"Chance favors the Prepared Mind." - Louis Pasteur
“Sometimes paranoia's just having all the facts.” - William S. Burroughs
"Facts do not cease to exist because they are ignored." - Aldous Huxley
"The market can remain irrational longer than you can remain solvent." John Keynes
After any major market move, it is a good idea to reassess your financial goals based on age, need, and risk tolerance. Do not be afraid to adjust and rebalance.
Here is an overview of the US market behavior last week and for 2017:
| Index | 3-Mar | Change | % Weekly | 2016 YTD | Volatility of Index |
| Dow Jones Industrials (DJIA) | 21,005.71 | 183.95 | 0.88% | 6.29% | 11.26% (VXD) |
| S&P 500 (SPX) | 2,380.50 | 13.16 | 0.56% | 6.35% | 10.96% (VIX) |
| NASDAQ 100 (NDX) | 5,373.48 | 30.17 | 0.56% | 10.48% | 11.77% (VXN) |
| Russell 2000 (RUT) | 1,394.12 | (0.40) | -0.03% | 2.73% | 16.69% (RVX) |
| S&P 100 (OEX) | 1056.84 | 9.03 | 0.86% | 6.60% | 10.08% (VXO) |
| Crude Oil (CLJ7) | 53.20 | (0.82) | -1.52% | -1.28% | 25.59%(OVX) |
| CBOE Volatility Index (VIX) | 10.96 | (0.51) | -4.45% | NA |
Concerns about Trump’s speech before Congress led to a Tuesday close of 12.92. The VIX ended the week closing down at 4.45% or 0.51. This was the lowest closing low since February 14. The VXST - CBOE Short-term Volatility Index – show the largest decrease, 9.03%, among the various S&P 500 volatility indexes. Fears of March 15 parliamentary elections in the Netherlands and the April 21 beginning of the French Presidential election process were not reflected in pricing of VIX futures or related products. This could change at any moment. The ephemeral nature of fear and VIX pricing guarantee this.
Here is an overview of last week for the VIX and related products:
| Indexes | Ticker | 3-Mar | 24-Feb | Change | % Change |
| CBOE Volatility Index | VIX | 10.96 | 11.47 | (0.51) | -4.45% |
| VIX March Future (3/22/2017) | VXH7 | 12.825 | 13.325 | (0.50) | -3.75% |
| VIX April Future (4/19/2017) | VXJ7 | 14.575 | 15.250 | (0.68) | -4.43% |
| VIX May Future (5/17/2017) | VXK7 | 15.425 | 16.075 | (0.65) | -4.04% |
| CBOE Short-term Volatility Index | VXST | 8.56 | 9.41 | (0.85) | -9.03% |
| CBOE 3 Month Volatility Index | VXV | 14.26 | 14.76 | (0.50) | -3.39% |
| CBOE Mid-term Volatility Index (6 mo) | VXMT | 16.25 | 16.68 | (0.43) | -2.58% |
| VIX of VIX | VVIX | 81.19 | 83.31 | (2.12) | -2.54% |
| CBOE SKEW Index | SKEW | 136.10 | 138.66 | (2.56) | -1.85% |
| Long VIX ETP's | |||||
| ProShares Ultra VIX Short Term Futures ETF | UVXY | 20.13 | 21.44 | (1.31) | -6.11% |
| iPath S&P 500 VIX Short Term Futures ETN | VXX | 17.54 | 18.09 | (0.55) | -3.04% |
| ProShares VIX Short Term Futures ETF | VIXY | 14.61 | 15.08 | (0.47) | -3.12% |
| iPath S&P 500 VIX Mid-Term Futures ETN | VXZ | 28.96 | 29.84 | (0.88) | -2.95% |
| Inverse VIX ETP's | |||||
| ProShares Short VIX Short Term Future ETF | SVXY | 128.79 | 125.25 | 3.54 | 2.83% |
| Daily Inverse VIX Short Term ETN | XIV | 66.42 | 64.52 | 1.90 | 2.94% |
There are just a few economic reports that will be released next week, but they do include one of the biggest – the U.S. Employment Situation report on Friday. Monday starts with Factory Orders followed by the Tuesday release of trade numbers. The focus changes to employment on Wednesday with the release of the ADP Employment Report. Employment remains the focus through Friday when February’s Employment Situation Report is released. The ECB will also release a statement after its regularly scheduled meeting on Thursday. January merchandise trade and industrial output will be released this coming week by a number of countries.
The wild card remains the US political climate. Google Trump and read the tweets from Donald Trump (@realDonaldTrump). His tweets have the capability of setting the tenor for an entire trading day.
The earnings season has entered the quiet time. This was the second straight ho-hum earnings season. It has been my experience that the post-earnings behavior of individual stocks and the associated options usually show a remarkable consistency between individual earnings announcements and movement of the underlying and change in the implied volatility of the options. This consistency within individual stocks has not been apparent the past two earnings cycles. It is as if a “new normal” is being defined.
