The Prepared Mind: November 23, 2015

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

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

“Got no checkbooks, got no banks. Still I’d like to express my thanks –

I’ve got the sun in the mornin’ and the moon at night.”
― Irving Berlin

Equity indexes showed steady gains throughout the week. The gains continued throughout the week plowing through fears of further terrorist attacks in Europe, the announcement of the Japanese economy reentering recession and FOMC minutes which all but guarantee a rate hike announcement at the December Fed meeting. The markets showed surprising strength despite the tragedy in Europe.

Here is an overview of the market behavior last week:

Index 20-Nov Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17823.81 578.57 3.35% 0.00% 14.92% (VXD)
S&P 500 (SPX) 2089.17 66.13 3.27% 1.47% 15.47% (VIX)
NASDAQ 100 (NDX) 4687.45 186.02 4.13% 10.57% 17.03% (VXN)
Russell 2000 (RUT) 1170.46 25.30 2.21% -2.84% 18.39% (RVX)
S&P 100 (OEX) 932.99 29.95 3.32% 2.71% 15.40% (VXO)
CBOE Volatility Index (VIX) 15.47 (4.61) -22.96% NA  

Data Source: OptionVue7

 

The VIX and associated products reacted strongly to a move of over 3% in the S&P 500.   Similar moves in the past would have sent the VIX in the vicinity of 12.00. The VIX closed at 15.47. Keep an eye on the settlement on Tuesday morning of the Nov 24 weekly VIX. There was a seller of 17,000 Nov 24 VIX 16 puts early last week. On Friday, about 20,000 more puts were sold at 0.30. The VIX closed and 15.47 and the Nov 24 VIX future closed at 16.325. The 20,000 contracts make money if the Nov 24 future closes above 15.70.

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

Indexes Ticker 20-Nov 13-Nov Change % Change
CBOE Volatility Index VIX 15.47 20.08 (4.61) -22.96%
VIX December Future (12/16/2015) VXZ5 17.425 19.875 (2.450) -12.33%
VIX January Future (1/1202015) VXF6 18.275 20.125 (1.850) -9.19%
VIX February Future (1/1202015) VXG6 18.875 20.375 (1.500) -7.36%
CBOE Short-term Volatility Index VXST 12.40 20.43 (8.03) -39.30%
CBOE 3 Month Volatility Index VXV 18.94 21.58 (2.64) -12.23%
CBOE Mid-term Volatility Index (6 month) VXMT 20.77 22.30 (1.53) -6.86%
VIX of VIX VVIX 90.79 106.06 (15.27) -14.40%
Long VIX ETP’s      
iPath S&P 500 VIX Short Term Futures VXX 19.43 21.96 (2.53) -11.52%
pShares VIX Short Term Futures ETF VIXY 12.92 14.60 (1.68) -11.51%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 11.35 11.92 (0.57) -4.78%
Inverse VIX ETP’s      
Daily Inverse VIX Short Term ETN XIV 28.94 26.05 2.89 11.09%
ProShares Short VIX Short Term Future ETF SVXY 56.65 50.96 5.69 11.17%

Data Source: OptionVue7

Discussion of the impact of terrorism will be a strong undercurrent during the upcoming week. Discussions last week focused on the words real and imagined. The closing levels of the VIX were much higher than would be expected for the levels of the S&P 500. It does not matter if the fears keeping the VIX at the higher levels are real or imagined. What matters is investor and trader perceptions. The shortened US trading week could magnify any moves to the upside or downside. Volatility levels should stay high in anticipation of “Employment Week” the week after next.

The earning’s season will slow to a crawl this week.  Start looking at earnings 30 days out for trading opportunities – ie Nike (NKE) on December 17 after the market close (AMC.) Major earnings announcements this week include GameStop, Tyson Foods, Burlington Stores, Dollar Tree, Hormel Foods, Tiffany, and Deere & Co.  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

“The smallest act of kindness is worth more than the grandest intention.” -Oscar Wilde

 

 

I can no other answer make, but, thanks, and thanks.  ~William Shakespeare
“The production of too many useful things results in too many useless people.” – Karl Marx

 

 

Monday November 23:

 

Economic: Chicago Fed National Activity Index – 8:30, PMI Manufacturing Index Flash – 9:45 AM, Existing Home Sales – 10:00.

