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Frank Fahey: Market News for the Prepared Mind: 9.18-9.25.2017

September 18, 2017


“Chance favors the Prepared Mind.” – Louis Pasteur

“If I panic, everyone else panics.” – Kobe Bryant

“Any bull market covers a multitude of sins, so there may be all sorts of problems with the current system that we won’t see until the bear market comes.” – Ron Chernow

“Remember, I’m neither a bear nor a bull, I’m an agnostic opportunist. I want to make money short and long-term. I want to find good situations and exploit them.” – Jim Cramer

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

 

Investors were caught of guard last week. September is historically a very poor performing month. There have been litanies of problems: Hurricane Harvey, North Korea, Hurricane Irma and Bitcoin. What happened?

The Dow hit record highs four days in a row. The S&P 500 closed the week at another new record high – up 1.58% for the week. The other major indexes turned in equally stellar performances. The small-cap dominated Russell 2000 led the way with gains of 2.31%. The rally left the cognoscenti struggling for explanations.

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

Index 15-Sep Change % Weekly 2017 YTD Volatility of Index
Dow Jones Industrials (DJIA) 22268.34 470.55 2.16% 12.68% 9.84% (VXD)
S&P 500 (SPX) 2500.23 38.80 1.58% 11.70% 10.17% (VIX)
NASDAQ 100 (NDX) 5988.00 74.33 1.26% 23.12% 12.51% (VXN)
Russell 2000 (RUT) 1431.72 32.30 2.31% 5.50% 11.83%(RVX)
S&P 100 (OEX) 1105.11 18.13 1.67% 11.47% 7.80%(VXO)
Dow Jones Transportation (TRAN) 4603.58 42.71 0.94% 13.63% NA
Crude Oil (CLV7) 50.37 2.81 5.91% -6.53% 26.65%(OVX)
Gold (GCZ7) 1323.50 (27.70) -2.05% 14.89% 12.06 (GVZ)
CBOE Volatility Index (VIX) 10.17 (1.95) -16.09% NA

Data Source: OptionVue8 

The biggest news on the VIX front is the return of Russell Rhoads blogging at http://www.cboe.com/blogs about the VIX and associated volatility issues. Russell is also a terrific guest on Stocks & Jocks every Thursday morning (listen live)! Of special interest are his series of reports from the CBOE Risk Management Conference.

The monthly September VIX Futures contract goes off the board on the open Wednesday.

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

Indexes Ticker 15-Sep 8-Sep Change % Change
CBOE Volatility Index VIX 10.170 12.125 -1.955 -16.12%
VIX September Future (9/20/2017) VXU7 11.125 13.275 (2.15) -16.20%
VIX October Future (10/18/2017) VXV7 12.925 14.325 (1.40) -9.77%
VIX November Future (11/15/2017) VXX7 14.175 14.875 (0.70) -4.71%
CBOE Short-term Volatility Index VXST 8.30 11.29 (2.99) -26.48%
CBOE 3 Month Volatility Index VXV 12.96 14.69 (1.73) -11.78%
CBOE Mid-term Volatility Index (6 month) VXMT 15.09 16.37 (1.28) -7.82%
VIX of VIX VVIX 90.63 100.12 (9.49) -9.48%
CBOE SKEW Index SKEW 144.54 135.39 9.15 6.76%
Long VIX ETP’s
ProShares Ultra VIX Short Term Futures ETF UVXY 24.69 31.83 (7.14) -22.43%
iPath S&P 500 VIX Short Term Futures ETN VXX 42.80 48.52 (5.72) -11.79%
ProShares VIX Short Term Futures ETF VIXY 35.57 40.26 (4.69) -11.65%
iPath S&P 500 VIX Mid-Term Futures ETN VXZ 21.38 22.47 (1.09) -4.85%
Inverse VIX ETP’s
ProShares Short VIX Short Term Future ETF SVXY 86.04 76.33 9.71 12.72%
Daily Inverse VIX Short Term ETN XIV 89.61 79.70 9.91 12.43%
Data Source: OptionVue8

This will be one of the most important weeks of the year when it comes to economic data. We are in the midst of a Central Bank bull market. The Federal Reserve holds its regularly scheduled meeting, and is expected to detail a timetable for reducing its balance sheet. We, also, get data on existing home sales and housing starts. The wild cards remain North Korea and the District of Columbia.

The god’s are conspiring against me. I will include my usual scans of earnings announcements next week. There are very few earnings announcements this week. The highlights include: Adobe Systems, Autozone, Fedex, Bed Bath and Beyond, Analogic, General Mills, Herman Miller, and CarMax. 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

“There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it’s the end of a bull market or end of a bear market.” – Paul Tudor Jones 

“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 18: 

Economic: Housing Market Index – 10:00.

International: Eurozone HICP – 5:00 AM.

Other:  Listen to Frank Fahey on “Stocks and Jocks” Listen Live

 

Tuesday, September 19: 

Economic: Housing Start – 8:30, Current Account – 8:30, Import and Export Prices – 8:30, Redbook – 8:55.

International: Japan Merchandise Trade – 7:50 PM.

Other: FOMC meeting begins.

 

Wednesday, September 20:

Economic: MBA Mortgage Applications – 7:00, Existing Homes Sales – 10:00, , EIA Petroleum Status Report – 10:30/

International Economic: Germany –PPI – 2:00 AM, Great Britain Retail Sales – 4:30 AM.

Other: FOMC Forecasts – 2:00 PM, Fed Chair Press Conference – 2:30 PM. September VIX Futures contract (VXU7) goes off the board on the open Wednesday.

 

Thursday, September 21: 

Economic: Weekly Jobless Claims – 8:30, Philadelphia Fed Business Outlook Survey – 8:30, FHFA House Price Index – 9:00, Bloomberg Consumer Comfort Index – 9:45, Leading Indicators – 10:00, EIA Natural Gas Report – 10:30, Money Supply – 4:30.

International: No major announcements.

 

Friday, September 22:

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

International: France GDP = 2:45 AM, France PMI Composite Flash – 3:00 AM, Germany PMI Composite Flash – 3:30 AM, Eurozone PMI Composite Flash – 4:00 AM.

Other: San Francisco Federal Reserve Bank President John Williams to speak at the Swiss National Bank Research Conference 2017 – Monetary Policy Design, Conduct and Effects in Zurich, Switzerland, with media Q&A – 6:00 AM, Kansas City Federal Reserve Bank President Esther George to deliver the keynote at the “Global Oil Supply & Demand: Prospects for Greater Balance” Conference in Oklahoma City, with audience Q&A – 9:30 AM.

 

Monday, September 25:

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

International: No major announcements.

Other: New York Federal Reserve Bank President William Dudley will speak about workforce development at Onondaga Community College in Syracuse, New York, with audience Q&A – 8:30 AM, Chicago Federal Reserve Bank President Charles Evans to speak about current economic conditions or monetary policy at the Economic of Grand Rapids Luncheon Meeting, with audience and media Q&A, in Grand Rapids, Michigan – 12:40PM, Minneapolis Federal Reserve Bank President Neel Kashkari to participate in Eye of the Hawk Town Hall Event in Grand Forks, North Dakota, with audience Q&A. – 6:30PM.

 

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