The Prepared Mind: January 11, 2016

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

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

“We are all wrong so often that it amazes me that we can have any conviction at all over the direction of things to come.” – Jim Cramer

“The darkest hour is just before dawn.” – Anonymous

It was a brutal beginning to New Year. The Dow Jones Industrial Average and the S&P 500 each suffered their worst opening week in history. The S&P 500 had its second worst week since 2011. The major US indices were down 6% to 7%. Intraday volatility was daunting for traders. Daily trading fluctuated back and forth in 3% to 5% ranges. Indexes prices were like Chicago weather; if you don’t like what you are seeing wait a few minutes and prices will be different. The impetus for the US and global sell-off was ascribed to a meltdown of Chinese equity markets, a weakening of the Chinese Yuan, multi-year lows for crude oil and geopolitical pressures from North Korea and the Mideast. In the near term, US corporate earnings will be the determining factor in market direction. All was not negative. On the positive side, Friday’s job situation report showed the U.S. economy added 292,000 new jobs in December, and revised the combined October-November tally upward by 50,000.

Here is an overview of the market behavior last week:

Index 8-Jan Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 16346.45 (1,078.58) -6.19% -6.19% 25.05% (VXD)
S&P 500 (SPX) 1922.03 (121.91) -5.96% -5.96% 27.01% (VIX)
NASDAQ 100 (NDX) 4271.12 (326.03) -7.09% -7.09% 28.33% (VXN)
Russell 2000 (RUT) 1044.92 (88.98) -7.85% -7.85% 27.40% (RVX)
S&P 100 (OEX) 855.58 (55.85) -6.13% -6.13% 27.67% (VXO)
CBOE Volatility Index (VIX) 27.01 8.80 48.33% NA  

Data Source: OptionVue7

 

The VIX hit its highest levels since September 2015. It should be noted the VIX levels are lower than those reached in August 2015. The VIX curve moved to backwardization this past week. Per Russell Rhoads, VIX guru at the CBOE, the biggest block trade on Friday “involved a seller of the VIX Jan 27th 16 Puts at 0.11 who the purchased the same number of VIX Feb 3rd 16 Puts for 0.18.” This is a debit spread with defined risk in a very volatile market.   From a trader’s perspective, the trade seems to be a play to profit from expansion of the spread as the VIX moves downward.

 

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

Indexes Ticker 8-Jan 31-Dec Change % Change
CBOE Volatility Index VIX 27.01 18.21 8.80 48.33%
VIX January Future (1/120/2016) VXF6 25.275 18.525 6.750 36.44%
VIX February Future (2/17/2016) VXG6 23.075 18.825 4.250 22.58%
VIX March Future (3/16/2016) VXH6 22.275 19.075 3.200 16.78%
CBOE Short-term Volatility Index VXST 27.98 17.52 10.46 59.70%
CBOE 3 Month Volatility Index VXV 26.23 19.80 6.43 32.47%
CBOE Mid-term Volatility Index (6 month) VXMT 25.49 20.59 4.90 23.80%
VIX of VIX VVIX 116.46 100.20 16.26 16.23%
Long VIX ETP’s      
iPath S&P 500 VIX Short Term Futures ETN VXX 24.83 20.10 4.73 23.53%
ProShares VIX Short Term Futures ETF VIXY 16.49 13.33 3.16 23.71%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 12.13 11.14 0.99 8.89%
Inverse VIX ETP’s      
Daily Inverse VIX Short Term ETN XIV 20.45 25.80 (5.35) -20.74%
ProShares Short VIX Short Term Future ETF SVXY 39.87 50.45 (10.58) -20.97%

Data Source: OptionVue7

The coming week is light on economic releases. The U.S. Producer Price Index (PPI) and retail sales are slated for Friday. Members of the FOMC will be speaking most days this coming week. Their speeches will be parsed for indications on the number and size of interest rate increase over the coming year. The ECB will be releasing minutes on Thursday. The lack of economic news will result in a focus on Chinese markets. Positive US earnings would temper the current market turmoil.

