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Frank Fahey: Market News for the Prepared Mind: 8.14-8.21.2017
August 14, 2017
“Chance favors the prepared mind.” -Louis Pasteur
“There is only one side of the market and it is not the bull side or the bear side, but the right side.” -Jesse Livermore
“I love to talk about nothing. It’s the only thing I know anything about.” -Oscar Wilde
“Computers have enabled people to make more mistakes faster than almost any invention in history, with the possible exception of tequila and handguns.” -Mitch Ratcliffe
“Better to have a simple model backed by excellent people than the other way around.” -Paul Carrett
NB: Sorry for the delay in posting. It always helps to hit “post.” Next week’s blog will contain on Index and VIX information. I will be in pursuit of the total eclipse.
The S&P 500 sold off 35.51 points to 2441. Last week’s 1.43% drop was the largest since November 2016. The bulk of the damage was done on Thursday when the SPX lost 1.45%. The sell-off was preceded by a market which was setting new records for lack of movement. Thursday’s skid was preceded by 58 consecutive trading sessions without a move, in either direction, exceeding 1%. This near absence of movement culminated in a record 16 straight sessions without a 0.3% move up or down. Both streaks ended with Thursday’s sell- off.
Financial talking head various blamed the ratcheting up of US-North Korea tensions and the long-legs of the current bull market. The nation’s debt ceiling limit, a statutory limit of outstanding debt obligations, needs to be raised, per the Trump administration, by September 29. Other sources are predicting a need for an increase earlier in September.
The congressional debt ceiling showdown created a crisis in 2011. It resulted in the most volatile week for financial markets since the 2008 recession. The S&P 500 was down as much as 10.6% the week of August 5. 2011. Congress will not be back inside the Beltway until September 5. Will Congress be able to reach a another bipartisan agreement in 2017? Ignore the debt ceiling negotiations at your own risk.
Here is an overview of the US market behavior last week and for 2017 YTD:
| Index | 11-Aug | Change | % Weekly | 2017 YTD | Volatility of Index |
| Dow Jones Industrials (DJIA) | 21858.32 | (234.49) | -1.06% | 10.60% | 13.89% (VXD) |
| S&P 500 (SPX) | 2441.32 | (35.51) | -1.43% | 9.07% | 15.51% (VIX) |
| NASDAQ 100 (NDX) | 5831.53 | (68.38) | -1.16% | 19.90% | 17.77% (VXN) |
| Russell 2000 (RUT) | 1374.23 | (38.09) | -2.70% | 1.26% | 19.59% (RVX) |
| S&P 100 (OEX) | 1081.80 | (13.62) | -1.24% | 9.12% | 12.87% (VXO) |
| Dow Jones Transportation (TRAN) | 4461.15 | (50.81) | -1.13% | 10.11% | NA |
| Crude Oil (CLU7) | 48.77 | (0.74) | -1.49% | -9.50% | 28.41%(OVX) |
| Gold (GCZ7) | 1295.70 | 30.90 | 2.44% | 12.47% | 13.45 (GVZ) |
| CBOE Volatility Index (VIX) | 15.51 | 5.48 | 54.64% | NA |
Data Source: OptionVue8
The VIX shook off the dog days of August by closing the week at 16.04 – the highest close since November 8, 2016. The gain for the week was over 54%. The VXST – the CBOE Short-term Volatility Index – was up 81% for the week. The term structure of the front three monthly futures narrowed while gaining from 15% to nearly 37%. The number of short positions in VIX futures hit a record high the previous week. The explosion in volatility was partially fueled by traders covering short positions.
