX, and DJIA – up 2.0% to 2.5%. The small cap dominated Russell 2000 gave only a passing nod to the continued bull’s party with a move upwards of only 0.34%. In retrospect the alternatives for the three week move were long or wrong. This move has been a lesson in the dangers of fighting a market trend.

Technical indicators for S&P 500 remain resolutely bullish. The S&P 500 has risen over 11% in October. The beginning of the week was characterized by a waffling of technical indicators. On Thursday, the SPX raced through resistance at 2040 and reconfirmed the bullish trend. There is strong support at 1990. Per the technical analysis definitions of a market trend, the current move will remain bullish as long as it closing under it 20 day moving average. Equity only put/call rations are bullish. Market breadth indicators are bullish after spending the beginning of the week oscillating between neutral and bullish. Volatility measurements are bullish. Ignore the trend at your own risk,

Here is an overview of the market behavior last week:

 

Here is an overview of the market behavior last week:

Index 23-Oct Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17646.70 430.73 2.50% -0.99% 14.19% (VXD)
S&P 500 (SPX) 2075.15 42.04 2.07% 0.79% 14.46% (VIX)
NASDAQ 100 (NDX) 4611.39 177.26 4.00% 8.78% 16.50% (VXN)
Russell 2000 (RUT) 1162.89 4.52 0.39% -3.47% 17.96% (RVX)
S&P 100 (OEX) 925.72 24.48 2.72% 1.91% 14.95% (VXO)
CBOE Volatility Index (VIX) 14.46 (0.59) -3.92% NA

Data Source: OptionVue7

 

VIX is in its third week of a bearish (bullish for the SPXx, bearish for the VIX) downtrend. This trend, by definition, will remain bullish as long as the VIX closes under it 20 day moving average. Most trading platforms give you the ability to compute and chart the price of the VIX versus its 20 day moving average. The borderline for the VIX between bullish and bearish is generally accepted as 19. The VIX closed below 15 for the first time since July. The VVIX, the volatility of the VIX, creeps up or holds constant as the VIX approaches lows.   The percentage and real difference between the VIX and the November VIX future increased last week, The beginning of the week will let us know if the VIX will be goin up or if the future will trade down.

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

Indexes Ticker 23-Oct 16-Oct Change % Change
CBOE Volatility Index VIX 14.46 15.05 (0.59) -3.92%
VIX November Future (11/18/2015) VXX5 16.6 17.075 (0.475) -2.78%
VIX December Future (12/16/2015) VXZ5 17.225 17.725 (0.500) -2.82%
VIX January Future (1/1202015) VXF6 18.025 18.575 (0.550) -2.96%
CBOE Short-term Volatility Index VXST 13.15 12.89 0.26 2.02%
CBOE 3 Month Volatility Index VXV 17.48 18.67 (1.19) -6.37%
CBOE Mid-term Volatility Index (6 month) VXMT 19.21 19.94 (0.73) -3.66%
VIX of VIX VVIX 97.21 97.58 (0.37) -0.38%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures VXX 18.63 19.69 (1.06) -5.38%
pShares VIX Short Term Futures ETF VIXY 12.39 13.12 (0.73) -5.56%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 10.93 11.33 (0.40) -3.53%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 31.53 30.73 0.80 2.60%
ProShares Short VIX Short Term Future ETF SVXY 61.72 60.16 1.56 2.59%

Data Source: OptionVue7

The biggest announcement of the week will be the announcement of the Fed’s policy decision on Wednesday at 2:00 PM Eastern. Earnings will continue to be an important focus of the US markets. Lowered expectations for earnings have tempered downside earnings surprises. Google, Amazon and McDonalds were bright spots last week. The last week of October will be highlighted by the S&P Case-Schiller Home Price Index on Tuesday and the first estimate of oQ3 GDP before the market opens on Thursday. The market will be looking forward to the following week and the plethora of employment related announcements.

