Frank Fahey: Market News for the Prepared Mind: 8.7-8.14.2017

August 7, 2017

“Chance favors the Prepared Mind.” — Louis Pasteur

“Today’s scientists have substituted mathematics for experiments, and they wander off through equation after equation, and eventually build a structure which as no relation.” — Nikola Tesla

“I love to talk about nothing. It’s the only thing I know anything about.” — Oscar Wilde

“Do you know who you are? Don’t ask. Act! Action will delineate and define you.” — Thomas Jefferson

“Better to have a simple model backed by excellent people than the other way around.” — Paul Carrett 

 

The talking heads are discounting new highs for the Dow Jones Industrials (DJIA.) It is a case of “Pay not attention to the man behind the curtain!” The naysayers’ arguments focus on two specific areas – the limited number of components in the average (30) and the components of the average are weighted according to nominal stock price rather than their overall relative economic size.

These factors lead to a situation where individual stocks can have a disproportionate effect on the performance of the index. This effect was apparent last week with Apple (AAPL) and 3M (MMM) propelling the DJIA to all-time new highs, and the previous week when Boeing (BA) had the same impact. The net result was the DJIA hit new highs on eight consecutive days.

The broader based S&P 500 (SPX) provides a less biased view of US equity markets. Market capitalization and number of components (500) prevent an individual stock from significantly moving the index. The SPX is not moving. It, too, has set a new record. The SPX has gone 12 trading days – nearly 2 ½ weeks – without a move up or down of 0.03%. This is the longest streak on record . “Nothing” is the new trend.

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

Data Source: OptionVue8 

The dog days have affected the VIX and related products, in the same manner they have affected the major equity indexes. The VIX is hovering above all-time lows. The markets are not moving. Europe is on vacation.The A-team traders in NYC are in the Hamptons enjoying the fruits of last year’s bonuses. The trading desks across the world are staffed by the B-team. They live in fear of making mistake and raising the hackles of the alpha dogs. Their trading mantra is Primum non nocere – “first, do no harm.”
Know, that these desks do not have the depth of experience to rationally respond to the black swan – the unexpected volatility event. This lack of experience can magnify panicked responses to unknowns. Be wary.

Here is an overview of last week for the VIX and related products:

Indexes	Ticker	4-Aug	28-Jul	Change	% Change
CBOE Volatility Index	VIX	10.03	10.29	(0.26)	-2.53%
VIX August Future (8/18/2017)	VXQ7	11.275	11.375	(0.10)	-0.88%
VIX September Future (9/20/2017)	VXU7	12.775	12.625	0.15	1.19%
VIX October Future (10/18/2017)	VXV7	13.525	13.825	(0.30)	-2.17%
CBOE Short-term Volatility Index	VXST	8.58	8.55	0.03	0.35%
CBOE 3 Month Volatility Index	VXV	12.75	12.58	0.17	1.35%
CBOE Mid-term Volatility Index (6 month)	VXMT	14.25	13.96	0.29	2.08%
VIX of VIX	VVIX	87.39	87.20	0.19	0.22%
CBOE SKEW Index	SKEW	138.32	139.91	(1.59)	-1.14%
Long VIX ETP’s
ProShares Ultra VIX Short Term Futures ETF	UVXY	29.79	30.19	(0.40)	-1.32%
iPath S&P 500 VIX Short Term Futures ETN	VXX	11.19	11.29	(0.10)	-0.89%
ProShares VIX Short Term Futures ETF	VIXY	37.31	37.54	(0.23)	-0.61%
iPath S&P 500 VIX Mid-Term Futures ETN	VXZ	21.19	21.00	0.19	0.90%
Inverse VIX ETP’s
ProShares Short VIX Short Term Future ETF	SVXY	90.77	90.22	0.55	0.61%
Daily Inverse VIX Short Term ETN	XIV	94.29	93.62	0.67	0.72%

Data Source: OptionVue8

The coming week includes consumer price readings and public speeches by four Fed officials. Thursday’s jobless claims and producer price data are other reports which could possibly engender some sort of move in the markets. Congress is on vacation. President Trump is on vacation. It should be very quiet. Maybe, too quiet?

It will be another blockbuster week for earnings. Earnings announcements will continue at a steady pace this week. The two stocks engendering the largest levels of interest are Nvidia (NVDA) and Priceline (PCLN) I am interested in both issues. I am far more likely to trade the NVDA announcement than the PCLN announcement.

I do not like the risk/reward ratio in Priceline.com. I will probably just watch and learn from PCLN price and implied volatility movement. PCLN closed at $2032.77 last week. Priceline’s average move for the past few earnings announcements has been nearly 7%. I will avoid a trade where the trade range expectations are plus or minus (+/-) $150. The at-the-money front month straddle is trading about $100.

