Sunday, October 23, 2016

Market News for the Prepared Mind: 10.24.2016–10.31.2016



"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

“The only virtue of being an aging risk manager is that you have a large collection of your own mistakes that you know not to repeat.” -Donald Van Deventer

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

imagesMarkets traded in a tight range last week with broad market indexes flat to up nearly a one percent. The weak was a battle between earnings expectations, a strong dollar seasoned with a dash of election season uncertainty. Improved earnings led to a Friday rebound. Three straight weeks of losses have left the euro (Symbol: 6E Z6 ) at $1.09 - is at its lowest level since March. Traders and investors are looking forward to the next FOMC meeting on November 1 and 2. The question is whether interest rates will be raised in November or December.

Here is an overview of the US market behavior last week:
Index 21-Oct Weekly Change % Weekly 2016 YTD Volatility of Index
Dow Jones Industrials (DJIA) 18,145.71 7.33 0.04% 4.14% 13..78% (VXD)
S&P 500 (SPX) 2,141.16 8.18 0.38% 4.76% 13.34% (VIX)
NASDAQ 100 (NDX) 4,851.86 43.38 0.90% 5.54% 15.37% (VXN)
Russell 2000 (RUT) 1,217.51 4.54 0.37% 7.37% 17.93% (RVX)
S&P 100 (OEX) 949.66 2.77 0.29% 4.19% 13.57% (VXO)
Crude Oil (CL Z6) 51.00 0.68 1.35% 37.58% 32.51%(OVX)
CBOE Volatility Index (VIX) 13.34 (2.78) -17.25% NA

Data Source: OptionVue8
The VIX October future and options expired last week. The November contract is now the front month. The spot VIX and the front three monthly futures traded lower last week. The financial press has focused on the November (expires 11/16) VIX future vs. the November 8 presidential election. The equity markets traded higher and the VIX futures and spot traded lower. The lower VIX or “fear gauge” has been attributed to an increased showing of strength by Hillary Clinton.

CBOE VIX guru, Russell Rhoads’ “Trade of the Week” was a November 1x2 spread. There was a seller of VIX Nov 17 Calls at 1.18 who bought twice as many VIX Nov 21 Calls at 0.62 for a net cost of 0.06 per spread. At the time of the spread sale, the cash VIX at was 13.70 and the November contract at 15.80. We do not know if this is an opening or closing transaction. This trade does not meet my risk reward comfort zone for an opening trade. At November expiration, the trade is a loser between 17 and 25. Most of my VIX ratio spreads are not held to expiration. Movements in the VIX are often ephemeral. As a result, I walk away from risk and take some profits on volatility movements.

Here is an overview of last week for the VIX and related products:
Indexes Ticker 21-Oct 14-Oct Change % Change
CBOE Volatility Index VIX 13.34 16.12 (2.78) -17.25%
VIX November Future (11/16/2016) VXX6 15.575 17.325 (1.75) -10.10%
VIX December Future (12/21/2016) VXZ6 16.525 17.625 (1.10) -6.24%
VIX January Future (1/18/2017) VXF7 17.875 18.775 (0.90) -4.79%
CBOE Short-term Volatility Index VXST 10.68 12.94 (2.26) -17.47%
CBOE 3 Month Volatility Index VXV 16.04 17.42 (1.38) -7.92%
CBOE Mid-term Volatility Index VXMT 18.24 19.14 (0.90) -4.70%
VIX of VIX VVIX 87.34 101.01 (13.67) -13.53%
CBOE SKEW Index SKEW 123.00 121.86 1.14 0.94%
Long VIX ETP's
ProShares Ultra VIX Short Term Futures ETF UVXY 14.23 17.58 (3.35) -19.06%
iPath S&P 500 VIX Short Term Futures ETN VXX 31.57 35.06 (3.49) -9.95%
ProShares VIX Short Term Futures ETF VIXY 26.27 29.15 (2.88) -9.88%
iPath S&P 500 VIX Mid-Tem Futures VXZ 36.65 37.88 (1.23) -3.25%
Inverse VIX ETP's
ProShares Short VIX Short Term Fut SVXY 78.18 70.71 7.47 10.56%
Daily Inverse VIX Short Term ETN XIV 40.08 36.24 3.84 10.60%

Data Source: OptionVue8
The last week of October brings reports on new home sales, the S&P CoreLogic Case-Shiller Home Price Index, and durable goods. (I have noticed a trend towards naming rights for non-government reports. The HPI or Home Price Index has morphed something 6 words longer than when I started this weekly blog six years ago.) The big number for the week will be Friday’s announcement of the first reading of third-quarter U.S. GDP. Analysts expect the GDP to rise at a consensus of 2.5 percent.