919 companies are reporting earnings this week, including 170 companies included in the S&P 500. I am in the process laying the groundwork for the next earnings cycle. I will be putting on some earnings trades this week for my DiscoverOptions live trade sessions. The first trade was day double calendar for Under Armor. Other trades added last week include double calendars in Apple and Facebook. I consciously avoided Amazon and Google. The high price and potential for significant moves/losses put these stocks outside my personal risk/reward comfort szone.These are first in the series of earnings trades. This will be an ongoing process of learning what does and does not work. I will perform a forensic audit on a losing trade to see if an alternative strategy might have worked better.

It is imperative for an option trader to know the date of earnings announcements in relationship to the expiration date of options being traded.   It is your responsibility to know the dates of announcements. You should call and confirm earnings dates with the individual company’s investor relations department. The November monthly expiration encompasses over 75% of the 3nd quarter earnings announcements for the S&P 500. 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. These OptionVue tools designed to help the trader successfully trade options around earnings plays. There are five different kinds of earnings play which OptionVue tracks.

I have provided a list of major earning announcements along with the previous 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 > 200 contracts. Once again, it is your responsibility to confirm these earnings dates. The date and time of earnings announcements can and do change.

Advice to stimulate your imagination:

 

“Chance favors the Prepared Mind.” – Louis Pasteur

“It is not certain that everything is uncertain.” – Blaise Pascal 

“‘A bull market is like sex. It feels best just before it ends.'” – Warren Buffet
“It’s not how right or how wrong you are that matters but how much $ you make

gwhen right and how much you do not lose when wrong” – George Soros

 

 

 

Monday October 26:

 

Economic: New House Sales – 10:00, Dallas Fed Manufacturing Survey – 10:30.

 

International Economic: No major announcements.

 

Other:   Richmond Federal Reserve Bank President Jeffrey Lacker speech on the economics of early childhood education, in Richmond – 12:00 PM.

 

Optionable Earnings:

Symbol Company Name Oct 23 Close IV30 B/A
CHKP Check Point Software Technologies Ltd. $82.04 27.97 BMO
IACI IAC/InterActiveCorp $67.65 38.23 BMO
LH Laboratory Corp. of America $109.51 27.13 BMO
SOHU Sohu.com Inc $45.00 47.75 BMO
CAKE Cheesecake Factory Inc $51.01 30.88 AMC
EW Edwards Lifesciences Corp $148.58 40.47 AMC
HIG Hartford Financial Services Group Inc $48.78 26.32 AMC
IDTI Integrated Device Technology Inc $24.42 46.58 AMC
KN Knowles Corp $21.59 64.60 AMC
RCII Rent-A-Center Inc $25.97 44.76 AMC
TWOU 2U Inc $23.02 78.59 AMC

 

Tuesday October 27:

 

Economic: Durable Goods Orders – 8:30, Redbook – 8:55, S&P Case-Schiller HPI – 9:00, PMI Services Flash – 9:56, Consumer Confidence – 10:00, Sate Street Investor Confidence – 10:00.

 

International Economic: Japan Retail Sales – 7:50 PM..

 

Other: FOMC Meeting Begins

 

Optionable Earnings:

