Monday, March 20, 2017

Market News for the Prepared Mind: 3.20.2017 – 3.27.2017


"Chance favors the Prepared Mind." - Louis Pasteur

All generalizations are dangerous, even this one.” - Alexandre Dumas fils

“If you must hold yourself up to your children as an object lesson,
hold yourself up as a warning and not as an example.” - George Bernard Shaw

“History is a vast early warning system.” - Norman Cousins

Stocks finished higher for the week. The specter of a correction – major or minor -has been a constant topic of discussion in the financial media. Market participants are presented with a litany of reason the market is “due” for a correction – Fibonacci numbers, CBOE Skew Index, low VIX, consecutive days without a 1% move in the SPX, number of days between 5% corrections, the French election in April, and Korean nuclear intentions. Listening to these admonitions can be daunting.

I acknowledge the outlier risks. These risks are a small part of the risk/reward equation. One of the most important factor in successful trading is knowing one’s response to emergency trading situations will be. I constantly ask myself “What if, what if, what if.” I always know how and where I can shut down risk. I am my own emergency first responder.

Here is an overview of the US market behavior last week and for 2017:
Index 17-Mar Change % Weekly 2016 YTD Volatility of Index
Dow Jones Industrials (DJIA) 20,914.62 11.64 0.06% 5.83% 10.33% (VXD)
S&P 500 (SPX) 2,378.25 7.00 0.30% 6.25% 11.28% (VIX)
NASDAQ 100 (NDX) 5,408.76 35.28 0.66% 11.21% 10.57% (VXN)
Russell 2000 (RUT) 1,391.50 25.86 1.89% 2.53% 14.14% (RVX)
S&P 100 (OEX) 1055.34 0.10 0.01% 6.45% 9.15% (VXO)
Crude Oil (CLK7) 49.26 0.35 0.72% -8.59% 27.45%(OVX)
CBOE Volatility Index (VIX) 11.28 (0.38) -3.26% NA
Data Source: OptionVue8


The CBOE Skew Index closed on Friday at 154.34. This is the highest closing level for the SKEW in the history of the index. The CBOE Skew Index has hit closing all time high a number of times during the current bull market run. In a nut shell, the SKEW measures the implied volatility/market pricing of deep out-of-the-money options on the S&P 500. A SKEW level of 100 in an indicator of a normal distribution of index implied volatilities. A “high” SKEW value is a shows market pricing of a large market move to the downside. In other words, the probability of outlier returns increases as the SKEW reaches higher prices.

Russell Rhoads, CBOE VIX guru sums the calculation as follows: “SKEW is calculated starting with a ratio. This ratio consists of the numerator being lower strike SPX puts and the denominator being higher strike SPX puts. For instances if the IV of the lower strike puts is 30% and the higher strike puts is 20% then the first part of the calculation is 30/20 = 1.33. This figure is then multiplied by 100 to give us the SKEW index or 1.33 x 100 results in a SKEW of 133. There are two ways for SKEW to rise, either through a higher numerator or a lower denominator. High SKEW does indicate that out of the money puts are relatively expensive, but in a low volatility environment we may get excited about an all-time high, but keep that number in a bit of context.”

SKEW monthly chart for 2011 – 2017. (Chart courtesy of Thinkorswim.)


Here is an overview of last week for the VIX and related products:
Indexes Ticker 17-Mar 10-Mar Change % Change
CBOE Volatility Index VIX 11.28 11.66 (0.38) -3.26%
VIX March Future (3/22/2017) VXH7 11.775 12.525 (0.75) -5.99%
VIX April Future (4/19/2017) VXJ7 13.270 14.200 (0.93) -6.55%
VIX May Future (5/17/2017) VXK7 14.225 15.125 (0.90) -5.95%
CBOE Short-term Volatility Index VXST 9.87 10.68 (0.81) -7.58%
CBOE 3 Month Volatility Index VXV 13.92 14.38 (0.46) -3.20%
CBOE Mid-term Volatility Index (6 month) VXMT 15.85 16.33 (0.48) -2.94%
VIX of VIX VVIX 78.66 80.27 (1.61) -2.01%
CBOE SKEW Index SKEW 154.34 138.99 15.35 11.04%
Long VIX ETP's
ProShares Ultra VIX Short Term Futures ETF UVXY 16.32 18.90 (2.58) -13.65%
iPath S&P 500 VIX Short Term Futures ETN VXX 15.81 17.01 (1.20) -7.05%
ProShares VIX Short Term Futures ETF VIXY 13.19 14.18 (0.99) -6.98%
iPath S&P 500 VIX Mid-Term Futures ETN VXZ 27.53 28.45 (0.92) -3.23%
Inverse VIX ETP's
ProShares Short VIX Short Term Future ETF SVXY 142.15 132.58 9.57 7.22%
Daily Inverse VIX Short Term ETN XIV 73.58 68.42 5.16 7.54%
Data Source: OptionVue8


The week opens with FBI Director James Comey testifying before a House committee investigating Russian activities during the 2016 presidential election. In addition, he is expected he will provide long-awaited answers and evidence on that issue and whether President Trump was indeed wiretapped. Other highlights for the week will be a litany of speeches – 12 in all - given by members of the Fed. Any of these talks have the potential to provide a market moving slip of the tongue. The House of Representatives is scheduled to vote on Thursday on an ACA replacement.

