Tuesday, November 29, 2016

Market News for the Prepared Mind: 11.28.2016 thru 12.05.2016

 
"Chance favors the Prepared Mind." - Louis Pasteur

“Imagination decides everything.” - Blaise Pascal
“Don't follow trends, start trends.” - Frank Capra
“The average man doesn’t wish to be told that it is a bull or a bear market.
What he desires is to be told specifically which particular stock to buy or sell.
He wants to get something for nothing. He does not wish to work.
He doesn’t even wish to have to think.” - Jesse Livermore
“The four most dangerous words in investing are 'This time it's different'.” – Sir John Templeton
Last week, the four major stock indices reached all-time highs on the same day. Small caps, large caps, and tech stocks – Russell 2000, Dow Jones, S&P 500, and Nasdaq 100– reached new highs on Monday. The last time the market rewarded us with this level of performance was on December 31, 1999 – on Y2K eve. The indexes continued to reach record highs on Tuesday and then on the Friday after Thanksgiving. The broad market is up 3% during this post-election rally. The small cap Russell 2000 is on a 15 day winning streak. It is up 15,8% over the past three weeks. Bond yields are over 3%.
It has not been a good season for pundits and talking heads. Market pundits are now starting the debate of when the Trump rally will end. I do best when I do not fight trends. The next few months will tell us if this is a second-wind rally or the blow off culmination of a seven year old bull market.
Here is an overview of the US market behavior last week:
Data Source: OptionVue8
Index 25-Nov Change % Weekly 2016 YTD Volatility of Index
Dow Jones Industrials (DJIA) 19,152.14 284.21 1.51% 9.91% 12.81% (VXD)
S&P 500 (SPX) 2,213.35 31.45 1.44% 8.29% 12.34% (VIX)
NASDAQ 100 (NDX) 4,870.02 61.98 1.29% 5.94% 14.39% (VXN)
Russell 2000 (RUT) 1,347.52 32.27 2.45% 18.84% 18.13% (RVX)
S&P 100 (OEX) 975.25 12.12 1.26% 7.00% 12.08% (VXO)
Crude Oil (CLF7) 45.96 (0.36) -0.78% 23.98% 53.46%(OVX)
CBOE Volatility Index (VIX) 12.34 (0.51) -3.97% NA

