It was May which came “in like a lion.” A week after the equity markets reached new highs, and many physical commodities did the same, the market responded with a whiplash. The commodity markets took a hard fall. Silver was down 27%, crude oil was down 14.7% . It was an object lesson for traders on the difference between bull and bear markets in commodities versus equities. It highlighted the differences required in risk /reward analysis when trading or investing in different types of products. For many it was a reminder to trade what you know, not what is hot.
The S&P 500 (SPX) closed at 1,340.20 or down 1.72%; the NASDAQ 100 (NDX) closed at 2,383.18 or down 0.87%; the Russell 2000 closed at 833.34 or down 3.69%, and the Dow Jones 30 Industrials closed at 12,638.74 or 1.34%. Implied volatility for the indexes – SPX (VIX). RUT (RVX) and NDX (VXN) – were up. For the second straight Friday, the VIX was up in conjunction with a gain in the SPX. Intraday volatility movements in the volatility indexes has been significant. Watch this indexes during the day. They are a very good indicator of overall market sentiment. It appears many traders are using the VIX as a hedge against a downward move in the market.
The earnings season tapers off this week. Tread carefully in the commodity markets. Know what you are trading – contract specifications, expiration dates, etc. If you are trading a commodity ETF, understand the weighting and how well the ETF tracks the “underlying.”
Citigroup (C) has a 1 for 10 stock split took place after the close on Friday. 10 shares at $4.50 will now equal 1 share at $45.00. Check your options positions. Make sure you understand the adjustment which taking place. Do not assume your brokerage house or trading platform have made the correct adjustments.
“Chance favors the Prepared Mind.” – Louis Pasteur
This week’s economic news:Monday May 9:
Economic:
Earnings: AMC – MCD – McDonald’s, BRK.B – Berkshire Hathaway, class B, TMX – Telefonos de Mexico, TSN – Tyson Foods, SLH – Solera Holdings, SF – Stifel Financial.
Tuesday May 10"
Economic: NFIB 8:30, Small Business Optimism Index – 7:30, ICSC- Goldman Sachs Store Sales – 8:45, Import and Export Prices – 8:30, Redbook – 8:55, March Wholesale Inventories – 10:00.
Earnings: IFF – International Flavor and Fragrances, DF – Dean Foods, DIS – Walt Disney, WEN – Wendy’s International, FSL – Fossil.
Wednesday May 11:
Economic: MBA Purchase Applications – 7:00, March International Trade – 8:30.
Earnings: SYMC – Symantec, CSCO – Cisco, M – Macy’s, MT – Arcelor Mittal
Thursday May 12:
Economic: Producer Price Index - 8:30, Retail Sales – 8:30, Jobless Claims – 8:30, Business Inventories – 10:00.
Earnings: KSS – Kohl’s, JWN – Nordstrom, NVDA – NVIDIA, CA – CA.
Friday May 13:
Economic: April Consumer Price Index – 8:30, Consumer Sentiment – 9:55
Earnings: A – Agilent.
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