The Prepared Mind: February 8, 2016

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

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

“The two most important things to do for self-defense are not to take a martial arts class or get a gun, but to think like the opposition and know where you’re most at risk.” – Barry Eisler

“The problem in defense is how far you can go without destroying from within what you are trying to defend from without.” – Dwight D. Eisenhower
Markets were chaotic last week. The S&P 500 fell 3.1% for the week and 1.8% on Friday. This was the largest loss for the S&P 500 in over a month. Technology stocks led the sell-off with NASDAQ 100 (NDX) losing 5.70% for the week and 3.44% on Friday. The sell-off was exacerbated by LinkedIn (LNKD) losing $83.90 or 44%. Weakness in the economy, as evidenced by shortfall in January job growth, was blamed as the impetus for the declines. Weak crude prices, perceived disappointing earnings (most domestic companies are beating earnings estimates this quarter), weakness in the Chinese economy have been cited as reason for the most recent weakness.

Daily trading range of the SPX for the past 10 days has been 36 points. The 24 hour trading range of the E-Mini (the future on the SPX) has been 47 points or nearly 2.5%. These levels of market volatility are not conducive to patient scalping of market moves. The 5 minute range is 4 points. There tend to be no small trading mistakes when markets are trading with these ranges. I have reduced my exposure to market in my trading portfolio. I am trading smaller size and fewer products. Be careful. Attention to detail is one of your greatest allies. Be nimble.

 

Here is an overview of the market behavior last week:

Index 5-Feb Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 16204.83 (261.47) -1.59% -7.00% 22.13% (VXD)
S&P 500 (SPX) 1880.02 (60.22) -3.10% -8.02% 23.38% (VIX)
NASDAQ 100 (NDX) 4021.59 (243.26) -5.70% -12.52% 27.65% (VXN)
Russell 2000 (RUT) 987.04 (47.24) -4.57% -12.95% 28.53% (RVX)
S&P 100 (OEX) 839.75 (28.59) -3.29% -7.86% 25.99% (VXO)
CBOE Volatility Index (VIX) 23.38 3.18 15.74% NA  

Data Source: OptionVue7

 

The VIX front month future (February) is still in backwardization relative to the second month future (March.) Backwardization means the front month future is trading at a higher price than the second month future. This backwardization has been present every day in 2016. According to Russell Rhoads at the CBOE, this is “running streak of twenty four trading days.  This is the longest stretch since 2011 and the fifth longest on record.” This backwardization indicates an anticipation of higher short term volatility in the SPX. The anticipation was reflected in the movement in the

Relative movement of the VXST (CBOE Short-term Volatility Index) versus other time based volatility measurements.

 

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

Indexes Ticker 5-Feb 29-Jan Change % Change
CBOE Volatility Index VIX 23.38 20.20 3.18 15.74%
VIX February Future (2/17/2016) VXG6 24.125 21.525 2.600 12.08%
VIX March Future (3/16/2016) VXH6 23.050 21.325 1.725 8.09%
VIX April Future (4/20/2016) VXJ6 22.825 21.400 1.425 6.66%
CBOE Short-term Volatility Index VXST 22.96 19.37 3.59 18.53%
CBOE 3 Month Volatility Index VXV 24.48 22.66 1.82 8.03%
CBOE Mid-term Volatility Index (6 month) VXMT 25.03 22.82 2.21 9.68%
VIX of VIX VVIX 100.55 89.95 10.60 11.78%
Long VIX ETP’s      
iPath S&P 500 VIX Short Term Futures ETN VXX 26.36 24.12 2.24 9.29%
ProShares VIX Short Term Futures ETF VIXY 17.48 15.99 1.49 9.32%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 12.83 12.09 0.74 6.12%
Inverse VIX ETP’s      
Daily Inverse VIX Short Term ETN XIV 18.16 20.02 (1.86) -9.29%
ProShares Short VIX Short Term Future ETF SVXY 35.47 39.12 (3.65) -9.33%

Data Source: OptionVue7

 

