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Frank Fahey: Market News for the Prepared Mind: 2.20-2.27.2017

February 21, 2017


“Imagination decides everything.” – Blaise Pascal

“Chance favors the Prepared Mind.” – Louis Pasteur

“By definition, risk-takers often fail. So do morons. In practice it’s difficult to sort them out.” – Scott Adams

 

The trend continues.  It was another new week of closing highs.  Decent earnings, no major PR explosions from the White House, and optimism about potential tax reform are fueling the rise.  I have been fighting a bronchial malaise, so I will keep it short this week.

Here is an overview of the US market behavior last week and for 2017:

Index 17-Feb Change % Weekly  2016 YTD Volatility of  Index
Dow Jones Industrials (DJIA) 20,624.05 354.78 1.75% 4.36% 11.33% (VXD)
S&P 500 (SPX) 2,351.16 37.91 1.64% 5.04% 11.49% (VIX)
NASDAQ 100 (NDX) 5,324.72 98.03 1.88% 9.48% NA (VXN)
Russell 2000 (RUT) 1,399.86 11.02 0.79% 3.15% 16.17% (RVX)
S&P 100 (OEX) 1039.23 18.54 1.82% 4.82% 11.27% (VXO)
Crude Oil (CLH7) 53.40 (0.45) -0.84% -0.91% 27.49%(OVX)
CBOE Volatility Index (VIX) 11.49 0.64 5.90% NA

Data Source: OptionVue8

The VIX up this week while the various month VIX futures moved down.   There is an intraday push and pull between SPX at all-time highs and the VIX futures and other short-term volatility indicators.  The difference between the VIX and the RVX (RUT volatility index) collapsed last week.  The previous week the difference was as high as 7.50.  The difference closed last week at 3.68.

Starting February 13, the CBOE is not computing the VXN – the volatility index on the NDX or NASDAQ 100.  The CBOE said it would start calculating the values at a future, as of yet, unannounced, date.  No reasons were given.

Here is an overview of last week for the VIX and related products:

Indexes Ticker 17-Feb 10-Feb Change % Change
CBOE Volatility Index VIX 11.49 10.85 0.64 5.90%
VIX March Future (3/22/2017) VXH7 13.125 13.375 (0.25) -1.87%
VIX April Future (4/19/2017) VXJ7 14.350 15.125 (0.78) -5.12%
VIX May Future (5/17/2017) VXK7 15.150 16.025 (0.87) -5.46%
CBOE Short-term Volatility Index VXST 9.03 9.02 0.01 0.11%
CBOE 3 Month Volatility Index VXV 13.72 13.91 (0.19) -1.37%
CBOE Mid-term Volatility Index (6 month) VXMT 15.79 16.17 (0.38) -2.35%
VIX of VIX VVIX 81.25 85.77 (4.52) -5.27%
CBOE SKEW Index SKEW 141.13 130.47 10.66 8.17%
Long VIX ETP’s
ProShares Ultra VIX Short Term Futures ETF UVXY 20.25 21.91 (1.66) -7.58%
iPath S&P 500  VIX Short Term Futures ETN VXX 17.54 18.21 (0.67) -3.68%
ProShares VIX Short Term Futures ETF VIXY 14.65 15.16 (0.51) -3.36%
iPath S&P 500  VIX Mid-Tem Futures ETN VXZ 28.49 30.06 (1.57) -5.22%
Inverse VIX ETP’s
ProShares Short VIX Short Term Future ETF SVXY 129.05 125.40 3.65 2.91%
Daily Inverse VIX Short Term ETN XIV 66.54 64.64 1.90 2.94%

Data Source: OptionVue8

The week of February 20 will be a shortened trading week due to President’s Day. Reports will be relased on existing and new home sales, along with the minutes of the Fed’s January meeting.  The week winds up with the final consumer sentiment score for February, one that dipped back noticeably in early February.