The coming week brings reports on new home sales, existing home sales, durable goods orders. The week's highlight will be Friday's durable goods report, offering the latest on the factory sector. Flash PMIs for the Eurozone and Japan will give a first look at data for March. Price data and all important retail sales will be released for February in the UK.

Fedex and Lennar are the only stocks announcing earnings this week which meet my criteria. For trading the announcement. This was the second straight ho-hum earnings season. It has been my experience that the post earnings behavior of individual stocks and the associated options usually show a remarkable consistency between individual earnings announcements in movement of the underlying and change in the implied volatility of the options. This consistency within individual stocks has not been apparent the past two earnings cycles. It is as if a “new normal” is being defined.


Advice to stimulate your imagination:

“I took a speed-reading course and read War and Peace in twenty minutes. It involves Russia.” - Woody Allen

“Man approaches the unattainable truth through a succession of errors.” - Aldous Huxley

“The sky is falling” – Chicken Little

"Buy the ticket, take the ride.” – Hunter S. Thompson

Monday March 20:


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

International Economic: Germany PPI - 3:00AM.

Other: Chicago Federal Reserve Bank President Charles Evans speaks about current economic conditions or monetary policy in live TV interview with Fox Business News' Maria Bartiromo during "Mornings with Maria." – 8:30AM, Chicago Federal Reserve Bank President Charles Evans will speak at New York National Association for Business Economics Luncheon followed by audience and then media Q&A in New York – 1:10PM.



Tuesday March 21:


Economic: NFIB Small Business Optimism Index – 6:00, PPI – FD – 8:30, Redbook – 8:55.

International Economic: Great Britain CPI & PPI – 5:30AM, Great Britain CBI Industrial Trends Survey – 7:00, AM, Japan – Merchandise Trade – 7:50PM.

Other: Kansas City Federal Reserve Bank President Esther George speaks on the U.S. economy and the Fed at a Women in Housing and Finance event in Washington, D.C., with audience Q&A – 12:00PM, Federal Reserve Bank of Cleveland President Loretta Mester speaks on outlook and communications at the University of Richmond in Richmond, Va., with audience and media Q&A – 6:00PM, Bank of Japan Minutes – 7:50PM, Boston Federal Reserve Bank President Eric Rosengren addresses the Twelfth Asia-Pacific High Level Meeting on Banking Supervision in Bali, Indonesia –9:45PM.



Wednesday March 22:


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

International Economic: Japan All Industry Index – 12:30AM.

Thursday March 23:


Economic: Jobless Claims - 8:30, Bloomberg Consumer Comfort Index - 9:45, New home Sales – 10:00, EIA Natural Gas Report – 10:30, Money Supply – 4;30.

International Economic: Great Britain Retail Sales – 5:30, Great Britain CBI Distributive Trades – 7:00AM.

Other: Federal Reserve Chairman Janet Yellen gives opening keynote at Federal Reserve System Community Development Research Conference in Washington – 8:00AM, Minneapolis Federal Reserve Bank President Neel Kashkari gives afternoon remarks at Federal Reserve System Community Development Research Conference in Washington – 12:00PM, Dallas Federal Reserve Bank President Robert Kaplan participates in a discussion on the economic outlook and monetary policy at the Chicago Council on Global Affairs in Chicago, with audience and media Q&A -7:00PM.


Friday March 24:


Economic: Durable Goods Orders – 8:30, PMI Composite Flash – 9:45, Baker-Hughes Rig Count – 1:00PM.

International Economic: France GDP – 3:45AM, Eurozone PMI Composite Flash – 5:00AM.

Other: Federal Reserve Bank of Chicago President Charles Evans gives opening remarks at Federal Reserve System Community Development Research Conference in Washington – 8:00AM, St. Louis Federal Reserve Bank President James Bullard speaks at a Economic Club of Memphis Economic Briefing in Memphis, Tenn., with audience and media Q&A – 8:05AM, San Francisco Federal Reserve Bank President John Williams discusses a paper titled "Safety, Liquidity, and the Natural Rate of Interest" at the Brookings Institution's Papers on Economic Activity spring conference – 8:30AM.

Monday March 27:


Economic: Dallas Fed Manufacturing Survey

International Economic: Eurozone M3 Money Supply – 5:00AM.

