Frank Fahey: Market News for the Prepared Mind: 6.26-7.3.2017

June 26, 2017

“Chance favors the Prepared Mind.” – Louis Pasteur

“Experience traders control risk, inexperienced traders chase gains.”  – Alan Farley

“You weren’t thinking and you weren’t paying attention either. People who don’t pay attention often get stuck in the Doldrums.”  – Norman Juster

“Nothing is a waste of time if you use the experience wisely.” – Auguste Rodin

 

Most of the market has embraced this past Wednesday’s start of summer.  The Dow Jones Industrials and the S&P 500 hovered around unchanged.  The SPX was up 0.2%, while the DJIA was up only 0.05%.  The tech laden NASDAQ 100 was up 2.14%.  The stellar performer for the week was healthcare.  This sector was up 3.7% in response to Senate and House healthcare plans that would limit regulation of the sector.

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

 Data Source: OptionVue8

VIX Futures and associated Indexes were down for the week.  The sole exception was the CBOE Short-term Volatility Index (VXST) which show a minuscule gain of 0.60%.  CBOE VIX guru Russell Rhoads trades of the week show some traders are still looking for a pop in the VIX.   Both trades involved the sale of an out-of-the-money put combined with the purchase of an out-of-the-money call vertical.  The first trade was the sale of VIX Jul 26th 10.50 Puts at 0.21, the purchase of  VIX Jul 26th 17.00 Calls for 0.54 and the sale of VIX Jul 26th 30.00 Calls at 0.15 which results in a net cost (without commissions)  of 0.18.  The second trade was  The other trade sold the VIX Jul 26th 11.00 Puts at 0.45, purchased the VIX Jul 26th 15 Calls for 0.68, and selling the VIX Jul 26th 30 Calls at 0.09 which results in a cost of 0.14.

I do not know if these trades are speculative or for protection.    I use a variant of the strategy to protect my index broke wing iron butterflies against a downside move. This strategy is very common in the VIX pit.  The inherent assumption by most of the traders is support between 10.50 and 11.00 for the VIX at expiration settlement.

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

Data Source: OptionVue8

The focus for the coming week will focus on economy.  The releases of Durable Goods Orders on Monday, International Trade on Wednesday, and Personal Income and Outlays on Friday will help in setting expectations for second quarter GDP.  Analysts are interested if the release of Pending Home Sales on Wednesday will show a rebound after two months of reported declines.  On Wednesday, President Trump meets with South Korean Prime Minister, Lee Nak-Yon.

It will be an interesting week for earnings.   Nike’s announcement is garnering the most interest.  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.  Earnings highlights include HB Fuller, Factset Research, Darden Restaurants, KB Home, General Mills, Paychex, Monsanto, Nike, Micron Technology, Acuity Brands, Constellation Brands, McCormick &Co, and Conagra Brands.

Advice to stimulate your imagination:

 

“Don’t wait. The time will never be just right.” – Napoleon Hill

“Inflation is the crabgrass in your savings.” – Robert Orben

“A point of view can be a dangerous luxury when substituted for insight and understanding.” – Marshall McLuhan

“If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes” Peter Lynch

 

 

Monday, June 26:

Economic:  Durable Goods Orders – 8:30, Chicago Fed National Activity Index – 8:30, Dallas Fed Manufacturing Survey – 10:30.

International Economic: No major announcements.

Other: San Francisco Federal Reserve Bank President John C. Williams to speak about “Speed Limits and Stall Speeds: Fostering Sustainable Growth in the United States” at the University of Sydney in Ultimo, New South Wales, with audience Q&A – 1:10AM

Earnings:  None meeting criteria.

 

Tuesday, June 27:

Economic:  Redbook – 8:55, S&P Corelogic Case-Shiller HPI – 9:00, Consumer Confidence – 10:00, Richmond Fed Manufacturing Index – 10:00, State Street Investor Confidence – 10:00.

International Economic: No major announcements.

Other:  San Francisco Federal Reserve Bank President John C. Williams to speak at The Economic Association of Australia, Eminent Speaker Series 2017 on “The Global Growth Slump: Causes and Consequences” in Sydney, New South Wales, with audience Q&A – 4:05AM, Philadelphia Federal Reserve Bank President Patrick Harker to speak on the economic outlook and international trade at the European Economics & Financial Centre, Distinguished Speakers Seminar in London, with audience Q&A – 11:15AM, Minneapolis Federal Reserve Bank President Neel Kashkari to participate in a townhall in Houghton, Michigan, with audience Q&A – 5:30PM.

Earnings:

 

Wednesday, June 28:

Economic:  MBA Mortgage Applications – 7:00, International Trade in Goods – 8:30, Pending Homes Sales Index – 10:00, EIA Petroleum Status Report – 10:30.

International Economic: Japan Retail Sales – 7:50PM.

Other:  San Francisco Federal Reserve Bank President John C. Williams to speak about The Global Growth Slump: Causes and Consequences at the The Economic Association of Australia, Eminent Speaker Series 2017 in Canberra, ACT, with audience Q&A – 3:30AM.

Earnings:

 

Thursday, June 29:

Economic:  GDP – 8:30, Weekly Jobless Claims – 8:30, Corporate Profits – 8:30, EIA Natural Gas Report – 10:30, Money Supply – 4:30.

International Economic:  Eurozone Economic Sentiment – 5:00Am, Germany – CPI – 8:00AM, Japan Household Spending, Unemployment Rate & CPI – 7:30PM, Japan Industrial Production – 7:50PM, China CFLP Manufacturing PMI – 9:00PM.

Other:  President Trump meets with South Korean Prime Minister, Lee Nak-Yon.

Earnings:

 

Friday, June 30:

Economic:  Personal Income and Outlays – 8:30, Chicago PMI – 9:45, Consumer Sentiment – 10:00, Baker Hughes Rig Count – 1:00.

International Economic:  No major announcements.

Earnings:  None meeting criteria.

 

Monday, July 3:

Economic:  Gallup Consumer Spending Measure – 8:30, PMI Manufacturing Index – 9:45, ISM Manufacturing Index – 10:00, Construction Spending – 10:00.

International Economic: Germany PMI Manufacturing – 3:55AM, Eurozone PMI Manufacturing Index – 4:00AM, Eurozone Unemployment Rate – 5:00AM.

Earnings: None meeting criteria.

 

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