More than 170 S&P 500 firms will report earnings this coming week. These firms will be providing fourth quarter and 2017 guidance. The most anticipated announcements are Apple on Tuesday followed by Amazon.com, Alphabet (Google,) and Twitter on Thursday. A significant portion of the energy sector will be reporting this week.
Earnings announcements and the accompanying forward guidance will be market movers this week. The week includes reports on industrial production, consumer prices, housing starts, and existing home sales. The week opens with a snapshot of the manufacturing sector. The Monday release of the Empire State Manufacturing and U.S. Industrial reports have the ability to move the market. The CPI will be released on Tuesday. The CPI is an indicator cited by the Fed when discussing inflation and interest rate targets. Economic reports for the rest of the week will focus on the housing sector.

The earnings season starts in full force this week. It is time to start preparing target equities and strategies for the next earning cycle. 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 Visa, Kimberly-Clark, AT&T, Procter & Gamble, Eli Lilly, 3M, Merck, Caterpillar, General Motors, Freeport-McMoRan, Apple, DuPont, United Technologies, Express Scripts, Comcast “A”, Texas Instruments, Biogen Idec, Coca-Cola 0 Boeing, Alphabet (Google), Praxair, Ford Motor,Amazon.com, Amgen, ConocoPhillips, Dow Chemical, UPS, Colgate-Palmolive, Bristol-Myers-Squib, Master card, Chevron, and Exxon Mobil..

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.

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

"By definition, risk-takers often fail. So do morons. In practice it's difficult to sort them out." - Scott Adams

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

“Any jerk can have short-term earnings. You squeeze, squeeze, squeeze,and the company sinks five years later.” - Jack Welch

“First of all, it was October, a rare month for boys.” - Ray Bradbury

Monday October 24:

Economic: Chicago Fed National Activity Index – 8:30AM, PMI Manufacturing Index Flash – 9:45AM.

International Economic: Germany PMI Composite Flash – 3:30AM, Eurozone PMI Composite Flash – 4:00AM, Great Britain Industrial Trends Survey – 8:00AM.

Other: New York Federal Reserve Bank President William Dudley will give opening remarks at the second annual conference on the Evolving Structure of the U.S. Treasury Market being held at the New York Fed – 9”00AM, St. Louis Federal Reserve President James Bullard gives presentation to Association for University Business and Economic Research in Fayetteville, Ark., with Q&A – 9:05AM, Chicago Federal Reserve President Charles Evans gives speech at the Civic Affairs Society of the University Club of Chicago Luncheon, followed by audience and media Q&A, in Chicago – 1:30PM, Federal Reserve Board Governor Jerome Powell will moderate a panel discussion addressing the future of the settlement process for Treasury market transactions at the second annual conference on the Evolving Structure of the U.S. Treasury Market being held at the New York Fed – 1:45PM.


Earnings:
Symbol
Company Name
Oct 21 Close
IV30
B/A
AVGOPTVOL
TMUS T-Mobile Us Inc $47.05 29.01 BMO 2691
VFC VF Corp $54.30 29.24 BMO 1518
ZION Zions Bancorp $32.26 25.71 AMC 1474





Tuesday October 25:

Economic: Redbook – 8:55, FHFA House Price Index – 9:00, S&P Corelogic Case-Shiller HPI – 9:00, Consumer Confidence – 10:00, Richmond Fed Manufacturing Index – 10:00, State Street Investor Confidence Index – 10:00.

International Economic: France Business Climate Indicator – 2:45AM.

Other: Atlanta Federal Reserve Bank President Dennis Lockhart will give a speech to the Opportunity Finance Network in Atlanta – 1:20PM.

