Blog
Frank Fahey: Market News for the Prepared Mind: 1.23-1.30.2017
January 23, 2017
“Chance favors the Prepared Mind.” – Louis Pasteur
“Imagination decides everything.” – Blaise Pascal
“There are known knowns. These are things we know that we know. There are known unknowns.That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.” – Donald Rumsfeld
“Confidence is ignorance. If you’re feeling cocky, it’s because there’s something you don’t know.” ― Eoin Colfer
If you wake up early on Monday mornings tune in to “Stocks and Jocks” – a financial talk show with sports commentary airing Monday-Friday, 6-8AM CT on stocksandjocks.net. I join host, Tom Haugh, at 6AM CT every Monday. The show has been described as combining “the market insight of Louis Rukeyser, a dash of sports, and the humor of Seinfeld with truly honest stock market and economic advice.” My area of expertise is honesty.
My apologies for the quiet time for the blog. Other responsibilities of a higher priority took precedence over my weekly writing. Rumblings of market volatility are expected by many during the first 100 days of the new administration. The blog is a good starting point for outlining what we do know about the upcoming trading week.
Inauguration week ended with domestic and global markets flat to lower. Uncertainty was tagged by many pundits as the primary source of concern for investors. Janet Yellen said it makes sense for the Fed to withdraw monetary support a “few times a year.” The size and timing of Fed rate increases, combined with uncertainty about President Trump’s policy direction, raised concerns about market volatility. Indexes sold off in response to the content and style of Trump’s inaugural speech. Most of the criticism centered on the absence of details about the President’s ambitious plans.
Here is an overview of the US market behavior last week and for 2017:
| Index | 20-Jan | Change | % Weekly | 2017 YTD | Volatility of Index |
| Dow Jones Industrials (DJIA) | 19,827.50 | (58.23) | -0.29% | 0.33% | 11.47% (VXD) |
| S&P 500 (SPX) | 2,266.50 | (8.10) | -0.36% | 1.26% | 11.54% (VIX) |
| NASDAQ 100 (NDX) | 5,063.20 | 3.70 | 0.07% | 4.10% | 13.04% (VXN) |
| Russell 2000 (RUT) | 1,351.85 | (20.15) | -1.47% | -0.39% | 16.96% (RVX) |
| S&P 100 (OEX) | 1003.04 | (3.56) | -0.35% | 1.17% | 10.50% (VXO) |
| Crude Oil (CLG7) | 53.24 | 0.09 | 0.17% | -1.21% | 29.19%(OVX) |
| CBOE Volatility Index (VIX) | 11.54 | 0.31 | 2.76% | NA |
Data Source: OptionVue8
The settlement range for the monthly VIX may be entering a new normal. The January exercise-settlement value for VIX options (VRO) was 12.42. This was the seventh straight monthly expiration with the VRO under 16.00. Per Russell Rhoads at the CBOE, the longest streak of monthly settlements under 16.00 is 11. This streak took place from August 2006 through June 2007.
Here is an overview of last week for the VIX and related products:
| Indexes | Ticker | 20-Jan | 13-Jan | Change | % Change |
| CBOE Volatility Index | VIX | 11.54 | 11.23 | 0.31 | 2.76% |
| VIX February Future (2/15/2017) | VXG7 | 13.825 | 14.225 | (0.40) | -2.81% |
| VIX March Future (3/22/2017) | VXH7 | 15.225 | 15.725 | (0.50) | -3.18% |
| VIX April Future (4/19/2017) | VXJ7 | 16.375 | 16.975 | (0.60) | -3.53% |
| CBOE Short-term Volatility Index | VXST | 9.72 | 8.99 | 0.73 | 8.12% |
| CBOE 3 Month Volatility Index | VXV | 14.49 | 14.54 | (0.05) | -0.34% |
| CBOE Mid-term Volatility Index (6 month) | VXMT | 17.07 | 17.16 | (0.09) | -0.52% |
| VIX of VIX | VVIX | 83.63 | 92.90 | (9.27) | -9.98% |
| CBOE SKEW Index | SKEW | 146.33 | 132.32 | 14.01 | 10.59% |
| Long VIX ETP’s | |||||
| ProShares Ultra VIX Short Term Futures ETF | UVXY | 28.40 | 30.63 | (2.23) | -7.28% |
| iPath S&P 500 VIX Short Term Futures ETN | VXX | 20.71 | 21.46 | (0.75) | -3.49% |
| ProShares VIX Short Term Futures ETF | VIXY | 17.25 | 17.90 | (0.65) | -3.63% |
| iPath S&P 500 VIX Mid-Tem Futures ETN | VXZ | 32.73 | 31.90 | 0.83 | 2.60% |
| Inverse VIX ETP’s | |||||
| ProShares Short VIX Short Term Future ETF | SVXY | 107.20 | 110.95 | (3.75) | -3.38% |
| Daily Inverse VIX Short Term ETN | XIV | 55.28 | 57.25 | (1.97) | -3.44% |
Data Source: OptionVue8
About 20% of S&P 500 stocks will be announcing earnings this coming week. Domestic economic reports focus on the housing sector. The release of Real GDP on Friday morning has the ability to move markets. Much of the trade this week will be in anticipation of next week’s Fed meeting and January employment numbers. Many traders are approaching the first week of Trump’s presidency with caution. Expect a flurry of activity with regards to the ACA, trade, immigration and energy’ Be careful with standing open orders.
