Monday, November 7, 2016

Market News for the Prepared Mind: 11.07.2016–11.14.2016



"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

“It seems that elections today are more popularity than they are substantial issues.” - Jesse Ventura

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

"I offer my opponents a bargain: if they will stop telling lies about us,I will stop telling the truth about them.” - Adlai Stevenson

"If voting made any difference they wouldn’t let us do it." - Mark Twain
 
Mark TwainNine days ago, on October 29, FBI Director James Comey announced the reopening of the Clinton email investigation. The S&P 500 index extended its losing streak to nine days on Friday. The fears created by Comey’s announcement has led to a narrowing of the gap between Donald Trump and Hillary Clinton. These fears and the associated market sell-off have masked the impact of better than expected third quarter earnings. As of today, 71% of earnings announcements by S&P 500 companies have exceeded analyst expectations. Current third quarter aggregate growth in per-share earnings is 2.7%. This is the first earnings growth per share since the first quarter of 2016.

Election news continues to move the equity markets and associated volatility markets. I am writing this blog on the night of Sunday November 6. 2016. This afternoon, Comey wrote in a letter to congressional committee chairmen, "Based on our review, we have not changed our conclusions that we expressed in July." Futures reacted immediately when extended trading hours opened. December E-mini futures are up over 1% with the November VIX future down over 13%. Once again, news which is good for Clinton is good for the market.

Monday is the last day for the release of news surprises which may impact the presidential election. I do not want to imagine what sort of stomach churning press release may appear. Do not assume that such a release cannot or will not occur. Know in advance what your trading response will be to different news scenarios.

So much for OPEC’s ability to control the price of oil. The oil ministers had agreed in principle to production cuts, but they failed to reach an agreement on specifics. This inability to reach a consensus with Venezuela, Iraq and Iran led to an increase in US oil inventories and a 10% retreat in the price of oil.

Here is an overview of the US market behavior last week:
Index 4-Nov Weekly Change % Weekly 2016 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17,888.25 (272.94) -1.50% 2.66% 21.46% (VXD)
S&P 500 (SPX) 2,085.18 (41.23) -1.94% 2.02% 22.51% (VIX)
NASDAQ 100 (NDX) 4,660.46 (145.13) -3.02% 1.38% 23.03% (VXN)
Russell 2000 (RUT) 1,162.87 (24.43) -2.06% 2.55% 25.38% (RVX)
S&P 100 (OEX) 923.84 (21.48) -2.27% 1.36% 24.19% (VXO)
Crude Oil (CL Z6) 44.13 (4.53) -9.31% 19.05% 43.69%(OVX)
CBOE Volatility Index (VIX) 22.51 6.32 39.04% NA
Data Source: OptionVue8

James Comey’s Sunday surprise has led to a sell-off om the VIX futures. Russell Rhoads’ trade of the week involves a trader who expected a return to the mean of VIX levels. This trader bought the VIX November 16/15 put vertical for $0.37. Settlement of the November VIX future at 15 or lower will result in a profit of $0.63 per spread.

Here is an overview of last week for the VIX and related products:
Indexes Ticker 4-Nov 28-Oct Change % Change
CBOE Volatility Index VIX 22.51 16.19 6.32 39.04%
VIX November Future (11/16/2016) VXX6 19.325 16.625 2.70 16.24%
VIX December Future (12/21/2016) VXZ6 18.975 17.100 1.88 10.96%
VIX January Future (1/18/2017) VXF7 19.725 18.325 1.40 7.64%
CBOE Short-term Volatility Index VXST 28.82 16.69 12.13 72.68%
CBOE 3 Month Volatility Index VXV 21.13 17.37 3.76 21.65%
CBOE Mid-term Volatility Index (6 month) VXMT 21.44 19.03 2.41 12.66%
VIX of VIX VVIX 120.23 99.44 20.79 20.91%
CBOE SKEW Index SKEW 133.03 126.35 6.68 5.29%
Long VIX ETP's
ProShares Ultra VIX Short Term Futures ETF UVXY 20.39 15.88 4.51 28.40%
iPath S&P 500 VIX Short Term Futures ETN VXX 37.94 33.43 4.51 13.49%
ProShares VIX Short Term Futures ETF VIXY 31.59 27.84 3.75 13.47%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 38.49 36.93 1.56 4.22%
Inverse VIX ETP's
ProShares Short VIX Short Term Future ETF SVXY 34.32 73.46 (39.14) -53.28%
Daily Inverse VIX Short Term ETN XIV 33.00 37.65 (4.65) -12.35%
Data Source: OptionVue8

