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.























































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