The recent behavior of the VIX brings to mind a common literary or cinema artifice or trope. This is a feeling we have all had while reading a book or watching a movie. It is an artifice guaranteed to raise the hair on the back of one’s neck as we wait for the silence to end. Watching the VIX last week brought this movie scene, typical of this trope, to mind.
"It's quiet...too quiet...
[Gunshot. Bullet whizzes past his head]
Now, suddenly, it's too loud. I preferred it when it was quiet." O’Malley, Red vs. Blue
I am waiting for the gunshot. The spot VIX traded below 12 for a moment last week. I am not the only trader with the feeling it is too quiet. Per Russell Rhoads. VIX guru at the CBOE, ” With spot VIX at 12.64 and the December 21st VIX futures contract at 14.50, there was a buyer of at least 30,000 VIX Dec 21st 16 Calls for 0.85 who then sold the same number of Dec 21st 22 Calls for 0.30 and a net cost of 0.55.”
My approach to the same scenario was to buy December 21st date broken wing call butterflies. My trades are a hedge to protect short premium S&P 500 iron butterflies against a short term downward move in the index. The liquidity of VIX options allow relatively ease of adjustment or rolling of positions.
A reminder: This approach is implemented by me, a veteran options trader with over 30 years experience of trading derivatives for a living. It is risky even if you know what you are doing, Do not attempt this at home unless you understand the risks and pitfalls of trading VIX options and futures.
It is quiet and unnerving. Be careful and understand the risk of any strategy you are involved in.
Here is an overview of last week for the VIX and related products:
Indexes Ticker 25-Nov 18-Nov Change % Change
CBOE Volatility Index VIX 12.34 12.85 (0.51) -3.97%
VIX December Future (12/21/2016) VXZ6 14.325 14.975 (0.65) -4.34%
VIX January Future (1/18/2017) VXF7 16.175 16.675 (0.50) -3.00%
VIX February Future (2/18/2017) VXG7 17.175 17.500 (0.32) -1.86%
CBOE Short-term Volatility Index VXST 10.43 8.63 1.80 20.86%
CBOE 3 Month Volatility Index VXV 15.51 15.52 (0.01) -0.06%
CBOE Mid-term Volatility Index (6 month) VXMT 17.93 18.02 (0.09) -0.50%
VIX of VIX VVIX 82.65 86.40 (3.75) -4.34%
CBOE SKEW Index SKEW 126.27 126.38 (0.11) -0.09%
Long VIX ETP's
ProShares Ultra VIX Short Term Futures ETF UVXY 10.57 11.52 (0.95) -8.25%
iPath S&P 500 VIX Short Term Futures ETN VXX 27.82 29.06 (1.24) -4.27%
ProShares VIX Short Term Futures ETF VIXY 23.19 24.20 (1.01) -4.17%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 35.15 35.43 (0.28) -0.79%
Inverse VIX ETP's
ProShares Short VIX Short Term Future ETF SVXY 85.09 81.46 3.63 4.46%
Daily Inverse VIX Short Term ETN XIV 43.65 41.84 1.81 4.33%
Data Source: OptionVue8
Next week is employment week. The plethora of earnings related reports culminates with the release of November jobs data on Friday morning. In addition, we will see the release of the second revision of the GDP, the S&P CoreLogic Case-Shiller Home Price Index. Motor Vehicle Sales and Chain Store Sales. We’ll also get retail sales reports on Black Friday and Cyber Monday.
The Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna on Wednesday. They will be attempting to negotiate the first production decrease in eight years. In the absence of a production cut, oil stocks would remain in surplus for a fourth straight year in 2017.
The earnings season is winding down this week. Confirm the date and time of a company’s earnings announcement before trading any earnings announcement strategy. The most accurate source of this information is the company’s investor relations website. I will start trading announcements this week. The earnings highlights this week for widely held and actively traded stocks are: Shoe Carnival, Thor Ind., Autodesk, Tiffany, Semtech, Guess?, Synopsys, American Eagle Outfitters, Kroger, Donaldson, Dollar General, Ulta Salon, G-III Apparel, Fred’s, Genesco, and Big Lots.
The variables for earnings announcements are: Closing price> $20, Implied Volatility > 22, Average daily option volume > 1,000 contracts. Liquidity, as determined by width of option markets and individual option contract volume, is a crucial component in successfully trading any option strategy. One of the most frustrating experiences is an inability to adjust or exit a strategy due to lack of liquidity in the market. The market uncertainty associated with the election has impacted liquidity. I found it difficult to enter trades last week. The bid/ask spreads seemed much larger than usual. Do not force trades in illiquid markets.
Remember – this is my first pass scan. I will evaluate these candidates based on my previous experience trading their earnings announcements, chart, and other historic data. Here is a list of upcoming earnings announcements meeting my first pass scan:
Symbol Company Name Nov 18 Close IV30 B/A AVGOPTVOL DATE
MNK Mallinckrodt PLC $56.87 69.66 BMO 1827 29-Nov
TIF Tiffany & Co. $79.18 33.32 BMO 4123 29-Nov
ADSK Autodesk, Inc. $75.15 42.97 AMC 3523 29-Nov
NTNX Nutanix Inc $34.13 102.91 AMC 1531 29-Nov
SPLK Splunk Inc $57.65 48.37 AMC 1954 29-Nov
GLNG Golar LNG Limited $25.52 70.53 BMO 5647 30-Nov
PVH PVH Corp $109.02 36.39 AMC 1231 30-Nov
DG Dollar General Corp. $79.71 35.02 BMO 5491 1-Dec
KR Kroger Co $33.70 31.30 BMO 8926 1-Dec
AMBA Ambarella Inc $65.36 49.93 AMC 6650 1-Dec
FIVE Five Below Inc $43.10 48.74 AMC 1863 1-Dec
SWHC Smith & Wesson Holding Corp $23.51 52.13 AMC 4760 1-Dec
ULTA Ulta Salon $262.02 37.69 AMC 5595 1-Dec
WDAY Workday Inc $83.13 41.18 AMC 2035 1-Dec
WUBA 58.com Inc (ADR) $33.58 34.84 BMO 2167 5-Dec
AZO AutoZone, Inc. $798.05 25.61 BMO 1863 6-Dec
GWPH GW Pharmaceuticals PLC $116.67 48.17 BMO 3317 6-Dec
TOL Toll Brothers Inc $30.05 32.30 BMO 1570 6-Dec
HDS HD Supply Holdings Inc $39.29 39.72 AMC 1703 6-Dec
HRB H & R Block Inc $23.68 39.44 AMC 1321 7-Dec
LULU Lululemon Athletica inc. $57.91 49.36 AMC 19134 7-Dec

Advice to stimulate your imagination:
“Great things are not accomplished by those who yield to trends and fads and popular opinion.” - Jack Kerouac
“Well, you know, I was a human being before I became a businessman.” – George Soros
“Don't blow off another's candle for it won't make yours shine brighter.”  - Jaachynma N.E. Agu
“To win the people, always cook them some savory that pleases them.” -  Aristophanes

Monday November 28:

Economic: Dallas Fed Manufacturing Survey – 10:30.
International Economic: Japan Household Spending and Unemployment Rate – 6:30PM. Japan Retail Sales – 6:50PM.
Other: Cyber Monday - Online shopping equivalent of brick and mortar Black Friday. It is one of the biggest online shopping days of the year.

