Sunday, August 21, 2016

Market News for the Prepared Mind: 8.22 - 8.29.2016

"Chance favors the Prepared Mind." - Louis Pasteur

“Imagination decides everything.” - Blaise Pascal

“Genius is patience” - Isaac Newton

“Have patience with all things, But, first of all with yourself.” 
- Saint Francis de Sales


The second longest bull market in history continued with the Dow Jones Industrials (DJIA), the NASDAQ100 (NDX) and the S&P 500 (SPX) drifted up to a low-volume all-time closing highs on Monday.   The bull market, which stated in 2009, has been surpassed in length by only the 1987-2000 bull run of 4,494 days.  This week’s theme in the financial media is how the bull market looks “tired.”

Rock and Roll Hall of Fame inductee Lou Reed succinctly described the market’s August lethargy:

You know there's nothin' happening at all
Every time she put on the radio
There was nothin' goin' down at all
Not at all

One of the few constants in equity markets is the summer doldrums – “nothin’ goin’ down at all.”  The low volume and the lack of market movement and interest are typical August market behavior.  The next two weeks are among the most popular vacation periods in the US and Europe.  Volume and price action should be quiet through the Labor Day. 

Do not become complacent.  A slow market environment can be interrupted by moments of violent price action.  The trading desks will be manned by back-ups. The relative lack of experience on vacation period trading desks has a tendency to exacerbate price action in either direction.  Trading is an exercise in balancing patience and panic.   One of the hallmarks of inexperience is a tendency to overreact to risk. 

Here is an overview of the US market behavior last week:
Index
19-Aug
Weekly Change
% Weekly
 2016 YTD
Volatility of  Index
Dow Jones Industrials (DJIA)
18,552.57
(23.90)
-0.13%
6.47%
11.09% (VXD)
S&P 500 (SPX)
2,183.87
(0.18)
-0.01%
6.85%
11.34% (VIX)
NASDAQ 100 (NDX)
4,806.14
23.80
0.50%
4.55%
13.42% (VXN)
Russell 2000 (RUT)
1,233.40
4.97
0.40%
8.78%
15.53% (RVX)
S&P 100 (OEX)
964.80
(1.71)
-0.18%
5.86%
10.32% (VXO)
Crude Oil (CL U6)
48.57
3.88
8.68%
31.02%
34.88%(OVX)
CBOE Volatility Index (VIX)
11.64
0.09
0.78%
NA

Data Source: OptionVue7

“Nothin’ goin’ down at all.”    The VIX reacted with nothing in response to the equity market’s nothing.  The August VIX futures contract expired on Wednesday.  The September contract (VXU6 – 9/21/2016) is the front month.  The November 2016 through April 2017 futures showed small gains despite the spot VIX being down almost 2%.  The CBOE Mid-term Volatility Index (6 month) was up 1%, reflecting the relative strength of the of the longer term VIX futures.  The spot VIX – as evidenced in the following price chart – closed at the lower end of its two year price range. 



Trader and analyst sentiment seem to be pointed in the direction of a higher VIX (and lower S&P 500) over the next few months.  When I look at charts, I am reminded by the succinct advice of the oldest trading member on the CBOE floor some thirty years ago:  “Frankie, every boat that ever sank had charts.”  You are responsible for your own navigation.


Here is an overview of last week for the VIX and related products:
Indexes
Ticker
19-Aug
12-Aug
Change
% Change
CBOE Volatility Index
VIX
11.34
11.55
(0.21)
-1.82%
VIX September Future (9/21/2016)
VXU6
14.750
14.975
(0.23)
-1.50%
VIX October Future (10/19/2016)
VXV6
16.675
16.725
(0.05)
-0.30%
VIX November Future (10/19/2016)
VXX6
17.725
17.625
(0.10)
0.57%
CBOE Short-term Volatility Index
VXST
9.40
9.54
(0.14)
-1.47%
CBOE 3 Month Volatility Index
VXV
15.13
15.26
(0.13)
-0.85%
CBOE Mid-term Volatility Index (6 month)
VXMT
17.71
17.52
0.19
1.08%
VIX of VIX
VVIX
82.44
94.49
(12.05)
-12.75%
CBOE SKEW Index
SKEW
136.58
132.13
4.45
3.37%
Long VIX ETP's





