Blog
Frank Fahey: Market News for the Prepared Mind: 2.20-2.27.2017
February 21, 2017
“Imagination decides everything.” – Blaise Pascal
“Chance favors the Prepared Mind.” – Louis Pasteur
“By definition, risk-takers often fail. So do morons. In practice it’s difficult to sort them out.” – Scott Adams
The trend continues. It was another new week of closing highs. Decent earnings, no major PR explosions from the White House, and optimism about potential tax reform are fueling the rise. I have been fighting a bronchial malaise, so I will keep it short this week.
Here is an overview of the US market behavior last week and for 2017:
| Index | 17-Feb | Change | % Weekly | 2016 YTD | Volatility of Index |
| Dow Jones Industrials (DJIA) | 20,624.05 | 354.78 | 1.75% | 4.36% | 11.33% (VXD) |
| S&P 500 (SPX) | 2,351.16 | 37.91 | 1.64% | 5.04% | 11.49% (VIX) |
| NASDAQ 100 (NDX) | 5,324.72 | 98.03 | 1.88% | 9.48% | NA (VXN) |
| Russell 2000 (RUT) | 1,399.86 | 11.02 | 0.79% | 3.15% | 16.17% (RVX) |
| S&P 100 (OEX) | 1039.23 | 18.54 | 1.82% | 4.82% | 11.27% (VXO) |
| Crude Oil (CLH7) | 53.40 | (0.45) | -0.84% | -0.91% | 27.49%(OVX) |
| CBOE Volatility Index (VIX) | 11.49 | 0.64 | 5.90% | NA |
Data Source: OptionVue8
The VIX up this week while the various month VIX futures moved down. There is an intraday push and pull between SPX at all-time highs and the VIX futures and other short-term volatility indicators. The difference between the VIX and the RVX (RUT volatility index) collapsed last week. The previous week the difference was as high as 7.50. The difference closed last week at 3.68.
Starting February 13, the CBOE is not computing the VXN – the volatility index on the NDX or NASDAQ 100. The CBOE said it would start calculating the values at a future, as of yet, unannounced, date. No reasons were given.
Here is an overview of last week for the VIX and related products:
| Indexes | Ticker | 17-Feb | 10-Feb | Change | % Change |
| CBOE Volatility Index | VIX | 11.49 | 10.85 | 0.64 | 5.90% |
| VIX March Future (3/22/2017) | VXH7 | 13.125 | 13.375 | (0.25) | -1.87% |
| VIX April Future (4/19/2017) | VXJ7 | 14.350 | 15.125 | (0.78) | -5.12% |
| VIX May Future (5/17/2017) | VXK7 | 15.150 | 16.025 | (0.87) | -5.46% |
| CBOE Short-term Volatility Index | VXST | 9.03 | 9.02 | 0.01 | 0.11% |
| CBOE 3 Month Volatility Index | VXV | 13.72 | 13.91 | (0.19) | -1.37% |
| CBOE Mid-term Volatility Index (6 month) | VXMT | 15.79 | 16.17 | (0.38) | -2.35% |
| VIX of VIX | VVIX | 81.25 | 85.77 | (4.52) | -5.27% |
| CBOE SKEW Index | SKEW | 141.13 | 130.47 | 10.66 | 8.17% |
| Long VIX ETP’s | |||||
| ProShares Ultra VIX Short Term Futures ETF | UVXY | 20.25 | 21.91 | (1.66) | -7.58% |
| iPath S&P 500 VIX Short Term Futures ETN | VXX | 17.54 | 18.21 | (0.67) | -3.68% |
| ProShares VIX Short Term Futures ETF | VIXY | 14.65 | 15.16 | (0.51) | -3.36% |
| iPath S&P 500 VIX Mid-Tem Futures ETN | VXZ | 28.49 | 30.06 | (1.57) | -5.22% |
| Inverse VIX ETP’s | |||||
| ProShares Short VIX Short Term Future ETF | SVXY | 129.05 | 125.40 | 3.65 | 2.91% |
| Daily Inverse VIX Short Term ETN | XIV | 66.54 | 64.64 | 1.90 | 2.94% |
Data Source: OptionVue8
The week of February 20 will be a shortened trading week due to President’s Day. Reports will be relased on existing and new home sales, along with the minutes of the Fed’s January meeting. The week winds up with the final consumer sentiment score for February, one that dipped back noticeably in early February.