Tuesday November 29:

Economic: GDP – 8:30. Corporate Profits – 8:30, Redbook – 8:55, S&P Corelogic Case-Shiller Home Price Index – 9:00, Consumer Confidence – 10:00. State Street Investor Confidence – 10:00.
International Economic: France GDP – 2:45AM, Germany CPI – 8:00AM, Japan Industrial Production – 6:50PM.
Other: Federal Reserve Vice Chair Stanley Fischer speech to The Clearing House annual conference, in New York – 7:45AM, New York Federal Reserve Bank President William Dudley delivers remarks on opportunities for economic growth in Puerto Rico, in San Juan, P.R., with Q&A – 9:15AM.


Wednesday November 30:

Economic: MBA Mortgage Applications – 7:00, ADP Employment Report – 8:15, Personal Income and Outlays - 8:30, Chicago PMI – 9:45, Pending Home Sale Index - 10:00, EIA Petroleum Status Report – 10:30, Beige Book – 2:00.
International Economic: Germany Retail Sales – 2:00AM, France PPI and CPI – 2:45AM, Germany Unemployment Rate – 3:55AM, Japan Manufacturing Index – 7:30PM, China PMI Manufacturing Index - 8:45PM.
Other: OPEC Oil Ministers meeting in Vienna. Dallas Federal Reserve Bank President Robert Kaplan discusses economic conditions, trends and the limits of monetary policy with the Economic Club of New York, with media Q&A – 8:00AM, Federal Reserve Board Gov. Jerome Powell participates in a discussion on Understanding Fedspeak at the Brookings Institution in Washington, D.C – 9:15AM, Cleveland Federal Reserve Bank President Loretta Mester gives a speech on monetary policy and economic outlook to the African American Chamber of Commerce of Western Pennsylvania in Pittsburgh, Pa., with media Q&A – 12:35PM.

Thursday December 1:

Economic: Motor Vehicle Sales, Chain Store Sales, Challenger Job-Cut Report – 8:30, Weekly Job Claims – 8:30, Gallup Good Jobs Rate – 8:30, PMI Manufacturing Index – 9:45, Bloomberg Consumer Comfort Index – 9:45, ISM Manufacturing Index – 10:00, Construction Spending – 10:00, EIA Natural Gas Report – 10:30.
International Economic: Germany PMI Manufacturing Index – 3:55AM, Eurozone PMI Manufacturing Index – 4:00AM, Eurozone Unemployment Rate – 5:00AM.
Other: St. Louis Federal Reserve Bank President James Bullard gives a talk at Commerce Bank in St. Louis, Mo., with audience and media Q&A – 9:15AM.

Friday December 2:

Economic: November Employment Situation – 8:30, Baker Hughes Rig Count – 1:00.
International Economic: Eurozone PPI – 5:00.
Other: Federal Reserve Gov. Daniel Tarullo delivers keynote speech at the Office of Financial Research's Financial Stability Conference in Washington, D.C. – 12:30PM.

Monday December 5:

Economic: Gallup US Consumer Spending Measure – 8:30, PMI Services Index – 9:45, ISM – Non-Manufacturing Index – 10:00, Labor Market Conditions Index – 10:00, TD Ameritrade IMX – 12:30.
International Economic: Eurozone PMI Composite – 4:00AM, Eurozone Retail Sales – 5:00AM

































































Sunday, November 20, 2016

Market News for the Prepared Mind: 11.21.2016 thru 11.28.2016


"Chance favors the Prepared Mind." - Louis Pasteur

“Imagination decides everything.” - Blaise Pascal

“I am grateful for what I am and have. My thanksgiving is perpetual.” - Henry David Thoreau

“If you are really thankful, what do you do? You share.” - W. Clement Stone

“After a good dinner, one can forgive anybody, even one's own relations.” -  Oscar Wilde

Stocks rose last week with bond yields and the US dollar moving in concert with the equities. The SUS dollar is at its highest level since 2003. The Chinese yuan is at its lowest level against the dollar since 2010. Bond yields are at the highest level since November 2015. In the past, such moves in bonds and the dollar created adverse equity market reaction. Instead of turmoil, the domestic equity indexes showed gains ranging from 0.11% for the Dow Jones Industrials to 2.56% for the small cap and financials dominated Russell 2000.

The Russell 2000 has been on an 11-day winning streak. It is up nearly 16% for the year. It has gained almost 38% since February 2016. The impact of financial stocks upon small cap gains is reflected by a 10.77% post-election gain in the S&P Financials. The energy sector has contributed significantly post-election gains in equity indexes.