ProShares Ultra VIX Short Term Futures ETF
UVXY
19.75
20.70
(0.95)
-4.59%
iPath S&P 500  VIX Short Term Futures ETN
VXX
36.13
36.95
(0.82)
-2.22%
ProShares VIX Short Term Futures ETF
VIXY
30.01
30.66
(0.65)
-2.12%
iPath S&P 500  VIX Mid-Tem Futures ETN
VXZ
38.90
38.47
0.43
1.12%
Inverse VIX ETP's





ProShares Short VIX Short Term Future ETF
SVXY
73.44
72.11
1.33
1.84%
Daily Inverse VIX Short Term ETN
XIV
37.55
36.85
0.70
1.90%

The week of August 22 includes reports on new home sales, existing home sales, and durable goods orders.  The major economic announcement will be the release of the second estimate of the second quarter GDP.  The second quarter earnings reporting season is nearly over.  The lack of earnings reports will significantly reduce the amount of individual corporate news. The dearth of economic reports and the lack of corporate news moves attention to monetary policy.

On Thursday and Friday, the Kansas City Federal Reserve Bank hosts an annual monetary policy symposium, discussing "Designing Resilient Monetary Policy Frameworks for the Future," in Jackson Hole, Wyoming. This event is closely watched by market players. In the past, the Jackson Hole stage has been used by Fed chairs to speak on prospects for US and global economies, in addition to discussing the direction and timing of future interest rates. 

Do not take an early lunch on Friday with standing opening orders.  Fed Chair Janet Yellen Janet Yellen will be speaking at 11AM EDT.  Traders will be waiting to react to her comments.

The earnings highlights this week for widely held and actively traded stocks include: Nordson, Toll Brothers, J.M. Smucker, Dollar General, Dycom Industries, La-Z-Boy, Intuit, Best Buy, HP, Guess?, Williams-Sonoma, Sanderson Farms, Signet Jewelers, Dollar Tree, GameStop, Tiffany &Co, Medtronic, Autodesk, Tech Data, Movado, Ulta Salon, and Big Lots.

I have an expanded initial scan for earnings play candidates over the next month.  You should further filter any of the stocks with your own risk/reward criteria.  This scan is available as a PDF.  Contact me a fjfahey@gmail.com if you would like it sent to you or if you would like to be removed from the distribution list for additional scans.
Symbol
Company Name
Aug 19 Close
IV30
B/A
DATE
 OPT VOL
HAIN
Hain Celestial Group Inc
$38.31
50.43
AMC
29-Aug
5575
PANW
Palo Alto Networks Inc
$137.09
49.73
AMC
30-Aug
8123
VEEV
Veeva Systems Inc
$39.72
44.80
AMC
30-Aug
1169
CRM
salesforce.com, inc.
$76.91
38.13
AMC
31-Aug
16291
FIVE
Five Below Inc
$46.91
48.02
AMC
31-Aug
1445
AMBA
Ambarella Inc
$63.64
52.24
AMC
1-Sep
5728
AVGO
Broadcom Ltd
$173.93
36.67
AMC
1-Sep
9405
LULU
Lululemon Athletica inc.
$80.09
40.25
AMC
1-Sep
11033
Data Source: OptionVue7

Advice to stimulate your imagination:

"Don't try to buy at the bottom and sell at the top.
It can't be done except by Liars." Bernard Baruch

In the middle of difficulty lies opportunity” Albert Einstein

"If you spend more than 13 minutes analyzing economic and market forecasts,
you've wasted 10 minutes" - Peter Lynch

"The market can remain irrational longer than you can remain solvent." - John Keynes

Monday August 22:

Economic:  Chicago Fed National Activity Index – 8:30.                                                                                                                                                                 
International Economic: No major announcements.

Earnings: No earnings announcements meeting scan criteria.


Tuesday August 23:

Economic:  Redbook – 8:55, Richmond Red Manufacturing Index – 9:00.

International Economic:  Germany PMI Manufacturing Flash -3:30AM, EMU PMI Manufacturing Flash – 4:00AM, Great Britain CBI Industrial Trends Survey – 6:00AM, EMU EC Consumer Confidence – 10:00.