Other: San Francisco Federal Reserve Bank President John Williams discusses a paper titled "Safety, Liquidity, and the Natural Rate of Interest" at the Brookings Institution's Papers on Economic Activity spring conference – 1:15PM.


































































Sunday, March 12, 2017

Market News for the Prepared Mind: 3.13.2017 – 3.20.2017


"Chance favors the Prepared Mind." - Louis Pasteur

“I had nothing to offer anybody except my own confusion.” – Jack Kerouac

“Experience is not what happens to a man; 
it is what a man does with what happens to him.” - Aldous Huxley

“When buying and selling are controlled by legislation,  the first things to be bought and sold are legislators.”   PJ O’Rourke

The S&P 500 Index recorded its first weekly loss after six consecutive weeks of gains. A strong jobs report and the glimmerings of inflation all but guarantee a rate hike at this week’s FOMC meeting. It should be noted that job numbers which Trump described as phony, when reported by the previous administration, are now described by the current administrations as “very real,” “great again”, and “great news for American workers.” The Bureau of Labor Statistics has not changed the methodology for computing the employment numbers. As Mike Ditka once famously replied, “Who ya crappin?”

This rosy outlook is threatened by the Trump administration’s impending renegotiation of trade agreements Grumbling by fiscal hawks in the House could throw a wrench in implementation of the president’s legislative agenda. This uncertainty led to a market searching for a trend. The lack of a short-term trend has made it difficult for traders. I ignored one my of my tried and true trading maxims last week – “Doing nothing is a viable trading strategy.” I chose to flail around rather than doing nothing. The comings week’s mantra will be “Do not force trades.”

Here is an overview of the US market behavior last week and for 2017:
Index 10-Mar Change % Weekly 2016 YTD Volatility of Index
Dow Jones Industrials (DJIA) 20,902.98 (102.73) -0.49% 5.77% 11.3% (VXD)
S&P 500 (SPX) 2,371.25 (9.25) -0.39% 5.94% 11.66% (VIX)
NASDAQ 100 (NDX) 5,373.48 0.00 0.00% 10.48% 12.20% (VXN)
Russell 2000 (RUT) 1,365.64 (28.48) -2.04% 0.63% 16.33% (RVX)
S&P 100 (OEX) 1055.24 (1.60) -0.15% 6.44% 10.50% (VXO)
Crude Oil (CLJ7) 48.39 (4.81) -9.04% -10.21% 33.45%(OVX)
CBOE Volatility Index (VIX) 11.66 0.70 6.39% NA
Data Source: OptionVue8


The 2017 high for the CBOE Volatility Index is 13.28. As of Friday March 10, the VIX has gone 46 consecutive session without going above 13.50. This is the longest stretch below 13.5 since the 2008 financial crisis. The longest all time streak of 68 days below 13.50 took place from September 2006 to February 2007. These low VIX levels are indicative of the fact the S&P 500 has gone 103 days without a 1% drop. Beware of complacency.

Here is an overview of last week for the VIX and related products:
Indexes Ticker 10-Mar 3-Mar Change % Change
CBOE Volatility Index VIX 11.66 10.96 0.70 6.39%
VIX March Future (3/22/2017) VXH7 12.525 12.825 (0.30) -2.34%
VIX April Future (4/19/2017) VXJ7 14.200 14.575 (0.38) -2.57%
VIX May Future (5/17/2017) VXK7 15.125 15.425 (0.30) -1.94%
CBOE Short-term Volatility Index VXST 10.68 8.56 2.12 24.77%
CBOE 3 Month Volatility Index VXV 14.38 14.26 0.12 0.84%
CBOE Mid-term Volatility Index (6 month) VXMT 16.33 16.25 0.08 0.49%
VIX of VIX VVIX 80.27 81.19 (0.92) -1.13%
CBOE SKEW Index SKEW 138.99 136.10 2.89 2.12%
Long VIX ETP's
ProShares Ultra VIX Short Term Futures ETF UVXY 18.90 20.13 (1.23) -6.11%
iPath S&P 500 VIX Short Term Futures ETN VXX 17.01 17.54 (0.53) -3.02%
ProShares VIX Short Term Futures ETF VIXY 14.18 14.61 (0.43) -2.94%
iPath S&P 500 VIX Mid-Term Futures ETN VXZ 28.45 28.96 (0.51) -1.76%
Inverse VIX ETP's
ProShares Short VIX Short Term Future ETF SVXY 132.58 128.79 3.79 2.94%
Daily Inverse VIX Short Term ETN XIV 68.42 66.42 2.00 3.01%
Data Source: OptionVue8


The week of March 13 is all about the Federal Reserve. The Federal Reserve will meet ab March 14 and March 5. It will and announce its monetary policy on Wednesday. Release of the FOMC report will be followed by a Janet Yellen press conference. Other national banks in the news this week. The Banks of Japan and England will also meet along with the Swiss National Bank. The Group of 20 (G20) will meet in Baden-Baden on March 17 and 18. China will release industrial production and retail sales data for the first two months of the year.

The earnings season has entered the quiet time. Adobe and Dollar General are the only stocks announcing earnings this week which meet my criteria. For trading the announcement. This was the second straight ho-hum earnings season. It has been my experience that the post earnings behavior of individual stocks and the associated options usually show a remarkable consistency between individual earnings announcements in movement of the underlying and change in the implied volatility of the options. This consistency within individual stocks has not been apparent the past two earnings cycles. It is as if a “new normal” is being defined.


