Blog
Frank Fahey: Market News for the Prepared Mind: 2.13-2.21.2017
February 13, 2017
“I love to talk about nothing. It’s the only thing I know anything about.”
― Oscar Wilde
“Imagination decides everything.” – Blaise Pascal
“The two most powerful warriors are patience and time.” – Leo Tolstoy
“Chance favors the Prepared Mind.” – Louis Pasteur
As of Fridays close, the S&P 500 had gone for 39 consecutive trading sessions without an intra-day move greater than 1%. This is the longest streak in history. The past few trading weeks summed up by the world’s oldest rock star, Tuli Kupferberg. in the Fug’s classic “Nothing.”
Monday, nothing
Tuesday, nothing
Wednesday and Thursday, nothing
Friday, for a change, a little more nothing
Saturday, once more, nothing
Sunday, nothing
Monday, nothing
Tuesday and Wednesday, nothing
Thursday, for a change, a little more nothing
Friday, once more, nothing.
The march of time may inexorable, but the market will not remain range bound. Patience is required by a trader waiting for something to occur in the markets. My first responsibility goal, as a trader, is to make sure I am not financially hurt by the next move in the market. Short term risk is the foundation for my position risk exposure. Success is not imperative on one’s ability to buy a bottom or sell a top.
Here is an overview of the US market behavior last week and for 2017:
| Index | 10-Feb | Change | % Weekly | 2016 YTD | Volatility of Index |
| Dow Jones Industrials (DJIA) | 20,269.27 | 197.81 | 0.99% | 2.56% | 10.98% (VXD) |
| S&P 500 (SPX) | 2,313.25 | 15.83 | 0.69% | 3.35% | 10.85% (VIX) |
| NASDAQ 100 (NDX) | 5,226.69 | 65.09 | 1.26% | 7.47% | 12.31% (VXN) |
| Russell 2000 (RUT) | 1,388.84 | 11.00 | 0.80% | 2.34% | 17.91% (RVX) |
| S&P 100 (OEX) | 1020.69 | 7.00 | 0.69% | 2.95% | 10.41% (VXO) |
| Crude Oil (CLH7) | 53.85 | 0.00 | 0.00% | -0.07% | 26.43%(OVX) |
| CBOE Volatility Index (VIX) | 10.85 | (0.12) | -1.09% | NA |
Data Source: OptionVue8
The VIX is, also, part of the nothing movement in the markets. The price of the VIX reflects a market which has been extraordinarily quiet. The VIX and associated products have shown minimally lower volatility levels as the SPX moved up this week. The VIX has closed under 12 for 16 days. The VIX is at a significant support level. The major topic of conversation among traders is the question Chubby Checker asked in Limbo Rock; “How low can you go?” I have seen at-the- money index implied volatility with an “8” handle and as high as the 170’s. It should be noted that I saw both of these levels in the same year – 1987.
Trading activity in the VIX options pit has been divided between trades providing portfolio insurance and speculative risk reversals. The risk reversals have seen the purchase of call verticals which are financed through the sale of out-of-the money puts. CBOE TV airs several daily reports from the VIX pit. These reports are valuable in getting a flavor of the daily VIX trade – options and futures.
Here is an overview of last week for the VIX and related products:
| Indexes | Ticker | 10-Feb | 3-Feb | Change | % Change |
| CBOE Volatility Index | VIX | 10.85 | 10.97 | (0.12) | -1.09% |
| VIX February Future (2/15/2017) | VXG7 | 11.725 | 12.475 | (0.75) | -6.01% |
| VIX March Future (3/22/2017) | VXH7 | 13.375 | 13.925 | (0.55) | -3.95% |
| VIX April Future (4/19/2017) | VXJ7 | 15.125 | 15.225 | (0.10) | -0.66% |
| VIX May Future (5/17/2017) | VXK7 | 16.025 | 16.025 | 0.00 | 0.00% |
| CBOE Short-term Volatility Index | VXST | 9.02 | 9.19 | (0.17) | -1.85% |
| CBOE 3 Month Volatility Index | VXV | 13.91 | 14.05 | (0.14) | -1.00% |
| CBOE Mid-term Volatility Index (6 month) | VXMT | 16.17 | 16.27 | (0.10) | -0.61% |
| VIX of VIX | VVIX | 85.77 | 88.97 | (3.20) | -3.60% |
| CBOE SKEW Index | SKEW | 130.47 | 133.25 | (2.78) | -2.09% |
| Long VIX ETP’s | |||||
| ProShares Ultra VIX Short Term Futures ETF | UVXY | 21.91 | 23.53 | (1.62) | -6.88% |
| iPath S&P 500 VIX Short Term Futures ETN | VXX | 18.21 | 18.82 | (0.61) | -3.24% |
| ProShares VIX Short Term Futures ETF | VIXY | 15.16 | 15.69 | (0.53) | -3.38% |
| iPath S&P 500 VIX Mid-Tem Futures ETN | VXZ | 30.06 | 30.06 | 0.00 | 0.00% |
| Inverse VIX ETP’s | |||||
| ProShares Short VIX Short Term Future ETF | SVXY | 125.40 | 121.36 | 4.04 | 3.33% |
| Daily Inverse VIX Short Term ETN | XIV | 64.64 | 62.69 | 1.95 | 3.11% |
Data Source: OptionVue8
It will be a very heavy week for economic news. The week starts with Janet Yellen’s semi-annual testimony before the Senate Banking Committee followed on Wednesday by her testimony before the House Financial Services Committee. Yellen’s testimony has the potential to break the streak of no daily 1% moves in the SPX. Reports on retail sales, consumer prices and industrial production will be released on Wednesday. Thursday’s highlight will be release of Housing Starts and the Philadelphia Fed Business Outlook Survey. The number in this regional manufacturing survey will be correlated and compared against Wednesday’s Industrial Production report.