Here is an overview of the US market behavior last week:
Index 18-Nov Weekly Change % Weekly 2016 YTD Volatility of Index
Dow Jones Industrials (DJIA) 18,867.93 20.27 0.11% 8.28% 13.14% (VXD)
S&P 500 (SPX) 2,181.90 17.45 0.81% 6.75% 12.85% (VIX)
NASDAQ 100 (NDX) 4,808.04 56.09 1.18% 4.59% 15.51% (VXN)
Russell 2000 (RUT) 1,315.25 32.86 2.56% 15.99% 18.12% (RVX)
S&P 100 (OEX) 963.13 4.45 0.46% 5.67% 12.91% (VXO)
Crude Oil (CLF7) 46.32 2.42 5.51% 24.95% 46.56%(OVX)
CBOE Volatility Index (VIX) 12.85 (1.32) -9.32% NA

Data Source: OptionVue8
The lower VIX reflects more than just the continuing “Trump rally.” The shortened trading week is reflected in the VIX levels. The NYSE and other markets will be closed on Thursday and will close two hours earlier than normal on Friday. Traders seem to be anticipating a quiet week across all markets. Russell Rhoads, CBOE VIX guru, has created a list of volatility events for the rest of 2016. These events include:

DATE EVENT
29-Nov Q3 GDP second estimate
2-Dec November Non-Farm Payrolls
4-Dec Constitutional Referendum in Italy
14-Dec Fed Meeting
19-Dec Electoral College Vote
Here is an overview of last week for the VIX and related products:
Indexes Ticker 18-Nov 11-Nov Change % Change
CBOE Volatility Index VIX 12.85 14.17 (1.32) -9.32%
VIX December Future (12/21/2016) VXZ6 14.975 16.125 (1.15) -7.13%
VIX January Future (1/18/2017) VXF7 16.675 17.325 (0.65) -3.75%
VIX February Future (2/18/2017) VXG7 17.500 17.925 (0.43) -2.37%
CBOE Short-term Volatility Index VXST 8.63 12.84 (4.21) -32.79%
CBOE 3 Month Volatility Index VXV 15.52 16.49 (0.97) -5.88%
CBOE Mid-term Volatility Index (6 mos) VXMT 18.02 18.45 (0.43) -2.33%
VIX of VIX VVIX 86.40 97.22 (10.82) -11.13%
CBOE SKEW Index SKEW 126.38 121.17 5.21 4.30%
Long VIX ETP's
ProShares Ultra VIX Short Term Futures ETF UVXY 11.52 13.54 (2.02) -14.92%
iPath S&P 500 VIX Short Term Futures ETN VXX 29.06 31.44 (2.38) -7.57%
ProShares VIX Short Term Futures ETF VIXY 24.20 26.18 (1.98) -7.56%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 35.43 35.78 (0.35) -0.98%
Inverse VIX ETP's
ProShares Short VIX Short Term Future ETF SVXY 81.46 78.79 2.67 3.39%
Daily Inverse VIX Short Term ETN XIV 41.84 35.85 5.99 16.71%

Data Source: OptionVue8
It will be a busy week for the economic calendar. The last full week of November includes reports on new home sales, existing home sales, and durable goods. Wednesday will be the most active day. The release of the FOMC minutes on Wednesday afternoon will cap the pre-Thanksgiving economic news.

The earnings season is winding down this week. Confirm the date and time of a company’s earnings announcement before trading any earnings announcement strategy. The most accurate source of this information is the company’s investor relations website. I will start trading announcements this week. The earnings highlights this week for widely held and actively traded stocks are Jack in the Box, Brocade Communications, Tyson Foods. Urban Outfitters, Barnes & Noble,, Medtronic, Eaton Vance, Dollar Tree, Hormel Foods, Movado, Campbell Soup, Cahico’s Fast Fodd, Gamestop, Valspare, Analog Devices, Cracker Barrel, and Deere & Co.

I have added a scan of stocks with earnings announcements to the calendar for each day in the coming week. The scan criteria are: Closing price> $20, Implied Volatility > 22, Average daily option volume > 1,000 contracts. Liquidity, as determined by width of option markets and individual option contract volume, is a crucial component in successfully trading any option strategy. One of the most frustrating experiences is an inability to adjust or exit a strategy due to lack of liquidity in the market. The market uncertainty associated with the election has impacted liquidity. I found it difficult to enter trades last week. The bid/ask spreads seemed much larger than usual. Do not force trades in illiquid markets.

Symbol Company Name Nov 18 Close IV30 B/A AVGOPTVOL DATE
TSN Tyson Foods, Inc. $66.70 39.54 BMO 3,395 21-Nov
WB Weibo Corp (ADR) $44.76 57.87 BMO 4,161 21-Nov
PANW Palo Alto Networks $164.15 45.15 AMC 8,460 21-Nov
SINA SINA Corp $67.85 51.17 AMC 2,005 21-Nov
YY YY Inc (ADR) $45.08 49.42 AMC 5,832 21-Nov
SIG Signet Jewelers Ltd. $92.12 46.14 DMT 3,322 22-Nov
BURL Burlington Stores Inc $77.51 40.46 BMO 1,005 22-Nov
CPB Campbell Soup $54.22 25.07 BMO 1,202 22-Nov
DLTR Dollar Tree, Inc. $81.65 38.41 BMO 5,077 22-Nov
GME GameStop Corp. $23.46 45.64 BMO 7,966 22-Nov
URBN Urban Outfitters, Inc. $38.83 52.00 BMO 2,681 22-Nov
HPE Hewlett Packard $23.60 33.55 AMC 8,031 22-Nov
VEEV Veeva Systems Inc $41.90 42.41 AMC 1,384 22-Nov
DE Deere & Company $91.77 26.00 BMO 13,842 23-Nov
CTRP Ctrip.Com International $42.31 36.95 AMC 9,937 23-Nov
MNK Mallinckrodt PLC $55.32 72.71 BMO 1,787 29-Nov
TIF Tiffany & Co. $77.11 37.82 BMO 5,786 29-Nov
ADSK Autodesk, Inc. $78.46 44.53 AMC 3,592 29-Nov
SPLK Splunk Inc $62.25 49.93 AMC 2,236 29-Nov
NTNX Nutanix Inc $31.20 100.62 1,415 29-Nov
GLNG Golar LNG Limited $24.92 71.29 BMO 5,520 30-Nov
PVH PVH Corp $110.13 36.64 AMC 1,564 30-Nov