The week of February 8 is very light on economic releases. Markets The highlights of the week will be two speeches by Fed Chair Janet Yellen. She will present the Fed’s semi-annual monetary report to House Financial Services Committee on Wednesday morning. Yellen will cover the same subject matter before the Senate Banking Committee on Thursday morning. Her opening remarks and ensuing answers to rounds of questioning could add more volatility to an already skittish market. in China, Korea, and Hong Kong will be closed the entire week to celebrate the Lunar New Year. Closure of the markets may temper the amount of volatility in European and US markets. The wild card for the week will be global reaction and North Korea response to North Korea’s launch and test of a ballistic missile

The earnings season is on full throttle. The earnings highlights for widely held and actively traded stocks are: Loews, Disney, Viacom, Ingersoll-Rand, CVS Health, Coca-Cola, Western Union, O’Reilly Automotive, Whole Foods Market, Time Warner, Cisco, Humana, CBS, Kellogg, Reynolds American, Nielsen, Mosaic, and Ventas. . Last week, I continued to avoid simultaneously opening positions which would be effected by two volatility events – a major market sell-off and earnings announcements. I have started the past three trading week intending to add earnings trades. The volatile markets have forced me reduce the number of different trades I have in place. As a prudent trader, I must limit the number of positions own in the portfolio the those I can monitor and adjust. Volatility severely restricts my span of trading control.

OptionVue7 has the ability to identify stocks 30 days out with a new enhanced Earnings Search feature. I have done a quick search 14 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.

Once again, it is your responsibility to confirm these earnings dates. The date and time of earnings announcements can and do change.

Symbol Company Name Feb 5 Close IV30 B/A DATE
AGN Allergan plc $272.45 28.89 BMO 22-Feb
PDCE PDC Energy Inc $51.07 66.92 AMC 22-Feb
ASTE Astec Industries, Inc. $36.84 38.68 BMO 23-Feb
CBI Chicago Bridge & Iron Company N.V. $37.60 46.40 AMC 23-Feb
DXCM DexCom, Inc. $70.63 58.66 AMC 23-Feb
DY Dycom Industries, Inc. $60.00 60.17 AMC 23-Feb
EXPD Expeditors International of Washington $45.79 27.31 AMC 23-Feb
FSLR First Solar, Inc. $67.20 60.51 AMC 23-Feb
HD Home Depot Inc $121.11 32.67 BMO 23-Feb
M Macy’s, Inc. $40.74 44.40 BMO 23-Feb
BLUE bluebird bio Inc $49.28 77.81 AMC 24-Feb
CRM salesforce.com, inc. $67.20 71.71 AMC 24-Feb
LAD Lithia Motors Inc $76.29 45.83 AMC 24-Feb
LB L Brands Inc $88.57 33.42 AMC 24-Feb
LOW Lowe’s Companies, Inc. $67.96 32.50 BMO 24-Feb
NTES NetEase Inc (ADR) $150.69 54.13 AMC 24-Feb
RY Royal Bank of Canada $51.64 30.65 BMO 24-Feb
SHLX Shell Midstream Partners LP $36.49 61.81 BMO 24-Feb
TGT Target Corporation $70.04 33.58 BMO 24-Feb
TJX TJX Companies Inc $70.76 30.92 BMO 24-Feb
ADSK Autodesk, Inc. $49.51 50.12 AMC 25-Feb
APA Apache Corporation $40.74 62.49 BMO 25-Feb
BGS B&G Foods, Inc. $35.05 30.71 AMC 25-Feb
BMRN BioMarin Pharmaceutical Inc. $71.15 70.35 AMC 25-Feb
DLTR Dollar Tree, Inc. $76.67 35.82 BMO 25-Feb
DPZ Domino’s Pizza, Inc. $114.00 32.21 BMO 25-Feb
EOG EOG Resources Inc $68.44 49.97 AMC 25-Feb
HLF Herbalife Ltd. $46.54 61.38 AMC 25-Feb
INTU Intuit Inc. $96.75 36.05 AMC 25-Feb
IONS Ionis Pharmaceuticals Inc $35.56 86.91 BMO 25-Feb
KHC Kraft Heinz Co $74.15 28.76 AMC 25-Feb
KSS Kohl’s Corporation $41.52 51.23 BMO 25-Feb
MELI Mercadolibre Inc $96.64 63.39 AMC 25-Feb
MNST Monster Beverage Corp $128.46 46.77 AMC 25-Feb
OLED Universal Display Corporation $48.24 61.98 AMC 25-Feb
PANW Palo Alto Networks Inc $145.29 76.33 AMC 25-Feb
RGR Sturm, Ruger & Company $61.38 43.68 AMC 25-Feb
SPLK Splunk Inc $47.09 96.28 AMC 25-Feb
TD Toronto-Dominion Bank $38.28 26.91 BMO 25-Feb
TREE Lendingtree Inc $67.64 86.90 BMO 25-Feb
W Wayfair Inc $42.31 99.93 AMC 25-Feb
AMT American Tower Corp $91.09 30.08 BMO 26-Feb
LVNTA Liberty Ventures $36.38 39.80 BMO 26-Feb
ENDP Endo International PLC $54.30 65.74 BMO 29-Feb
GWRE Guidewire Software Inc $55.24 51.62 AMC 29-Feb
WDAY Workday Inc $64.84 73.00 AMC 29-Feb
AZO AutoZone, Inc. $747.87 26.35 BMO 1-Mar
DKS Dicks Sporting Goods Inc $38.98 42.46 BMO 1-Mar
MDT Medtronic PLC $76.20 25.40 BMO 1-Mar
MIDD Middleby Corp $87.54 40.56 AMC 1-Mar
ROST Ross Stores, Inc. $54.48 36.51 BMO 1-Mar
AMBA Ambarella Inc $39.35 78.98 AMC 3-Mar
AVGO Avago Technologies Ltd $136.12 53.91 AMC 3-Mar
CVGW Calavo Growers, Inc. $49.25 42.92 BMO 3-Mar
KR The Kroger Co $38.96 29.18 BMO 3-Mar
YY YY Inc (ADR) $56.33 38.95 AMC 3-Mar
FL Foot Locker, Inc. $68.05 35.24 AMC 4-Mar