It is not a “retail trade.” It is too difficult to control risk at these prices. There a number of other trading alternatives for the week. The alternatives include: CBS, Tyson Foods, Marriott Int’l, Tripadvisor, Walt Disney, Fossil, Ralph Lauren, Henry Schein, Monster Beverage, CVS Health Michael Kors, Mylan, Perrigo, Avnet, Nvidia, Nordstrom, Macy’s. Kohl’s, and J C Penney. 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:

“You need chaos in your soul to give birth to a dancing star.” Friedrich Nietzsche 

“Now came the dog days—day after day of hot, still summer, when for hours at a time light seemed the only thing that moved; the sky-sun, clouds and breeze-awake above the drowsing downs.” – Richard Adams 

“A point of view can be a dangerous luxury when substituted for insight and understanding.” – Marshall McLuhan 

“Freedom is what you do with what’s been done to you.” – Jean-Paul Sartre 

 

Monday, August 7: 

Economic: Gallup US Consumer Spending Measure – 8:30, Labor Market Conditions Index – 10:00, TD Ameritrade IMX – 12:30.
International Economic: Germany Industrial Production – 2:00AM.

Other: St. Louis Federal Reserve Bank President James Bullard to discuss the U.S. economy and monetary policy at the America’s Cotton Marketing Cooperatives 2017 Conference in Nashville, with audience and media Q&A – 11:45AM, Minneapolis Federal Reserve Bank President Neel Kashkari to take part in a moderated audience Q&A session at the Sioux Falls Rotary Club event in Sioux Falls, SD – 1:25PM.

Earnings:

SYMBOL	B/A	8/4 Close	AVGVOL	AVG MOVE	SMA 10	50% FIB
BAH	BMO	$34.61	1,273,830	5.16%	$34.04	$33.40
TSN	BMO	$63.30	2,756,450	4.76%	$62.63	$61.38
ALB	AMC	$119.60	1,137,890	3.15%	$117.94	$111.86
CAR	AMC	$32.21	3,786,290	9.08%	$32.03	$29.84
CBS	AMC	$63.62	2,867,650	2.41%	$66.14	$65.35
EVHC	AMC	$55.79	1,402,240	1.83%	$58.13	$58.91
IPHI	AMC	$34.69	1,266,800	9.41%	$38.00	$36.81
LBTYA	AMC	$34.61	3,140,040	2.80%	$33.54	$32.56
MAR	AMC	$105.02	2,451,590	2.04%	$103.55	$102.31
RSPP	AMC	$31.11	2,427,740	3.21%	$33.53	$32.72

 

Tuesday, August 8: 

Economic: Motor NFIB Small Business Optimism Index – 8:30, Redbook – 8:55, JOLTS – 10:00.
International: Germany Merchandise Trade – 2:00AM, France Merchandise Trade – 2:45AM, China PPI & CPI – 9:30PM.

Earnings:

SYMBOL	B/A	8/4 Close	AVGVOL	AVG MOVE	SMA 10	50% FIB
ARMK	BMO	$39.91	1,332,200	4.40%	$40.17	$40.55
CVS	BMO	$77.97	6,031,140	4.24%	$78.52	$79.31
EGN	BMO	$49.95	1,658,500	2.73%	$51.90	$50.69
EXPD	BMO	$59.56	1,194,230	3.32%	$59.12	$57.87
IONS	BMO	$52.36	1,419,600	4.71%	$53.50	$55.01
KITE	BMO	$112.58	1,263,020	7.89%	$110.05	$106.39
KORS	BMO	$36.80	2,484,970	6.24%	$35.78	$34.88
LBTYK	BMO	$33.25	3,611,070	2.31%	$32.43	$31.43
LNG	BMO	$44.68	1,798,230	1.72%	$45.47	$47.07
MNK	BMO	$41.02	2,553,220	5.59%	$45.73	$45.27
NCLH	BMO	$56.90	1,527,410	8.16%	$55.66	$55.20
PDCE	BMO	$46.26	1,266,770	4.09%	$46.22	$44.66
RL	BMO	$77.29	1,681,100	6.25%	$74.94	$73.41
SEE	BMO	$43.49	2,194,330	4.89%	$44.57	$44.56
VNTV	BMO	$64.04	2,031,240	1.76%	$64.17	$62.55
W	BMO	$80.36	1,643,180	13.03%	$76.74	$76.44
ZTS	BMO	$62.12	2,728,190	5.09%	$62.28	$62.16
ACAD	AMC	$30.69	1,537,150	6.89%	$29.91	$28.58
ANDV	AMC	$97.93	2,120,980	2.15%	$98.12	$96.87
CLR	AMC	$33.65	3,508,550	1.63%	$32.64	$31.90
DIS	AMC	$107.69	7,142,580	1.69%	$108.32	$106.78
GDDY	AMC	$42.57	1,366,500	4.84%	$43.26	$42.66
MNST	AMC	$52.71	2,168,070	3.42%	$53.18	$51.63
TRIP	AMC	$39.51	2,735,580	9.72%	$38.23	$37.91
TSO	AMC	$99.53	2,127,980	2.15%	$98.12	$96.87
TSRO	AMC	$128.59	1,197,230	2.75%	$128.18	$129.80
WBMD	AMC	$66.30	1,091,480	2.25%	$65.11	$60.66
XEC	AMC	$94.00	1,218,690	2.32%	$96.70	$95.14

 

Wednesday, August 9: 

Economic: MBA Mortgage Applications – 7:00, Productivity and Costs – 8:30, Wholesale Trade – 10:00, EIA Petroleum Status Report – 10:30.
International Economic: Japan Machine Orders – 7:50PM.