The second week in November includes the second Tuesday of the month, which thankfully means the circus of the presidential election will come to an end. There are few economic reports slated for next week. The major variables have the market in a state of flux - the presidential election, third-quarter earnings, crude oil. Earnings announcements and the accompanying forward guidance have little potential to move the market this week.

The earnings season is in 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 Priceline.com, AMC Entertainment, Chemours, Dean Foods. LendingClub, Sysco, CVS, DR Horton, Johnson Controls, Rackspace, Rockwell Automation, Marriott, Trip Advisor, Mylan, Viacom, Disney, Ralph Lauren, Michael Kors, NVIDIA, Nordstrom, Kohl’s, Macy’s. and JC Penney.

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.

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

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

“Ephemeral" It means 'which is in danger of speedy disappearance.” - Antoine de Saint-Exupéry

“The month of November makes me feel that life is passing more quickly. In an effort to slow it down, I try to fill the hours more meaningfully.” - Henry Rollins





Monday November 7:

Economic: Gallup US Consumer Spending Measure – 8:30, Labor Market Conditions Index – 10:00, TD Ameritrade IMX – 12:30.

International Economic: Chinese Merchandise Trade Balance, Germany Manufacturer’s Orders – 2:00AM, Eurozone Retail Sales – 5.00AM.


Other: Chicago Federal Reserve Bank President Charles Evans gives opening remarks at a conference in Chicago – 2:45PM.


Earnings:
Symbol Company Name Nov 4 Close IV30 B/A AVGOPTVOL
CTSH Cognizant Technology Solutions $51.65 35.42 BMO 4136
HSBC HSBC Holdings plc (ADR) $37.09 26.06 BMO 4393
MAR Marriott International Inc $69.24 27.17 BMO 2530
MGM MGM Resorts International $25.77 34.45 BMO 11623
SYY SYSCO Corporation $47.85 27.94 BMO 1008
ACAD ACADIA Pharmaceuticals Inc. $20.87 108.67 AMC 3136
ALB Albemarle Corporation $83.80 38.66 AMC 1445
DEPO Depomed Inc $21.82 83.36 AMC 1450
HTZ Hertz Global Holdings Inc $33.44 59.63 AMC 1967
PCLN Priceline Group Inc $1,438.10 34.81 AMC 15626
REN Resolute Energy Corp $23.74 102.84 AMC 1220
FNV Franco-Nevada Corporation $68.21 42.44 1173




Tuesday November 8:


U.S. Presidential Election


Economic: NFIB Small Business Optimism Index – 6:00AM, Redbook – 8:55, JOLTS – 10:00.

International Economic: Germany Industrial Production – 2:00AM, Germany Merchandise Trade – 2:00AM. Great Britain Industrial Production – 4:30AM, China PPI and CPI – 8:30PM.


Other: Chicago Fed President Charles Evans will speak at a moderated discussion entitled "A Conversation with Charles Evans" followed by Q&A, at the Council of Foreign Relations, in New York -7:45AM, Chicago Fed President Charles Evans will speak at the UBS Knowledge Network event "Luncheon Discussion with Charles Evans" followed by Q&A, in New York – 12:20PM.