Here is an overview of last week for the VIX and related products:
| Indexes | Ticker | 11-Aug | 4-Aug | Change | % Change |
| S&P 500 | SPX | 2441.32 | 2476.83 | (35.51) | -1.43% |
| CBOE Volatility Index | VIX | 15.51 | 10.03 | 5.48 | 54.64% |
| VIX August Future (8/18/2017) | VXQ7 | 15.425 | 11.275 | 4.15 | 36.81% |
| VIX September Future (9/20/2017) | VXU7 | 15.275 | 12.775 | 2.50 | 19.57% |
| VIX October Future (10/18/2017) | VXV7 | 15.525 | 13.525 | 2.00 | 14.79% |
| CBOE Short-term Volatility Index | VXST | 15.53 | 8.58 | 6.95 | 81.00% |
| CBOE 3 Month Volatility Index | VXV | 16.39 | 12.75 | 3.64 | 28.55% |
| CBOE Mid-term Volatility Index (6 month) | VXMT | 16.86 | 14.25 | 2.61 | 18.32% |
| VIX of VIX | VVIX | 127.43 | 87.39 | 40.04 | 45.82% |
| CBOE SKEW Index | SKEW | 136.48 | 138.32 | (1.84) | -1.33% |
| Long VIX ETP’s | |||||
| ProShares Ultra VIX Short Term Futures ETF | UVXY | 43.09 | 29.79 | 13.30 | 44.65% |
| iPath S&P 500 VIX Short Term Futures ETN | VXX | 13.66 | 11.19 | 2.47 | 22.07% |
| ProShares VIX Short Term Futures ETF | VIXY | 45.50 | 37.31 | 8.19 | 21.95% |
| iPath S&P 500 VIX Mid-Term Futures ETN | VXZ | 23.20 | 21.19 | 2.01 | 9.49% |
| Inverse VIX ETP’s | |||||
| ProShares Short VIX Short Term Future ETF | SVXY | 71.88 | 90.77 | (18.89) | -20.81% |
| Daily Inverse VIX Short Term ETN | XIV | 74.58 | 94.29 | (19.71) | -20.90% |
Data Source: OptionVue8
The wild cards for the week are North Korea, the debt ceiling, and The POTUS’ twitter account. The week of August 14 brings reports on consumer spending, retail sales, housing starts, manufacturing and industrial production, as well as the minutes of the last Fed meeting.
This earnings season winds down over the next two weeks. The highlights include: Sysco, Urban Outfitters, Coach, Jack Henry, Staples, TJX, Advance Auto Parts, American Eagle Outfitters, Dick’s Sporting Goods, Home Depot, Target, L Brands, Cisco Systems, Ross Stores, Wal-Mart, Gap, Applied Materials, Estee Lauder, Footlocker, and Deere and Co. 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.
Advice to stimulate your imagination:
“A man without ethics is a wild beast loosed upon this world.” -Albert Camus
“The average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing.” -Jesse Livermore
“A point of view can be a dangerous luxury when substituted for insight and understanding.” -Marshall McLuhan
“What we learn from history is that people don’t learn from history.” -Warren Buffet
“Freedom is what you do with what’s been done to you.” -Jean-Paul Sartre
Monday, August 14:
Economic: No major announcements.
International Economic: Eurozone Industrial Production – 5:00AM.
Earnings:
| SYMBOL | B/A | 8/11 Close | AVGVOL | AVG MOVE | SMA 10 | 50% FIB |
| JD | BMO | $45.90 | 11,189,500 | 6.19% | $46.25 | $43.85 |
| SYY | BMO | $51.58 | 2,975,760 | 1.64% | $52.12 | $50.94 |
Tuesday, August 15:
Economic: Retail Sales – 8:30, Empire State Manufacturing Survey – 8:30, Import and Export Prices – 8:30, Redbook – 8:55, Business Inventories – 10:00, Housing Market Index – 10:00.
International: Germany GDP Flash – 2:00AM, Great Britain CPI and PPI – 4:30AM.
Earnings:
| SYMBOL | B/A | 8/11 Close | AVGVOL | AVG MOVE | SMA 10 | 50% FIB |
| AAP | BMO | $107.34 | 1,854,100 | 4.90% | $110.48 | $107.27 |
| COH | BMO | $47.55 | 2,646,440 | 3.02% | $47.41 | $47.31 |
| HD | BMO | $154.88 | 4,747,060 | 1.00% | $151.55 | $150.11 |
| TJX | BMO | $71.07 | 4,819,050 | 2.53% | $70.39 | $69.38 |
| A | AMC | $59.33 | 1,908,560 | 2.98% | $59.99 | $60.03 |
| JKHY | AMC | $105.74 | 570,145 | 1.56% | $106.50 | $106.03 |
Wednesday, August 16:
Economic: MBA Mortgage Applications – 7:00, Housing Starts – 8:30, Atlanta Fed Business Inflation Expectations 10:00, EIA Petroleum Status Report – 10:30.
International Economic: Great Britain Labour Report – 4:30AM. Eurozone GDP Flash – 5:00AM, Japan Merchandise Trade – 7:50PM.
Other: FOMC Minutes – 3:00PM.
