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Frank Fahey: Market News for the Prepared Mind: 6.5-6.12.2017

June 5, 2017


“Chance favors the Prepared Mind.” – Louis Pasteur

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

“All you need is the plan – the road map – and the courage to press on to your destination.” – Earl Nightingale

“To achieve anything in this game,
you must be prepared to dabble on the boundary of disaster.” – Stirling Moss

The Dow Jones Industrial Average, the Stand and Poor’s 500, and the NASDAQ Composite all closed at record highs last week. The Dow Jones Transportation Index is flirting with new highs. This stellar performance came despite pronouncements by analysts that the “Trump Trade” is dead, weaker than expected job growth and lackluster consumer spending.

Trading has an underpinning of discipline combined with the trader’s personal risk/reward comfort zone and their understanding of what is a “normal” market. Traders often discuss the concept of “normal.” Our success depends on being able to reduce market movement and trends to a lowest common denominator. This basic view of the market is what is “normal.”

My recent conversations with other professional options traders have shown a growing consensus that we are seeing a new ”normal.” A new “normal” requires the options trader to reassess current strategies within the context of current market intraday movement, implied volatility for options, and the liquidity/investor participation individual option markets. This is another example of the need “The Prepared Mind” in successful implementation and management of option strategies.

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

Data Source: OptionVue8

The VIX has closed has closed below 10 more time this year than any other year since 1990. The average VIX closing price is lower than any other yearly averages during the same period. The VIX and associated derivatives held strong this week despite record high in the major equity indexes. Spread strategies being implemented in VIX options tend to be bullish. The spreads being quoted appear to be reflecting the belief the VIX is trading around a support level. This level appears to be rooted in psychological feelings rather than technical facts.

Data Source: OptionVue8

This week will be a much quieter last week. The focus will be on the service sector. manufacturing, the consumer, and inventories. The highlights of the week is fired FBI Director James Comey is scheduled to testify before the Senate Intelligence Committee in an open session on Thursday morning at 10 AM. This testimony will be aired live on ABC, CBS, CNN and other networks.

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 Thor, Casey’s General Sore, Fred’s, GIII Apparel, Oxford Industries, Brown-Forman, Analogic, Verifone, and J.M. Smucker.

Advice to stimulate your imagination:

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

“You’ll always miss 100% of the shots you don’t take.” – Wayne Gretzky

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

“If you spend more than 13 minutes analyzing economic and market forecasts,
you’ve wasted 10 minutes” Peter Lynch

 

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:

 

Tuesday, June 6:

Economic: Gallup US ECI – 8:30, Redbook – 8:55, JOLTS – 10:00.

International Economic: Eurozone Retail Sales – 5:00AM.

Earnings:

 

Wednesday, June 7:

Economic: MBA Mortgage Applications – 7:00, Gallup US Job Creation Index – 8:30, EIA Petroleum Status Report – 10:30.

International Economic: Germany Manufacturers’ Orders – 2:00AM, Japan GDP = 7:50PM. China Merchandise Trade Balance – 10:00PM.

Earnings:

 

Thursday, June 8:

Economic: Weekly Jobless Claims – 8:30, Bloomberg Consumer Confidence – 9:45, Quarterly Services Survey – 10:00, EIA Natural Gas Report – 10:30, Money Supply – 4:30.

International Economic: Germany Industrial Production- 2:00, France Merchandise Trade – 2:45AM, Eurozone GDP – 5:00AM, China PPI and CPI – 9:30PM

Other: European Central Bank Announcement – 7:45AM, Fired FBI Director James Comey is scheduled to testify before the Senate Intelligence Committee in an open session on Thursday morning at 10 AM.

Earnings:

 

Friday, June 9:

Economic: Wholesale Trade – 10:00, Baker Hughes Rig Count – 1:00.

International Economic: Japan Tertiary Index – 12:30AM, German Merchandise Trade – 2:00, Great Britain Industrial Production and Merchandise Trade – 4:30Am.

Earnings:

 

Monday, June 12:

Economic: No major announcements

International Economic: No major announcements.

Earnings:

 

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