Earnings announcements are predictable volatility events providing trading opportunity. It is important to reduce the number of surprises which may occur in any trading campaign. Confirm the date and time of any 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 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 > 25, Average daily option volume > 800 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 earning trades last week. The bid/ask spreads seemed much larger than usual. Do not force trades in illiquid markets. Data Source for earnings: OptionVue8
Earnings Scan: March 6 through March 17
| Symbol | Company Name | Mar 3 Close | IV30 | B/A | AVGOPTVOL | DATE |
| CASY | Casey's General Stores Inc | $113.91 | 30.08 | AMC | 958 | 6-Mar |
| THO | Thor Industries, Inc. | $113.94 | 36.21 | AMC | 848 | 6-Mar |
| DKS | Dicks Sporting Goods Inc | $52.34 | 49.32 | BMO | 5429 | 7-Mar |
| URBN | Urban Outfitters, Inc. | $26.06 | 52.60 | BMO | 2267 | 7-Mar |
| MOMO | Momo Inc (ADR) | $26.87 | 63.71 | 1698 | 7-Mar | |
| CIEN | Ciena Corporation | $26.10 | 46.53 | BMO | 4732 | 8-Mar |
| SIG | Signet Jewelers Ltd. | $64.58 | 46.27 | DMT | 1746 | 9-Mar |
| STRP | Straight Path Communications | $32.63 | 81.74 | BMO | 1249 | 9-Mar |
| FNSR | Finisar Corporation | $34.48 | 60.90 | AMC | 3054 | 9-Mar |
| NAV | Navistar International Corp | $27.68 | 51.73 | AMC | 1109 | 9-Mar |
| ULTA | Ulta Beauty Inc | $278.15 | 33.32 | AMC | 4262 | 9-Mar |
| BIVV | Bioverativ Inc | $52.51 | 35.23 | 1030 | 9-Mar | |
| REN | Resolute Energy Corp | $44.49 | 54.39 | AMC | 1176 | 14-Mar |
| JBL | Jabil Circuit, Inc. | $25.96 | 33.08 | AMC | 832 | 15-Mar |
| WSM | Williams-Sonoma, Inc. | $50.34 | 33.69 | AMC | 861 | 15-Mar |
| DG | Dollar General Corp. | $73.12 | 36.30 | BMO | 4844 | 17-Mar |
Advice to stimulate your imagination:
“I took a speed-reading course and read War and Peace in twenty minutes. It involves Russia.” - Woody Allen
“Nobody should have any illusion about the possibility of gaining military superiority over Russia. We will never allow this to happen.” - Vladimir Putin
“If you do not actively attack the risks, they will actively attack you.” - Tom Gib
Economic: Gallup US Spending Measure - 8:30, Factory Orders – 10:00, TD-Ameritrade IMX – 12:30, Durable Goods Orders – 8:30, Dallas Fed Manufacturing Survey – 10:30.
International Economic: No major announcements.
Orders: Minneapolis Federal Reserve Bank President Neel Kashkari speaks at NABE conference in panel titled "A View from the FRB Minneapolis," in Washington, D.C – 3:00PM.
Tuesday March 7:
Economic: International Trade in Goods – 8:30, Gallup US ECI – 8:30. Redbook – 8:55, EIA Petroleum Status Report – 10:30.
International Economic: Germany Manufacturers’ Orders – 2:00AM, Eurozone GDP – 5:00AM.
Wednesday March 8:
Economic: MBA Mortgage Applications – 7:00 ADP Employment Report - 8:15, Productivity and Costs - 8:30, Wholesale Trade - 10:00, EIA Natural Gas Report – 10:30.
International Economic: Germany Industrial Production – 2:00AM, France Merchandise Trade – 2:45. China CPI & PPI – 8:30PM.
Thursday March 9:
Economic: Challenger Job-Cut Report – 7:30, Jobless Claims - 8:30, Gallup Good Jobs Rate - 8:30, Import and Export Prices - 8:30, Bloomberg Consumer Comfort Index - 9:45, Quarterly Services Survey - 10:00.
International Economic: No major announcements.
Other: European Central Bank (ECB) Announcement – 7:45 AM
Friday March 10:
Economic: February Employment Situation – 8:30, Baker-Hughes Rig Count – 1:00PM.
International Economic: Germany Merchandise Trade - 2:00AM, France Industrial Production - 3:45AM, Italy Unemployment Rate - 4:00AM, Great Britain Industrial Production - 5:30AM, Great Britain Merchandise Trade – 5:30AM.
Monday March 13:
Economic: Labor Market Situation – 10:00.
International Economic: Japan Tertiary Index – 1:30AM, China Industrial Production and Retail Sales – 10:00PM.
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