The earnings season is starting to wind down. 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.   The earnings highlights this week, for widely held and actively traded stocks, are Tesla, Fitbit, Jack in the Box, HP, Cheesecake Factory, Trans Ocean, Public Storage, Popeyes, Toll Brothers. Ctrip, Hormel Foods, Baidu, Monster Beverage, Nordstrom, Foot Locker, and Priceline.

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 Sources for earnings: Livevol Core and OptionVue8 

 

Advice to stimulate your imagination:

“By definition, risk-takers often fail. So do morons. In practice it’s difficult to sort them out.” – Scott Adams

“In theory there is no difference between theory and practice. In practice there is.” – Yogi Berra

“To make a mistake is only human; to persist in a mistake is idiotic.” -Roman Cicero

“To learn patience is not to rebel against every hardship.” -Henri Nouwen

 

 

Monday February 20: 

US Markets Closed: Holiday – Presidents Day

International Economic:   Germany PPI – 2:00AM, Great Britain Industrial Trends Survery- 600AM, Japan Consumer Confidence Flash – 7:30PM.

 

Tuesday February 21: 

Economic:   PMI Manufacturing Index Flash – 9:45.

International Economic:  China Merchandise Trade – 2:00AM, France CPI – 2:45AM, Germany PMI Composite Flash – 4:00AM, Eurozone PMI Composite Flash.

Other:  Minneapolis Federal Reserve Bank President Neel Kashkari participates in a fireside chat on the economy and the role of the Federal Reserve hosted by the Financial Planning Association of Minnesota in Golden Valley, Minn., with audience Q&A – 8:50AM, Philadelphia Federal Reserve Bank President Patrick Harker speaks on the economic outlook at the University of Pennsylvania in Philadelphia, with audience and media Q&A – 12:00PM, San Francisco Federal Reserve Bank President John Williams speaks to students of Boise State University on “Getting to Know the Fed,” in Boise, Id. with audience Q&A – 3:30PM.

Earnings:

Symbol Company Name Feb 17 Close IV30 B/A AVGOPTVOL
BHP BHP Billiton Limited (ADR) $40.99 30.30 BMO 4211
HAIN Hain Celestial Group Inc $34.46 35.75 AMC 4064

 

Wednesday February 22:

Economic:  MBA Mortgage Applications – 7:00, Redbook – 8:55, Existing Home Sales – 10:00., Industrial Production – 9:15, Atlanta Fed Business Inflation Expectations = 10:00, Housing Market Index – 10:00, EIA Petroleum Status Report – 10:30.

International Economic:  Great Britain GDP – 4:30AM, Eurozone HICP – 5:00AM.

Other:  FOMC minutes – 2:00.

Earnings:

Symbol Company Name Feb 17 Close IV30 B/A AVGOPTVOL
BHP BHP Billiton Limited (ADR) $40.99 30.30 BMO 4211
HAIN Hain Celestial Group Inc $34.46 35.75 AMC 4064

 

Thursday February 23:

Economic:  Weekly Jobless Claims – 8:30, Chicago Fed National Activity Index – 8:30, FHFA House Price Index – 9:00, Bloomberg Consumer Comfort Index – 9:45, PMI Services Flash – 9:45, EIA Natural Gas Report – 10:30, Kansas City Fed Manufacturing Index – 11:00, EIA Petroleum Status Report – 11:00, Money Supply – 4:30PM.

International Economic:  Germany GDP 2:00AM, Great Britain CBI Distributive Trades – 6:00AM.

Other:  Atlanta Federal Reserve Bank President Dennis Lockhart speaks on the past 10 years at the Atlanta Federal Reserve in Atlanta, GA – 8:35AM.

