The Prepared Mind: March 7, 2016

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

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

“When you find yourself in a hole, stop digging.” – Will Rogers

Wise men say, and not without reason, that whoever wished to foresee the future might consult the past.” Machiavelli

The major indexes rose for the third straight week. The financial media is conflicted about the future direction of the markets. Headlines range from “Stocks Soar 3% as Fears of Fed Rate Hikes Subside” to “Is the Recovery Real, or Just a Bear-Market Rally?” to “Bracing for the Stock Market’s Next Big Drop.” A rebound in commodity prices, led by a crude oil’s 37% increase from its lows, contributed to the improved market sentiment.   Many market analysts remain skeptical of the rally in equities. They point to weak earnings, anemic wage growth, and the continued presence of the problems which engendered the sell-off at the beginning of the year as the justifications for their skepticism. Other concerns were the potential of a Chinese economic implosion, a potential lack of stability in the European Union, and another dive in the price of crude oil.

Here is an overview of the market behavior last week:

Index 4-Mar Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17006.77 366.80 2.20% -2.40% 16.77% (VXD)
S&P 500 (SPX) 1999.99 51.94 2.67% -2.15% 16.86% (VIX)
NASDAQ 100 (NDX) 4322.01 94.56 2.24% -5.99% 20.81% (VXN)
Russell 2000 (RUT) 1079.95 44.67 4.31% -4.76% 20.48% (RVX)
S&P 100 (OEX) 887.86 20.92 2.41% -2.59% 18.42% (VXO)
CBOE Volatility Index (VIX) 16.86 (2.95) -14.89% NA

Data Source: OptionVue7

The VIX reflected the move upwards in the S&P 500 by, once again, closing on Friday at 2016 lows. The VIX closed at 16.86, well below the 19 level which some technical analysts have declared a confirmation of a bull move. The CBOE’s Russell Rhoads pointed out the occurrence of the “Death Cross” in the VIX. The last time this occurred was November 16, 2007. The Death Cross in the VIX occurs when the 1 year closing average for the VIX crosses over the 5 year average closing price. The last time this occurred, the SPX was lower at the 3,6,9, and 12 month periods after its occurrence. Other analysts are calling for a further move downward in the VIX and a move up in the SPX. Mr. Rhoads does not make any prediction on the implications of this death cross upon the future direction of the S&P 500 or the VIX.

 

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

Indexes Ticker 5-Mar 26-Feb Change % Change
CBOE Volatility Index VIX 16.86 19.81 (2.95) -14.89%
VIX March Future (3/16/2016) VXH6 18.925 21.475 (2.550) -11.87%
VIX April Future (4/20/2016) VXJ6 20.025 21.825 (1.800) -8.25%
VIX May Future (5/18/2016) VXK6 20.525 22.075 (1.550) -7.02%
CBOE Short-term Volatility Index VXST 15.86 18.56 (2.70) -14.55%
CBOE 3 Month Volatility Index VXV 19.63 21.86 (2.23) -10.20%
CBOE Mid-term Volatility Index (6 month) VXMT 21.17 23.11 (1.94) -8.39%
VIX of VIX VVIX 81.97 83.26 (1.29) -1.54%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 21.86 24.50 (2.64) -10.78%
ProShares VIX Short Term Futures ETF VIXY 14.46 16.24 (1.78) -10.96%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 11.84 12.69 (0.85) -6.70%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 21.26 19.21 2.05 10.67%
ProShares Short VIX Short Term Future ETF SVXY 41.55 36.43 5.12 14.05%

Data Source: OptionVue7

The coming week will have very few reports. This does not mean there will be an absence of market volatility. The European Central Bank is meeting this week. The ECB is holding a press conference at 7:45AM on Thursday, March 10. Its announcement of future monetary policy moves will have the ability to move markets.

The earnings season is tapering off. The earnings highlights for widely held and actively traded stocks are: Thor Industries. Casey’s General Stores, Urban Outfitters, Rex Energy, John Wiley and Sons, Korn/Ferry, Comtech, Vera Bradley, Medifast, Verifone, Children’s Place, Stein Mart, Dollar General, Hibbett Sports, Buckle, Genesco, and Kirkland’s.   Announcements date and time can and do change. It is your responsibility to confirm these times.