Advice to stimulate your imagination:

 

“Chance favors the Prepared Mind.” – Louis Pasteur

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

 

“I’m not afraid of death; I just don’t want to be there when it happens.” – Woody Allen

 

Monday February 8:

 

Economic: Labor Market Conditions Index – 10:00, TD Ameritrade IMX – 12:30.

 

International Economic: Chinese, Hong Kong and Korean Markets closed for Chinese New Year.

Germany Industrial Production – 2:00AM.

 

Earnings:

Symbol Company Name Feb 5 Close IV30 B/A
CTSH Cognizant Technology Solutions Corp $59.62 41.02 BMO
GOLD Randgold Resources Ltd. (ADR) $76.80 40.54 BMO
HAS Hasbro, Inc. $75.90 46.05 BMO
L Loews Corporation $36.55 26.35 BMO
LII Lennox International Inc. $118.20 39.06 BMO
FOXA Twenty-First Century Fox Inc $26.08 40.04 AMC
MOH Molina Healthcare, Inc. $55.43 42.49 AMC
PAA Plains All American Pipeline, L.P. $21.18 77.80 AMC
QLYS Qualys Inc $25.17 85.44 AMC

 

 

 

 

Tuesday February 9:

 

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

 

International Economic: Chinese, Hong Kong and Korean Markets closed for Chinese New Year, Germany Merchandise Trade – 2:00AM, Great Merchandise Trade – 4:30AM, Japan PPI – 6:30.

 

Other: Chinese, Hong Kong and Korean Markets closed for Chinese New Year.

 

Earnings:

Symbol Company Name Feb 5 Close IV30 B/A
AGU Agrium Inc. (USA) $87.32 33.75 BMO
CNC Centene Corp $60.33 49.92 BMO
CVS CVS Health Corp $94.63 27.77 BMO
EGRX Eagle Pharmaceuticals Inc $61.88 88.71 BMO
GT Goodyear Tire & Rubber Co $27.61 45.93 BMO
MLM Martin Marietta Materials, Inc. $124.41 47.51 BMO
NCR NCR Corporation $21.35 49.71 BMO
OMC Omnicom Group Inc. $72.65 29.81 BMO
REGN Regeneron Pharmaceuticals Inc $412.59 52.55 BMO
SAVE Spirit Airlines Incorporated $45.40 61.77 BMO
SNY Sanofi SA (ADR) $40.59 31.19 BMO
TDG TransDigm Group Incorporated $227.35 44.69 BMO
TGNA Tegna Inc $23.49 42.99 BMO
AKAM Akamai Technologies, Inc. $44.64 62.76 AMC
APAM Artisan Partners Asset Management Inc $29.11 44.94 AMC
BBSI Barrett Business Services, Inc. $35.58 87.46 AMC
CSC Computer Sciences Corporation $31.91 39.40 AMC
DIS Walt Disney Co $95.43 35.15 AMC
DWRE Demandware Inc $44.17 83.87 AMC
MAS Masco Corp $25.39 41.93 AMC
NBIX Neurocrine Biosciences, Inc. $37.07 89.24 AMC
OTEX Open Text Corporation (USA) $47.19 49.55 AMC
PAYC Paycom Software Inc $30.97 87.66 AMC
PNRA Panera Bread Co $198.19 39.56 AMC
SGEN Seattle Genetics, Inc. $32.88 67.98 AMC
VIAB Viacom, Inc. $45.34 57.69 AMC
WYNN Wynn Resorts, Limited $63.78 73.39 AMC