Symbol Company Name Oct 23 Close IV30 B/A
HCA HCA Holdings Inc $66.08 40.16 DMT
AME AMETEK, Inc. $55.63 25.47 BMO
AMTD TD Ameritrade Holding Corp. $32.96 25.71 BMO
ARG Airgas, Inc. $91.70 25.10 BMO
ARLP Alliance Resource Partners, L.P. $21.85 31.37 BMO
BABA Alibaba Group Holding Ltd $70.99 47.54 BMO
BAX Baxter International Inc $34.92 30.10 BMO
BEAV B/E Aerospace Inc $44.75 33.64 BMO
BMY Bristol-Myers Squibb Co $63.18 25.69 BMO
BP BP plc (ADR) $35.92 26.27 BMO
BTU Peabody Energy Corporation $23.59 144.44 BMO
CMCSA Comcast Corporation $61.70 22.19 BMO
CMCSK Comcast Corporation $62.07 23.70 BMO
CMI Cummins Inc. $111.82 27.33 BMO
CNC Centene Corp $55.53 43.31 BMO
COH Coach Inc $30.15 45.79 BMO
CVLT CommVault Systems, Inc. $37.17 40.56 BMO
DD E I Du Pont De Nemours And Co $59.19 22.19 BMO
ETH Ethan Allen Interiors Inc. $27.62 44.63 BMO
IPGP IPG Photonics Corporation $75.09 44.81 BMO
IR Ingersoll-Rand PLC $55.67 27.44 BMO
JBLU JetBlue Airways Corporation $24.62 42.59 BMO
LXK Lexmark International Inc $32.88 41.21 BMO
MAC Macerich Co $84.04 27.13 BMO
MDC M.D.C. Holdings, Inc. $27.86 30.81 BMO
NCR NCR Corporation $25.42 42.62 BMO
PCAR PACCAR Inc $53.93 27.15 BMO
PCRX Pacira Pharmaceuticals Inc $38.00 78.91 BMO
PFE Pfizer Inc. $33.33 22.64 BMO
QSR * Restaurant Brands International Inc. $37.00 36.38 BMO
RAI Reynolds American, Inc. $48.88 22.20 BMO
SAVE Spirit Airlines Incorporated $43.04 51.21 BMO
SEE Sealed Air Corp $51.45 29.04 BMO
SPG Simon Property Group Inc $204.83 22.31 BMO
SPR Spirit AeroSystems Holdings, Inc. $50.99 35.08 BMO
ST Sensata Technologies Holding N.V. $47.92 30.27 BMO
TMUS T-Mobile Us Inc $40.44 33.77 BMO
TXT Textron Inc. $39.17 35.11 BMO
UTHR United Therapeutics Corporation $119.57 54.85 BMO
WBAI 500.com Ltd $20.45 90.36 BMO
WYN Wyndham Worldwide Corporation $77.42 30.10 BMO
ZLTQ Zeltiq Aesthetics Inc $33.73 74.13 BMO
AAPL Apple Inc. $115.50 30.69 AMC
AKAM Akamai Technologies, Inc. $72.53 37.04 AMC
APC Anadarko Petroleum Corporation $73.00 36.07 AMC
BGS B&G Foods, Inc. $37.48 30.35 AMC
CBG CBRE Group Inc $35.28 27.64 AMC
CHRW C.H. Robinson Worldwide, Inc. $72.72 27.29 AMC
CNI Canadian National Railway (USA) $61.61 22.50 AMC
ESRX Express Scripts Holding Co $82.69 34.41 AMC
FISV Fiserv Inc $94.51 25.88 AMC
FNF Fidelity National Financial Inc $34.44 23.30 AMC
GILD Gilead Sciences, Inc. $107.60 32.97 AMC
GRUB GrubHub Inc $30.10 71.73 AMC
IPHI Inphi Corporation $29.94 64.39 AMC
MAS Masco Corp $27.63 31.77 AMC
OI Owens-Illinois Inc $23.83 30.28 AMC
PNRA Panera Bread Co $181.08 36.00 AMC
SCCO Southern Copper Corp $28.44 33.65 AMC
SFLY Shutterfly, Inc. $39.88 36.12 AMC
TWTR Twitter Inc $29.15 67.12 AMC
UHS Universal Health Services, Inc. $111.73 43.21 AMC

 

 

 

 

Wednesday October 28:

 

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

 

International Economic: No major announcements.

 

Other: FOMC Meeting Announcement – 2:00 PM.

