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Frank Fahey: Market News for the Prepared Mind: 8.7-8.14.2017

August 7, 2017


“Chance favors the Prepared Mind.” — Louis Pasteur

“Today’s scientists have substituted mathematics for experiments, and they wander off through equation after equation, and eventually build a structure which as no relation.” — Nikola Tesla

“I love to talk about nothing. It’s the only thing I know anything about.” — Oscar Wilde

“Do you know who you are? Don’t ask. Act! Action will delineate and define you.” — Thomas Jefferson

“Better to have a simple model backed by excellent people than the other way around.” — Paul Carrett 

 

The talking heads are discounting new highs for the Dow Jones Industrials (DJIA.) It is a case of “Pay not attention to the man behind the curtain!” The naysayers’ arguments focus on two specific areas – the limited number of components in the average (30) and the components of the average are weighted according to nominal stock price rather than their overall relative economic size.

These factors lead to a situation where individual stocks can have a disproportionate effect on the performance of the index. This effect was apparent last week with Apple (AAPL) and 3M (MMM) propelling the DJIA to all-time new highs, and the previous week when Boeing (BA) had the same impact. The net result was the DJIA hit new highs on eight consecutive days.

The broader based S&P 500 (SPX) provides a less biased view of US equity markets. Market capitalization and number of components (500) prevent an individual stock from significantly moving the index. The SPX is not moving. It, too, has set a new record. The SPX has gone 12 trading days – nearly 2 ½ weeks – without a move up or down of 0.03%. This is the longest streak on record . “Nothing” is the new trend.

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

Index 4-Aug Change % Weekly 2017 YTD Volatility of Index
Dow Jones Industrials (DJIA) 22092.81 262.50 1.20% 11.79% 10.33% (VXD)
S&P 500 (SPX) 2476.83 4.73 0.19% 10.66% 10.03% (VIX)
NASDAQ 100 (NDX) 5899.91 (9.01) -0.15% 21.31% 15.91% (VXN)
Russell 2000 (RUT) 1412.32 (16.94) -1.19% 4.07% 14.63% (RVX)
S&P 100 (OEX) 1095.42 5.89 0.54% 10.49% 8.90% (VXO)
Dow Jones Transportation (TRAN) 4511.96 (7.84) -0.17% 11.37% NA
Crude Oil (CLU7) 49.51 (0.28) -0.56% -8.13% 28.53%(OVX)
Gold (GCZ7) 1264.80 (10.80) -0.85% 9.79% 10.87 (GVZ)
CBOE Volatility Index (VIX) 10.03 (0.26) -2.53% NA

Data Source: OptionVue8 

The dog days have affected the VIX and related products, in the same manner they have affected the major equity indexes. The VIX is hovering above all-time lows. The markets are not moving. Europe is on vacation.The A-team traders in NYC are in the Hamptons enjoying the fruits of last year’s bonuses. The trading desks across the world are staffed by the B-team. They live in fear of making mistake and raising the hackles of the alpha dogs. Their trading mantra is Primum non nocere – “first, do no harm.”
Know, that these desks do not have the depth of experience to rationally respond to the black swan – the unexpected volatility event. This lack of experience can magnify panicked responses to unknowns. Be wary.

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

Indexes Ticker 4-Aug 28-Jul Change % Change
CBOE Volatility Index VIX 10.03 10.29 (0.26) -2.53%
VIX August Future (8/18/2017) VXQ7 11.275 11.375 (0.10) -0.88%
VIX September Future (9/20/2017) VXU7 12.775 12.625 0.15 1.19%
VIX October Future (10/18/2017) VXV7 13.525 13.825 (0.30) -2.17%
CBOE Short-term Volatility Index VXST 8.58 8.55 0.03 0.35%
CBOE 3 Month Volatility Index VXV 12.75 12.58 0.17 1.35%
CBOE Mid-term Volatility Index (6 month) VXMT 14.25 13.96 0.29 2.08%
VIX of VIX VVIX 87.39 87.20 0.19 0.22%
CBOE SKEW Index SKEW 138.32 139.91 (1.59) -1.14%
Long VIX ETP’s
ProShares Ultra VIX Short Term Futures ETF UVXY 29.79 30.19 (0.40) -1.32%
iPath S&P 500 VIX Short Term Futures ETN VXX 11.19 11.29 (0.10) -0.89%
ProShares VIX Short Term Futures ETF VIXY 37.31 37.54 (0.23) -0.61%
iPath S&P 500 VIX Mid-Term Futures ETN VXZ 21.19 21.00 0.19 0.90%
Inverse VIX ETP’s
ProShares Short VIX Short Term Future ETF SVXY 90.77 90.22 0.55 0.61%
Daily Inverse VIX Short Term ETN XIV 94.29 93.62 0.67 0.72%

Data Source: OptionVue8

The coming week includes consumer price readings and public speeches by four Fed officials. Thursday’s jobless claims and producer price data are other reports which could possibly engender some sort of move in the markets. Congress is on vacation. President Trump is on vacation. It should be very quiet. Maybe, too quiet?

