The Prepared Mind: March 14, 2016

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

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

“Complacency is a state of mind that exists only in retrospective: it has to be shattered before being ascertained.” – Vladimir Nabokov

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 fourth straight week. Crude oil, also, was up for the fourth consecutive week. Higher crude oil prices and monetary easing by the European Central Bank gave the markets an end of week push. A number of economists expressed concern about the market moves relying on impetus of monetary policy changes and increases in crude oil prices, Economic growth and earnings have been superseded as reasons for market movement. This change has been pointed to as a reason to be wary about the current rally. A number of analysts voiced the same concern based on the price performance of the VIX and VIX related products versus price movement in the S&P 500.

Here is an overview of the market behavior last week:

Index 11-Mar Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17213.31 206.54 1.21% -1.22% 16.37% (VXD)
S&P 500 (SPX) 2022.19 22.20 1.11% -1.06% 16.50% (VIX)
NASDAQ 100 (NDX) 4352.61 30.60 0.71% -5.32% 19.65% (VXN)
Russell 2000 (RUT) 1086.80 6.85 0.63% -4.15% 20.25% (RVX)
S&P 100 (OEX) 896.55 8.69 0.98% -1.63% 17.26% (VXO)
CBOE Volatility Index (VIX) 16.50 (0.36) -2.14% NA

Data Source: OptionVue7

The VIX reflected the move upwards in the S&P 500 by moving down. However, the VIX did not close at new lows and confirm the new S&P 2016 closing high. Longer term volatility measurements to not reflect the complacency in the market. The VXMT and VVIX reflected longer term market concerns. Enter the products in the table below into a desktop watchlist. Watch movement of these products in relationship to the price movement in the S&P 500.

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

Indexes Ticker 11-Mar 5-Mar Change % Change
CBOE Volatility Index VIX 16.50 16.86 (0.36) -2.14%
VIX March Future (3/16/2016) VXH6 17.625 18.925 (1.300) -6.87%
VIX April Future (4/20/2016) VXJ6 19.100 20.025 (0.925) -4.62%
VIX May Future (5/18/2016) VXK6 19.750 20.525 (0.775) -3.78%
CBOE Short-term Volatility Index VXST 15.20 15.86 (0.66) -4.16%
CBOE 3 Month Volatility Index VXV 19.47 19.63 (0.16) -0.82%
CBOE Mid-term Volatility Index (6 month) VXMT 21.30 21.17 0.13 0.61%
VIX of VIX VVIX 92.35 81.97 10.38 12.66%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 20.90 21.86 (0.96) -4.39%
ProShares VIX Short Term Futures ETF VIXY 13.85 14.46 (0.61) -4.22%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 11.67 11.84 (0.17) -1.44%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 22.09 21.26 0.83 3.90%
ProShares Short VIX Short Term Future ETF SVXY 43.15 41.55 1.60 3.85%

Data Source: OptionVue7

 

The coming week will, once again, have very few economic reports. The major reports are US CPI. Industrial Production and Housing starts. The main source of market moving news will come from central banks and monetary policy. The FOMC meets on Tuesday and Wednesday. The two days of meetings culminate at 2:00 EDT on Wednesday with the release of FOMC announcements and FOMC economic forecasts. Fed Chari Janet Yellen will hold a press conference at 2:30. Investors are looking for guidance on how the Fed will balance a weakening economy against inflation, The FOMC announcements will be preceded by the Bank of Japan’s release of policy statements on Monday.

Chinese Industrial Production number will be released at 1:30AM on Monday. Reuters reported the Chinese government will allow commercial banks to swap non-performing loans for equity positions in the companies with non-performing loans. It is speculated the announcement will be this coming week. This is the next step in the contraction of the Chinese economy. The size and extent of these loans are a major unknown. This delaying tactic is replacing worthless loans with worthless equity. The next are of concern in China will center on sub-prime loans in Chinese real estate.