Earnings:
Symbol
Company Name
Oct 21 Close
IV30
B/A
AVGOPTVOL
AMTD TD Ameritrade Holding $36.64 27.14 BMO 1425
BHI Baker Hughes Inc. $52.25 32.72 BMO 3813
CAT Caterpillar Inc. $86.63 26.36 BMO 26337
CIT CIT Group Inc. $36.16 31.55 BMO 3446
DD E I Du Pont De Nemours $69.46 22.91 BMO 2723
DFS Discover Financial $55.56 24.88 BMO 1047
GLW Corning Incorporated $23.80 24.68 BMO 5512
GM General Motors Company $31.75 24.04 BMO 32053
LLY Eli Lilly and Co $78.74 22.59 BMO 10029
PII Polaris Industries Inc. $79.23 41.12 BMO 2206
UA Under Armour Inc $38.41 42.99 BMO 12603
USG USG Corporation $25.90 40.39 BMO 1209
WHR Whirlpool Corporation $166.07 30.02 BMO 1824
AEM Agnico Eagle Mines Ltd ( $49.17 43.64 AMC 3251
AKAM Akamai Technologies $56.73 47.78 AMC 3906
CHRW C.H. Robinson Worldwide $68.75 23.78 AMC 1215
CMG Chipotle Mexican Grill $405.10 39.83 AMC 16852
COF Capital One Financial $74.51 27.19 AMC 4736
ESRX Express Scripts Holding $71.04 27.31 AMC 7792
EW Edwards Lifesciences $117.86 32.16 AMC 1866
JNPR Juniper Networks, Inc. $22.75 40.22 AMC 3812
PNRA Panera Bread Co $195.32 31.26 AMC 1306
RRC Range Resources Corp. $38.59 44.97 AMC 4008
VRTX Vertex Pharmaceuticals $82.92 53.56 AMC 1165
VLO Valero Energy $54.77 29.23 13675



Wednesday October 26:

Economic: MBA Mortgage Applications – 7:00, International Trade in Goods – 8:30, PMI Services Flash – 9:45, New Home Sales – 10:00, EIA Petroleum Status Report.

International Economic: No major announcements.

Earnings:
Symbol
Company Name
Oct 21 Close
IV30
B/A
AVGOPTVOL
BA Boeing Co $135.84 23.20 BMO 16527
BIIB Biogen Inc $299.66 42.00 BMO 8526
GRMN Garmin Ltd. $48.59 37.75 BMO 2015
GSK GlaxoSmithKline plc $41.43 22.17 BMO 2100
HES Hess Corp. $52.65 39.48 BMO 8837
HLT Hilton Worldwide Holdings $23.00 27.07 BMO 3166
LUV Southwest Airlines Co $42.29 29.95 BMO 6512
MDCO The Medicines Company $36.51 128.82 BMO 1523
NEM Newmont Mining Corp $37.01 41.54 BMO 18461
SPG Simon Property Group Inc $197.26 23.15 BMO 1611
STT State Street Corp $71.03 27.68 BMO 1101
SU Suncor Energy Inc. (USA) $29.35 24.86 BMO 3900
WYN Wyndham Worldwide $68.65 32.07 BMO 1926
BSX Boston Scientific Corp. $23.01 34.06 AMC 3520
BWLD Buffalo Wild Wings $139.45 46.67 AMC 2074
EXAS EXACT Sciences Corp. $20.15 79.72 AMC 3276
GRUB GrubHub Inc $42.64 60.65 AMC 1636
MDLZ Mondelez International Inc $42.09 26.08 AMC 16552
MUR Murphy Oil Corporation $29.35 47.94 AMC 1793
NOW ServiceNow Inc $78.85 49.97 AMC 1709
NSC Norfolk Southern Corp. $93.13 25.86 AMC 1829
O Realty Income Corp $62.45 25.32 AMC 1094
TRN Trinity Industries Inc $23.21 44.49 AMC 1131
TSLA Tesla Motors Inc $199.10 43.91 AMC 82288
TXN Texas Instruments Inc. $69.75 25.80 AMC 8351
VMW VMware, Inc. $73.26 36.83 AMC 8673
WDC Western Digital Corp $53.86 44.96 AMC 13174
NXPI NXP Semiconductors NV $104.49 22.19 9961



Thursday October 27:
Economic: Durable Goods Orders – 8:30, Weekly Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, Pending Home Sales Index – 10:00, EIA Natural Gas Report – 10:30, Kansas Fed Manufacturing Index – 11:00.

International Economic: Great Britain GDP – 4:30AM, Japan CPI, Household Spending, & Unemployment Rate – 7:30PM.