 

Optionable Earnings:

Symbol Company Name Oct 23 Close IV30 B/A
AGCO AGCO Corporation $46.25 33.88 BMO
AM Antero Midstream Partners LP $23.54 56.35 BMO
AN AutoNation, Inc. $61.64 28.06 BMO
ANTM Anthem Inc $139.41 38.89 BMO
CRUS Cirrus Logic, Inc. $32.44 55.66 BMO
DB Deutsche Bank AG (USA) $30.31 29.50 BMO
DYAX Dyax Corp. $26.65 93.20 BMO
GNRC Generac Holdings Inc. $27.83 49.75 BMO
GRMN Garmin Ltd. $35.06 29.74 BMO
GSK GlaxoSmithKline plc (ADR) $41.44 26.55 BMO
HES Hess Corp. $61.13 34.68 BMO
HLT Hilton Worldwide Holdings Inc $25.22 34.13 BMO
HOT Starwood Hotels & Resorts Worldwide $69.99 41.66 BMO
IMAX IMAX Corporation (USA) $37.59 38.88 BMO
IP International Paper Co $42.69 28.09 BMO
LVLT Level 3 Communications, Inc. $48.58 35.86 BMO
MAR Marriott International Inc $76.87 30.60 BMO
NEP Nextera Energy Partners LP $24.56 47.50 BMO
NOC Northrop Grumman Corporation $179.50 27.68 BMO
NOV National-Oilwell Varco, Inc. $38.98 36.53 BMO
OXY Occidental Petroleum Corporation $74.34 23.81 BMO
SU Suncor Energy Inc. (USA) $29.08 29.71 BMO
TKR Timken Co $29.29 34.99 BMO
WBA Walgreens Boots Alliance Inc $88.63 33.48 BMO
WMB Williams Companies Inc $39.81 40.44 BMO
ACHC Acadia Healthcare Company Inc $56.90 54.33 AMC
AEM Agnico Eagle Mines Ltd (USA) $29.09 55.74 AMC
AMGN Amgen, Inc. $152.31 30.06 AMC
AR Antero Resources Corp $21.91 60.53 AMC
ARII American Railcar Industries, Inc. $45.47 52.71 AMC
ARRS Arris Group Inc $29.03 37.12 AMC
ASGN On Assignment, Inc. $39.79 42.12 AMC
AXTA Axalta Coating Systems Ltd $29.54 37.45 AMC
BWLD Buffalo Wild Wings $176.17 43.60 AMC
CAVM Cavium Inc $71.56 48.56 AMC
CMPR Cimpress NV $76.77 57.36 AMC
ELLI Ellie Mae Inc $69.26 71.99 AMC
EQIX Equinix Inc $294.62 28.60 AMC
FFIV F5 Networks, Inc. $120.54 40.34 AMC
GPRO GoPro Inc $28.72 84.85 AMC
HBI Hanesbrands Inc. $28.21 38.99 AMC
LNC Lincoln National Corporation $51.39 26.18 AMC
LOPE Grand Canyon Education Inc $38.15 43.75 AMC
MDLZ Mondelez International Inc $46.94 27.49 AMC
MEOH Methanex Corporation (USA) $40.06 45.16 AMC
MMLP Martin Midstream Partners L.P. $28.52 39.24 AMC
MUR Murphy Oil Corporation $28.05 45.67 AMC
NSC Norfolk Southern Corp. $80.52 23.73 AMC
NTRI NutriSystem Inc. $23.97 56.34 AMC
ORLY O’Reilly Automotive Inc $256.98 28.65 AMC
OTEX Open Text Corporation (USA) $47.11 40.30 AMC
RRC Range Resources Corp. $32.31 68.04 AMC
SIMO Silicon Motion Technology Corp. $29.52 52.34 AMC
SPWR SunPower Corporation $23.87 57.40 AMC
TLLP Tesoro Logistics LP $52.99 38.20 AMC
TSO Tesoro Corporation $101.53 35.93 AMC
UNM Unum Group $33.24 23.03 AMC
VAR Varian Medical Systems, Inc. $75.90 29.40 AMC
VECO Veeco Instruments Inc. $20.40 42.63 AMC
VRTX Vertex Pharmaceuticals Incorporated $109.49 56.17 AMC
WPZ Williams Partners LP $32.10 39.23 AMC
YELP Yelp Inc $22.52 83.87 AMC

 

 

 

Thursday October 29:

 

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

 

International Economic: Bank of Japan Announcement,, Germany Unemployment Rate – 4:55 AM, Germany CPI – 9:00 AM, Japan Unemployment Rate – 7:30 PM.

