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Frank Fahey: Market News for the Prepared Mind: 9.11-9.18.2017

September 11, 2017


“Chance favors the Prepared Mind.” – Louis Pasteur

“Millions saw the apple fall, but Newton was the one who asked why.” – Bernard Baruch

“Panic causes tunnel vision.” – Simon Sinek

“A stock operator has to fight a lot of expensive enemies within himself.” – Jesse Livermore

“Panic is a natural human response to danger, but it’s one that severely compounds the risk.” – David Ignatius 

 

The major indexes continue remain within easy striking distance of all-time highs. There is almost palpable disbelief among the financial cognoscenti that the indexes have not had a correction. Once again I have been reminded about the perils of ignoring a trend. The trend is bullish.

A characteristic of a bull market is the markets celebrate good news while ignoring bad news. Bad news sells. As a result, purveyors of news and opinion focus on the bad news as a means to market their product. The bad news last week was impressive. Natural disasters (Hurricanes Harvey, Irma, and Jose), gas shortages, weakness in the US dollar, and an H-Bomb test by North Korea dominated the news. The Republican Party received the worst news when Nancy Pelosi and Donald Trump cut a deal. The deal removed a potential debt ceiling crisis from the equation. The bad news was not totally ignored. This litany of bad news had only a minor effect on the market.

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

Index 8-Sep Change % Weekly 2017 YTD Volatility of Index
Dow Jones Industrials (DJIA) 21797.79 (189.77) -0.86% 10.30% 12.01% (VXD)
S&P 500 (SPX) 2461.43 (15.12) -0.61% 9.97% 12.12% (VIX)
NASDAQ 100 (NDX) 5913.67 15.77 0.27% 21.59% 16.07% (VXN)
Russell 2000 (RUT) 1399.42 (14.10) -1.00% 3.12% 15.49%(RVX)
S&P 100 (OEX) 1086.98 (8.27) -0.76% 9.64% 10.761%(VXO)
Dow Jones Transportation (TRAN) 4560.87 69.74 1.55% 12.57% NA
Crude Oil (CLV7) 47.56 0.21 0.44% -11.75% 29.49%(OVX)
Gold (GCZ7) 1351.20 21.30 1.60% 17.29% 13.77 (GVZ)
CBOE Volatility Index (VIX) 12.12 1.99 19.64% NA

Data Source: OptionVue8 

Negative news was ignored by the equity markets, but it was not ignored by the VIX and other volatility products. The CBOE Short-term Volatility Index (VXST) showed the greatest reaction to uncertainty by closing at 11.29. up 2.32 or 25.86%. The front month VIX future (VXU7) contango settled at 7.91% vs. Thursday’s contango of 9.75%. Narrowing of the contango percentage shows a greater relative concern for the front month versus the second month.

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

Indexes Ticker 8-Sep 1-Sep Change % Change
CBOE Volatility Index VIX 12.12 11.28 0.84 7.45%
VIX September Future (9/20/2017) VXU7 13.275 13.075 0.20 1.53%
VIX October Future (10/18/2017) VXV7 14.325 14.025 0.30 2.14%
VIX November Future (11/15/2017) VXX7 14.875 14.425 0.45 3.12%
CBOE Short-term Volatility Index VXST 11.29 8.97 2.32 25.86%
CBOE 3 Month Volatility Index VXV 14.69 13.99 0.70 5.00%
CBOE Mid-term Volatility Index (6 month) VXMT 16.37 15.42 0.95 6.16%
VIX of VIX VVIX 100.12 93.53 6.59 7.05%
CBOE SKEW Index SKEW 135.39 130.16 5.23 4.02%
Long VIX ETP’s
ProShares Ultra VIX Short Term Futures ETF UVXY 31.83 30.88 0.95 3.08%
iPath S&P 500 VIX Short Term Futures ETN VXX 48.52 47.68 0.84 1.76%
ProShares VIX Short Term Futures ETF VIXY 40.26 39.63 0.63 1.59%
iPath S&P 500 VIX Mid-Term Futures ETN VXZ 22.47 21.86 0.61 2.79%
Inverse VIX ETP’s
ProShares Short VIX Short Term Future ETF SVXY 76.33 77.96 (1.63) -2.09%
Daily Inverse VIX Short Term ETN XIV 79.70 73.89 5.81 7.86%

Data Source: OptionVue8 

The second week of September is light on economic reports. The only numbers of note will be on inflation and industrial production. The impact of the hurricanes may push Fed unwinding further out into the future.the future. The week winds up with consumer sentiment winds up Friday and will tally the psychological effects of both Harvey as well as Hurricane Irma. The wild cards remain North Korea and pull together a tax reform bill.

There are very few earnings announcements this week. The highlights include: United Natural Foods, Cracker Barrel, and Oracle. 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:

“Ideas come and go, stories stay.” – Nassim Nicholas Taleb

“Bull markets are born in pessimism, grow on skepticism, mature on optimism and die on euphoria.” – John Templeton 

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

“Don’t give me timing, give me time.” – Jesse Livermore

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

 

Monday, September 11:

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Economic: No major announcements.

International: Japan Tertiary Index – 1:30AM.

Earnings: None meeting scan criteria.

 

Tuesday, September 12:

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

International: Great Britain CPI – 4:00 AM.

Earnings: None meeting scan criteria.


Wednesday, September 13:
Economic: MBA Mortgage Applications – 7:00, PPI – FD – 8:30, EIA Petroleum Status Report – 10:30

International Economic: Germany CPI – 3:15 AM, Great Britain Labour Market Report – 4:30 AM, Eurozone Industrial Production – 5:00 AM.

Earnings: None meeting scan criteria.

 

Thursday, September 14:

Economic: Weekly Jobless Claims – 8:30, Consumer Price Index – – 8:30, Bloomberg Consumer Comfort Index – 9:45, Quarterly Services Survey – 10:00, EIA Natural Gas Report – 10:30, Money Supply – 4:30.

International: Great Britain Retail Sales – 4:30 AM.

Other: Bank of England Announcement & Minutes – 7:00 AM.

Earnings: None meeting scan criteria.

 

Friday, September 15:

QUADRUPLE WITCHING

Economic: Retail Sales – 8:30, Empire State Manufacturing Survey – 8:30, Industrial Production – 9:15, Business Inventories – 10:00, Consumer Sentiment – 10:00, Baker Hughes Rig Count – 1:00.

International: Eurozone Merchandise Trade – 5:00 AM.

Earnings: None meeting scan criteria.


Monday, September 18:

Economic: Housing Market Index – 10:00.

International: Eurozone HICP – 5:00 AM.

Earnings: None meeting scan criteria.

 

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