 

 

Wednesday February 10:

 

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

 

International Economic: Chinese, Hong Kong and Korean Markets closed for Chinese New Year, France Industrial Production – 3:45AM, Great Britain Industrial Production – 4:30AM.

 

Other: Federal Reserve Chair Janet Yellen presents semi-annual monetary report to House Financial Services Committee, in Washington – 10:00 AM, San Francisco Federal Reserve Bank President John Williams speech on health and the economy, in Los Angeles – 1:30PM.

 

Earnings:  

Symbol Company Name Feb 5 Close IV30 B/A
AFSI AmTrust Financial Services Inc $27.47 42.37 BMO
ARMH ARM Holdings plc (ADR) $44.15 57.88 BMO
CRTO Criteo SA (ADR) $30.29 76.97 BMO
CTL Centurylink Inc $26.54 45.73 BMO
EEFT Euronet Worldwide, Inc. $73.43 48.34 BMO
HUM Humana Inc $168.65 30.93 BMO
MYL Mylan NV $52.31 47.63 BMO
OC Owens Corning $45.37 40.43 BMO
PPC Pilgrim’s Pride Corporation $22.30 44.79 BMO
SEE Sealed Air Corp $41.64 43.35 BMO
TWX Time Warner Inc $71.84 43.18 BMO
ACHC Acadia Healthcare Company Inc $59.72 43.83 AMC
AEM Agnico Eagle Mines Ltd (USA) $32.73 51.54 AMC
ARMK Aramark $33.31 35.66 AMC
BERY Berry Plastics Group Inc $30.52 47.96 AMC
CSCO Cisco Systems, Inc. $23.54 36.20 AMC
CSOD Cornerstone OnDemand, Inc. $31.09 76.68 AMC
EXPE Expedia Inc $99.90 66.47 AMC
IRBT iRobot Corporation $34.41 53.03 AMC
O Realty Income Corp $57.48 25.53 AMC
ORLY O’Reilly Automotive Inc $250.88 39.48 AMC
PRU Prudential Financial Inc $66.98 39.88 AMC
PXD Pioneer Natural Resources $124.49 52.78 AMC
QTWO Q2 Holdings Inc $21.86 74.49 AMC
SKX Skechers USA Inc $29.08 79.04 AMC
TSLA Tesla Motors Inc $175.33 75.04 AMC
WFM Whole Foods Market, Inc. $29.20 52.87 AMC

 

 

Thursday February 11:

 

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

 

International Economic: Chinese, Hong Kong and Korean Markets closed for Chinese New Year. Japanese are closed.

 

 

Other: Federal Reserve Chair Janet Yellen presents semi-annual monetary report to Senate Banking Committee, in Washington 10:00AM.

 

Earnings:

