The Prepared Mind: March 28, 2016

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

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

“To think creatively, we must be able to look afresh at what we normally take for granted” – George Keller

“Imagination will often carry us to worlds that never were. But without it we go nowhere.” –  Carl Sagan

“The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”  – George Bernard Shaw

“I don’t know where I’m going, but I’m on my way.” – Carl Sandburg

Five week rallies for the major equity indexes and crude oil futures ended this week.  The market is up around 11% from the low of February 11.  It was a quiet trading week with equity indexes (with the exception of the Russell 2000) down less than 1%.  The market hiccups for the week were Tuesday’s terrorist attacks in Belgium and a mounting concern the Fed will increase interest rates in April.  Weakness in energy stocks and crude oil added an additional underpinning of concerns about the future direction of the market.

My favorite quote of the week is from Anne Stephenson-Yang, the founder of Team-J Capital Research.  She describes the recent rebound in the Chinese equity markets as a “dead panda bounce.” She writes, “the root of nearly every part of the ‘rebound’ story is cash stoking an asset bubble, and that will not last long. It does suggest a degree of political panic.”  Stephenson-Wang is yet another voice raising concerns about the levels of Chinese government intervention in supporting the yuan, and the equity and real estate markets.

Here is an overview of the market behavior last week:

Index 24-Mar Weekly Change % Weekly  2015 YTD Volatility of  Index
Dow Jones Industrials (DJIA) 17515.73 (86.57) -0.49% 0.52% 14.19% (VXD)
S&P 500 (SPX) 2035.94 (13.62) -0.66% -0.39% 14.74% (VIX)
NASDAQ 100 (NDX) 4403.68 3.23 0.07% -4.21% 17.31% (VXN)
Russell 2000 (RUT) 1077.80 (20.53) -1.87% -4.95% 19.40% (RVX)
S&P 100 (OEX) 904.06 (3.82) -0.42% -0.81% 14.91% (VXO)
CBOE Volatility Index (VIX) 14.74 0.72 5.14% NA

Data Source: OptionVue7

Here is the Prepared Mind video offered on Youtube:
http://youtu.be/qp70RYK2wRA?hd=1

The VIX was up in response to last week’s minor downturn. The April future was the major exception to the gains in long VIX products.  Lat week , the April VIX future showed an elevated premium level versus the VIX spot value.    Generally there are 4 weeks in between the expiration dates for the monthly VIX futures.  There are five weeks between the expiration of the March future (expired on March 16) and the expiration of the April future which expires on April 20.  The loss in premium value for the April VIX future, despite a loss in the SPX,  reflects a normal premium difference between the spot and the future four weeks prior to expiration.

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

Indexes Ticker 24-Mar 18-Mar Change % Change
CBOE Volatility Index VIX 14.74 14.02 0.72 5.14%
VIX April Future (4/20/2016) VXH6 17.375 17.725 (0.350) -1.97%
VIX May  Future (5/18/2016) VXJ6 19.075 18.875 0.200 1.06%
VIX June  Future (6/15/2016) VXM6 19.825 19.575 0.250 1.28%
CBOE Short-term Volatility Index VXST 12.35 12.47 (0.12) -0.96%
CBOE 3 Month Volatility Index VXV 18.27 17.93 0.34 1.90%
CBOE Mid-term Volatility Index (6 month) VXMT 20.06 19.78 0.28 1.42%
VIX of VIX VVIX 84.20 86.20 (2.00) -2.32%
Long VIX ETP’s
 iPath S&P 500  VIX Short Term Futures ETN VXX 19.30 19.35 (0.05) -0.26%
ProShares VIX Short Term Futures ETF VIXY 12.75 12.80 (0.05) -0.39%
 iPath S&P 500  VIX Mid-Tem Futures ETN VXZ 11.53 11.33 0.20 1.77%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 23.69 23.71 (0.02) -0.08%

Data Source: OptionVue7

 

The week is very heavy on reports culminating with the March Employment Situation Report on Friday, April 1. The reports start on Monday with a report on person income and spending.  The housing sector has been lackluster.  Analysts are hoping for a rebound in Pending New Home Sales on Monday.  The other housing relates reports are Case-Shiller Home Prices on Tuesday and Construction Spending on Friday.  A bounce in housing will mean a bounce for the market.  Strength in Friday’s Employment situation Report will raise speculation about the probability of a Fed increase in interest rates at the April meeting.