Earnings:

SYMBOL	B/A	8/4 Close	AVGVOL	AVG MOVE	SMA 10	50% FIB
ATHM	BMO	$47.82	1,212,820	2.94%	$48.15	$46.85
AVT	BMO	$38.20	1,257,710	1.93%	$38.86	$39.07
FWONK	BMO	$35.18	1,682,960	3.25%	$34.73	$35.03
LITE	BMO	$58.85	1,811,120	6.83%	$63.74	$62.41
MBLY	BMO	$63.49	2,972,730	1.55%	$63.37	$63.15
MDCO	BMO	$36.43	1,153,500	1.64%	$38.09	$39.95
MYL	BMO	$32.92	4,957,290	1.95%	$38.24	$37.05
NVO	BMO	$42.06	1,952,120	9.19%	$42.33	$42.54
SINA	BMO	$96.12	1,435,990	11.70%	$94.32	$90.22
SNI	BMO	$87.29	2,671,580	4.86%	$84.67	$77.53
TRCO	BMO	$40.80	2,339,900	1.31%	$41.73	$41.16
WB	BMO	$78.77	2,591,310	14.24%	$76.25	$72.31
XRAY	BMO	$61.59	1,283,590	2.92%	$62.34	$63.06
ALNY	AMC	$82.44	1,092,830	10.52%	$81.94	$81.38
ATH	AMC	$49.90	1,586,540	2.25%	$50.47	$50.00
CTRP	AMC	$57.70	3,674,220	3.46%	$58.69	$56.66
GXP	AMC	$31.22	2,913,200	0.94%	$30.60	$30.05
LYV	AMC	$37.36	1,259,010	4.80%	$36.98	$35.78
NTES	AMC	$304.47	1,276,920	5.94%	$308.48	$305.51
PBYI	AMC	$85.80	1,700,200	1.55%	$93.51	$90.99
PTLA	AMC	$61.50	1,013,300	10.89%	$63.85	$60.48
SFR	AMC	$34.31	1,268,360	0.88%	$34.89	$34.52

 

Thursday, August 10: 

Economic: Weekly Jobless Claims – 8:30, PPI-FD – 8:30, Bloomberg Consumer Comfort Index – 9:45, EIA Natural Gas Report – 10:30, Money Supply – 4:30.

International Economic: Japan Tertiary Index – 1:30AM, Great Britain Industrial Production – 4:30AM, Great Britain Merchandise Trade – 4:30AM.

Other: William Dudley New York Federal Reserve Bank President will deliver opening remarks and join a panel of New York Fed economists to answer questions after the presentation of the Economic Press Briefing on Wage Inequality in the Region, in New York – 10:00AM.

Earnings:

SYMBOL	B/A	8/4 Close	AVGVOL	AVG MOVE	SMA 10	50% FIB
DDS	BMO	$72.93	1,149,540	9.09%	$72.40	$66.47
EAT	BMO	$34.71	1,227,660	5.59%	$35.73	$36.58
KSS	BMO	$41.89	4,532,050	9.68%	$40.74	$39.33
PRGO	BMO	$67.43	1,514,590	8.12%	$0.00	$0.00
YY	BMO	$73.49	1,085,350	2.87%	$71.32	$65.08
BZUN	AMC	$32.02	2,098,150	3.39%	$32.73	$28.13
JWN	AMC	$46.81	3,026,170	6.88%	$47.72	$48.15
NVDA	AMC	$167.21	22,750,900	11.70%	$165.09	$154.25
TTD	AMC	$53.39	1,296,070	19.36%	$53.78	$52.98

 

Friday, August 11: 

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

International Economic: Germany CPI – 2:00AM,

Other: Federal Reserve Bank of Dallas President Robert Kaplan to speak at the University of Texas at Arlington Accounting Department Sixth Annual CPE Day in Arlington, Texas, with audience and media Q&A – 9:40AM, Minneapolis Federal Reserve Bank President Neel Kashkari to take part in a moderated audience Q&A session at the Independent Community Bankers of Minnesota Annual Convention in Bloomington, MN – 11:30AM.

Earnings: None meeting criteria.

 

Monday, August 14: 

Economic: No Major Announcements.

International Economic: Japan GDP, 7:50PM, China Industrial Production & Retail Sales – 10:PM,

Earnings:

SYMBOL	B/A	8/4 Close	AVGVOL	AVG MOVE	SMA 10	50% FIB
JD	BMO	$46.40	10,758,100	6.19%	$44.86	$42.68
SYY	BMO	$52.33	3,053,240	1.64%	$51.97	$50.94

 

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