This earnings cycle is nearing the end. The earnings highlights this week for widely held and actively traded stocks are: Lennar, 3D Systems, Cintas, Oracle, Factset Research, Children’s Place. Guess?, Jabil Circuit, Williams-Sonoma, FedEx. Adobe Systems, and Tiffany & Co. 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 11 Close IV30 B/A DATE
FIVE Five Below Inc $38.23 49.59 AMC 22-Mar
NKE Nike Inc $58.88 32.82 AMC 22-Mar
RHT Red Hat Inc $70.06 39.99 AMC 22-Mar
SIG Signet Jewelers Ltd. $109.65 48.43 DMT 24-Mar
ACN Accenture Plc $103.58 28.28 BMO 24-Mar
PTR PetroChina Company Limited (ADR) $67.49 38.92 BMO 24-Mar
RH Restoration Hardware Holdings Inc $38.71 58.60 AMC 24-Mar
CCL Carnival Corp $46.30 32.84 BMO 25-Mar
CALM Cal-Maine Foods Inc $51.36 48.17 BMO 28-Mar
LULU Lululemon Athletica inc. $63.23 45.82 AMC 30-Mar
WBA Walgreens Boots Alliance Inc $80.66 28.16 BMO 5-Apr
DRI Darden Restaurants, Inc. $67.12 27.60 AMC 5-Apr
MON Monsanto Company $88.99 28.99 BMO 6-Apr
STZ Constellation Brands, Inc. $140.50 27.14 BMO 6-Apr
BBBY Bed Bath & Beyond Inc. $50.10 36.01 AMC 6-Apr
CAG ConAgra Foods Inc $43.40 27.09 BMO 7-Apr
KMX CarMax, Inc $50.98 46.19 BMO 7-Apr

Data Source: OptionVue7

 

Advice to stimulate your imagination:

“Chance favors the Prepared Mind.” – Louis Pasteur

 

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 11 Close IV30 B/A
KANG iKang Healthcare Group Inc (ADR) $20.40 44.75 AMC

 

Tuesday March 15

Economic: PPI- FD – 8:30, Retail Sales – 8:30, Empire State Manufacturing Survey – 8:30, Redbook – 8:55, Business Inventories – 10:00, Housing Market Index – 10:00.

International Economic: No major announcements.

 

Other: FOMC Meeting begins.

 

Earnings:

Symbol Company Name Mar 11 Close IV30 B/A
DSW DSW Inc. $26.49 42.26 BMO
PLCE Childrens Place Inc $69.05 39.81 BMO
BBSI Barrett Business Services, Inc. $24.36 93.83 AMC
HDS HD Supply Holdings Inc $27.33 38.46 AMC
ORCL Oracle Corporation $38.05 27.22 AMC

 

 

Wednesday March 16:

 

Economic: MBA Mortgage Applications – 7:00, CPI – 8:30, Housing Starts – 8:30, Industrial Production 9:15, EIA Petroleum Status Report – 10:30.

 

International Economic: No major announcements.

 

Other: March VIX futures settle on open. FOMC Meeting announcement – 2:00, FOMC Forecasts – 2:00, Janet Yellen Press Conference – 2:30.

 

Earnings:

Symbol Company Name Mar 11 Close IV30 B/A
FDX FedEx Corporation $141.61 26.07 BMO
CTRP Ctrip.com International, Ltd. (ADR) $38.99 60.19 AMC
GES Guess?, Inc. $22.36 41.78 AMC
JBL Jabil Circuit, Inc. $21.20 38.21 AMC
NOAH Noah Holdings Limited (ADR) $24.08 56.79 AMC
QUNR Qunar Cayman Islands Ltd $36.05 56.53 AMC
SCCO Southern Copper Corp $26.28 36.74 AMC

Thursday March 17:

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

International Economic: EMU HICP – 6:00AM, EMU Merchandise Trade – 6:00AM

Other: Bank of England Announcement and Minutes – 8:00AM, Bank of Japan Announcement and Minutes – 7:50PM.

Earnings:

Symbol Company Name Mar 11 Close IV30 B/A
LEN Lennar Corporation $44.86 30.14 BMO
TFM The Fresh Market Inc $22.22 58.65 BMO
ADBE Adobe Systems Incorporated $84.85 33.56 AMC

 

Friday March 18:

Economic: Consumer Sentiment – 9:00, Atlanta Fed Business Inflation Expectations – 10:00, Baker Hughes Rig Count – 1:00.

International Economic: Germany PPI – 3:00AM.

Other: New York Federal Reserve Bank President William Dudley opening remarks to bank supervision conference, in New York – 9:00,AM, Boston Federal Reserve Bank President Eric Rosengren on panel discussing bank supervision, in New York -11:00AM, St. Louis Federal Reserve Bank President James Bullard speech on the economy and monetary policy, in Frankfurt – 3:00PM.

Earnings: None meeting criteria.

Monday March 21:

Economic: Chicago Fed National Activity Index – 8:30, Existing Home Sales – 10:00.

International Economic: EMU Consumer Confidence Flash – 11:00AM.

Other: Atlanta Federal Reserve Bank President Dennis Lockhart speech in Savanna, Georgia – 12:30PM, St Louis Federal Reserve Bank President James Bullard outlook speech in St. Louis – 8:30PM.

Earnings: None meeting criteria.

 

 

 

 

 

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