Advice to stimulate your imagination:

“The fact that people are full of greed, fear, or folly is predictable. The sequence is not predictable.” - Warren Buffett

“Half of the American people have never read a newspaper. Half never voted for President. One hopes it is the same half.” ― Gore Vidal

“Don't blow off another's candle for it won't make yours shine brighter.” - Jaachynma N.E. Agu

“To win the people, always cook them some savory that pleases them.” -  Aristophanes


Monday November 21:

Economic: Chicago Fed National Activity Index – 8:30.

International Economic: No major announcements.

Other: Federal Reserve Vice Chairman Stanley Fischer discusses monetary policy, inflation rates and economic outlook at the Council on Foreign Relations in New York – 8:00AM.


Tuesday November 22:

Economic: Redbook – 8:55, Existing Home Sales – 10:00, Richmond Fed Manufacturing Index – 10:00.

International Economic: Great Britain CBI Industrial Trends Survey – 6:00AM.


Wednesday November 23:

Economic: MBA Mortgage Applications – 7:00, Durable Goods Orders 8:30, Weekly Jobless Claims – 8:30, FHFA House Price Index – 9:00, PMI Manufacturing Index Flash – 9:45, Bloomberg Consumer Comfort Index – 9:45AM, New Home Sales – 10:00, Consumer Sentiment – 10:00, EIA Petroleum Status Report – 10:30, EIA Natural Gas Report – 12:00.

International Economic: Eurozone PMI Composite Flash – 4:00AM.

Other: FOMC minutes – 2:00PM.


Thursday November 25:


Thanksgiving - US Markets Closed

Economic: No major announcements.

International Economic: Germany GDP – 2:00AM,

Other: St. Louis Federal Reserve Bank President James Bullard gives a talk at Commerce Bank in St. Louis, Mo., with audience and media Q&A – 9:15AM.

Friday November 26:

NYSE Early Close – 1:00PM.

Economic: International Trade in Goods – 8:30, PMI Services Flash – 9:45, Baker Hughes Rig Count – 1:00.

International Economic: Great Britain GDP - 4:30AM.


Monday November 28:


Economic: Dallas Fed Manufacturing Survey – 10:30.

International Economic: Japan Household Spending and Unemployment Rate – 6:30PM. Japan Retail Sales – 6:50PM.























































Thursday, November 17, 2016

Market News for the Prepared Mind: 11.14.2016 – 11.21.2016


The Prepared Mind is tardy and in truncated format.  My wife and I traveled to the least populated counties in Illinois.  Pope and Hardin Counties are farther south than more than half the land mass of Kentucky.  The population centers are clustered between the Ohio Rive and the Shawnee National Forest.  It was a welcome respite from the market chaos preceding the presidential election.

The near absence of call phone and internet connectivity lead to my executive decision to forgo the blog this week.  I have include the weekly performance table to maintain continuity of information.

Here is an overview of the US market behavior last week:
Index 11-Nov Weekly Change % Weekly 2016 YTD Volatility of Index
Dow Jones Industrials (DJIA) 18,847.66 959.41 5.36% 8.16% 15.02% (VXD)
S&P 500 (SPX) 2,164.45 79.27 3.80% 5.90% 14.17% (VIX)
NASDAQ 100 (NDX) 4,751.95 91.49 1.96% 3.37% 18.95% (VXN)
Russell 2000 (RUT) 1,251.61 88.74 7.63% 10.38% 19.68% (RVX)
S&P 100 (OEX) 958.68 34.84 3.77% 5.18% 14.19% (VXO)
Crude Oil (CL Z6) 43.12 (1.01) -2.29% 16.32% 45.31%(OVX)
CBOE Volatility Index (VIX) 14.17 (8.34) -37.05% NA
Data Source: OptionVue8