The earnings season is starting to wind down. Earnings announcements are predictable volatility events providing trading opportunity. It is important to reduce the number of surprise which may occur in any trading campaign. 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. The earnings highlights this week, for widely held and actively traded stocks, are Teva Pharmaceutical, Noble Energy, Restaurants International, Scorpio Tankers, Rent-A-Center, and Flowers Foods.
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 > 800 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 Sources for earnings: Livevol Core and OptionVue8
Advice to stimulate your imagination:
“A lot of my work is a matter of reacting to surprises in life.” – Alexander Wang
” Patience is necessary, and one cannot reap immediately where one has sown.” – Soren Kierkegaard
“To learn patience is not to rebel against every hardship.” – Henri Nouwen
Monday February 13:
Economic: No major Announcements.
International Economic: Japan GDP – 6:50PM Sunday, China CPI and PPI – 8:30PM.
Earnings:
| Symbol | Company Name | Feb 10 Close | IV30 | B/A | AVGOPTVOL |
| NBL | Noble Energy, Inc. | $38.39 | 26.97 | BMO | 1944 |
| TEVA | Teva Pharmaceutical | $32.25 | 36.73 | BMO | 28401 |
| CSOD | Cornerstone OnDemand, Inc. | $41.55 | 50.79 | AMC | 1627 |
Tuesday February 14:
Last day of Trading for February VIX Futures and Options.
Economic: NFIB Small Business Optimism Index – 6:00, PPI-FD – 8:30, Producer Price Index – 8:30, Redbook – 8:55
International Economic: Germany CPI – 2:00AM, Germany GDP Flash – 2:00AM, Great Britain CPI & PPI – 5:00AM, Eurozone GDP Flash – 5:00AM, Eurozone Industrial Production – 5:00AM.
Other: Richmond Federal Reserve Bank President Jeffrey Lacker speaks at the University of Delaware 2017 Economic Forecast conference in Newark, Del., with media & audience Q&A – 8:50AM, Federal Reserve Chair Janet Yellen will give her semiannual monetary policy testimony before the Senate Banking Committee – 10:00AM, Atlanta Federal Reserve Bank President Dennis Lockhart speaks at Huntsville Rotary Club regarding crisis, recession, and recovery in Huntsville, Ala., with media and audience Q&A – 12:50PM, Dallas Federal Reserve Bank President Robert Kaplan participates in a panel discussion at the Greater Houston Port Bureau luncheon in Houston, Texas, with audience and media Q&A – 1:00PM,.
Earnings:
| Symbol | Company Name | Feb 10 Close | IV30 | B/A | AVGOPTVOL |
| A | Agilent Technologies Inc | $50.47 | 25.05 | BMO | 1215 |
| DISCA | Discovery Communications | $27.96 | 31.26 | BMO | 1173 |
| DVN | Devon Energy Corp | $44.75 | 32.70 | BMO | 11012 |
| INCY | Incyte Corporation | $122.96 | 43.99 | BMO | 1367 |
| MLM | Martin Marietta Materials, Inc. | $225.32 | 30.69 | BMO | 1108 |
| TMUS | T-Mobile Us Inc | $62.25 | 36.44 | BMO | 9410 |
| ESRX | Express Scripts Holding Co | $67.48 | 27.04 | AMC | 9698 |
Wednesday February 15:
Economic: MBA Mortgage Applications – 7:00, Consumer Price Index (CPI) – 8:30, Retail Sales – 8:30, Empire State Manufacturing Survey – 8:30, Industrial Production – 9:15, Atlanta Fed Business Inflation Expectations = 10:00, Housing Market Index – 10:00, EIA Petroleum Status Report – 10:30.
International Economic: Great Britain Labour Report – 4:30AM, Eurozone Merchandise Trade – 5:00AM.
Other: Federal Reserve Chair Janet Yellen will give her semiannual monetary policy testimony before the House Financial Services Committee – 10:00, Boston Federal Reserve Bank President Eric Rosengren gives keynote speech at New York Association Economics Luncheon at the Harvard Club in NYC – 12:00PM, Philadelphia Federal Reserve President Patrick Harker speaks on the economic outlook at La Salle University 16th Annual Economic Outlook in Pa., with media and audience Q&A – 12:45PM.