OptionVue7 has the ability to identify stocks 30 days out with a new enhanced Earnings Search feature. I have done a quick search 7 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 Mar 5 Close IV30 B/A DATE
FDX FedEx Corporation $143.86 26.46 BMO 16-Mar
CLC CLARCOR Inc. $50.91 33.26 AMC 16-Mar
CTRP Ctrip.com International, Ltd. (ADR) $39.24 60.60 AMC 16-Mar
ORCL Oracle Corporation $37.89 27.68 AMC 16-Mar
WSM Williams-Sonoma, Inc. $55.79 45.41 16-Mar
LEN Lennar Corporation $45.64 32.06 BMO 17-Mar
ADBE Adobe Systems Incorporated $87.21 36.96 AMC 17-Mar
MFRM Mattress Firm Holding Corp $46.15 65.95 AMC 17-Mar
NKE Nike Inc $61.47 29.78 AMC 17-Mar
TIF Tiffany & Co. $69.10 34.53 BMO 18-Mar
RHT Red Hat Inc $68.67 34.49 AMC 22-Mar
PVH PVH Corp $85.45 34.56 AMC 23-Mar
SIG Signet Jewelers Ltd. $112.00 44.99 DMT 24-Mar
ACN Accenture Plc $102.80 27.79 BMO 24-Mar
CAG ConAgra Foods Inc $43.09 27.16 BMO 24-Mar
PTR PetroChina Company Limited (ADR) $70.12 38.71 BMO 24-Mar
RH Restoration Hardware Holdings Inc $39.12 53.83 AMC 24-Mar
CCL Carnival Corp $48.05 32.09 BMO 25-Mar
CALM Cal-Maine Foods Inc $55.28 48.68 BMO 28-Mar
LULU Lululemon Athletica inc. $61.78 44.63 AMC 29-Mar

Data Source: OptionVue7

 

Advice to stimulate your imagination:

 

“Chance favors the Prepared Mind.” – Louis Pasteur

 

Monday March 7:

 

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

 

International Economic: China Merchandise Trade Balance, Germany Manufacturers’ Orders – 2:00AM.

 

Other: Federal Reserve Vice Chair Stanley Fischer speech to NABE, in Washington – 2:30PM.

 

Earnings:

Symbol Company Name Mar 4 Close IV30 B/A
SUP Superior Industries International Inc. $21.42 36.16 BMO
UNFI United Natural Foods, Inc. $36.55 50.11 BMO
URBN Urban Outfitters, Inc. $27.43 49.62 BMO
CASY Casey’s General Stores Inc $102.49 36.54 AMC
SHAK Shake Shack Inc $41.23 65.05 AMC

 

 

Tuesday March 8:

Economic: NFIB Small Business Optimism Index, Redbook – 8:55.

International Economic: Germany Industrial Production – 2:00AM, Emu GDP – 5:00AM.

 

Other:

 

Earnings:

Symbol Company Name Mar 4 Close IV30 B/A
BITA Bitauto Hldg Ltd (ADR) $22.04 75.00 BMO
DKS Dicks Sporting Goods Inc $43.49 47.02 BMO
KLXI KLX Inc $29.97 41.03 BMO
AVAV AeroVironment, Inc. $25.73 56.29 AMC

 

 

Wednesday March 9:

 

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

 

International Economic: Great Britain Industrial Production 5:30AM, Japan PPI – 7:50PM. China CPI and PPI – 8:30PM.

 

Other:

 

Earnings:

Symbol Company Name Mar 4 Close IV30 B/A
LGIH LGI Homes Inc $24.27 71.13 BMO
ONCE Spark Therapeutics Inc $34.18 84.96 BMO
SCCO Southern Copper Corp $26.13 38.29 AMC

 

 

 

Thursday March 10:

 

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

                                                                                                                                                                     

International Economic: Germany Merchandise Trade = 2:00AM, French Industrial Production – 3:45AM.

 

Other: European Central Bank Monetary Policy Announcement – 7:45AM.

 

Earnings:

Symbol Company Name Mar 4 Close IV30 B/A
CSIQ Canadian Solar Inc. $22.54 72.80 BMO
DG Dollar General Corp. $75.02 27.81 BMO
TFM The Fresh Market Inc $23.20 60.31 BMO
PAY VeriFone Systems Inc $25.16 43.11 AMC
ULTA Ulta Salon, Cosmetics & Fragrance $169.38 48.44 AMC

 

 

Friday March 11:

 

Economic: Import and Export Prices – 8:30, Baker Hughes Rig Count – 1:00.

 

International Economic: Germany Merchandise Trade – 2:00Am, Great Britain Merchandise Trade – 5:30AM.

 

Earnings:

 

Monday March 14:

 

Economic: No major announcements.

 

International Economic: China Industrial Production and Retail Sales at 1:30AM on Sunday March 13, EMU Industrial Production 6:00AM.

 

Other: Bank of Japan Announcement.

 

Earnings:

Symbol Company Name Mar 4 Close IV30 B/A
HIBB Hibbett Sports, Inc. $37.00 62.94 BMO
STRP Straight Path Communications Inc $30.42 120.31 BMO
KANG iKang Healthcare Group Inc (ADR) $21.09 49.42 AMC

 

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