Earnings:
Symbol Company Name Nov 4 Close IV30 B/A AVGOPTVOL
AER AerCap Holdings N.V. $40.77 40.12 BMO 1321
CVS CVS Health Corp $81.57 29.51 BMO 8025
DHI D.R. Horton, Inc. $28.29 34.45 BMO 1756
JCI Johnson Controls International $40.81 28.69 BMO 2410
OPHT Ophthotech Corp $30.85 220.11 BMO 1270
ZAYO Zayo Group Holdings Inc $31.77 32.90 BMO 1084
TRIP Tripadvisor Inc $62.74 54.87 AMC 3008
W Wayfair Inc $32.28 79.88 AMC 2385
MOMO Momo Inc (ADR) $23.70 76.71 4647
PBYI Puma Biotechnology Inc $34.60 98.22 1246



Wednesday November 9:


Economic: MBA Mortgage Applications – 7:00, US Wholesale Trade - 10:00, EIA Petroleum Status Report – 10:30.


International Economic: Great Britain Merchandise Trade – 4:30QM, Japan Machine Orders – 6:50PM.


Other: Minneapolis Federal Reserve Bank President Neel Kashkari participates in a fireside chat in Eau Claire, Wi., with audience Q&A – 1:30PM, San Francisco Federal Reserve Bank President John Williams participates in fireside chat on Outlook on the Economy at the University of San Francisco, with audience and media Q&A – 9:00PM.


Earnings:
Symbol Company Name Nov 4 Close IV30 B/A AVGOPTVOL
COTY Coty Inc $22.35 40.46 BMO 34891
DISH DISH Network Corp $54.92 43.84 BMO 2143
ETP Energy Transfer Partners LP $33.20 42.21 BMO 5764
IONS Ionis Pharmaceuticals Inc $27.00 79.41 BMO 1955
MYL Mylan NV $34.14 51.47 BMO 15216
SLW Silver Wheaton Corp. (USA) $24.42 50.38 BMO 19872
TASR TASER International, Inc. $21.98 52.91 BMO 1919
HAIN Hain Celestial Group Inc $35.58 58.51 AMC 8183
XON Intrexon Corp $24.51 62.58 AMC 2642
JUNO Juno Therapeutics Inc $22.72 73.46 AMC 1665
NTES NetEase Inc (ADR) $243.42 43.70 AMC 4420
NCLH Norwegian Cruise Line Holdings $37.21 45.46 AMC 2014
SHAK Shake Shack Inc $31.93 51.53 AMC 2563
VIAB Viacom, Inc. $36.68 39.88 AMC 6299
KITE Kite Pharma Inc $40.01 67.89 1867



Thursday November 10:
Economic: Weekly Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, EIA Natural Gas Report – 10:30.


International Economic: France Industrial Production – 2:45AM.


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.


Earnings:
Symbol Company Name Nov 4 Close IV30 B/A AVGOPTVOL
AZN AstraZeneca plc (ADR) $27.74 36.02 BMO 3684
KSS Kohl's Corporation $42.69 51.72 BMO 5709
M Macy's Inc $36.89 44.89 BMO 16981
KORS Michael Kors Holdings Ltd $48.24 53.60 BMO 6985
PRGO Perrigo Company PLC $79.95 50.44 BMO 2734
RL Ralph Lauren Corp $97.64 44.93 BMO 1240
JWN Nordstrom, Inc. $50.21 54.59 AMC 8427
NVDA NVIDIA Corporation $67.96 52.56 AMC 33142
DIS Walt Disney Co $93.37 23.80 AMC 45745



Friday November 11:


US Banks Closed, Markets Open


Economic: University of Michigan Consumer Sentiment – 10:00, Baker Hughes Rig Count – 1:00.


International Economic: Germany CPI – 2:00AM


Other: Atlanta Federal Reserve President Dennis Lockhart gives speech at the National Association of Realtors conference in Orlando, Fla., with audience Q&A – 8:30AM, Dallas Federal Reserve Bank President Rob Kaplan to speak at Association of Banks of Mexico forum in Mexico City, with audience and media Q&A – 12:00PM.


Earnings: None meeting criteria


Monday November 14:


Economic: No major announcements.

International Economic: Released on Saturday November 12: China Industrial Production and Retail Sales – 12:30AM.


Other: San Francisco Federal Reserve Bank President John Williams participates in a panel discussion at the Bay Area Council in San Francisco, with audience Q&A – 6:30PM,


Earnings: None meeting Criteria
















































































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