Advice to stimulate your imagination:
“I took a speed-reading course and read War and Peace in twenty minutes. It involves Russia.” - Woody Allen

“I don't mind going back to daylight saving time. With inflation, 
the hour will be the only thing I've saved all year.” – Victor Borge

"Buy the ticket, take the ride.” – Hunter S. Thompson

Monday March 13:

Economic: Labor Market Conditions Index – 10:00.

International Economic: Japan Tertiary Index – 1:30AM, China Industrial Production and Retail Sales – 10:00PM.

Tuesday March 14:

Economic: NFIB Small Business Optimism Index – 6:00, PPI – FD – 8:30, Redbook – 8:55.

International Economic: Germany CPI – 3:00AM, Eurozone Industrial Production – 6:00.

Other: FOMC meeting begins.


Wednesday March 15:

Economic: MBA Mortgage Applications – 7:00, CPI – 8:30, Retail Sales – 8:30, Empire State Manufacturing Survey = 8:30, Business Inventories – 10:00, Housing Market Index 0 10:00, EIA Petroleum Status Report – 10:30.

International Economic: France CPI – 3:45AM, Great Britain Labour Market Report – 5:30AM.

Other: FOMC Meeting Announcement – 2:00, Fed Chair Press Conference – 2:30.


Thursday March 16:

Economic: Housing Starts – 8:30, Jobless Claims - 8:30, Philadelphia Fed Business Outlook Survey – 8:30, Bloomberg Consumer Comfort Index - 9:45, JOLTS – 10:00, EIA Natural Gas Report – 10:30, Money Supply – 4;30.
International Economic: Eurozone HICP – 6:00AM.
Other: European Central Bank (ECB) Announcement – 7:45 AM

Friday March 17:

Quadruple Witching - expiration for stock index futures, stock index options, stock options and single stock futures.


Economic: Industrial Production – 9:15, Atlanta Fed Business Inflation Expectations - 10:00, Consumer Sentiment – 10:00, Leading Indicators – 10:00, Baker-Hughes Rig Count – 1:00PM.

International Economic: Eurozone Merchandise Trade – 6:00AM.

Monday March 20:

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

International Economic: Germany PPI - 3:00AM.

Other: Chicago Federal Reserve Bank President Charles Evans will speak at New York National Association for Business Economics Luncheon followed by audience and then media Q&A in New York – 1:10PM.

























































Monday, March 6, 2017

Market News for the Prepared Mind: 3.6.2017 – 3.13.2017


"Chance favors the Prepared Mind." - Louis Pasteur

“Sometimes paranoia's just having all the facts.” - William S. Burroughs

"Facts do not cease to exist because they are ignored." - Aldous Huxley

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

The Dow Jones Industrials and the S&P 500 are up over 6% since New Year’s Day. The tech-laden NADAQ 100 is up nearly 10.5% for the same period. The 2009-2017 bull market is the second longest in in history, surpassed on by the bull market running from 1987-2000. In absolute terms this bull market is the third strongest in history. The market rose 582% from 1987-2000 and 267% from 1949 to 1956. This long-term movement leaves the investor in the quandary of “What to do.”

After any major market move, it is a good idea to reassess your financial goals based on age, need, and risk tolerance. Do not be afraid to adjust and rebalance.

Here is an overview of the US market behavior last week and for 2017:
Index 3-Mar Change % Weekly 2016 YTD Volatility of Index
Dow Jones Industrials (DJIA) 21,005.71 183.95 0.88% 6.29% 11.26% (VXD)
S&P 500 (SPX) 2,380.50 13.16 0.56% 6.35% 10.96% (VIX)
NASDAQ 100 (NDX) 5,373.48 30.17 0.56% 10.48% 11.77% (VXN)
Russell 2000 (RUT) 1,394.12 (0.40) -0.03% 2.73% 16.69% (RVX)
S&P 100 (OEX) 1056.84 9.03 0.86% 6.60% 10.08% (VXO)
Crude Oil (CLJ7) 53.20 (0.82) -1.52% -1.28% 25.59%(OVX)
CBOE Volatility Index (VIX) 10.96 (0.51) -4.45% NA
Data Source: OptionVue8

Concerns about Trump’s speech before Congress led to a Tuesday close of 12.92. The VIX ended the week closing down at 4.45% or 0.51. This was the lowest closing low since February 14. The VXST - CBOE Short-term Volatility Index – show the largest decrease, 9.03%, among the various S&P 500 volatility indexes. Fears of March 15 parliamentary elections in the Netherlands and the April 21 beginning of the French Presidential election process were not reflected in pricing of VIX futures or related products. This could change at any moment. The ephemeral nature of fear and VIX pricing guarantee this.

