"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 |
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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