 

Optionable Earnings:

Company Name Oct 23 Close IV30 B/A
BofI Holding, Inc. $98.91 71.60 DMT
BorgWarner Inc. $42.26 32.22 DMT
Universal Insurance Holdings, Inc. $35.77 46.92 DMT
AmerisourceBergen Corp. $92.80 35.57 BMO
Aetna Inc $103.36 42.99 BMO
Air Products & Chemicals, Inc. $137.83 29.77 BMO
Avnet, Inc. $45.68 28.11 BMO
Brunswick Corporation $48.35 32.76 BMO
Bunge Ltd $79.09 25.74 BMO
Ball Corporation $68.42 33.19 BMO
Coca-Cola Enterprises Inc $51.31 24.27 BMO
Charter Communications, Inc. $178.38 30.39 BMO
ConocoPhillips $54.58 28.78 BMO
Cheniere Energy Partners LP $28.40 33.88 BMO
Carter’s, Inc. $88.98 34.20 BMO
CARBO Ceramics Inc. $20.18 102.72 BMO
Enterprise Products Partners L.P. $26.49 33.25 BMO
Gaming and Leisure Properties Inc $30.09 25.38 BMO
Goodyear Tire & Rubber Co $32.57 33.86 BMO
Chart Industries, Inc. $22.15 68.83 BMO
Invesco Ltd. $32.98 25.14 BMO
Johnson Controls Inc $45.11 25.06 BMO
L-3 Communications Holdings, Inc. $114.01 24.04 BMO
Cheniere Energy, Inc. $45.96 47.85 BMO
MGM Resorts International $20.47 44.57 BMO
Novo Nordisk A/S (ADR) $53.65 29.13 BMO
Oshkosh Corporation $38.57 44.98 BMO
PBF Energy Inc $30.05 49.18 BMO
Pinnacle Foods Inc $43.54 28.74 BMO
Pinnacle Entertainment, Inc $35.55 28.97 BMO
Potash Corporation of Saskatchewan $21.51 31.11 BMO
Royal Dutch Shell plc (ADR) $55.39 27.06 BMO
Royal Dutch Shell Plc CL B $55.97 28.23 BMO
Santander Consumer USA Holdings Inc $20.93 38.96 BMO
Sherwin-Williams Co $246.93 30.00 BMO
Sony Corp (ADR) $28.74 35.06 BMO
Smith & Nephew plc (ADR) $35.09 30.76 BMO
Sanofi SA (ADR) $49.88 25.68 BMO
Starz $38.09 39.44 BMO
Teva Pharmaceutical Industries Ltd $55.96 33.81 BMO
Total SA (ADR) $50.76 25.47 BMO
Time Warner Cable Inc $182.90 26.05 BMO
Virgin America Inc $34.84 40.43 BMO
Zimmer Biomet Holdings Inc $94.39 27.07 BMO
Alkermes Plc $60.69 55.73 AMC
Baidu Inc (ADR) $153.50 45.64 AMC
BioMarin Pharmaceutical Inc. $101.60 63.80 AMC
Cambrex Corporation $41.05 62.87 AMC
CVR Refining LP $20.90 32.01 AMC
Deckers Outdoor Corp $59.78 55.10 AMC
Delphi Automotive PLC $84.55 29.91 AMC
DeVry Education Group Inc $26.28 45.52 AMC
Electronic Arts Inc. $74.54 40.50 AMC
Eastman Chemical Company $71.39 30.70 AMC
Expedia Inc $127.58 51.28 AMC
Fluor Corporation (NEW) $45.35 31.82 AMC
Flowserve Corp $42.98 37.47 AMC
First Solar, Inc. $49.89 53.56 AMC
Harman International Industries Inc./DE/ $104.99 46.35 AMC
Imperva Inc $61.12 69.03 AMC
Jarden Corp $47.38 34.24 AMC
LinkedIn Corp $200.46 49.93 AMC
Live Nation Entertainment, Inc. $26.01 32.36 AMC
Microchip Technology Inc. $48.86 33.75 AMC
McKesson Corporation $181.44 27.01 AMC
Mercadolibre Inc $97.48 52.77 AMC
Molina Healthcare, Inc. $62.86 54.24 AMC
Meritage Homes Corp $39.94 38.17 AMC
Neurocrine Biosciences, Inc. $47.47 70.73 AMC
Norwegian Cruise Line Holdings Ltd $60.90 33.52 AMC
Neustar Inc $26.98 45.57 AMC
Oil States International, Inc. $29.83 49.27 AMC
Outerwall Inc $59.66 51.43 AMC
Pitney Bowes Inc. $20.98 34.18 AMC
Boston Beer Co Inc $257.65 36.15 AMC
Starbucks Corporation $61.49 25.86 AMC
Seattle Genetics, Inc. $39.76 62.94 AMC
Tempur Sealy International Inc $72.28 46.72 AMC