Here is an overview of last week for the VIX and related products:
Indexes Ticker 3-Mar 24-Feb Change % Change
CBOE Volatility Index VIX 10.96 11.47 (0.51) -4.45%
VIX March Future (3/22/2017) VXH7 12.825 13.325 (0.50) -3.75%
VIX April Future (4/19/2017) VXJ7 14.575 15.250 (0.68) -4.43%
VIX May Future (5/17/2017) VXK7 15.425 16.075 (0.65) -4.04%
CBOE Short-term Volatility Index VXST 8.56 9.41 (0.85) -9.03%
CBOE 3 Month Volatility Index VXV 14.26 14.76 (0.50) -3.39%
CBOE Mid-term Volatility Index (6 mo) VXMT 16.25 16.68 (0.43) -2.58%
VIX of VIX VVIX 81.19 83.31 (2.12) -2.54%
CBOE SKEW Index SKEW 136.10 138.66 (2.56) -1.85%
Long VIX ETP's
ProShares Ultra VIX Short Term Futures ETF UVXY 20.13 21.44 (1.31) -6.11%
iPath S&P 500 VIX Short Term Futures ETN VXX 17.54 18.09 (0.55) -3.04%
ProShares VIX Short Term Futures ETF VIXY 14.61 15.08 (0.47) -3.12%
iPath S&P 500 VIX Mid-Term Futures ETN VXZ 28.96 29.84 (0.88) -2.95%
Inverse VIX ETP's
ProShares Short VIX Short Term Future ETF SVXY 128.79 125.25 3.54 2.83%
Daily Inverse VIX Short Term ETN XIV 66.42 64.52 1.90 2.94%
Data Source: OptionVue8


There are just a few economic reports that will be released next week, but they do include one of the biggest – the U.S. Employment Situation report on Friday. Monday starts with Factory Orders followed by the Tuesday release of trade numbers. The focus changes to employment on Wednesday with the release of the ADP Employment Report. Employment remains the focus through Friday when February’s Employment Situation Report is released. The ECB will also release a statement after its regularly scheduled meeting on Thursday. January merchandise trade and industrial output will be released this coming week by a number of countries.

The wild card remains the US political climate. Google Trump and read the tweets from Donald Trump (@realDonaldTrump). His tweets have the capability of setting the tenor for an entire trading day.

The earnings season has entered the quiet time. This was the second straight ho-hum earnings season. It has been my experience that the post-earnings behavior of individual stocks and the associated options usually show a remarkable consistency between individual earnings announcements and movement of the underlying and change in the implied volatility of the options. This consistency within individual stocks has not been apparent the past two earnings cycles. It is as if a “new normal” is being defined.

Earnings announcements are predictable volatility events providing trading opportunity. It is important to reduce the number of surprises which may occur in any trading campaign. Confirm the date and time of any 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 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 > 25, Average daily option volume > 800 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 earning trades last week. The bid/ask spreads seemed much larger than usual. Do not force trades in illiquid markets. Data Source for earnings: OptionVue8


Earnings Scan: March 6 through March 17

Symbol Company Name Mar 3 Close IV30 B/A AVGOPTVOL DATE
CASY Casey's General Stores Inc $113.91 30.08 AMC 958 6-Mar
THO Thor Industries, Inc. $113.94 36.21 AMC 848 6-Mar
DKS Dicks Sporting Goods Inc $52.34 49.32 BMO 5429 7-Mar
URBN Urban Outfitters, Inc. $26.06 52.60 BMO 2267 7-Mar
MOMO Momo Inc (ADR) $26.87 63.71 1698 7-Mar
CIEN Ciena Corporation $26.10 46.53 BMO 4732 8-Mar
SIG Signet Jewelers Ltd. $64.58 46.27 DMT 1746 9-Mar
STRP Straight Path Communications $32.63 81.74 BMO 1249 9-Mar
FNSR Finisar Corporation $34.48 60.90 AMC 3054 9-Mar
NAV Navistar International Corp $27.68 51.73 AMC 1109 9-Mar
ULTA Ulta Beauty Inc $278.15 33.32 AMC 4262 9-Mar
BIVV Bioverativ Inc $52.51 35.23 1030 9-Mar
REN Resolute Energy Corp $44.49 54.39 AMC 1176 14-Mar
JBL Jabil Circuit, Inc. $25.96 33.08 AMC 832 15-Mar
WSM Williams-Sonoma, Inc. $50.34 33.69 AMC 861 15-Mar
DG Dollar General Corp. $73.12 36.30 BMO 4844 17-Mar


Advice to stimulate your imagination:
“I took a speed-reading course and read War and Peace in twenty minutes. It involves Russia.” - Woody Allen

“Nobody should have any illusion about the possibility of gaining military superiority over Russia. We will never allow this to happen.” - Vladimir Putin

“If you do not actively attack the risks, they will actively attack you.” - Tom Gib

Monday March 6:


Economic: Gallup US Spending Measure - 8:30, Factory Orders – 10:00, TD-Ameritrade IMX – 12:30, Durable Goods Orders – 8:30, Dallas Fed Manufacturing Survey – 10:30.


