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Frank Fahey: Market News for the Prepared Mind: 5.29-6.5.2017

May 30, 2017


“Chance favors the Prepared Mind.” – Louis Pasteur

“Experience traders control risk, inexperienced traders chase gains.” – Alan Farley

“We are pioneers and the history of pioneers is not that good.” – Jeff Bezos

“I have a right to be blind sometimes.” – Lord Nelson

The blog will continue to focus on numbers and “facts.” The major indices rebounded from two weeks of negative numbers to set new all-time highs. The market’s ability to ignore “bad news” was a topic of conversation this week among the financial news talking heads.

Economic data has been tepid of late. The economic news continued this trend last week with despite disappointing GDP numbers for the first quarter, new-home sales, and durable goods orders. Many analysts attributed the strength of the US domestic equity indexes on better than expected results from overseas.

Other analysts have scrapped their crystal balls. The most puzzling explanation was, “The markets just want to go higher.” This analysis should be called the Cyndi Lauper Theory in honor of her song “Girls Just Want to Have Fun.” Please give me that man’s seat at the table.

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

Index 26-May Change % Weekly 2017 YTD Volatility of Index
Dow Jones Industrials (DJIA) 21,080.28 275.44 1.32% 6.67% 9.60% (VXD)
S&P 500 (SPX) 2,415.82 34.10 1.43% 7.93% 9.81% (VIX)
NASDAQ 100 (NDX) 5,788.36 136.80 2.42% 19.01% 12.26% (VXN)
Russell 2000 (RUT) 1,382.24 14.91 1.09% 1.85% 14.79% (RVX)
S&P 100 (OEX) 1065.35 14.56 1.39% 7.46% 9.16% (VXO)
Crude Oil (CLN7) 49.87 (1.09) -2.14% -7.46% 30.04%(OVX)
Dow Jones Transportation (TRAN) 4527.94 199.52 4.61% 11.76% NA
CBOE Volatility Index (VIX) 9.81 (2.23) -18.52% NA

Data Source: OptionVue8

The VIX closed just above the post financial crisis lows from earlier this month. The CBOE Short-term Volatility Index (VXST) closed at an all-time low on Friday. Russell Rhoads, CBOE VIX guru, points out the low VIX levels are not accompanied by SKEW in the 150’s. Usually, SKEW is inversely related to low VIX levels. The current SKEW a lack of concern for tail risk despite the low VIX. There appears to be a lack of near term fear about economic and political turmoil.

Indexes Ticker 26-May 19-May Change % Change
CBOE Volatility Index VIX 9.81 12.04 (2.23) -18.52%
VIX June Future (6/21/2017) VXM7 11.925 12.725 (0.80) -6.29%
VIX July Future (7/18/2017) VXN7 12.925 13.475 (0.55) -4.08%
VIX August Future (8/18/2017) VXQ7 13.775 14.425 (0.65) -4.51%
CBOE Short-term Volatility Index VXST 7.60 10.98 (3.38) -30.78%
CBOE 3 Month Volatility Index VXV 12.44 13.49 (1.05) -7.78%
CBOE Mid-term Volatility Index (6 month) VXMT 14.84 15.57 (0.73) -4.69%
VIX of VIX VVIX 81.81 87.21 (5.40) -6.19%
CBOE SKEW Index SKEW 125.41 131.39 (5.98) -4.55%
Long VIX ETP’s
ProShares Ultra VIX Short Term Futures ETF UVXY 10.95 12.95 (2.00) -15.45%
iPath S&P 500 VIX Short Term Futures ETN VXX 13.46 14.64 (1.18) -8.06%
ProShares VIX Short Term Futures ETF VIXY 11.22 12.16 (0.94) -7.73%
iPath S&P 500 VIX Mid-Term Futures ETN VXZ 24.60 25.08 (0.48) -1.91%
Inverse VIX ETP’s
ProShares Short VIX Short Term Future ETF SVXY 153.49 142.40 11.09 7.79%
Daily Inverse VIX Short Term ETN XIV 79.54 73.67 5.87 7.97%

Data Source: OptionVue8

It will be a very heavy week for economic news. The week starts with markets closed for Memorial Day in the U.S., and ends with the U.S. Employment Situation report. In between, we get a wide range of employment reports and indexes plus Consumer Spending, the S&P CoreLogic Case-Shiller Home Price Index, and International Trade.

This earnings season is winding down. It has been a strong earnings season. 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. Earnings highlights include g-III Apparel, Michael Kors Holdings, Vera Bradley, Analog Devices, Dollar General, Ciena, and Broadcom,

Advice to stimulate your imagination:

“Sometimes paranoia is just having all the facts.” – William S. Burroughs

“The secret of life is to have no fear; it’s the only way to function.” – Stokely Carmichael

“All media exist to invest our lives with artificial perceptions and arbitrary values.” – Marshall McLuhan

“The key to risk management is never putting yourself in a position where you cannot live to fight another day.” – Dick Fuld

Monday, May 29:

US Holiday – Memorial Day – Markets Closed

International Economic: Japan Household Spending and Unemployment Rate – 7:30PM.