Here is an overview of last week for the VIX and related products:
Indexes Ticker 11-Nov 4-Nov Change % Change
CBOE Volatility Index VIX 14.17 22.51 (8.34) -37.05%
VIX November Future (11/16/2016) VXX6 14.925 19.325 (4.40) -22.77%
VIX December Future (12/21/2016) VXZ6 16.125 18.975 (2.85) -15.02%
VIX January Future (1/18/2017) VXF7 17.325 19.725 (2.40) -12.17%
VIX February Future (2/18/2017) VXG7 17.925 19.875 (1.95) -9.81%
CBOE Short-term Volatility Index VXST 12.84 28.82 (15.98) -55.45%
CBOE 3 Month Volatility Index VXV 16.49 21.13 (4.64) -21.96%
CBOE Mid-term Volatility Index (6 month) VXMT 18.45 21.44 (2.99) -13.95%
VIX of VIX VVIX 97.22 120.23 (23.01) -19.14%
CBOE SKEW Index SKEW 121.17 133.03 (11.86) -8.92%
Long VIX ETP's
ProShares Ultra VIX Short Term Futures ETF UVXY 13.54 20.39 (6.85) -33.59%
iPath S&P 500 VIX Short Term Futures ETN VXX 31.44 37.94 (6.50) -17.13%
ProShares VIX Short Term Futures ETF VIXY 26.18 31.59 (5.41) -17.13%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 35.78 38.49 (2.71) -7.04%
Inverse VIX ETP's
ProShares Short VIX Short Term Future ETF SVXY 78.79 64.32 14.47 22.50%
Daily Inverse VIX Short Term ETN XIV 35.85 33.00 2.85 8.64%
Data Source: OptionVue8



Monday, November 7, 2016

Market News for the Prepared Mind: 11.07.2016–11.14.2016



"Chance favors the Prepared Mind." - Louis Pasteur

“Imagination decides everything.” - Blaise Pascal

“No man will ever carry out of the Presidency the reputation which carried him into it.” - Thomas Jefferson

“It seems that elections today are more popularity than they are substantial issues.” - Jesse Ventura

"We are pioneers and the history of pioneers is not that good." - Jeff Bezos

"I offer my opponents a bargain: if they will stop telling lies about us,I will stop telling the truth about them.” - Adlai Stevenson

"If voting made any difference they wouldn’t let us do it." - Mark Twain
 
Mark TwainNine days ago, on October 29, FBI Director James Comey announced the reopening of the Clinton email investigation. The S&P 500 index extended its losing streak to nine days on Friday. The fears created by Comey’s announcement has led to a narrowing of the gap between Donald Trump and Hillary Clinton. These fears and the associated market sell-off have masked the impact of better than expected third quarter earnings. As of today, 71% of earnings announcements by S&P 500 companies have exceeded analyst expectations. Current third quarter aggregate growth in per-share earnings is 2.7%. This is the first earnings growth per share since the first quarter of 2016.

Election news continues to move the equity markets and associated volatility markets. I am writing this blog on the night of Sunday November 6. 2016. This afternoon, Comey wrote in a letter to congressional committee chairmen, "Based on our review, we have not changed our conclusions that we expressed in July." Futures reacted immediately when extended trading hours opened. December E-mini futures are up over 1% with the November VIX future down over 13%. Once again, news which is good for Clinton is good for the market.

Monday is the last day for the release of news surprises which may impact the presidential election. I do not want to imagine what sort of stomach churning press release may appear. Do not assume that such a release cannot or will not occur. Know in advance what your trading response will be to different news scenarios.

So much for OPEC’s ability to control the price of oil. The oil ministers had agreed in principle to production cuts, but they failed to reach an agreement on specifics. This inability to reach a consensus with Venezuela, Iraq and Iran led to an increase in US oil inventories and a 10% retreat in the price of oil.

Here is an overview of the US market behavior last week:
Index 4-Nov Weekly Change % Weekly 2016 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17,888.25 (272.94) -1.50% 2.66% 21.46% (VXD)
S&P 500 (SPX) 2,085.18 (41.23) -1.94% 2.02% 22.51% (VIX)
NASDAQ 100 (NDX) 4,660.46 (145.13) -3.02% 1.38% 23.03% (VXN)
Russell 2000 (RUT) 1,162.87 (24.43) -2.06% 2.55% 25.38% (RVX)
S&P 100 (OEX) 923.84 (21.48) -2.27% 1.36% 24.19% (VXO)
Crude Oil (CL Z6) 44.13 (4.53) -9.31% 19.05% 43.69%(OVX)
CBOE Volatility Index (VIX) 22.51 6.32 39.04% NA
Data Source: OptionVue8

James Comey’s Sunday surprise has led to a sell-off om the VIX futures. Russell Rhoads’ trade of the week involves a trader who expected a return to the mean of VIX levels. This trader bought the VIX November 16/15 put vertical for $0.37. Settlement of the November VIX future at 15 or lower will result in a profit of $0.63 per spread.