International Economic: No major announcements.


Orders: Minneapolis Federal Reserve Bank President Neel Kashkari speaks at NABE conference in panel titled "A View from the FRB Minneapolis," in Washington, D.C – 3:00PM.


Tuesday March 7:

Economic: International Trade in Goods – 8:30, Gallup US ECI – 8:30. Redbook – 8:55, EIA Petroleum Status Report – 10:30.

International Economic: Germany Manufacturers’ Orders – 2:00AM, Eurozone GDP – 5:00AM.

Wednesday March 8:


Economic: MBA Mortgage Applications – 7:00 ADP Employment Report - 8:15, Productivity and Costs - 8:30, Wholesale Trade - 10:00, EIA Natural Gas Report – 10:30.


International Economic: Germany Industrial Production – 2:00AM, France Merchandise Trade – 2:45. China CPI & PPI – 8:30PM.


Thursday March 9:


Economic: Challenger Job-Cut Report – 7:30, Jobless Claims - 8:30, Gallup Good Jobs Rate - 8:30, Import and Export Prices - 8:30, Bloomberg Consumer Comfort Index - 9:45, Quarterly Services Survey - 10:00.

International Economic: No major announcements.

Other: European Central Bank (ECB) Announcement – 7:45 AM


Friday March 10:


Economic: February Employment Situation – 8:30, Baker-Hughes Rig Count – 1:00PM.


International Economic: Germany Merchandise Trade - 2:00AM, France Industrial Production - 3:45AM, Italy Unemployment Rate - 4:00AM, Great Britain Industrial Production - 5:30AM, Great Britain Merchandise Trade – 5:30AM.


Monday March 13:


Economic: Labor Market Situation – 10:00.


International Economic: Japan Tertiary Index – 1:30AM, China Industrial Production and Retail Sales – 10:00PM.

























































Sunday, February 26, 2017

Market News for the Prepared Mind: 2.27.2017 – 3.6.2017

“Imagination decides everything.” - Blaise Pascal

"Chance favors the Prepared Mind." - Louis Pasteur

“This awful catastrophe is not the end but the beginning.
History does not end so. It is the way its chapters open.” - St. Augustine

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

The Dow Jones Industrials were up for the 11th straight day. The string of gains is the product of a string of small daily gains. Treasury yields move to their lowest levels in over 5 weeks. The VIX remains at levels showing little investor concern. Most of the indicators are decidedly bullish, yet I am wary. Over 30 years as a professional options trader has left me permanently wary.

Here is an overview of the US market behavior last week and for 2017:
Index 24-Feb Change % Weekly 2016 YTD Volatility of Index
Dow Jones Industrials (DJIA) 20,821.76 197.71 0.96% 5.36% 11.34% (VXD)
S&P 500 (SPX) 2,367.34 16.18 0.69% 5.77% 11.47% (VIX)
NASDAQ 100 (NDX) 5,343.31 18.59 0.35% 9.86% 12.75% (VXN)
Russell 2000 (RUT) 1,394.52 (5.34) -0.38% 2.76% 16.90% (RVX)
S&P 100 (OEX) 1047.81 8.58 0.83% 5.69% 10.65% (VXO)
Crude Oil (CLJ7) 54.02 0.29 0.54% 0.24% 25.72%(OVX)
CBOE Volatility Index (VIX) 11.47 (0.02) -0.17% NA
Data Source: OptionVue8

THE VIX was down for the week. The March VIX future was down, while the April and May futures showed increases of over 6%. Russell Rhoads, CBOE VIX guru, pointed to the upcoming first round of the French presidential election as impetus for the strength of the April and May VIX futures. This strength was reflected in the VIX 3 month and 6 month Volatility Indexes. The VXV (CBOE 3 Month Volatility Index) was up 7.58%,

Here is an overview of last week for the VIX and related products:
Indexes Ticker 24-Feb 17-Feb Change % Change
CBOE Volatility Index VIX 11.47 11.49 (0.02) -0.17%
VIX March Future (3/22/2017) VXH7 13.325 13.125 0.20 1.52%
VIX April Future (4/19/2017) VXJ7 15.250 14.350 0.90 6.27%
VIX May Future (5/17/2017) VXK7 16.075 15.150 0.92 6.11%
CBOE Short-term Volatility Index VXST 9.41 9.03 0.38 4.21%
CBOE 3 Month Volatility Index VXV 14.76 13.72 1.04 7.58%
CBOE Mid-term Volatility Index (6 month) VXMT 16.68 15.79 0.89 5.64%
VIX of VIX VVIX 83.31 81.25 2.06 2.54%
CBOE SKEW Index SKEW 138.66 141.15 (2.49) -1.76%
Long VIX ETP's
ProShares Ultra VIX Short Term Futures ETF UVXY 21.44 20.25 1.19 5.88%
iPath S&P 500 VIX Short Term Futures ETN VXX 18.09 17.54 0.55 3.14%
ProShares VIX Short Term Futures ETF VIXY 15.08 14.65 0.43 2.94%
iPath S&P 500 VIX Mid-Term Futures ETN VXZ 29.84 28.49 1.35 4.74%
Inverse VIX ETP's
ProShares Short VIX Short Term Future ETF SVXY 125.25 129.05 (3.80) -2.94%
Daily Inverse VIX Short Term ETN XIV 64.52 66.54 (2.02) -3.04%
Data Source: OptionVue8