Earnings:

Symbol Company Name Feb 17 Close IV30 B/A AVGOPTVOL
CLR Continental Resources, Inc. $46.01 37.67 BMO 4162
CLVS Clovis Oncology Inc $61.37 71.23 BMO 2927
DISH DISH Network Corp $62.72 36.49 BMO 4082
ETP Energy Transfer Partners LP $38.38 31.48 BMO 5623
GRMN Garmin Ltd. $50.95 32.25 BMO 1234
HFC HollyFrontier Corp $30.00 36.21 BMO 2206
MBLY Mobileye NV $44.97 43.63 BMO 11285
MDCO The Medicines Company $52.80 76.55 BMO 1504
SBGI Sinclair Broadcast Group Inc $36.30 34.05 BMO 1005
SLCA U.S. Silica Holdings Inc $57.36 48.47 BMO 1758
SXL Sunoco Logistics Partners L.P. $25.81 30.48 BMO 1864
TOL Toll Brothers Inc $31.43 28.49 BMO 3168
WB Weibo Corp (ADR) $55.26 51.04 BMO 2422
BLUE bluebird bio Inc $76.55 63.39 AMC 1120
CTRP Ctrip.Com International Ltd $45.51 34.94 AMC 6431
JACK Jack in the Box Inc. $109.30 35.94 AMC 834
LB L Brands Inc $57.48 29.80 AMC 3446
MTDR Matador Resources Co $26.86 45.28 AMC 1749
RH RH $27.18 60.99 AMC 7408
RRC Range Resources Corp. $31.24 42.61 AMC 5549
SINA SINA Corp $76.38 46.03 AMC 1099
SM SM Energy Co $27.11 57.20 AMC 1669
SUN Sunoco LP $28.51 41.24 AMC 3082
TSLA Tesla Inc $268.95 42.38 AMC 91894

 

Friday February 24:

Economic:  New Home Sales – 10:00, Consumer Sentiment – 10:00, Baker-Hughes Rig count – 1:00PM.

International Economic:  No major announcements

Earnings:

Symbol Company Name Feb 17 Close IV30 B/A AVGOPTVOL
APA Apache Corporation $55.25 27.74 BMO 9813
CRZO Carrizo Oil & Gas Inc $33.37 40.34 BMO 892
HRL Hormel Foods Corp $37.24 27.43 BMO 997
KSS Kohl’s Corporation $41.53 46.96 BMO 4982
PTLA Portola Pharmaceuticals Inc $30.27 63.84 BMO 815
WUBA 58.com Inc (ADR) $33.70 52.41 BMO 3973
ACIA Acacia Communications, Inc. $64.19 72.17 AMC 3165
BIDU Baidu Inc (ADR) $184.94 30.50 AMC 14476
BMRN BioMarin Pharmaceutical Inc. $90.53 35.40 AMC 916
CBI Chicago Bridge & Iron Company N. $35.77 39.97 AMC 3511
HLF Herbalife Ltd. $61.06 44.82 AMC 10874
ICPT Intercept Pharmaceuticals Inc $129.85 57.64 AMC 1059
IDCC InterDigital, Inc. $99.95 39.83 AMC 965
JWN Nordstrom, Inc. $44.18 52.00 AMC 7240
MNST Monster Beverage Corp $43.45 33.22 AMC 2598
OLED Universal Display Corporation $71.30 58.10 AMC 1027
PE Parsley Energy Inc $31.86 38.03 AMC 886
SEMG SemGroup Corp $39.90 37.75 AMC 1410
SPLK Splunk Inc $62.86 43.26 AMC 3003
W Wayfair Inc $40.17 64.16 AMC 1266
SAGE SAGE Therapeutics Inc $62.75 94.51 915

 

Monday February 27:

Economic:  Durable Goods Orders – 8:30, Dallas Fed Manufacturing Survey – 10:30

International Economic:  Japan Industrial Production and Retail Trade – 6:50PM.

Earnings:

Symbol Company Name Feb 17 Close IV30 B/A AVGOPTVOL
FL Foot Locker, Inc. $70.50 31.99 AMC 2143

 

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