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 surprises 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 Tesla, Fitbit, Jack in the Box, HP, Cheesecake Factory, Trans Ocean, Public Storage, Popeyes, Toll Brothers. Ctrip, Hormel Foods, Baidu, Monster Beverage, Nordstrom, Foot Locker, and Priceline.
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:
“By definition, risk-takers often fail. So do morons. In practice it’s difficult to sort them out.” – Scott Adams
“In theory there is no difference between theory and practice. In practice there is.” – Yogi Berra
“To make a mistake is only human; to persist in a mistake is idiotic.” -Roman Cicero
“To learn patience is not to rebel against every hardship.” -Henri Nouwen
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: China Merchandise Trade – 2:00AM, France CPI – 2:45AM, Germany PMI Composite Flash – 4:00AM, Eurozone PMI Composite Flash.
Other: Minneapolis Federal Reserve Bank President Neel Kashkari participates in a fireside chat on the economy and the role of the Federal Reserve hosted by the Financial Planning Association of Minnesota in Golden Valley, Minn., with audience Q&A – 8:50AM, Philadelphia Federal Reserve Bank President Patrick Harker speaks on the economic outlook at the University of Pennsylvania in Philadelphia, with audience and media Q&A – 12:00PM, San Francisco Federal Reserve Bank President John Williams speaks to students of Boise State University on “Getting to Know the Fed,” in Boise, Id. with audience Q&A – 3:30PM.
Earnings:
| Symbol | Company Name | Feb 17 Close | IV30 | B/A | AVGOPTVOL |
| BHP | BHP Billiton Limited (ADR) | $40.99 | 30.30 | BMO | 4211 |
| HAIN | Hain Celestial Group Inc | $34.46 | 35.75 | AMC | 4064 |
Wednesday February 22:
Economic: MBA Mortgage Applications – 7:00, Redbook – 8:55, Existing Home Sales – 10:00., 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 GDP – 4:30AM, Eurozone HICP – 5:00AM.
Other: FOMC minutes – 2:00.
Earnings:
| Symbol | Company Name | Feb 17 Close | IV30 | B/A | AVGOPTVOL |
| BHP | BHP Billiton Limited (ADR) | $40.99 | 30.30 | BMO | 4211 |
| HAIN | Hain Celestial Group Inc | $34.46 | 35.75 | AMC | 4064 |
Thursday February 23:
Economic: Weekly Jobless Claims – 8:30, Chicago Fed National Activity Index – 8:30, FHFA House Price Index – 9:00, Bloomberg Consumer Comfort Index – 9:45, PMI Services Flash – 9:45, EIA Natural Gas Report – 10:30, Kansas City Fed Manufacturing Index – 11:00, EIA Petroleum Status Report – 11:00, Money Supply – 4:30PM.
International Economic: Germany GDP 2:00AM, Great Britain CBI Distributive Trades – 6:00AM.
Other: Atlanta Federal Reserve Bank President Dennis Lockhart speaks on the past 10 years at the Atlanta Federal Reserve in Atlanta, GA – 8:35AM.