Here is an overview of last week for the VIX and related products:
Indexes Ticker 4-Nov 28-Oct Change % Change
CBOE Volatility Index VIX 22.51 16.19 6.32 39.04%
VIX November Future (11/16/2016) VXX6 19.325 16.625 2.70 16.24%
VIX December Future (12/21/2016) VXZ6 18.975 17.100 1.88 10.96%
VIX January Future (1/18/2017) VXF7 19.725 18.325 1.40 7.64%
CBOE Short-term Volatility Index VXST 28.82 16.69 12.13 72.68%
CBOE 3 Month Volatility Index VXV 21.13 17.37 3.76 21.65%
CBOE Mid-term Volatility Index (6 month) VXMT 21.44 19.03 2.41 12.66%
VIX of VIX VVIX 120.23 99.44 20.79 20.91%
CBOE SKEW Index SKEW 133.03 126.35 6.68 5.29%
Long VIX ETP's
ProShares Ultra VIX Short Term Futures ETF UVXY 20.39 15.88 4.51 28.40%
iPath S&P 500 VIX Short Term Futures ETN VXX 37.94 33.43 4.51 13.49%
ProShares VIX Short Term Futures ETF VIXY 31.59 27.84 3.75 13.47%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 38.49 36.93 1.56 4.22%
Inverse VIX ETP's
ProShares Short VIX Short Term Future ETF SVXY 34.32 73.46 (39.14) -53.28%
Daily Inverse VIX Short Term ETN XIV 33.00 37.65 (4.65) -12.35%
Data Source: OptionVue8

The second week in November includes the second Tuesday of the month, which thankfully means the circus of the presidential election will come to an end. There are few economic reports slated for next week. The major variables have the market in a state of flux - the presidential election, third-quarter earnings, crude oil. Earnings announcements and the accompanying forward guidance have little potential to move the market this week.

The earnings season is in winding down this week. Confirm the date and time of a company’s earnings announcement before trading any earnings announcement strategy. The most accurate source of this information is the company’s investor relations website. I will start trading announcements this week. The earnings highlights this week for widely held and actively traded stocks are Priceline.com, AMC Entertainment, Chemours, Dean Foods. LendingClub, Sysco, CVS, DR Horton, Johnson Controls, Rackspace, Rockwell Automation, Marriott, Trip Advisor, Mylan, Viacom, Disney, Ralph Lauren, Michael Kors, NVIDIA, Nordstrom, Kohl’s, Macy’s. and JC Penney.

I have added a scan of stocks with earnings announcements to the calendar for each day in the coming week. The scan criteria are: Closing price> $20, Implied Volatility > 22, Average daily option volume > 1,000 contracts. Liquidity, as determined by width of option markets and individual option contract volume, is a crucial component in successfully trading any option strategy. One of the most frustrating experiences is an inability to adjust or exit a strategy due to lack of liquidity in the market. The market uncertainty associated with the election has impacted liquidity. I found it difficult to enter trades last week. The bid/ask spreads seemed much larger than usual. Do not force trades in illiquid markets.

Advice to stimulate your imagination:

“The fact that people are full of greed, fear, or folly is predictable. The sequence is not predictable.” - Warren Buffett

“Half of the American people have never read a newspaper. Half never voted for President. One hopes it is the same half.”  - Gore Vidal

“To achieve anything in this game, you must be prepared to dabble on the boundary of disaster.” - Stirling Moss

“Ephemeral" It means 'which is in danger of speedy disappearance.” - Antoine de Saint-ExupĂ©ry

“The month of November makes me feel that life is passing more quickly. In an effort to slow it down, I try to fill the hours more meaningfully.” - Henry Rollins





Monday November 7:

Economic: Gallup US Consumer Spending Measure – 8:30, Labor Market Conditions Index – 10:00, TD Ameritrade IMX – 12:30.

International Economic: Chinese Merchandise Trade Balance, Germany Manufacturer’s Orders – 2:00AM, Eurozone Retail Sales – 5.00AM.


Other: Chicago Federal Reserve Bank President Charles Evans gives opening remarks at a conference in Chicago – 2:45PM.


Earnings:
Symbol Company Name Nov 4 Close IV30 B/A AVGOPTVOL
CTSH Cognizant Technology Solutions $51.65 35.42 BMO 4136
HSBC HSBC Holdings plc (ADR) $37.09 26.06 BMO 4393
MAR Marriott International Inc $69.24 27.17 BMO 2530
MGM MGM Resorts International $25.77 34.45 BMO 11623
SYY SYSCO Corporation $47.85 27.94 BMO 1008
ACAD ACADIA Pharmaceuticals Inc. $20.87 108.67 AMC 3136
ALB Albemarle Corporation $83.80 38.66 AMC 1445
DEPO Depomed Inc $21.82 83.36 AMC 1450
HTZ Hertz Global Holdings Inc $33.44 59.63 AMC 1967
PCLN Priceline Group Inc $1,438.10 34.81 AMC 15626
REN Resolute Energy Corp $23.74 102.84 AMC 1220
FNV Franco-Nevada Corporation $68.21 42.44 1173




Tuesday November 8:


U.S. Presidential Election


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

International Economic: Germany Industrial Production – 2:00AM, Germany Merchandise Trade – 2:00AM. Great Britain Industrial Production – 4:30AM, China PPI and CPI – 8:30PM.