Symbol Company Name Feb 5 Close IV30 B/A
AIG American International Group Inc $54.02 34.75 BMO
BG Bunge Ltd $59.50 38.02 BMO
DBD Diebold Inc $27.50 46.21 BMO
GGAL Grupo Financiero Galicia S.A. (ADR) $27.90 52.93 BMO
GRA W. R. Grace & Co $67.95 35.23 BMO
K Kellogg Company $71.83 24.50 BMO
NICE Nice-Systems Ltd (ADR) $60.03 34.93 BMO
NLSN Nielsen Holdings PLC $46.70 33.15 BMO
PAG Penske Automotive Group, Inc. $31.47 49.25 BMO
QLIK Qlik Technologies Inc $24.93 76.74 BMO
RAI Reynolds American, Inc. $47.37 29.35 BMO
RSG Republic Services, Inc. $44.13 24.30 BMO
SHPG Shire PLC (ADR) $163.34 43.03 BMO
TAP Molson Coors Brewing Company $87.63 30.19 BMO
TEVA Teva Pharmaceutical Industries Ltd $59.90 32.18 BMO
TOT Total SA (ADR) $43.90 33.67 BMO
TRI Thomson Reuters Corp $37.74 27.32 BMO
WWAV WhiteWave Foods Co $38.59 60.93 BMO
ALLE Allegion PLC $59.80 35.90 AMC
ALNY Alnylam Pharmaceuticals, Inc. $67.51 75.61 AMC
ATVI Activision Blizzard, Inc. $31.94 54.69 AMC
CBS CBS Corporation $48.41 38.55 AMC
COLM Columbia Sportswear Company $52.30 65.98 AMC
CYBR Cyberark Software Ltd $43.68 77.04 AMC
DVA DaVita HealthCare Partners Inc $65.45 27.60 AMC
ELLI Ellie Mae Inc $73.57 72.80 AMC
LOGM LogMeIn Inc $49.52 67.71 AMC
MOS Mosaic Co $24.80 58.54 AMC
NUS Nu Skin Enterprises, Inc. $33.60 82.02 AMC
RIO Rio Tinto plc (ADR) $26.96 62.15 AMC
STMP Stamps.com Inc. $92.06 64.75 AMC
THS TreeHouse Foods Inc. $75.58 44.93 AMC
TRIP Tripadvisor Inc $63.81 67.33 AMC

 

 

Friday February 12:

 

 

Economic: Retail Sales – 8:30, Imports and Export prices – 8:30, Business Inventories – 10:00, Consumer Sentiment – 10:00, Baker-Hughes Rig Count – 1:00.

 

International Economic: Chinese, Hong Kong and Korean Markets closed for Chinese New Year, Germany CPI – 2:00AM, Germany GDP Flash – 2:00AM. EMU GDP Flash – 5:00AM.

 

Earnings:

Symbol Company Name Feb 5 Close IV30 B/A
IPG Interpublic Group of Companies Inc $21.91 40.59 BMO
TRP TransCanada Corporation (USA) $35.68 36.67 BMO
ZAYO Zayo Group Holdings Inc $25.26 45.99 BMO
VTR Ventas, Inc. $56.37 28.21 AMC

 

 

Monday February 15:

 

US Holiday – Presidents Day

Markets Closed

 

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

 

Earnings: None meeting criteria.

 

Tuesday February 16:

 

 

Economic: Empire State Manufacturing Survey – 8:30, Housing Market Index – 10:00.

 

International Economic: Great Britain PPI and CPI – 4:30AM, Japan Machine Orders – 6:50PM.

 

Other: Philadelphia Federal Reserve Bank President Patrick Harker speech to economic forecast conference, in Newark, Delaware – 9:00AM.

 

Earnings:

Symbol Company Name Feb 5 Close IV30 B/A
A Agilent Technologies Inc $37.42 38.05 BMO
BXLT Baxalta Inc $38.89 30.19 BMO
DVN Devon Energy Corp $26.56 80.13 BMO
FE FirstEnergy Corp. $33.25 27.83 BMO
FOSL Fossil Group Inc $34.41 71.90 BMO
GNRC Generac Holdings Inc. $29.14 67.17 BMO
GPC Genuine Parts Company $86.03 27.65 BMO
HRL Hormel Foods Corp $78.43 35.36 BMO
ZTS Zoetis Inc $41.54 36.88 BMO
CAKE Cheesecake Factory Inc $48.83 35.98 AMC
CERN Cerner Corporation $58.49 43.24 AMC
ESRX Express Scripts Holding Co $68.15 38.70 AMC
NCLH Norwegian Cruise Line Holdings Ltd $42.50 58.76 AMC
PSA Public Storage $246.22 28.79 AMC
RAX Rackspace Hosting, Inc. $21.09 77.37 AMC
TEX Terex Corporation $21.22 85.76 AMC
ZEN Zendesk Inc $21.05 78.88 AMC

 

 

 

 

 

 

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