Earnings:

SYMBOL B/A 5/26 Close AVGVOL AVG MOVE SMA 10 50% FIB
RYAAY BMO $106.22 255,745 3.11% $101.90 $97.03
TTM BMO $37.07 1,405,530 7.33% $35.18 $35.09

 

Tuesday, May 30:

Economic: Personal Income and Outlays – 8:30, S&P Corelogic Case-Shiller HPI -9:00, State Street Investor Confidence Index – 10:00, Dallas Fed Manufacturing Survey – 10:30.

International Economic: France GDP – 2:45AM, Eurozone Economic Sentiment – 5:00AM, Germany CPI – 8:00AM, Japan Industrial Production – 7:50PM, China CFLP Manufacturing PMI = 9:00PM.

Earnings:

SYMBOL B/A 5/26 Close AVGVOL AVG MOVE SMA 10 50% FIB
ADI BMO $82.81 3,287,900 2.71% $81.27 $78.80
KORS BMO $36.76 2,043,180 5.29% $36.41 $37.17
OLLI AMC $41.70 597,864 3.24% $40.30 $39.59
PANW AMC $118.08 2,227,790 12.80% $117.19 $114.72
SMTC AMC $37.10 488,458 2.13% $36.22 $35.27
VAL BMO $112.99 867,747 0.16% $112.22 $112.32

 

Wednesday, May 31:

Economic: MBA Mortgage Applications – 7:00, Redbook – 8:55, Chicago PMI – 9:45, Pending Home Sales Index – 10:00, Beige Book – 2:00, Farm Prices – 3:00.

International Economic: Germany Retail Sales – 2:00AM, France PPI, Germany Unemployment Rate – 3:55AM, Eurozone Unemployment Rate – 5:00AM, Japan PMI Manufacturing Index – 8:30PM.

Other: Dallas Federal Reserve Bank President Robert Kaplan to participate in a moderated Q&A session with audience and media at the C. Peter McColough Series on International Economics in New York City – 800AM, San Francisco Federal Reserve Bank President John Williams to speak at The Bank of Korea International Conference 2017: Global Economic and Financial Challenges: The Decade Ahead in Seoul, with media and audience Q&A – 7:30PM.

Earnings:

SYMBOL B/A 5/26 Close AVGVOL AVG MOVE SMA 10 50% FIB
AVGO AMC $241.21 2,361,800 3.57% $237.92 $228.88
COO AMC $217.46 380,447 1.44% $214.06 $208.60
DCI BMO $46.68 508,991 7.10% $46.72 $46.31
DG BMO $72.32 2,877,090 4.78% $71.46 $71.91
FIVE AMC $52.63 1,163,250 5.97% $52.12 $50.37
GWRE AMC $67.73 385,908 2.62% $63.50 $63.76
JOY BMO $28.30 1,114,410 0.12% $28.25 $28.21
LULU AMC $48.23 3,858,690 12.79% $49.32 $51.84
MBLY BMO $61.80 5,931,020 2.59% $61.78 $61.70
RH AMC $57.81 1,773,290 16.53% $57.58 $53.65
TECD BMO $94.66 427,206 5.06% $93.70 $94.95
VMW AMC $96.81 1,205,560 6.26% $94.61 $93.96
WDAY AMC $99.99 1,536,100 7.58% $97.71 $93.12

 

Thursday, June 1:

Economic: Motor Vehicle Sales, Chain Store Sales, Challenger Job-Cut Report – 7:30, ADP Employment Report – 8:15, Weekly Jobless Claims – 8:30, Productivity and Costs – 8:30, Gallup Good Jobs Rate – 8:30, PMI Manufacturing Index – 9:45, Bloomberg Consumer Confidence – 9:45, ISM Manufacturing Index – 10:00, Construction Spending – 10:00, EIA Natural Gas Report – 10:30, EIA Petroleum Status Report – 11:00, Money Supply – 4:30.

International Economic: Germany PMI Manufacturing Index – 3:55AM, Eurozone PMI Manufacturing Index – 4:00SM

Earnings: None meeting criteria.

 

Friday, June 2:

Economic: Employment Situation – 8:30, International Trade – 8:30, Baker Hughes Rig Count – 1:00.

International Economic: Eurozone PPI – 5:00AM.

Earnings: None meeting criteria.

 

Monday, June 5:

Economic: Gallup US Consumer Spending Measure – 8:30, PMI Services – 9:56. Factory Orders – 10:00, ISM Non-Manufacturing Index – 10:00, Labor Market Conditions Index = 10:00, TD Ameritrade IMX – 12:30

International Economic: No major announcements.

Earnings:

SYMBOL B/A 5/26 Close AVGVOL AVG MOVE SMA 10 50% FIB
CASY AMC $115.78 505,433 3.57% $114.47 $113.30
THO AMC $91.40 835,078 7.83% $93.33 $94.37

 

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