Earnings:
| Symbol | Company Name | Feb 10 Close | IV30 | B/A | AVGOPTVOL |
| BG | Bunge Ltd | $68.57 | 31.32 | BMO | 1137 |
| CC | Chemours Co | $27.59 | 54.32 | BMO | 2459 |
| MDCO | The Medicines Company | $48.75 | 68.45 | BMO | 1663 |
| SHOP | Shopify Inc | $54.61 | 51.82 | BMO | 1088 |
| TRGP | Targa Resources Corp | $59.31 | 31.60 | BMO | 1486 |
| WMB | Williams Companies Inc | $28.67 | 30.04 | BMO | 6183 |
| WYN | Wyndham Worldwide | $81.65 | 27.07 | BMO | 1036 |
| ADI | Analog Devices, Inc. | $76.51 | 25.10 | AMC | 810 |
| AEM | Agnico Eagle Mines Ltd (USA) | $50.20 | 39.39 | AMC | 4020 |
| AMAT | Applied Materials, Inc. | $35.41 | 29.42 | AMC | 12083 |
| CAR | Avis Budget Group Inc. | $37.41 | 53.08 | AMC | 2641 |
| CF | CF Industries Holdings, Inc. | $34.49 | 42.68 | AMC | 11251 |
| LBTYA | Liberty Global PLC | $35.19 | 30.77 | AMC | 1276 |
| NTAP | NetApp Inc. | $39.31 | 37.47 | AMC | 3836 |
| NTES | NetEase Inc (ADR) | $257.56 | 37.91 | AMC | 3552 |
| TRIP | Tripadvisor Inc | $52.51 | 46.61 | AMC | 2967 |
Thursday February 16:
Economic: Housing Starts – 8:30, Weekly Jobless Claims – 8:30, Philadelphia Fed Business Outlook Survey – 8:30, Bloomberg Consumer Comfort Index – 9:45, EIA Natural Gas Report – 10:30, Money Supply – 4:30PM.
International Economic: No major announcements
Other: European Central Bank Minutes (ECB) – 7:30AM.
Earnings:
| Symbol | Company Name | Feb 10 Close | IV30 | B/A | AVGOPTVOL |
| ALXN | Alexion Pharmaceuticals, Inc. | $127.08 | 39.38 | BMO | 5807 |
| CAB | Cabelas Inc | $50.24 | 39.61 | BMO | 1058 |
| CHTR | Charter Communications Inc | $325.07 | 28.39 | BMO | 2991 |
| MGM | MGM Resorts International | $28.62 | 28.32 | BMO | 19619 |
| PRGO | Perrigo Company PLC | $79.44 | 42.08 | BMO | 2179 |
| REGN | Regeneron Pharmaceuticals | $360.00 | 30.85 | BMO | 4194 |
| SHPG | Shire PLC (ADR) | $171.82 | 26.95 | BMO | 997 |
| ANET | Arista Networks Inc | $97.81 | 38.54 | AMC | 1095 |
| TPX | Tempur Sealy International Inc | $45.75 | 55.02 | AMC | 3115 |
| TRN | Trinity Industries Inc | $27.85 | 41.51 | AMC | 1430 |
| WBMD | WebMD Health Corp. | $50.65 | 34.24 | AMC | 4529 |
Friday February 17:
Economic: E-Commerce Retail Sales, Leading Indicators – 10:00, Baker-Hughes Rig count – 1:00PM.
International Economic: Great Britain Retail Sales – 4:30AM
Earnings:
| Symbol | Company Name | Feb 10 Close | IV30 | B/A | AVGOPTVOL |
| VFC | VF Corp | $49.47 | 30.89 | BMO | 3438 |
| FLR | Fluor Corporation (NEW) | $55.37 | 27.55 | AMC | 1149 |
Monday February 20:
US Markets Closed: Holiday – Presidents Day
International Economic: Germany PPI – 2:00AM, Great Britain Industrial Trends Survery- 600AM, Japan Consumer Confidence Flash – 7:30PM.
Tuesday February 21:
Economic: PMI Manufacturing Index Flash – 9:45.
International Economic: France CPI – 2:45AM, Germany PMI Composite Flash – 4:00AM, Eurozone PMI Composite Flash,
Earnings:
| Symbol | Company Name | Feb 10 Close | IV30 | B/A | AVGOPTVOL |
| AER | AerCap Holdings N.V. | $45.94 | 26.12 | BMO | 925 |
| DDS | Dillard’s, Inc. | $57.29 | 44.79 | BMO | 941 |
| DISH | DISH Network Corp | $61.07 | 36.54 | BMO | 4076 |
| M | Macy’s Inc | $32.37 | 49.23 | BMO | 23821 |
| NEM | Newmont Mining Corp | $37.20 | 36.02 | BMO | 21471 |
| XPO | XPO Logistics Inc | $45.43 | 45.69 | BMO | 2225 |
| AAP | Advance Auto Parts, Inc. | $164.83 | 31.32 | AMC | 2077 |
| CXO | Concho Resources Inc | $139.86 | 29.44 | AMC | 906 |
| NFX | Newfield Exploration Co. | $40.91 | 37.08 | AMC | 2023 |
| TEX | Terex Corporation | $31.32 | 39.66 | AMC | 1327 |
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