 

 

Friday October 30:

 

Economic: Personal Income and Outlays – 8:30, Employment Cost Index – 8:30, Chicago PMI – 9:45, UofM Consumer Sentiment – 10:00, Baker-Hughes Rig Count – 1:00.

 

International Economic: France PPI – 3:45 AM, EMU Unemployment – 5:00 AM.

 

Optionable Earnings:

Symbol Company Name Oct 23 Close IV30 B/A
IRM Iron Mountain Inc $31.28 27.63 DMT
ABBV AbbVie Inc $48.27 37.84 BMO
AXL American Axle & Manufact. Holdings, $20.54 36.86 BMO
CVX Chevron Corporation $91.62 26.71 BMO
ETN Eaton Corporation PLC $54.35 26.84 BMO
EXC Exelon Corporation $31.01 26.21 BMO
GBX Greenbrier Companies Inc $36.43 54.10 BMO
GWR Genesee & Wyoming Inc $66.05 34.69 BMO
MCO Moody’s Corporation $99.02 24.10 BMO
MYL Mylan NV $39.16 50.81 BMO
NWL Newell Rubbermaid Inc. $42.91 25.83 BMO
PSX Phillips 66 $82.61 26.38 BMO
PSXP Phillips 66 Partners LP $55.31 38.81 BMO
AAN Aaron’s, Inc. $37.88 36.00 AMC
IDCC InterDigital, Inc. $49.43 33.14 AMC
SM SM Energy Co $35.52 68.49 AMC
STX Seagate Technology PLC $39.24 43.91 AMC

 

 

November 2:

 

Economic: PMI Manufacturing Index – 9:45, ISM Manufacturing Index – 10:00, Construction Spending – 10:00.

 

International Economic: EMU PMI Composite Flash – 4:00 AM.

 

Optionable Earnings:

Symbol Company Name Oct 23 Close IV30 B/A
CAH Cardinal Health Inc $77.75 24.07 BMO
CTB Cooper Tire & Rubber Co $41.82 36.74 BMO
DO Diamond Offshore Drilling Inc $20.46 54.13 BMO
EL Estee Lauder Companies Inc $84.59 28.36 BMO
HNT Health Net, Inc. $61.25 27.74 BMO
NBL Noble Energy, Inc. $36.48 40.54 BMO
RSPP RSP Permian Inc $26.39 62.88 BMO
THC Tenet Healthcare Corp $28.24 77.68 BMO
CAR Avis Budget Group Inc. $49.33 42.78 AMC
CYH Community Health Systems $26.30 72.85 AMC
EEP Enbridge Energy Partners, L.P. $27.53 37.55 AMC
ENS EnerSys $65.88 37.60 AMC
FIT Fitbit Inc $37.09 79.29 AMC
FMC FMC Corp $37.36 40.80 AMC
GGP General Growth Properties Inc $28.60 26.83 AMC
MIC Macquarie Infrastructure Corp $79.55 25.86 AMC
MR Mindray Medical International Ltd $23.98 28.90 AMC
PXD Pioneer Natural Resources $136.89 39.22 AMC
QLYS Qualys Inc $35.21 65.67 AMC
V Visa Inc $76.42 26.78 AMC

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