The first quarter earnings season starts in a few weeks with the earnings announcement by Alcoa (AA) on April 11.  Alcoa’s announcement has been historically regarded as the beginning of the earnings season.  It is time to start preparing target equities and strategies for the next earning cycle.  We are entering the final two weeks of the earnings doldrums – the time between earnings announcement cycles.  The earnings highlights this week for widely held and actively traded stocks are: Cal Maine Foods, SYNNEX, Sonic, McCormick & Co, Lennar, Paychex, Micron Technology, Carnival, and the Movado Group.   Announcements date and time can and do change.  It is your responsibility to confirm these times.

The following table will assist you in preparing for the upcoming earnings announcement cycle.  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 24 Close IV30 B/A DATE
WBA Walgreens Boots Alliance Inc $82.34 26.33 BMO 5-Apr
DRI Darden Restaurants, Inc. $66.52 26.51 AMC 5-Apr
AYI Acuity Brands, Inc. $217.80 43.55 BMO 6-Apr
MON Monsanto Company $90.07 30.75 BMO 6-Apr
STZ Constellation Brands, Inc. $150.11 26.09 BMO 6-Apr
BBBY Bed Bath & Beyond Inc. $49.46 35.03 AMC 6-Apr
KMX CarMax, Inc $48.44 48.32 BMO 7-Apr
FAST Fastenal Company $48.83 32.57 BMO 12-Apr
DAL Delta Air Lines, Inc. $48.91 35.46 BMO 13-Apr
NOW ServiceNow Inc $62.25 54.87 AMC 13-Apr
OZRK Bank Of The Ozarks Inc $42.52 36.55 AMC 13-Apr
BLK BlackRock, Inc. $339.23 25.55 BMO 14-Apr
CE Celanese Corporation $65.34 28.65 BMO 14-Apr
C Citigroup Inc $42.37 30.31 BMO 15-Apr
HAS Hasbro, Inc. $78.07 29.74 BMO 15-Apr
NFLX Netflix, Inc. $99.59 64.77 AMC 15-Apr
PKG Packaging Corp Of America $58.39 28.64 AMC 15-Apr
CMA Comerica Incorporated $38.57 32.62 BMO 16-Apr
GS Goldman Sachs Group Inc $154.08 26.15 BMO 16-Apr
HOG Harley-Davidson Inc $48.37 27.69 BMO 16-Apr
KSU Kansas City Southern $85.35 33.53 BMO 16-Apr
PCAR PACCAR Inc $53.68 26.11 BMO 16-Apr
PRGO Perrigo Company PLC $130.23 29.91 BMO 16-Apr
UA Under Armour Inc $82.88 39.02 BMO 16-Apr
CMG Chipotle Mexican Grill, Inc. $474.46 36.84 AMC 16-Apr
ILMN Illumina, Inc. $152.54 44.38 AMC 16-Apr
ISRG Intuitive Surgical, Inc. $586.33 32.47 AMC 16-Apr
MANH Manhattan Associates, Inc. $54.79 37.99 AMC 16-Apr
MLNX Mellanox Technologies, Ltd. $53.63 36.82 AMC 16-Apr
VMW VMware, Inc. $51.85 43.94 AMC 16-Apr
ARMH ARM Holdings plc (ADR) $42.67 27.80 BMO 17-Apr
NS NuStar Energy L.P. $39.62 46.00 BMO 17-Apr
AXP American Express Company $60.63 26.14 AMC 17-Apr
CLB Core Laboratories N.V. $112.36 39.34 AMC 17-Apr
FB Facebook Inc $112.54 30.18 AMC 17-Apr