Earnings:
Symbol Company Name Oct 21 Close IV30 B/A AVGOPTVOL
BOFI BofI Holding, Inc. $22.29 50.61 DMT 1955
HCA HCA Holdings Inc $82.01 26.83 DMT 4265
AET Aetna Inc $110.93 24.91 BMO 4753
ALXN Alexion Pharmaceuticals, $122.47 41.09 BMO 1379
BMY Bristol-Myers Squibb Co $50.36 25.95 BMO 50090
BX Blackstone Group LP $23.62 25.16 BMO 12906
CELG Celgene Corporation $100.02 32.91 BMO 20258
COP ConocoPhillips $41.49 29.76 BMO 19673
CRUS Cirrus Logic, Inc. $53.91 60.72 BMO 2203
DOW Dow Chemical Co $53.82 22.50 BMO 12281
EPD Enterprise Products Partner $27.07 23.67 BMO 4849
GT Goodyear Tire & Rubber $31.74 33.54 BMO 5537
IP International Paper Co $47.18 31.05 BMO 4509
IVZ Invesco Ltd. $29.82 28.24 BMO 1282
MJN Mead Johnson Nutrition $79.40 29.97 BMO 1816
NOV National-Oilwell Varco $37.19 37.53 BMO 3197
PRGO Perrigo Company PLC $88.51 47.24 BMO 2666
SNE Sony Corp (ADR) $32.72 32.91 BMO 1274
VA Virgin America Inc $54.35 34.49 BMO 1124
AAPL Apple Inc. $117.06 25.06 AMC 559250
AMGN Amgen, Inc. $161.50 25.43 AMC 12871
AMZN Amazon.com, Inc. $810.32 34.46 AMC 86382
BIDU Baidu Inc (ADR) $175.17 38.48 AMC 24108
BMRN BioMarin Pharmaceutical $84.20 42.88 AMC 2431
CBI Chicago Bridge & Iron $27.76 45.19 AMC 2394
CEMP Cempra Inc $23.48 139.42 AMC 1128
EMN Eastman Chemical $66.89 31.76 AMC 1388
EXPE Expedia Inc $124.66 41.38 AMC 8187
FSLR First Solar, Inc. $42.08 58.40 AMC 15336
FTNT Fortinet Inc $31.33 47.56 AMC 2074
GOOG Google Inc. $796.97 27.59 AMC 18654
GOOGL Alphabet Inc $821.63 27.36 AMC 28239
HAIN Hain Celestial Group Inc $36.51 65.57 AMC 7837
HBI Hanesbrands Inc. $24.76 38.52 AMC 2144
HIG Hartford Financial Services $42.89 25.09 AMC 2659
MCK McKesson Corporation $161.95 24.40 AMC 1071
N NetSuite Inc $101.63 51.10 AMC 1086
SRCL Stericycle Inc $74.68 45.59 AMC 1057
TCK Teck Resources Ltd (USA) $20.33 60.87 AMC 10749
TPX Tempur Sealy International $52.40 47.04 AMC 1996
VRSN Verisign, Inc. $76.56 30.27 AMC 1780
WYNN Wynn Resorts, Limited $96.00 43.19 AMC 32625
GNC GNC Holdings Inc $21.60 74.70 2690
MPC Marathon Petroleum Corp $43.05 36.11 4590
NTNX Nutanix Inc $28.50 94.62 1275
TV Grupo Televisa SAB $26.02 35.72 1167




Friday October 28:

Economic: GDP – 8:30, Employment Cost Index – 8:30, Consumer Sentiment – 10:00, Baker Hughes Rig Count – 1:00.

International Economic: No major announcements.

Earnings:
Symbol
Company Name
Oct 21 Close
IV30
B/A
AVGOPTVOL
ABBV AbbVie Inc $61.76 24.49 BMO 10418
COG Cabot Oil & Gas $22.06 46.76 BMO 3156
CVX Chevron Corporation $101.87 22.22 BMO 38793
PSX Phillips 66 $79.74 22.76 BMO 4901
RCL Royal Caribbean Cruises $70.48 39.18 BMO 4018
SNY Sanofi SA (ADR) $38.07 23.41 BMO 1547
WY Weyerhaeuser Co $31.50 23.66 BMO 1923
BUD Anheuser-Busch InBev $127.44 26.46 4664



Monday October 31:

Economic: Personal Income and Outlays 8:30, Chicago PMI – 9:45, Dallas Fed Manufacturing Survey – 10:30.

International Economic: Germany Retail Sales – 3:00AM, China PMI Manufacturing – 9:00PM.

Other: Bank of Japan Announcement.

Earnings:
Symbol Company Name Oct 21 Close IV30 B/A AVGOPTVOL
CAH Cardinal Health Inc $75.58 22.28 BMO 1110
THC Tenet Healthcare Corp $23.52 61.71 BMO 3414
WMB Williams Companies Inc $30.18 38.98 BMO 10664
APC Anadarko Petroleum $63.76 34.27 AMC 13364
EEP Enbridge Energy Partners $25.70 31.25 AMC 1023
GGP General Growth Properties $26.12 24.34 AMC 2900
IDTI Integrated Device Technology $20.37 54.97 AMC 1301
OLN Olin Corporation $21.90 40.49 AMC 1451
TSO Tesoro Corporation $80.85 35.40 AMC 5782
WPZ Williams Partners LP $37.49 36.42 AMC 1295














































































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