The unofficial start of the earnings seasons is the announcement by Alcoa (AA) after the market close on Monday, January 11. This week will be relatively quite the Earnings highlights are Alcoa, HB Fuller, Supervalu, CSX, Intel, JPMorgan Chase, Wells Fargo and Fastenal.    The week before last I started placing double calendars for stocks with earnings three to four weeks in the future.   I did not open any new positions based on earnings strategies this past week. Having no position is a viable strategy. I decided to avoid simultaneously opening position which would be effected by two volatility events – a major market sell-off and earnings announcements. This was a biiger step into the tradin unknown than I was willing to take.

OptionVue7 has the ability to identify stocks 30 days out with a new enhanced Earnings Search feature. I have done a quick search 21 to 28 days forward for candidates for double calendars. Here are the results of my initial scan for double calendar candidates. You should further filter any of the stocks with your own risk/reward criteria.

Symbol Company Name Jan 8 Close IV30 B/A DATE
AET Aetna Inc $110.27 33.53 BMO 1-Feb
CAH Cardinal Health Inc $85.00 25.55 BMO 1-Feb
AFL AFLAC Incorporated $57.21 27.69 AMC 1-Feb
APC Anadarko Petroleum Corporation $40.11 63.06 AMC 1-Feb
HCA HCA Holdings Inc $64.29 43.32 DMT 2-Feb
ADM Archer Daniels Midland Company $34.52 33.69 BMO 2-Feb
AGCO AGCO Corporation $45.26 35.28 BMO 2-Feb
BAX Baxter International Inc $36.79 27.69 BMO 2-Feb
DOW Dow Chemical Co $46.64 37.84 BMO 2-Feb
EMR Emerson Electric Co. $44.61 34.21 BMO 2-Feb
LYB LyondellBasell Industries NV $80.09 37.20 BMO 2-Feb
PFE Pfizer Inc. $31.40 22.99 BMO 2-Feb
PNR Pentair PLC $46.48 35.34 BMO 2-Feb
R Ryder System, Inc. $52.04 42.38 BMO 2-Feb
SLGN Silgan Holdings Inc. $53.25 28.61 BMO 2-Feb
UPS United Parcel Service, Inc. $92.60 27.53 BMO 2-Feb
BBSI Barrett Business Services, Inc. $40.43 72.69 AMC 2-Feb
CHRW C.H. Robinson Worldwide, Inc. $63.09 29.59 AMC 2-Feb
CMG Chipotle Mexican Grill, Inc. $416.00 55.76 AMC 2-Feb
DIS Walt Disney Co $99.50 27.07 AMC 2-Feb
EW Edwards Lifesciences Corp $77.56 35.14 AMC 2-Feb
GILD Gilead Sciences, Inc. $96.25 34.44 AMC 2-Feb
MANH Manhattan Associates, Inc. $59.87 45.12 AMC 2-Feb
ULTI The Ultimate Software Group, Inc. $176.48 35.23 AMC 2-Feb
XOM Exxon Mobil Corporation $76.23 31.46   2-Feb
ADP Automatic Data Processing $78.78 25.03 BMO 3-Feb
BDX Becton Dickinson and Co $144.53 24.26 BMO 3-Feb
CMCSA Comcast Corporation $54.61 28.57 BMO 3-Feb
CTSH Cognizant Technology Solutions Corp $56.64 38.09 BMO 3-Feb
ETN Eaton Corporation PLC $49.73 33.44 BMO 3-Feb
GSK GlaxoSmithKline plc (ADR) $39.01 27.06 BMO 3-Feb
HUM Humana Inc $175.15 29.12 BMO 3-Feb
IACI IAC/InterActiveCorp $55.89 40.09 BMO 3-Feb
IP International Paper Co $36.29 34.56 BMO 3-Feb
LVLT Level 3 Communications, Inc. $50.69 36.45 BMO 3-Feb
MAC Macerich Co $80.75 28.07 BMO 3-Feb
MNK Mallinckrodt PLC $66.85 60.89 BMO 3-Feb
NOV National-Oilwell Varco, Inc. $30.74 47.91 BMO 3-Feb
RGLD Royal Gold, Inc USA) $38.74 47.66 BMO 3-Feb
