A little VOL

Grassrooters,

Hello volatility, well, a little. The “Trump Bump” may be quickly fading, and we welcome the opportunity for a little volatility into the market.  With the onslaught of earnings this week we could see added vol this week.

Yesterday I sold some puts on my short Nasdaq, covered a few winning trades, and placed a Mastercard and Under Armour earnings trade.

Mastercard was a nice winner and Under Armour was a complete bust. Down around 25%, this was well outside the expected move, and now I’ll be playing defense until I can hopefully scratch the trade or make it a small loss.  This is where the work begins when you have big moves like that.

under-armourFrom Tradwise:

The enduring equity market finally took a respite last week as the S&P 500 declined 1% for its first weekly reversal since before the US Presidential election. The Benchmark eventually closed at $2191 while staying fixed in a fairly tight range. Energy, financial, and basic material sectors all gained over the progression of the last five sessions. Technology and healthcare struggled to keep pace as the Nasdaq extended its recent underperformance giving up -2.7% during the same period. The Dow Jones Industrial (DJIA) components were able to eke out a fractional +0.1% gain for its fourth consecutive weekly advance sustaining a 10% return so far in 2016. The small cap Russell 2000 index saw its only daily advance come on Friday after contracting for the four straight sessions prior following a red-hot November.  Friday’s monthly U.S. unemployment report touted an encouraging nine-year low of only 4.6% with another 178,000 jobs created during the month of November. One aspect  mounting some concerns however was the job force participation rate withering to only 62.7% amongst the ages of 25-64 with hourly income also edging .1% lower for the first time this year. Experts still predict that the overall vitality of the labor market is sufficient to essentially assume a long awaited rate hike in the upcoming Federal Reserve meeting.

 

Investors seem apprehensive around the implications surrounding an Italian referendum vote as an eventual exit from the Eurozone could create Brexit like reactions. The CBOE Volatility Index closed Friday at the higher end of the range above $14 but will be put to the test early on with any major announcements coming oversees. The U.S. 10 year treasury dropped 5 basis points on Friday to settle at 2.4% after Thursday’s high watermark not seen since June of 2015. Gold Futures (/GC) may see more emphasis to round out the year depending on repercussions from the geopolitical development as exit polls are showing the Prime Minister’s future may very well be in jeopardy. Oil bulls applauded last week’s impressive run compliments of OPEC production cuts to put crude (/CL) back in reach of year-highs obtained in mid-October and above $51 a barrel sending the entire sector skyrocketing last week.

 

The upcoming week is gearing up to be relatively light with only a trickle of economic data expected to leave ample room for outside variables to shape market sentiment. Monday will showcase PMI numbers along with the TD Ameritrade monthly IMX to better gauge retail investors’ recent risk appetite towards equities. Thursday will host another weekly unemployment snapshot before Friday’s final 2016 consumer sentiment report comes out during one of the busiest shopping weeks of the entire year with encouraging data early on. Earnings will have little impact on the markets over the near-term with only the notable name of Costco scheduled to release mid-week.
Major Earnings for the Upcoming Week:

 

Monday:

A.M. –  N/A

P.M.– N/A

 

Tuesday:

A.M.– AZO, BMO, CONN, MIK,TOL

P.M.– PLAY

 

Wednesday:

A.M. – VRA

P.M. – CASY,COST, HRB, LULU, VRNT

 

Thursday:

A.M. –CIEN, HOV

P.M. –AVGO, BRCM, RH

 

Friday:

A.M.– LEE, MTN

P.M. – N/A

 

Economic Releases (12/5– 12/9):

 

Monday:

7:30 am CT – Fed’s Dudley Speaks

7:30 am CT – Final Services PMI

9:00 am CT –ISM Non-Manufacturing PMI

9:00 am CT – Labor Market Conditions

11:30 am CT –TD Ameritrade IMX Survey

1:00 pm CT – Fed’s Bullard Speaks

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Dow 30,000

barrons-dow-30000_0

According to Barron’s “the Dow hitting 20,000 was no fluke. Today’s stock prices are well supported by solid prospects for corporate earnings and economic growth.  In fact, if President Trump can avoid stumbling into a trade war-or a real war- the Dow could surpass 30,000 by the year 2025.”