Other: Chicago Fed President Charles Evans will speak at a moderated discussion entitled "A Conversation with Charles Evans" followed by Q&A, at the Council of Foreign Relations, in New York -7:45AM, Chicago Fed President Charles Evans will speak at the UBS Knowledge Network event "Luncheon Discussion with Charles Evans" followed by Q&A, in New York – 12:20PM.


Earnings:
Symbol Company Name Nov 4 Close IV30 B/A AVGOPTVOL
AER AerCap Holdings N.V. $40.77 40.12 BMO 1321
CVS CVS Health Corp $81.57 29.51 BMO 8025
DHI D.R. Horton, Inc. $28.29 34.45 BMO 1756
JCI Johnson Controls International $40.81 28.69 BMO 2410
OPHT Ophthotech Corp $30.85 220.11 BMO 1270
ZAYO Zayo Group Holdings Inc $31.77 32.90 BMO 1084
TRIP Tripadvisor Inc $62.74 54.87 AMC 3008
W Wayfair Inc $32.28 79.88 AMC 2385
MOMO Momo Inc (ADR) $23.70 76.71 4647
PBYI Puma Biotechnology Inc $34.60 98.22 1246



Wednesday November 9:


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


International Economic: Great Britain Merchandise Trade – 4:30QM, Japan Machine Orders – 6:50PM.


Other: Minneapolis Federal Reserve Bank President Neel Kashkari participates in a fireside chat in Eau Claire, Wi., with audience Q&A – 1:30PM, San Francisco Federal Reserve Bank President John Williams participates in fireside chat on Outlook on the Economy at the University of San Francisco, with audience and media Q&A – 9:00PM.


Earnings:
Symbol Company Name Nov 4 Close IV30 B/A AVGOPTVOL
COTY Coty Inc $22.35 40.46 BMO 34891
DISH DISH Network Corp $54.92 43.84 BMO 2143
ETP Energy Transfer Partners LP $33.20 42.21 BMO 5764
IONS Ionis Pharmaceuticals Inc $27.00 79.41 BMO 1955
MYL Mylan NV $34.14 51.47 BMO 15216
SLW Silver Wheaton Corp. (USA) $24.42 50.38 BMO 19872
TASR TASER International, Inc. $21.98 52.91 BMO 1919
HAIN Hain Celestial Group Inc $35.58 58.51 AMC 8183
XON Intrexon Corp $24.51 62.58 AMC 2642
JUNO Juno Therapeutics Inc $22.72 73.46 AMC 1665
NTES NetEase Inc (ADR) $243.42 43.70 AMC 4420
NCLH Norwegian Cruise Line Holdings $37.21 45.46 AMC 2014
SHAK Shake Shack Inc $31.93 51.53 AMC 2563
VIAB Viacom, Inc. $36.68 39.88 AMC 6299
KITE Kite Pharma Inc $40.01 67.89 1867



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


International Economic: France Industrial Production – 2:45AM.


Other: St. Louis Federal Reserve Bank President James Bullard gives a talk at Commerce Bank in St. Louis, Mo., with audience and media Q&A – 9:15AM.


Earnings:
Symbol Company Name Nov 4 Close IV30 B/A AVGOPTVOL
AZN AstraZeneca plc (ADR) $27.74 36.02 BMO 3684
KSS Kohl's Corporation $42.69 51.72 BMO 5709
M Macy's Inc $36.89 44.89 BMO 16981
KORS Michael Kors Holdings Ltd $48.24 53.60 BMO 6985
PRGO Perrigo Company PLC $79.95 50.44 BMO 2734
RL Ralph Lauren Corp $97.64 44.93 BMO 1240
JWN Nordstrom, Inc. $50.21 54.59 AMC 8427
NVDA NVIDIA Corporation $67.96 52.56 AMC 33142
DIS Walt Disney Co $93.37 23.80 AMC 45745



Friday November 11:


US Banks Closed, Markets Open


Economic: University of Michigan Consumer Sentiment – 10:00, Baker Hughes Rig Count – 1:00.


International Economic: Germany CPI – 2:00AM


Other: Atlanta Federal Reserve President Dennis Lockhart gives speech at the National Association of Realtors conference in Orlando, Fla., with audience Q&A – 8:30AM, Dallas Federal Reserve Bank President Rob Kaplan to speak at Association of Banks of Mexico forum in Mexico City, with audience and media Q&A – 12:00PM.


Earnings: None meeting criteria


Monday November 14:


Economic: No major announcements.

International Economic: Released on Saturday November 12: China Industrial Production and Retail Sales – 12:30AM.


Other: San Francisco Federal Reserve Bank President John Williams participates in a panel discussion at the Bay Area Council in San Francisco, with audience Q&A – 6:30PM,


Earnings: None meeting Criteria