RL Ralph Lauren Corp $104.56 40.20 BMO 3-Feb
BXP Boston Properties, Inc. $124.98 26.05 AMC 3-Feb
CBG CBRE Group Inc $31.07 35.34 AMC 3-Feb
CBOE CBOE Holdings, Inc $62.86 24.43 AMC 3-Feb
CCK Crown Holdings, Inc. $48.47 29.73 AMC 3-Feb
IMPV Imperva Inc $59.16 62.67 AMC 3-Feb
JLL Jones Lang LaSalle Inc $145.87 33.35 AMC 3-Feb
LCI Lannett Company, Inc. $36.00 59.37 AMC 3-Feb
LNC Lincoln National Corporation $45.36 34.87 AMC 3-Feb
MET Metlife Inc $42.51 32.54 AMC 3-Feb
ORLY O’Reilly Automotive Inc $240.17 33.05 AMC 3-Feb
WYNN Wynn Resorts, Limited $60.19 69.05 AMC 3-Feb
YUM Yum! Brands, Inc. $69.08 40.38 AMC 3-Feb
MPC Marathon Petroleum Corp $47.99 45.76   3-Feb
MPLX MPLX LP $34.42 59.50   3-Feb
MRK Merck & Co., Inc. $51.96 25.47   3-Feb
NXPI NXP Semiconductors NV $76.00 51.03   3-Feb
RACE Ferrari NV $46.65 47.94   3-Feb
SYT Syngenta AG (ADR) $74.22 42.57   3-Feb
VOD Vodafone Group Plc (ADR) $31.63 26.08 DMT 4-Feb
AZN AstraZeneca plc (ADR) $32.14 26.12 BMO 4-Feb
CHTR Charter Communications, Inc. $173.63 32.07 BMO 4-Feb
CI CIGNA Corporation $141.37 27.78 BMO 4-Feb
CMI Cummins Inc. $87.19 35.74 BMO 4-Feb
DNKN Dunkin Brands Group Inc $38.27 35.47 BMO 4-Feb
EQT EQT Corporation $51.87 47.60 BMO 4-Feb
GRA W. R. Grace & Co $92.15 30.03 BMO 4-Feb
GWPH GW Pharmaceuticals PLC- ADR $61.81 107.16 BMO 4-Feb
ICE Intercontinental Exchange Inc $254.17 26.53 BMO 4-Feb
KORS Michael Kors Holdings Ltd $38.96 52.16 BMO 4-Feb
LAZ Lazard Ltd $39.04 45.86 BMO 4-Feb
MMC Marsh & McLennan Companies, Inc. $53.70 25.00 BMO 4-Feb
OAK Oaktree Capital Group LLC $44.42 30.48 BMO 4-Feb
PM Philip Morris International Inc. $87.25 22.04 BMO 4-Feb
PRLB Proto Labs Inc $62.32 40.51 BMO 4-Feb
RDS.A Royal Dutch Shell plc (ADR) $42.12 41.80 BMO 4-Feb
RDS.B Royal Dutch Shell Plc CL B $42.04 41.97 BMO 4-Feb
SNA Snap-on Incorporated $164.24 25.48 BMO 4-Feb
SNY Sanofi SA (ADR) $41.27 26.69 BMO 4-Feb
TM Toyota Motor Corp (ADR) $115.57 25.86 BMO 4-Feb
WHR Whirlpool Corporation $137.65 39.17 BMO 4-Feb
ATHN athenahealth, Inc $159.30 46.76 AMC 4-Feb
ATVI Activision Blizzard, Inc. $36.27 44.09 AMC 4-Feb
AVB AvalonBay Communities Inc $182.66 24.56 AMC 4-Feb
BWLD Buffalo Wild Wings $154.23 42.82 AMC 4-Feb
CAA CalAtlantic Group Inc $33.89 47.17 AMC 4-Feb
DATA Tableau Software Inc $88.57 65.14 AMC 4-Feb
EXPE Expedia Inc $114.81 39.17 AMC 4-Feb
HAIN Hain Celestial Group Inc $36.95 48.42 AMC 4-Feb
HIG Hartford Financial Services Group Inc $41.20 35.10 AMC 4-Feb
KHC Kraft Heinz Co $71.90 23.41 AMC 4-Feb
LNKD LinkedIn Corp $217.00 52.63 AMC 4-Feb
NUS Nu Skin Enterprises, Inc. $33.99 82.62 AMC 4-Feb
OUTR Outerwall Inc $34.50 71.06 AMC 4-Feb
POST Post Holdings Inc $60.46 56.71 AMC 4-Feb
QRVO Qorvo Inc $45.64 75.02 AMC 4-Feb
TPX Tempur Sealy International Inc $65.70 46.53 AMC 4-Feb
VRSN Verisign, Inc. $80.55 35.31 AMC 4-Feb
AON Aon PLC $88.57 26.95 BMO 5-Feb
CME CME Group Inc $87.53 28.02 BMO 5-Feb
EL Estee Lauder Companies Inc $83.33 30.45 BMO 5-Feb
MCO Moody’s Corporation $92.72 31.86 BMO 5-Feb
TSN Tyson Foods, Inc. $52.17 34.14 BMO 5-Feb
HRS Harris Corporation $86.24 25.20 AMC 5-Feb

