The Prepared Mind: November 30, 2015

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

“Chance favors the prepared mind.” — Louis Pasteur

“Change before you have to.” – Jack Welch

It was a very quiet shortened trading week. The small cap dominated Russell 2000 was the week’s star performer. The RUT gained nearly 2.5% while the other major trading indices hovered around unchanged. The highlight of the week was the “fear” created by Turkey shooting down a Russian Jet.   The concern was ephemeral with a short-lived sell-off in equities, an increase in volatility levels combined with increased oil crude oil prices. Emotions were calmed and the markets returned to and stayed at near the previous week’s close.

Here is an overview of the market behavior last week:

Index 27-Nov Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17798.49 (25.32) -0.14% -0.14% 15.13% (VXD)
S&P 500 (SPX) 2090.11 0.94 0.04% 1.52% 15.12% (VIX)
NASDAQ 100 (NDX) 4682.16 (5.29) -0.11% 10.45% 17.13% (VXN)
Russell 2000 (RUT) 1199.56 29.10 2.49% -0.43% 16.89% (RVX)
S&P 100 (OEX) 931.53 (1.46) -0.16% 2.55% 15.85% (VXO)
CBOE Volatility Index (VIX) 15.12 (0.35) -2.26% NA  

Data Source: OptionVue7

The VIX and associated products reflected the lack of movement in the associated stock indices.   The VIX closed at 15.12 – down just over 2%.   On Friday, there was a seller of the VIX 26/37.50 cal vertical for a net credit of 0.18. This trade makes money at December VIX expiration with VIX settlement under 26.18. This trade does well in the absence of any black swan events.

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

Indexes Ticker 27-Nov 20-Nov Change % Change
CBOE Volatility Index VIX 15.12 15.47 (0.35) -2.26%
VIX December Future (12/16/2015) VXZ5 17.175 17.425 (0.250) -1.43%
VIX January Future (1/120/2016) VXF6 18.275 18.025 0.250 1.39%
VIX February Future (2/17/2016) VXG6 18.875 18.675 0.200 1.07%
CBOE Short-term Volatility Index VXST 14.21 12.40 1.81 14.60%
CBOE 3 Month Volatility Index VXV 17.35 18.94 (1.59) -8.39%
CBOE Mid-term Volatility Index (6 month) VXMT 19.51 20.77 (1.26) -6.07%
VIX of VIX VVIX 88.35 90.79 (2.44) -2.69%
Long VIX ETP’s      
iPath S&P 500 VIX Short Term Futures ETN VXX 18.91 19.43 (0.52) -2.68%
ProShares VIX Short Term Futures ETF VIXY 12.57 12.92 (0.35) -2.71%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 11.14 11.35 (0.21) -1.85%
Inverse VIX ETP’s      
Daily Inverse VIX Short Term ETN XIV 29.63 28.94 0.69 2.38%
ProShares Short VIX Short Term Future ETF SVXY 58.08 56.65 1.43 2.52%

Data Source: OptionVue7

It is Employment Week. The week’s reports are dominated by employment culminate with the Employment situation Report on Friday before the opening. Expect the market to respond to reports on retail sales for Black Friday.   Reports for sales on Cyber Monday will also have the ability to move the market. The wild card and primary potential source of black swans will continue to be the war on ISIL. The general tenor of the financial media is complacent to bullish.

 

The earning’s season slows to a crawl.  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 Thor Industries, Bob Evans Farms, G-III Apparel, American Eagle Outfitters, Brown, Forman, Barnes & Noble, Kroger, Dollar Gerneral, Medtronic, Toro, Genesco and Big Lots. .  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 great menace to the life of an industry is industrial self-complacency.” – Joyce Carol Oates
“The production of too many useful things results in too many useless people.” – Karl Marx

 

 

Monday November 30:

 

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

 

International Economic: Germany Retail Sales – 2:00 AM, Germany CPI – 8:00 AM,

 

Earnings

Symbol Company Name Nov 27 Close IV30 B/A
GLNG Golar LNG Limited (USA) $28.01 88.42 BMO
WUBA 58.com Inc (ADR) $57.33 58.78 BMO

 

 

Tuesday December 1:

 

Economic: Motor Vehicle Sales, Gallup US ECI, Redbook – 8:55, PMI Manufacturing Index – 9:45, ISM Manufacturing Index – 10:00, Construction Spending – 10:00.

 

International Economic: Germany Unemployment Rate – 3:55 AM.

 

Other: Chicago Federal Reserve Bank President Charles Evans speech on the economy, in East Lansing, Michigan – 12:45 PM.

 

Earnings:

Symbol Company Name Nov 27 Close IV30 B/A
QIHU Qihoo 360 Technology Co Ltd $67.68 40.83 AMC

 

 

 

Wednesday December 2:

 

Economic: MBA Mortgage Applications – 7:00, ADP Employment Report – 8:15, Productivity and Costs – 8:30, Gallup US Job creation Index – 8:30, EIA Petroleum Status Report – 10:30, Beige Book – 2:00.

 

International Economic: EMU PPI – 5:00.

 

Other: San Francisco Fed President John Williams speech on the outlook, in Portland, Oregon – 11:00AM, Federal Reserve Chair Janet Yellen speech to Economic Club of Washington, in Washington – 12:25PM.

 

Earnings:

Symbol Company Name Nov 27 Close IV30 B/A
AVGO Avago Technologies Ltd $128.39 47.78 AMC

 

 

Thursday December 3

 

Economic: Chain Store Sales, Challenger Job-Cut Report – 7:30, Weekly Jobless Claims – 8:30, Gallup Good Jobs Rate – 8:30 AM, PMI Service Index – 9:45, Bloomberg Consumer Comfort Index – 9:45, Factory Order – 10:00, ISM Non-Manufacturing Index – 10:00, EIA Natural Gas Report – 10:30.

 

International Economic: European Central Bank Announcement – 7:45AM.

 

Other: Cleveland Federal Reserve Bank President Loretta Mester welcoming remarks to Cleveland Fed financial stability conference, in Washington – 8:30AM, Federal Reserve Chair Janet Yellen testifies before Joint Economic Committee, in Washington.

 

Earnings:

Symbol Company Name Nov 27 Close IV30 B/A
DG Dollar General Corp. $65.17 30.03 BMO
GWPH GW Pharmaceuticals PLC- ADR $85.16 81.66 BMO
KR Kroger Co $37.17 26.30 BMO
LE Lands’ End, Inc. $25.20 64.23 BMO
MIK Michaels Companies Inc $22.42 42.38 BMO
SHLD Sears Holdings Corp $22.46 81.04 BMO
AMBA Ambarella Inc $58.27 74.06 AMC
COO Cooper Companies Inc $145.31 32.91 AMC
ULTA Ulta Salon, Cosmetics & Fragrance, $170.11 42.57 AMC

 

 

Friday December 4:

 

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

 

International Economic: Germany Manufacturers’ Orders = 2:00, EMU GDP – %:00AM,.

 

Earnings: None meeting criteria.

 

 

Monday December 7:

 

Economic: Gallup US Consumer Spending Measure – 8:30, US Labor Market Conditions Index – 10:00, TD Ameritrade IMX – 12:30PM.

 

International Economic: Germany Industrial Production – 2:00AM. Japan GDP – 6:50PM

 

Earnings: None meeting criteria.

 

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