It will be another blockbuster week for earnings. Earnings announcements will continue at a steady pace this week. The two stocks engendering the largest levels of interest are Nvidia (NVDA) and Priceline (PCLN) I am interested in both issues. I am far more likely to trade the NVDA announcement than the PCLN announcement.

I do not like the risk/reward ratio in Priceline.com. I will probably just watch and learn from PCLN price and implied volatility movement. PCLN closed at $2032.77 last week. Priceline’s average move for the past few earnings announcements has been nearly 7%. I will avoid a trade where the trade range expectations are plus or minus (+/-) $150. The at-the-money front month straddle is trading about $100.

It is not a “retail trade.” It is too difficult to control risk at these prices. There a number of other trading alternatives for the week. The alternatives include: CBS, Tyson Foods, Marriott Int’l, Tripadvisor, Walt Disney, Fossil, Ralph Lauren, Henry Schein, Monster Beverage, CVS Health Michael Kors, Mylan, Perrigo, Avnet, Nvidia, Nordstrom, Macy’s. Kohl’s, and J C Penney. 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.

Advice to stimulate your imagination:

“You need chaos in your soul to give birth to a dancing star.” Friedrich Nietzsche 

“Now came the dog days—day after day of hot, still summer, when for hours at a time light seemed the only thing that moved; the sky-sun, clouds and breeze-awake above the drowsing downs.” – Richard Adams 

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

“Freedom is what you do with what’s been done to you.” – Jean-Paul Sartre 

 

Monday, August 7: 

Economic: Gallup US Consumer Spending Measure – 8:30, Labor Market Conditions Index – 10:00, TD Ameritrade IMX – 12:30.
International Economic: Germany Industrial Production – 2:00AM.

Other: St. Louis Federal Reserve Bank President James Bullard to discuss the U.S. economy and monetary policy at the America’s Cotton Marketing Cooperatives 2017 Conference in Nashville, with audience and media Q&A – 11:45AM, Minneapolis Federal Reserve Bank President Neel Kashkari to take part in a moderated audience Q&A session at the Sioux Falls Rotary Club event in Sioux Falls, SD – 1:25PM.

Earnings:

SYMBOL B/A 8/4 Close AVGVOL AVG MOVE SMA 10 50% FIB
BAH BMO $34.61 1,273,830 5.16% $34.04 $33.40
TSN BMO $63.30 2,756,450 4.76% $62.63 $61.38
ALB AMC $119.60 1,137,890 3.15% $117.94 $111.86
CAR AMC $32.21 3,786,290 9.08% $32.03 $29.84
CBS AMC $63.62 2,867,650 2.41% $66.14 $65.35
EVHC AMC $55.79 1,402,240 1.83% $58.13 $58.91
IPHI AMC $34.69 1,266,800 9.41% $38.00 $36.81
LBTYA AMC $34.61 3,140,040 2.80% $33.54 $32.56
MAR AMC $105.02 2,451,590 2.04% $103.55 $102.31
RSPP AMC $31.11 2,427,740 3.21% $33.53 $32.72

 

Tuesday, August 8: 

Economic: Motor NFIB Small Business Optimism Index – 8:30, Redbook – 8:55, JOLTS – 10:00.
International: Germany Merchandise Trade – 2:00AM, France Merchandise Trade – 2:45AM, China PPI & CPI – 9:30PM.

Earnings:

SYMBOL B/A 8/4 Close AVGVOL AVG MOVE SMA 10 50% FIB
ARMK BMO $39.91 1,332,200 4.40% $40.17 $40.55
CVS BMO $77.97 6,031,140 4.24% $78.52 $79.31
EGN BMO $49.95 1,658,500 2.73% $51.90 $50.69
EXPD BMO $59.56 1,194,230 3.32% $59.12 $57.87
IONS BMO $52.36 1,419,600 4.71% $53.50 $55.01
KITE BMO $112.58 1,263,020 7.89% $110.05 $106.39
KORS BMO $36.80 2,484,970 6.24% $35.78 $34.88
LBTYK BMO $33.25 3,611,070 2.31% $32.43 $31.43
LNG BMO $44.68 1,798,230 1.72% $45.47 $47.07
MNK BMO $41.02 2,553,220 5.59% $45.73 $45.27
NCLH BMO $56.90 1,527,410 8.16% $55.66 $55.20
PDCE BMO $46.26 1,266,770 4.09% $46.22 $44.66
RL BMO $77.29 1,681,100 6.25% $74.94 $73.41
SEE BMO $43.49 2,194,330 4.89% $44.57 $44.56
VNTV BMO $64.04 2,031,240 1.76% $64.17 $62.55
W BMO $80.36 1,643,180 13.03% $76.74 $76.44
ZTS BMO $62.12 2,728,190 5.09% $62.28 $62.16
ACAD AMC $30.69 1,537,150 6.89% $29.91 $28.58
ANDV AMC $97.93 2,120,980 2.15% $98.12 $96.87
CLR AMC $33.65 3,508,550 1.63% $32.64 $31.90
DIS AMC $107.69 7,142,580 1.69% $108.32 $106.78
GDDY AMC $42.57 1,366,500 4.84% $43.26 $42.66
MNST AMC $52.71 2,168,070 3.42% $53.18 $51.63
TRIP AMC $39.51 2,735,580 9.72% $38.23 $37.91
TSO AMC $99.53 2,127,980 2.15% $98.12 $96.87
TSRO AMC $128.59 1,197,230 2.75% $128.18 $129.80
WBMD AMC $66.30 1,091,480 2.25% $65.11 $60.66
XEC AMC $94.00 1,218,690 2.32% $96.70 $95.14

 

Wednesday, August 9: 

Economic: MBA Mortgage Applications – 7:00, Productivity and Costs – 8:30, Wholesale Trade – 10:00, EIA Petroleum Status Report – 10:30.
International Economic: Japan Machine Orders – 7:50PM.