Earnings:
| Symbol | Company Name | Feb 17 Close | IV30 | B/A | AVGOPTVOL |
| CLR | Continental Resources, Inc. | $46.01 | 37.67 | BMO | 4162 |
| CLVS | Clovis Oncology Inc | $61.37 | 71.23 | BMO | 2927 |
| DISH | DISH Network Corp | $62.72 | 36.49 | BMO | 4082 |
| ETP | Energy Transfer Partners LP | $38.38 | 31.48 | BMO | 5623 |
| GRMN | Garmin Ltd. | $50.95 | 32.25 | BMO | 1234 |
| HFC | HollyFrontier Corp | $30.00 | 36.21 | BMO | 2206 |
| MBLY | Mobileye NV | $44.97 | 43.63 | BMO | 11285 |
| MDCO | The Medicines Company | $52.80 | 76.55 | BMO | 1504 |
| SBGI | Sinclair Broadcast Group Inc | $36.30 | 34.05 | BMO | 1005 |
| SLCA | U.S. Silica Holdings Inc | $57.36 | 48.47 | BMO | 1758 |
| SXL | Sunoco Logistics Partners L.P. | $25.81 | 30.48 | BMO | 1864 |
| TOL | Toll Brothers Inc | $31.43 | 28.49 | BMO | 3168 |
| WB | Weibo Corp (ADR) | $55.26 | 51.04 | BMO | 2422 |
| BLUE | bluebird bio Inc | $76.55 | 63.39 | AMC | 1120 |
| CTRP | Ctrip.Com International Ltd | $45.51 | 34.94 | AMC | 6431 |
| JACK | Jack in the Box Inc. | $109.30 | 35.94 | AMC | 834 |
| LB | L Brands Inc | $57.48 | 29.80 | AMC | 3446 |
| MTDR | Matador Resources Co | $26.86 | 45.28 | AMC | 1749 |
| RH | RH | $27.18 | 60.99 | AMC | 7408 |
| RRC | Range Resources Corp. | $31.24 | 42.61 | AMC | 5549 |
| SINA | SINA Corp | $76.38 | 46.03 | AMC | 1099 |
| SM | SM Energy Co | $27.11 | 57.20 | AMC | 1669 |
| SUN | Sunoco LP | $28.51 | 41.24 | AMC | 3082 |
| TSLA | Tesla Inc | $268.95 | 42.38 | AMC | 91894 |
Friday February 24:
Economic: New Home Sales – 10:00, Consumer Sentiment – 10:00, Baker-Hughes Rig count – 1:00PM.
International Economic: No major announcements
Earnings:
| Symbol | Company Name | Feb 17 Close | IV30 | B/A | AVGOPTVOL |
| APA | Apache Corporation | $55.25 | 27.74 | BMO | 9813 |
| CRZO | Carrizo Oil & Gas Inc | $33.37 | 40.34 | BMO | 892 |
| HRL | Hormel Foods Corp | $37.24 | 27.43 | BMO | 997 |
| KSS | Kohl’s Corporation | $41.53 | 46.96 | BMO | 4982 |
| PTLA | Portola Pharmaceuticals Inc | $30.27 | 63.84 | BMO | 815 |
| WUBA | 58.com Inc (ADR) | $33.70 | 52.41 | BMO | 3973 |
| ACIA | Acacia Communications, Inc. | $64.19 | 72.17 | AMC | 3165 |
| BIDU | Baidu Inc (ADR) | $184.94 | 30.50 | AMC | 14476 |
| BMRN | BioMarin Pharmaceutical Inc. | $90.53 | 35.40 | AMC | 916 |
| CBI | Chicago Bridge & Iron Company N. | $35.77 | 39.97 | AMC | 3511 |
| HLF | Herbalife Ltd. | $61.06 | 44.82 | AMC | 10874 |
| ICPT | Intercept Pharmaceuticals Inc | $129.85 | 57.64 | AMC | 1059 |
| IDCC | InterDigital, Inc. | $99.95 | 39.83 | AMC | 965 |
| JWN | Nordstrom, Inc. | $44.18 | 52.00 | AMC | 7240 |
| MNST | Monster Beverage Corp | $43.45 | 33.22 | AMC | 2598 |
| OLED | Universal Display Corporation | $71.30 | 58.10 | AMC | 1027 |
| PE | Parsley Energy Inc | $31.86 | 38.03 | AMC | 886 |
| SEMG | SemGroup Corp | $39.90 | 37.75 | AMC | 1410 |
| SPLK | Splunk Inc | $62.86 | 43.26 | AMC | 3003 |
| W | Wayfair Inc | $40.17 | 64.16 | AMC | 1266 |
| SAGE | SAGE Therapeutics Inc | $62.75 | 94.51 | 915 |
Monday February 27:
Economic: Durable Goods Orders – 8:30, Dallas Fed Manufacturing Survey – 10:30
International Economic: Japan Industrial Production and Retail Trade – 6:50PM.
Earnings:
| Symbol | Company Name | Feb 17 Close | IV30 | B/A | AVGOPTVOL |
| FL | Foot Locker, Inc. | $70.50 | 31.99 | AMC | 2143 |
Follow Stocks & Jocks on Twitter — Follow Frank Fahey on Twitter