The first trading week of March does not end with the the employment situation report. Instead of the usual first Friday of the month, the Bureau of Labor Statistics won’t release employment figures for February until the following Friday, March 10.. The coming week includes reports on durable goods and the CoreLogic Case-Shiller Home Price Index. The absence of the monthly employment numbers will allow extra attention to other economic releases” Durable goods orders on Monday, the second estimate for fourth-quarter GDP will follow on Tuesday as will January trade data on goods, and Wednesday will see personal income & outlays. The week closes with the ISM non-manufacturing report. The international focus is on Dutch Parliamentary elections on March 15 and the first round of the French presidential election on April 23. European investors are jittery.

The earnings season is starting to wind down. This is the second straight ho-hum earnings season. It has been my experience that the post earnings behavior of individual stocks and the associated options have shown a remarkable consistency in movement of the underlying and change in the implied volatility of the options. This consistency within individual stocks has not been apparent the past two earnings cycles. It is as if a “new normal” is being defined.
Earnings announcements are predictable volatility events providing trading opportunity. It is important to reduce the number of surprises which may occur in any trading campaign. Confirm the date and time of any 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 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 > 25, Average daily option volume > 800 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 earning trades last week. The bid/ask spreads seemed much larger than usual. Do not force trades in illiquid markets. Data Sources for earnings: Livevol Core and OptionVue8

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

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

“If you do not actively attack the risks, they will actively attack you.” - Tom Gib

Monday February 27:
Economic: Durable Goods Orders – 8:30, Pending Home Sales – 10:00, Dallas Fed Manufacturing Survey – 10:30

International Economic: Japan Industrial Production and Retail Trade – 6:50PM.

Other: Dallas Federal Reserve Bank President Robert Kaplan participates in a moderated discussion at the University of Oklahoma Price College of Business in Norman, Okla., with audience and media Q&A – 11:00AM.

Earnings:
Symbol Company Name Feb 24 Close IV30 B/A AVGOPTVOL
PRGO Perrigo Company PLC $84.07 40.82 BMO 2235
WUBA 58.com Inc (ADR) $32.68 53.75 BMO 3570
ALB Albemarle Corporation $92.41 34.07 AMC 1198
EOG EOG Resources Inc $97.57 28.39 AMC 7699
HAIN Hain Celestial Group Inc $34.84 35.57 AMC 3360
OKE ONEOK, Inc. $54.64 27.91 AMC 1057
PCLN Priceline Group Inc $1,637.26 25.03 AMC 15745
WDAY Workday Inc $88.19 43.69 AMC 3671
PBYI Puma Biotechnology Inc $34.70 174.27 1290
Tuesday February 28:


Economic: GDP – 8:30AM, International Trade in Goods – 8:30, Redbook – 8:55, S&P Corelogic Case-Shiller HPI 0 9:00, Chicago PMI – 9:45, Consumer Confidence – 10:00, Richmond Fed Manufacturing Index - 10:00, State Street Investor Confidence – 10:00, Farm Price – 3:00.

International Economic: Germany Retail Sales – 2:00AM, France GDP, CPI, PPI – 2:45AM.

Other: Kansas City Federal Reserve Bank President Esther George gives keynote speech about the U.S. Economy and Monetary Policy at Banking and the Economy: A Forum for Women in Banking in Midwest City, Okla., with audience Q&A – 12:45PM, San Francisco Federal Reserve Bank President John Williams gives outlook speech at the Santa Cruz Chamber of Commerce in Santa Cruz, Calif., with audience and media Q&A - 3:30PM, St. Louis Federal Reserve Bank President Bullard speaks about U.S. economy and monetary policy at Spring 2017 GWU Alumni Lecture in Economics at George Washington University in D.C., with audience and media Q&A - 6:30PM.