Earnings:

SYMBOL B/A 8/4 Close AVGVOL AVG MOVE SMA 10 50% FIB
ATHM BMO $47.82 1,212,820 2.94% $48.15 $46.85
AVT BMO $38.20 1,257,710 1.93% $38.86 $39.07
FWONK BMO $35.18 1,682,960 3.25% $34.73 $35.03
LITE BMO $58.85 1,811,120 6.83% $63.74 $62.41
MBLY BMO $63.49 2,972,730 1.55% $63.37 $63.15
MDCO BMO $36.43 1,153,500 1.64% $38.09 $39.95
MYL BMO $32.92 4,957,290 1.95% $38.24 $37.05
NVO BMO $42.06 1,952,120 9.19% $42.33 $42.54
SINA BMO $96.12 1,435,990 11.70% $94.32 $90.22
SNI BMO $87.29 2,671,580 4.86% $84.67 $77.53
TRCO BMO $40.80 2,339,900 1.31% $41.73 $41.16
WB BMO $78.77 2,591,310 14.24% $76.25 $72.31
XRAY BMO $61.59 1,283,590 2.92% $62.34 $63.06
ALNY AMC $82.44 1,092,830 10.52% $81.94 $81.38
ATH AMC $49.90 1,586,540 2.25% $50.47 $50.00
CTRP AMC $57.70 3,674,220 3.46% $58.69 $56.66
GXP AMC $31.22 2,913,200 0.94% $30.60 $30.05
LYV AMC $37.36 1,259,010 4.80% $36.98 $35.78
NTES AMC $304.47 1,276,920 5.94% $308.48 $305.51
PBYI AMC $85.80 1,700,200 1.55% $93.51 $90.99
PTLA AMC $61.50 1,013,300 10.89% $63.85 $60.48
SFR AMC $34.31 1,268,360 0.88% $34.89 $34.52

 

Thursday, August 10: 

Economic: Weekly Jobless Claims – 8:30, PPI-FD – 8:30, Bloomberg Consumer Comfort Index – 9:45, EIA Natural Gas Report – 10:30, Money Supply – 4:30.

International Economic: Japan Tertiary Index – 1:30AM, Great Britain Industrial Production – 4:30AM, Great Britain Merchandise Trade – 4:30AM.

Other: William Dudley New York Federal Reserve Bank President will deliver opening remarks and join a panel of New York Fed economists to answer questions after the presentation of the Economic Press Briefing on Wage Inequality in the Region, in New York – 10:00AM.

Earnings:

SYMBOL B/A 8/4 Close AVGVOL AVG MOVE SMA 10 50% FIB
DDS BMO $72.93 1,149,540 9.09% $72.40 $66.47
EAT BMO $34.71 1,227,660 5.59% $35.73 $36.58
KSS BMO $41.89 4,532,050 9.68% $40.74 $39.33
PRGO BMO $67.43 1,514,590 8.12% $0.00 $0.00
YY BMO $73.49 1,085,350 2.87% $71.32 $65.08
BZUN AMC $32.02 2,098,150 3.39% $32.73 $28.13
JWN AMC $46.81 3,026,170 6.88% $47.72 $48.15
NVDA AMC $167.21 22,750,900 11.70% $165.09 $154.25
TTD AMC $53.39 1,296,070 19.36% $53.78 $52.98

 

Friday, August 11: 

Economic: CPI – 8:30, International Trade – 8:30, Baker Hughes Rig Count – 1:00.

International Economic: Germany CPI – 2:00AM,

Other: Federal Reserve Bank of Dallas President Robert Kaplan to speak at the University of Texas at Arlington Accounting Department Sixth Annual CPE Day in Arlington, Texas, with audience and media Q&A – 9:40AM, Minneapolis Federal Reserve Bank President Neel Kashkari to take part in a moderated audience Q&A session at the Independent Community Bankers of Minnesota Annual Convention in Bloomington, MN – 11:30AM.

Earnings: None meeting criteria.

 

Monday, August 14: 

Economic: No Major Announcements.

International Economic: Japan GDP, 7:50PM, China Industrial Production & Retail Sales – 10:PM,

Earnings:

SYMBOL B/A 8/4 Close AVGVOL AVG MOVE SMA 10 50% FIB
JD BMO $46.40 10,758,100 6.19% $44.86 $42.68
SYY BMO $52.33 3,053,240 1.64% $51.97 $50.94

 

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