FFIV F5 Networks, Inc. $102.99 35.16 AMC 17-Apr
LRCX Lam Research Corporation $79.36 25.86 AMC 17-Apr
LVS Las Vegas Sands Corp. $52.38 34.23 AMC 17-Apr
QCOM QUALCOMM, Inc. $50.99 32.94 AMC 17-Apr
TSO Tesoro Corporation $90.62 39.72 AMC 17-Apr
TUP Tupperware Brands Corporation $55.82 30.58 AMC 17-Apr
URI United Rentals, Inc. $61.60 49.09 AMC 17-Apr
YUM Yum! Brands, Inc. $80.55 32.77 AMC 17-Apr
AAL American Airlines Group Inc $41.92 36.66 BMO 18-Apr
ADPT Adeptus Health Inc $54.91 80.71 BMO 18-Apr
ALK Alaska Air Group, Inc. $81.12 27.99 BMO 18-Apr
ALXN Alexion Pharmaceuticals, Inc. $133.63 39.77 BMO 18-Apr
AN AutoNation, Inc. $47.98 29.61 BMO 18-Apr
BHI Baker Hughes Incorporated $44.96 67.24 BMO 18-Apr
BIIB Biogen Inc $255.24 42.75 BMO 18-Apr
BK Bank of New York Mellon Corp $37.52 25.80 BMO 18-Apr
CAB Cabelas Inc $45.48 32.87 BMO 18-Apr
EQT EQT Corporation $63.05 39.31 BMO 18-Apr
HP Helmerich & Payne, Inc. $57.84 48.92 BMO 18-Apr
LUV Southwest Airlines Co $44.43 31.94 BMO 18-Apr
NUE Nucor Corporation $46.05 27.17 BMO 18-Apr
PII Polaris Industries Inc. $96.22 30.92 BMO 18-Apr
RCL Royal Caribbean Cruises Ltd $73.30 35.33 BMO 18-Apr
SLB Schlumberger Limited. $72.96 28.29 BMO 18-Apr
UAL United Continental Holdings Inc $59.74 36.04 BMO 18-Apr
UNP Union Pacific Corporation $81.52 26.71 BMO 18-Apr
AMGN Amgen, Inc. $148.76 27.20 AMC 18-Apr
AMZN Amazon.com, Inc. $569.63 34.50 AMC 18-Apr
CBI Chicago Bridge & Iron Company $37.42 39.91 AMC 18-Apr
EW Edwards Lifesciences Corp $85.89 38.40 AMC 18-Apr
GOOG Google  Inc. $738.06 27.26 AMC 18-Apr
GOOGL Alphabet Inc $757.56 26.77 AMC 18-Apr
HA Hawaiian Holdings, Inc. $46.70 40.94 AMC 18-Apr
KLAC KLA-Tencor Corp $71.00 25.05 AMC 18-Apr
MSFT Microsoft Corporation $53.97 27.89 AMC 18-Apr
SIVB SVB Financial Group $99.85 36.23 AMC 18-Apr
SYNA Synaptics, Incorporated $74.83 53.99 AMC 18-Apr

Data Source: OptionVue7

 

Advice to stimulate your imagination:

 

“Chance favors the Prepared Mind.” – Louis Pasteur

 

Monday March 28:

 

Markets closed for Easter Monday include Hong Kong, Germany, Spain, and the United Kingdom.

Economic:  International Trade in Goods – 8:30, Personal Income and Outlays – 8:30, Pending Homes Sales – 10:00, Dallas Fed Manufacturing Survey – 10:30.

International Economic:  Japan Unemployment – 7:30PM, Japan Household Spending – 7:30PM.

Earnings:

Symbol Company Name Mar 25 Close IV30 B/A
CALM Cal-Maine Foods Inc $50.50 48.53 BMO
SNX SYNNEX Corporation $93.22 40.00 AMC

 Tuesday March 29

Economic: Redbook – 8:55, S&P Case Schiller HPI – 9:00AM, Consumer Confidence – 10:00.