Does anyone else find articles like this comical?  Based on current pricing the Dow Jones Industrial Average has less than a 15% chance of touching 25,000 by January, 2019.  Unless the gurus at Barrons have a crystal ball, I’d rather be selling any uptick in this overpriced index.

Today we will see an uptick, hopefully, in the Vix.  I’ll be looking to add some new trades in some liquid underlyings.  We have some big earnings being released this week, so I’ll be looking at stocks that have a high IV rank, but no upcoming earnings.

From Tradewise:

Political unrest was the main theme over the weekend with President Trump’s executive order to temporarily suspend travel from terrorist regions sparking outrage. The Dow Jones ($DJI) is in jeopardy of losing its coveted 20K status as both Asian and European markets are retreating early with the renewed uncertainty in policy. The CBOE Volatility Index (VIX) may become more active gin the near-term after hitting a shocking low of $10.30 last week with essentially no risk premium priced in. Gold Futures (/GC) are showing some signs of demand this morning as a possible safe haven just under $1195 after 3 straight daily declines last week.

Oil Prices (/CL) have remained surprisingly steady above $53 as of late with the U.S. rig count rising by 15 last week to 566 total- accounting for the largest weekly climb in almost 4 years. Equilibrium continues to prevail as OPEC countries have been slow to curb production after their recent attempt to manipulate pricing. German yields have been pushed higher this morning with inflationary signs finally detected in tandem with the U.S. 10 year hovering just above 2.48% ahead of tomorrow’s Fed meeting.

Consumer spending, personal income, and core inflationary data will all be revealed pre-market.  Pending home sales will also be disseminated shortly after the market open as some of the last data points the Fed will observe before commencing their two-day meeting tomorrow. Although slightly muted today, there will be a constant flow of earnings all week with a fifth of all S&P 500 companies reporting along with 5 key DOW components with headliners Apple (APPL) tomorrow and Facebook (FB) Wednesday.

Stock Stories:

FITBIT (FIT) –Getting Slimmer! – The popular wearable device maker is slashing up to 10% of their workforce due to a barrage of growing competition.  Shares have continued to decline ever since reaching an all-time high of $52 back in August of 2015 with another 10% dip pre-market after the most recent news.

Tempur Sealy International (TPX)- Back Pain!!  Shares of the mattress company are down an astonishing 30% pre-market after announcing a contract termination with Mattress Firm.  Shares will likely open near 2 year lows with several analyst downgrades adding to the pain.

Major Economic Reports:

7:30 am CT – Personal Income and Outlays

9:00 am CT – Pending Home Sales

9:30 am CT – Dallas Fed Mfg. Survey

12:00 pm CT – 5-Year Note Auction results

Notable Earnings:

Monday – 1/30:

Before Market:  BAH, CSTR

After Market:  PFG, RMBS

Tuesday – 1/31:

Before Market:  AET, ALLY, COH, CNX, DHR, LLY, XOM, HOG, MAN, MA, NUE, PCAR, PFE, SPG, S UA/UAA, UPS, VLO, XRX\

After Market:   AMD, ALGN, APC, AAPL, CHRW, EA, OLN,X

 

Dow 20k

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Grassrooters,

There you go, folks!  The infamous DOW 20,ooo!  You couldn’t tune into any financial news network and not hear about this.  Even my twitter feed was becoming unbearable.  Can we now get back to normalcy? I find it hilarious how the main stream media can’t find anything else to discuss.  I think I saw CNBC going out to talk with “Main Street” about this historical event.  What a joke!

What does this mean for the retail investor?  Probably nothing.

The DJIA, Dow Jones Industrial Average,  was created by Charles Dow and Edward Jones, co-founders of the Wall Street Journal and Dow Jones & Company, in 1896 and it’s the second-oldest U.S. stock market index after the Dow Jones Transportation Average. When it was founded, the DJIA was comprised of 12 industrial and railroad companies. Today, the DJIA is now comprised of 30 large-cap, publicly-owned companies based in the United States. Companies are selected by editors of the Wall Street Journal and are typically only added if they have an excellent reputation, demonstrate sustained growth, and is of interest to a large number of investors. Two interesting facts about the DJI are its components have only changed 51 times since its inception in 1896 and General Electric has had the longest continuous presence on the index. General Electric was also part of the initial 12 companies that comprised the index.