Earnings:
Symbol Company Name Feb 24 Close IV30 B/A AVGOPTVOL
ALR Alere Inc $40.37 64.40 BMO 2697
DPZ Domino's Pizza, Inc. $186.30 34.62 BMO 1322
GLNG Golar LNG Limited (USA) $27.20 54.67 BMO 3694
IONS Ionis Pharmaceuticals Inc $44.35 67.63 BMO 1839
LNG Cheniere Energy, Inc. $47.35 34.07 BMO 9020
MDCO The Medicines Company $51.84 76.94 BMO 1453
NXST Nexstar Media Group Inc $69.50 35.00 BMO 889
PTLA Portola Pharmaceuticals Inc $32.16 70.13 BMO 916
ROST Ross Stores, Inc. $67.64 27.91 BMO 966
TASR TASER International, Inc. $25.47 47.03 BMO 1949
TGT Target Corporation $64.98 25.53 BMO 18152
TSRO TESARO Inc $185.94 62.60 BMO 2512
ACAD ACADIA Pharmaceuticals Inc. $39.56 65.98 AMC 5335
AMBA Ambarella Inc $57.03 45.56 AMC 5362
CBI Chicago Bridge & Iron Company $33.89 41.32 AMC 3728
CRM salesforce.com, inc. $82.07 31.72 AMC 25239
DXCM DexCom, Inc. $77.96 45.62 AMC 1172
PANW Palo Alto Networks Inc $152.74 41.60 AMC 7766
SRPT Sarepta Therapeutics Inc $30.15 81.60 AMC 6283
VEEV Veeva Systems Inc $43.58 40.11 AMC 1351
KITE Kite Pharma Inc $52.97 72.81 1497

Wednesday March 1:


Economic: Motor Vehicle Sales, MBA Mortgage Applications – 7:00, Personal Income and Outlays – 8:30, Gallup US Job Creation Index – 6:30, PMI Manufacturing Index – 9:45, ISM Manufacturing Index – 10:00, Construction – 10:00, EIA Petroleum Status Report – 10:30. Beige Book – 2:00.

International Economic: Germany Unemployment Rate – 3:55AM, Eurozone Manufacturing Index – 4:00AM, Germany CPI - 8:00AM.

Other: Dallas Federal Reserve Bank President Robert Kaplan discuss local and national issues with Paul Quinn College President Michael Sorrell in Dallas, Texas – 12:00PM.

Earnings:
Symbol Company Name Feb 24 Close IV30 B/A AVGOPTVOL
BBY Best Buy Co Inc $44.31 48.03 BMO 12114
DLTR Dollar Tree, Inc. $77.57 44.73 BMO 7573
MYL Mylan NV $42.33 33.26 BMO 11743
PCRX Pacira Pharmaceuticals Inc $43.90 108.69 BMO 1091
AVGO Broadcom Ltd $210.58 29.52 AMC 9588
MNST Monster Beverage Corp $43.91 34.50 AMC 2474
SHAK Shake Shack Inc $36.61 41.64 AMC 1501

Thursday March 2:

Economic: Chain Store Sales, Weekly Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, PMI Services Flash – 9:45, EIA Natural Gas Report – 10:30, Money Supply – 4:30PM.

International Economic: Eurozone Unemployment Rate - 5:00AM, Eurozone PPI – 5:00AM, Global Composite PMI - 11:00AM.

Other: Federal Reserve Bank of Cleveland President Loretta Mester participates in a Power Talk event at Barnard College in New York, N.Y., with audience Q&A – 7:00PM

Earnings:
Symbol Company Name Feb 24 Close IV30 B/A AVGOPTVOL
BURL Burlington Stores Inc $85.39 38.82 BMO 1202
CNQ Canadian Natural Resource Ltd $29.40 31.48 BMO 3559
JD JD.Com Inc(ADR) $30.61 35.65 BMO 22659
KR Kroger Co $32.99 27.51 BMO 6572
ADSK Autodesk, Inc. $87.10 42.30 AMC 5291
NTNX Nutanix Inc $30.15 77.50 AMC 1812

Friday March 3:


Economic: PMI Service Index – 9:45, ISM Non-Manufacturing Index – 10:00, Baker-Hughes Rig Count – 1:00PM.

International Economic: Eurozone Retail Sales – 5:00AM, Global Composite PMI - 11:00AM.

Other: Vice Chairman Stanley Fischer of the Board of Governors of the Federal Reserve System gives keynote speech on this year's report on inflation expectations and dynamics at Chicago Booth's 2017 US Monetary Policy Forum in New York City, Chicago Federal Reserve Bank President Charles Evans and Richmond Federal Reserve Bank President Jeffrey Lacker discuss this year's report on inflation expectations and dynamics at Chicago Booth's 2017 US Monetary Policy Forum in New York City, with audience Q&A – 10:15AM, Federal Reserve Chair Janet Yellen speaks at the Executives' Club of Chicago – 1:00PM.

Earnings:
Symbol Company Name Feb 24 Close IV30 B/A AVGOPTVOL
BIG Big Lots, Inc. $51.35 45.82 BMO 959

Monday March 6:

Economic: Gallup US spending Measure - 8:30, Factory Orders – 10:00, TD-Ameritrade IMX – 12:30PM, Durable Goods Orders – 8:30, Dallas Fed Manufacturing Survey – 10:30.

International Economic: No major announcements.

Orders: Minneapolis Federal Reserve Bank President Neel Kashkari speaks at NABE conference in panel titled "A View from the FRB Minneapolis," in Washington, D.C – 3:00PM.

Earnings:
Symbol Company Name Feb 24 Close IV30 B/A AVGOPTVOL
CASY Casey's General Stores Inc $116.60 30.08 AMC 958
THO Thor Industries, Inc. $110.16 36.21 AMC 848