The earnings season is ramping up this week. 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. I will start trading announcements this week. The earnings highlights this week for widely held and actively traded stocks are Halliburton, Yahoo!, Alibaba, Alcoa, Capital One, Cree, Eagle Materials, Rockwell Automation, Textron, McKesson, F5 Networks, QUALCOMM, Alphabet, Boeing, McDonald’s, Caterpillar, Microsoft.Xilinx, Biogen, Whirlpool, VMware, PayPal, and American Airlines.
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 > 400 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 Source for earnings: Livevol Core and OptionVue8
Advice to stimulate your imagination:
“Remember what the Dormouse said…feed your head!” – Grace Slick
“Any fool can know. The point is to understand.” – Albert Einstein
Monday January 23:
Economic: No major announcements
International Economic: Eurozone Consumer Confidence Flash – 10:00AM, Japan PMI Manufacturing Index Flash – 7:30PM.
Other: ECB President Draghi speaks – 6:30AM.
Earnings:
| Symbol | Company Name | Jan 20 Close | IV30 | B/A | AVGOPTVOL |
| HAL | Halliburton Company | $55.34 | 25.88 | BMO | 25383 |
| SIMO | Silicon Motion Technology | $42.29 | 46.92 | AMC | 406 |
| YHOO | Yahoo! Inc. | $42.09 | 27.37 | AMC | 16406 |
| ZION | Zions Bancorp | $42.31 | 30.60 | AMC | 2350 |
Tuesday January 24:
Economic: Redbook – 8:55, Existing Home Sales – 10:00, Richmond Fed Manufacturing Index – 10:00.
International Economic: Germany PMI Composite Flash – 3:30AM, Eurozone PMI Composite Flash – 4:00AM
Earnings:
| Symbol | Company Name | Jan 20 Close | IV30 | B/A | AVGOPTVOL |
| BABA | Alibaba Group Holding Ltd | $96.17 | 29.75 | BMO | 104477 |
| DHI | D.R. Horton, Inc. | $28.01 | 29.50 | BMO | 2876 |
| DFS | Discover Financial Services | $70.00 | 25.98 | BMO | 2154 |
| FITB | Fifth Third Bancorp | $25.99 | 28.76 | BMO | 3601 |
| PII | Polaris Industries Inc. | $85.90 | 40.51 | BMO | 1360 |
| PLD | Prologis Inc | $52.76 | 25.81 | BMO | 889 |
| AA | Alcoa Corp | $35.42 | 42.17 | AMC | 5489 |
| CA | CA, Inc. | $32.55 | 25.08 | AMC | 762 |
| COF | Capital One Financial Corp. | $86.72 | 27.94 | AMC | 7370 |
| CREE | Cree, Inc. | $27.62 | 44.32 | AMC | 2131 |
| HA | Hawaiian Holdings, Inc. | $55.20 | 42.80 | AMC | 584 |
| LOGI | Logitech International SA | $25.34 | 44.36 | AMC | 425 |
| STX | Seagate Technology PLC | $36.34 | 42.72 | AMC | 10214 |
| STLD | Steel Dynamics, Inc. | $35.79 | 35.78 | AMC | 4543 |
| EXP | Eagle Materials, Inc. | $98.35 | 32.78 | 587 |
Wednesday January 25:
Economic: MBA Mortgage Applications – 7:00, FHFA House Price Index – 9:00, EIA Petroleum Status Report – 10:30.
International Economic: Germany Ifo Survey – 4:00AM, Great Britain Industrial Trends Survey – 6:00AM.