Earnings:
| SYMBOL | B/A | 8/11 Close | AVGVOL | AVG MOVE | SMA 10 | 50% FIB |
| CACI | AMC | $128.55 | 120,466 | 2.97% | $128.29 | $128.32 |
| CSCO | AMC | $31.47 | 21,578,700 | 3.59% | $31.56 | $31.46 |
| CTRP | AMC | $53.85 | 3,379,010 | 3.46% | $58.07 | $56.73 |
| LB | AMC | $40.88 | 3,697,260 | 3.90% | $43.70 | $48.60 |
| NTAP | AMC | $41.49 | 3,229,650 | 5.21% | $42.85 | $41.72 |
| OSIS | AMC | $80.98 | 123,352 | 9.55% | $79.70 | $78.23 |
| PRXL | AMC | $87.62 | 1,144,680 | 6.89% | $87.55 | $87.38 |
| SNPS | AMC | $76.27 | 1,028,220 | 5.33% | $76.50 | $74.75 |
| TGT | AMC | $55.65 | 7,721,120 | 6.42% | $57.06 | $54.62 |
Thursday, August 17:
Economic: Weekly Jobless Claims – 8:30, Philadelphia Fed Business Outlook Survey – 8:30, Industrial Production – 9:15, Bloomberg Consumer Comfort Index – 9:45, E-Commerce Retail Sales – 10:00, Leading Indicators – 10:00, EIA Natural Gas Report – 10:30, Money Supply – 4:30.
International Economic: Great Britain Retail Sales – 4:30Am, Eurozone Merchandise Trade – 5:00AM.
Other: European Central Bank Minutes – 7:30AM.
Earnings:
| SYMBOL | B/A | 8/11 Close | AVGVOL | AVG MOVE | SMA 10 | 50% FIB |
| BABA | BMO | $151.70 | 17,896,800 | 2.83% | $155.06 | $150.35 |
| HTHT | BMO | $99.36 | 254,998 | 4.41% | $100.92 | $91.84 |
| LANC | BMO | $123.11 | 119,364 | 4.25% | $123.07 | $124.48 |
| MSG | BMO | $215.66 | 128,323 | 1.25% | $217.21 | $205.82 |
| WMT | BMO | $80.40 | 9,052,650 | 3.03% | $80.71 | $77.56 |
| AMAT | AMC | $43.08 | 10,802,700 | 0.62% | $43.56 | $44.58 |
| ATGE | AMC | $33.25 | 743,034 | None | $33.12 | $35.25 |
| CIB | AMC | $43.48 | 365,562 | 2.00% | $43.70 | $43.98 |
| GLOB | AMC | $42.96 | 323,077 | 4.18% | $44.08 | $43.66 |
| ROST | AMC | $55.56 | 3,673,540 | 3.02% | $55.43 | $54.95 |
Friday, August 18:
Economic: Consumer Sentiment – 10:00, Baker Hughes Rig Count – 1:00.
International Economic: Germany PPI – 2:00AM.
Other: Dallas Federal Reserve Bank President Robert Kaplan to participate in a moderated Q&A session at the Dallas County Community College District Conference Day 2017 in Dallas, with audience Q&A.
Earnings:
| SYMBOL | B/A | 8/11 Close | AVGVOL | AVG MOVE | SMA 10 | 50% FIB |
| DE | BMO | $126.70 | 2,475,940 | 9.17% | $129.68 | $127.88 |
| EL | BMO | $99.65 | 1,674,480 | 3.95% | $99.94 | $98.97 |
| FL | BMO | $49.30 | 3,888,560 | 10.20% | $48.31 | $48.09 |
Monday, August 21:
Economic: Chicago Fed National Activity Index – 8:30.
International Economic: No major announcements.
Earnings:
| SYMBOL | B/A | 8/11 Close | AVGVOL | AVG MOVE | SMA 10 | 50% FIB |
| BBL | AMC | $35.03 | 1,632,510 | 0.45% | $35.92 | $33.98 |
| BHP | AMC | $40.35 | 2,557,050 | 0.68% | $41.19 | $39.15 |
| FN | AMC | $41.00 | 567,423 | 4.91% | $43.23 | $43.94 |
| NDSN | AMC | $127.68 | 359,855 | 6.35% | $127.51 | $124.03 |
| PINC | AMC | $33.35 | 380,602 | 3.85% | $34.37 | $34.82 |
| ZAYO | AMC | $33.82 | 2,066,120 | 2.34% | $32.95 | $32.13 |
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