Earnings:
Symbol
Company Name
August 19 Close
IV30
B/A
AVGOPTVOL
ALR
Alere Inc
$40.21
48.60
BMO
2002
BBY
Best Buy Co Inc
$33.20
39.42
BMO
9060
TOL
Toll Brothers Inc
$28.62
30.28
BMO
1659
INTU
Intuit Inc.
$112.54
25.13
AMC
1273
TV
Grupo Televisa SAB
$27.23
23.67

1382


Wednesday August 24:

Economic:  MBA Mortgage Applications – 7:00, FHFA House Price Index – 9:00, PMI Manufacturing Index Flash – 9:45, Existing Home Sales – 10:00, EIA Petroleum Status Report - 10:30.

International Economic:  Germany GDP - 2:00AM.

Earnings:
Symbol
Company Name
August 19 Close
IV30
B/A
AVGOPTVOL
CTRP
Ctrip.com International, Ltd. (ADR)
$46.29
41.06
AMC
9562
PVH
PVH Corp
$106.50
37.22
AMC
1487
WDAY
Workday Inc
$81.37
46.91
AMC
3460
WSM
Williams-Sonoma, Inc.
$52.22
41.93

2471


Thursday August 25:

Economic:  Weekly Jobless Claims – 8:30, Durable Goods Orders – 6:30, Bloomberg Consumer Comfort Index – 9:45, EIA Natural Gas Report – 10:30< Kansas City Fed Manufacturing Index – 11:00.

International Economic:  France Business Climate Indicator – 2:45, Japan CPI – 7:30PM.

Other:  Kansas City Federal Reserve Bank hosts annual monetary policy symposium, discussing "Designing Resilient Monetary Policy Frameworks for the Future," in Jackson Hole, Wyoming. Symposium participants include prominent central bankers, finance ministers, academics, and financial market participants from around the world. 

Earnings:
Symbol
Company Name
August 19 Close
IV30
B/A
AVGOPTVOL
SIG
Signet Jewelers Ltd.
$92.94
50.83
DMT
5460
BURL
Burlington Stores Inc
$78.04
36.34
BMO
1340
DG
Dollar General Corp.
$91.69
26.64
BMO
3653
DLTR
Dollar Tree, Inc.
$95.86
29.76
BMO
4514
GME
GameStop Corp.
$31.17
44.04
BMO
7993
GLNG
Golar LNG Limited (USA)
$20.63
65.44
BMO
2049
TIF
Tiffany & Co.
$68.22
34.00
BMO
5030
ADSK
Autodesk, Inc.
$63.50
35.26
AMC
1269
SPLK
Splunk Inc
$63.83
47.10
AMC
3874
ULTA
Ulta Salon, Cosmetics & Frag
$271.59
37.38
AMC
3535

Friday August 26:

Economic:  GDP – 8:30, International Trade in Goods – 8:30, Corporate Profits – 8:30, PMI Services Flash – 9:45. Consumer Sentiment – 10:00, Baker Hughes Rig Count – 1:00.

International Economic:  France GDP – 2:45AM.

Other:  Kansas City Federal Reserve Bank hosts annual monetary policy symposium, discussing "Designing Resilient Monetary Policy Frameworks for the Future," in Jackson Hole, Wyoming. Janet Yellen speaks at 11:00AM, Symposium participants include prominent central bankers, finance ministers, academics, and financial market participants from around the world. 

Earnings:
Symbol
Company Name
August 19 Close
IV30
B/A
AVGOPTVOL
BIG
Big Lots, Inc.
$54.49
45.21
BMO
1181
TTM
Tata Motors Limited (ADR)
$38.73
33.12

1193


Monday August 29:

Economic:  Personal Income and Outlays – 8:30, Dallas Fed Manufacturing Survey – 10:30.                                                                                                                                                                 
International Economic: Japan Unemployment Rate and Household Spending – 7:30PM.

Earnings:
Symbol
Company Name
August 19 Close
IV30
B/A
AVGOPTVOL
HAIN
Hain Celestial Group Inc
$38.31
50.43
AMC
5575