 

International Economic: EMU PMI Composite Flash – 4:00 AM, Japan PMI Manufacturing Index Flash – 8:35PM.

 

Earnings:

Symbol Company Name Nov 20 Close IV30 B/A
GME GameStop Corp. $38.46 56.65 BMO
JEC Jacobs Engineering Group Inc $42.74 32.20 BMO
MNK Mallinckrodt PLC $60.08 76.82 BMO
TSN Tyson Foods, Inc. $44.46 35.62 BMO
DY Dycom Industries, Inc. $83.44 58.94 AMC
PANW Palo Alto Networks Inc $167.39 44.30 AMC
POST Post Holdings Inc $64.14 63.88 AMC
YY YY Inc (ADR) $59.41 35.25 AMC

 

 

Tuesday November 23:

 

Economic GDP – 8:30, Corporate Profits – 8:30, Redbook – 8:55, S&P Case Shiller HPI – 9:00, Consumer Confidence – 10:00. Richmond Fed Manufacturing Index – 10:00, State Street Investor Confidence Index – 10:00.

 

International Economic: Germany GDP – 2:00AM, France Business Climate Indicator – 2:45AM.

 

Earnings:

Symbol Company Name Nov 20 Close IV30 B/A
SIG Signet Jewelers Ltd. $139.71 44.05 DMT
BURL Burlington Stores Inc $40.70 62.26 BMO
CBRL Cracker Barrel Old Country Store $134.10 27.63 BMO
DLTR Dollar Tree, Inc. $67.16 38.90 BMO
DSW DSW Inc. $22.12 47.52 BMO
HRL Hormel Foods Corp $68.84 23.18 BMO
PDCO Patterson Companies, Inc. $48.28 23.22 BMO
TIF Tiffany & Co. $74.24 41.25 BMO
VAL The Valspar Corp $82.70 25.17 BMO
ADI Analog Devices, Inc. $59.77 48.03 AMC
AVAV AeroVironment, Inc. $23.53 51.28 AMC
QIHU Qihoo 360 Technology Co Ltd $64.29 52.43 AMC
QUNR Qunar Cayman Islands Ltd $35.08 84.34 AMC
VEEV Veeva Systems Inc $27.26 48.73 AMC

 

 

 

Wednesday November 25:

 

Economic: MBA Mortgage Applications – 7:00, Durable Goods Orders – 8:30, Weekly Jobless Claims – 8:30, Personal Income and Outlays – 8:30, FHFA House Price Index – 9:00, PMI Services Falsh – 9:45. Bloomberg Consumer Comfort Index – 9:45, New Home Sales – 10:00, Consumer Sentiment – 10:00, EIA Petroleum Status Report – 10:30.

 

International Economic: No major announcements.

 

Other:

 

Earnings:

Symbol Company Name Nov 20 Close IV30 B/A
DE Deere & Company $74.94 34.58 BMO
GLNG Golar LNG Limited (USA) $28.00 66.94 BMO
WUBA 58.com Inc (ADR) $52.14 57.23 BMO

 

 

Thursday November 26:

 

US markets are closed for Thanksgiving Day

 

International Economic: No major announcements.

 

 

 

Friday November 27

 

New York Stock Exchange Early Close – 1:00 PM

 

Economic: Baker-Hughes Rig Count – 1:00.

 

International Economic: France PPI – 2:45, Great Britain GDP – 4:30.

 

Earnings: None meeting criteria.

 

 

Monday November 30:

 

Economic: Chicago Fed PMI – 8:30, Pending Homes Sales Index – 10:00, Dallas Fed Manufacturing Survey – 10:30, Farm Prices – 3:00.

 

International Economic: Germany CPi – 8:00 AM,

 

Earnings: None meeting criteria.

 

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