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

 

“I’ve lost tremendous amounts of money in various markets

and I think that’s something that makes you better at my job, not worse. “ – Jim Cramer

 

Monday January 11:

 

Economic: Labor Market Conditions Index – 10:00.

 

International Economic: No major announcements.

 

Other: Atlanta Federal Reserve Bank President Dennis Lockhart speech in Atlanta -12:40PM, Dallas Federal Reserve Bank President Rob Kaplan speech on economic outlook, in Dallas – 7:50PM.

 

Earnings:

Symbol Company Name Jan 8 Close IV30 B/A
AA Alcoa $8.07 55.30 AMC
SHLM A Schulman Inc $29.04 41.10 AMC

 

 

Tuesday January 12:

 

Economic: NFIB Small Business Optimism Index – 6:00AM, Redbook – 8:55, JOLTS – 10:00AM.

 

International Economic: Great Britain Industrial Production – 4:30AM, China Merchandise Trade Balance – 8:00PM.

 

Other: Richmond Federal Reserve Bank President Jeffrey Lacker speech on economic outlook, in Columbia, South Carolina – 3:15 PM. President Barack Obama gives his final State of the Union address to Congress at 9PM.

 

Earnings:

Symbol Company Name Jan 8 Close IV30 B/A DATE
CSX CSX Corporation $23.62 36.71 AMC 12-Jan

 

 

 

Wednesday January 13:

 

Economic: MBA Mortgage Applications – 7:00, Atlanta Fed Business Inflation Expectations – 10:00, EIA Petroleum Status Report – 10:30, Beige Book – 2:00.

 

International Economic: EMU Industrial Production – 5:00AM.

Other: Boston Federal Reserve Bank President Eric Rosengren speech on the economic outlook, in Boston – 7:45AM, Chicago Federal Reserve Bank President Charles Evans speech to economic forecast luncheon, in Cedar Rapids, Iowa – 1:00PM.

 

Earnings: None meeting criteria.