International Economic: Japan Industrial Production – 7:50PM.

 Other:  San Francisco Federal Reserve Bank President John Williams speech on monetary policy and the global outlook, in Singapore – 5:15AM, Federal Reserve Chairman Janet Yellen speech to Economic Club of New York – 11:30AM, Dallas Federal Reserve Bank President Rob Kaplan participates in moderated Q&A, in Austin, Texas – 1:00PM, Dallas Federal Reserve Bank President Rob Kaplan participates in moderated Q&A, in Austin, Texas – 4:00PM.

Earnings:

Symbol Company Name Mar 25 Close IV30 B/A
SNP China Petroleum & Chemical Corp (ADR) $61.81 36.75 DMT
ALR Alere Inc $50.37 25.79 BMO
LEN Lennar Corporation $46.20 31.37 BMO
PLAY Dave & Buster’s Entertainment Inc $38.22 45.72 AMC
VRNT Verint Systems Inc. $34.39 45.00 AMC

 

Wednesday March 30:

Economic:  MBA Mortgage Applications – 7:00, ADP Employment Report – 8:15, EIA Petroleum Status Report – 10:30, Farm Prices – 3:00.

 International Economic:  EMU EC Economic Sentiment – 6:00AM, Germany CPI – 8:00AM,

Other:  Chicago Federal Reserve Bank President Charles Evans speech to Forecasters Club of New York – 1:00PM.

Earnings:

Symbol Company Name Mar 25 Close IV30 B/A
CCL Carnival Corp $48.06 34.20 BMO
IOC InterOil Corporation (USA) $28.62 64.15 AMC
LULU Lululemon Athletica inc. $60.07 50.05 AMC

 

Thursday March 31:

Economic: Challenger Job-Cut Report – 8:15, Gallup Good Jobs Rate – 8:30, Weekly Jobless Claims – 8:30, Chicago PMI – 9:45, Bloomberg Consumer Comfort Index – 9:45, EIA Natural Gas Report – 10:30.                                                                                                                                                 

International Economic:  France GDP – 3:45AM, Germany Retail Sales – 2:00AM, French CPI – 2:45AM, Germany Unemployment – 3:55AM, Great Britain GDP – 4:30AM.

Other:   Chicago Federal Reserve Bank President Charles Evans discussion at asset management forum, in New York – 9:30AM New York Federal Reserve Bank President William Dudley speech on the role of the Federal Reserve, in Lexington, Virginia – 5:00PM.

 Earnings: No announcements meeting criteria.

 Friday April 1:

 Economic:  Motor Vehicle Sales, March Employment Situation – 8:30, PMI Manufacturing Index – 9:45, ISM Manufacturing Index – 10:00, Consumer Sentiment – 10:00, Construction Spending 10:00, Baker Hughes Rig Count – 1:00.

 International Economic: Germany PMI Manufacturing Index – 3:55AM, EMU Unemployment Rate 0 5:00AM

Other:  Cleveland Fed President Loretta Mester to address the New York Association for Business Economics at the Harvard Club, in New York – 1:00PM.

 

Earnings: No announcements meeting criteria.

Monday April 4:

Economic:  Gallup US Consumer Spending Measure – 8:30, Labor Market Conditions Index – 10:00, Factory Orders.

International Economic:  No major announcements. 

Other: Boston Federal Reserve Bank Eric Rosengren presentation on cybersecurity and financial stability to Boston Fed conference on cybersecurity, in Boston – 10:15AM, Minneapolis Federal Reserve Bank President Neel Kashkari briefing with reporters following conference on too-big-to-fail, in Minneapolis – 5:15PM, Minneapolis Federal Reserve Bank President Neel Kashkari holds town hall on too-big-to-fail, in Minneapolis – 7PM.

Earnings: No announcements meeting criteria.

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