Earnings:
| Symbol | Company Name | Jan 20 Close | IV30 | B/A | AVGOPTVOL |
| HES | Hess Corp. | $57.72 | 34.33 | BMO | 15415 |
| ROK | Rockwell Automation | $140.00 | 26.72 | BMO | 678 |
| STT | State Street Corp | $78.75 | 28.83 | BMO | 1432 |
| TXT | Textron Inc. | $49.42 | 28.76 | BMO | 1284 |
| CTXS | Citrix Systems, Inc. | $92.63 | 31.25 | AMC | 977 |
| CLB | Core Laboratories N.V. | $121.24 | 33.82 | AMC | 403 |
| EBAY | eBay Inc | $30.72 | 33.28 | AMC | 20652 |
| FFIV | F5 Networks, Inc. | $142.54 | 34.94 | AMC | 923 |
| LRCX | Lam Research Corporation | $110.84 | 28.67 | AMC | 1870 |
| LVS | Las Vegas Sands Corp. | $55.84 | 29.66 | AMC | 22556 |
| MCK | McKesson Corporation | $147.29 | 32.68 | AMC | 1949 |
| MEOH | Methanex Corporation (USA) | $44.55 | 36.04 | AMC | 500 |
| MUR | Murphy Oil Corporation | $31.60 | 42.49 | AMC | 1366 |
| NSC | Norfolk Southern Corp. | $114.42 | 27.01 | AMC | 2844 |
| QCOM | QUALCOMM, Inc. | $64.44 | 30.41 | AMC | 31658 |
| NOW | ServiceNow Inc | $82.70 | 47.20 | AMC | 1757 |
| TER | Teradyne, Inc. | $26.09 | 33.15 | AMC | 832 |
| URI | United Rentals, Inc. | $110.45 | 41.65 | AMC | 4627 |
| VAR | Varian Medical Systems, Inc. | $89.48 | 27.16 | AMC | 449 |
| VRTX | Vertex Pharmaceuticals Inc. | $80.91 | 47.63 | AMC | 1498 |
| WDC | Western Digital Corp | $71.67 | 38.03 | AMC | 18273 |
| XLNX | Xilinx, Inc. | $57.98 | 28.64 | AMC | 5095 |
Thursday January 26:
Economic: Weekly Jobless Claims – 8:30, International Trade in Goods – 8:30, Chicago Fed National Activity Index – 8:30, Bloomberg Consumer Comfort Index – 9:45, PMI Services Flash – 9:45, New Home Sales – 10:00, Leading Indicators – 10:00, EIA Natural Gas Report – 10:30, Kansas City Fed Manufacturing Index – 11:00.
International Economic: Great Britain GDP – 4:30AM, Great Britain Distributive Trades – 6:00AM.
Earnings:
| Symbol | Company Name | Jan 20 Close | IV30 | B/A | AVGOPTVOL |
| ASH | Ashland Global Holdings Inc | $109.77 | 25.69 | BMO | 779 |
| BHI | Baker Hughes Incorporated | $61.96 | 29.18 | BMO | 3226 |
| BIIB | Biogen Inc | $280.35 | 38.70 | BMO | 7044 |
| BMY | Bristol-Myers Squibb Co | $55.49 | 31.11 | BMO | 36743 |
| BC | Brunswick Corporation | $54.90 | 33.82 | BMO | 410 |
| CELG | Celgene Corporation | $113.62 | 27.46 | BMO | 22994 |
| DOV | Dover Corp | $78.25 | 27.24 | BMO | 574 |
| EQT | EQT Corporation | $62.49 | 31.14 | BMO | 602 |
| IVZ | Invesco Ltd. | $30.17 | 25.80 | BMO | 1206 |
| LLL | L3 Technologies Inc | $151.91 | 25.72 | BMO | 429 |
| MJN | Mead Johnson Nutrition CO | $74.85 | 31.52 | BMO | 1975 |
| RCL | Royal Caribbean Cruises Ltd | $84.56 | 34.73 | BMO | 3625 |
| SHW | Sherwin-Williams Co | $283.09 | 26.08 | BMO | 1087 |
| LUV | Southwest Airlines Co | $50.07 | 31.53 | BMO | 7499 |
| WHR | Whirlpool Corporation | $185.23 | 31.47 | BMO | 2211 |
| ETFC | E*TRADE Financial Corp | $36.24 | 28.28 | AMC | 4028 |
| EMN | Eastman Chemical Company | $76.02 | 26.90 | AMC | 1572 |
| JNPR | Juniper Networks, Inc. | $27.42 | 33.73 | AMC | 4363 |
| KLAC | KLA-Tencor Corp | $81.15 | 27.18 | AMC | 705 |
| MXIM | Maxim Integrated Products | $40.58 | 29.53 | AMC | 1338 |
| MSCC | Microsemi Corporation | $55.13 | 49.92 | AMC | 979 |
| SYNA | Synaptics, Incorporated | $53.27 | 55.57 | AMC | 783 |
| VMW | VMware, Inc. | $82.69 | 34.16 | AMC | 3253 |
| WRK | WestRock Co | $51.28 | 32.23 | AMC | 755 |
| PYPL | Paypal Holdings Inc | $41.27 | 26.85 | 14829 |
Friday January 27:
Economic: Durable Goods Orders – 8:30, GDP – 8:30, Consumer Sentiment – 10:00, Baker-Hughes Rig count – 1:00PM.
International Economic: No major announcements.
Earnings:
| Symbol | Company Name | Jan 20 Close | IV30 | B/A | AVGOPTVOL |
| AAL | American Airlines Group Inc | $47.26 | 33.69 | BMO | 30194 |
| BEN | Franklin Resources, Inc. | $39.86 | 27.64 | BMO | 2226 |
Monday January 30:
Economic: Personal Income and Outlays – 8:30, Pending Home Sales Index – 10:00, Dallas Fed Manufacturing Survey – 10:30.
International Economic: Germany CPI – 8:00, Japan Household Spending and Unemployment Rate – 6:30PM, Japan Industrial Production – 6:50PM.
Earnings: None meeting criteria.