 

Thursday January 14:

 

Economic: Chain Store Sales, Challenger Job-Cut Report – 7:30, Weekly Jobless Claims – 8:30, Gallup Good Jobs Rate – 8:30, Bloomberg Consumer Comfort Index – 9:45, EIA Natural Gas Report – 10:30.

 

International Economic: Bank of England Announcement and Minutes 7:00AM, European Central Bank (ECB) Minutes – 10:00AM.

 

Other: St Louis Federal Reserve Bank President James Bullard speech on the economy and monetary policy, in Memphis, Tennessee – 8:15AM.

 

Earnings:

Symbol Company Name Jan 8 Close IV30 B/A DATE
FRC First Republic Bank $63.28 29.88 BMO 14-Jan
JPM JPMorgan Chase & Co. $60.27 31.92 BMO 14-Jan
TSM Taiwan Semiconductor Mfg. Co. Ltd. $21.10 30.95 BMO 14-Jan
GPN Global Payments Inc $61.36 34.46 AMC 14-Jan
INTC Intel Corporation $31.84 33.71 AMC 14-Jan

 

 

 

Friday January 15:

 

Economic: PPI – FD – 8:30, Retail Sales – 8:30, Empire State Manufacturing Survey – 8:30, Industrial Production – 9:15, Consumer Sentiment – 9:55, Business Inventories – 10:00, Baker-Hughes Rig Count – 1:00.

 

International Economic: EMU Merchandise Trade – 5:00AM.

 

Other: New York Federal Reserve Bank President William Dudley speech to Economic Leadership Forum in Somerset, New Jersey – 9:00AM.

 

Earnings:

Symbol Company Name Jan 8 Close IV30 B/A DATE
BLK BlackRock, Inc. $315.73 31.45 BMO 15-Jan
C Citigroup Inc $47.56 35.61 BMO 15-Jan
FAST Fastenal Company $39.05 30.14 BMO 15-Jan
PNC PNC Financial Services Group Inc $89.28 27.51 BMO 15-Jan
USB U.S. Bancorp $40.27 28.38 BMO 15-Jan
WFC Wells Fargo & Co $50.40 29.56 BMO 15-Jan

 

 

 

Monday January 18:

 

Markets Closed – US Holiday – Martin Luther King Jr Day

 

International Economic: China Industrial Production – (:00PM, China Retail Sales – 9:00PM, China GDP – 10:00PM.

Other: Atlanta Federal Reserve Bank President Dennis Lockhart speech in Atlanta -12:40PM.

 

Earnings: None meeting criteria.

 

Tuesday January 19:

 

Economic: Housing Market Index – 10:00 AM.

 

International Economic: Germany CPI – 2:00, EMU HICP – 5:00AM.

 

Other: Richmond Federal Reserve Bank President Jeffrey Lacker speech on economic outlook, in Columbia, South Carolina – 3:15 PM.

 

Earnings:

Symbol Company Name Jan 8 Close IV30 B/A DATE
CMA Comerica Incorporated $39.69 38.70 BMO 19-Jan
DAL Delta Air Lines, Inc. $47.00 41.73 BMO 19-Jan
EDU New Oriental Education & Tech Grp $27.48 45.75 BMO 19-Jan
MS Morgan Stanley $28.98 37.89 BMO 19-Jan
SCHW Charles Schwab Corp $29.18 37.98 BMO 19-Jan
UNH UnitedHealth Group Inc $112.09 32.00 BMO 19-Jan
CREE Cree, Inc. $25.14 51.52 AMC 19-Jan
IBM International Business Machines Corp. $132.86 30.00 AMC 19-Jan
LLTC Linear Technology Corporation $39.19 34.71 AMC 19-Jan
NFLX Netflix, Inc. $114.56 70.59 AMC 19-Jan
SMCI Super Micro Computer, Inc. $22.03 62.11 AMC 19-Jan

 

 

 

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