The index is weighted by price instead of market cap. That is why Goldman Sachs Inc (GS) is the biggest component of the DJI at 8.04%, while Apple Inc (AAPL), one of the most valuable companies in the world, is only 4.13% of the index.

While CNBC likes to get everyone believing the DJIA is the index to follow, you can see that it represents a very small aspect of the general market.  Something more important to watch, and probably has had more impact on your investments and 401k is the S&P 500 Index (SPX).  The SPX is made up of 505 common stocks issued by 500 mid- and large-cap companies. The reason why there are more stocks than companies is because some companies, like Alphabet (GOOG, GOOGL), issue multiple classes of stock. It accounts for roughly 75-80% of the U.S. equities’ market value. In the past, the SPX has closely correlated with the Dow because Financials are a large component of both index. Financials comprise just under 15% of the SPX and 17.63% of the DJI..  The S&P 500 and the Nasdaq both his lifetime highs yesterday as well.  As discussed yesterday I added to my short positions in both of these indexes.  We are currently at a price extreme and I am looking to take advantage of the markets normalizing.

Tuesday’s Trades:

Short S&P 500

Short Nasdaq 100

Short Russell 2000

Covered 20yr Bond Options for a profit

Rolled the untested Boeing Puts up collecting another $1.08 in premium.  I’ll be looking to roll this inverted strangle to the March Cycle soon.

Covered Mexican Peso (/6m) for a nice profit.

Today I’ll be looking to get some new trades on.  My theta numbers are very low, but rightfully so due to the low volatility in the markets.

Major Economic Reports:

7:30 am CT – Weekly Jobless Claims

7:30 am CT – Chicago Fed National Activity Index

7:30 am CT – International Trade in Goods

8:45 am CT – PMI Services Flash

9:00 am CT – New Home Sales

9:00 am CT – Leading Economic Indicators

9:30 am CT – Natural Gas Inventories

10:00 am CT – Kansas City Fed Mfg. Index

12:00 pm CT – 7-Year Note Auction results

Record Highs!!

4 indices.png

Ahhh, markets reach new highs today on the heels of President Trump’s executive decisions yesterday.  Today, I will be looking to add to my short positions in The S&P’s, Nasdaq, and Russell 2000.  I have sold some puts against my short positions too.  Remember, it is vital to stay mechanical and reduce cost basis where possible.

I’m also managing some of my winning trades in TLT.  Tune back in tomorrow as I recap some of the other trades I place on this memorable trading day.

Stay healthy Grassrooters!

1/25/2017 From Tradewise 

The Trump presidency provided more fuel for equities yesterday as the White House ramps up growth rhetoric. U.S. stocks closed sharply higher on Tuesday as the benchmark S&P 500 Index (SPX) settled at all-time highs and saw another intraday record. The tech heavy Nasdaq (QQQ) also traded and settled at a record close while the Dow (DIA) and small caps (IWM) rose and played catch-up to the overall market. This morning, equity futures (/ES) are higher, indicating the market may make another assault on Dow 20,000. The market had been down in six of the past seven sessions but yesterday got back to its winning ways and looks ready to continue that rally. In addition to the earnings reports scheduled for release, the economic calendar will have reports on housing and oil inventories.

 

Treasuries are slightly lower and helping stocks reach another all-time high. Yields have dipped from overnight peaks but the 10-year note is higher at 2.48%. A weaker Yen helped propel Japan’s Nikkei 1.43% higher, while a firmer British Pound weighed on the FTSE 100 and limited the advance. While German consumer data was a little weaker than expected, it’s still at a high level and French production unexpectedly improved, supporting hopes for economic growth. Oil (/CL) have slipped as a build in inventories after yesterday’s close reflected more production from domestic shale drillers. The U.S. calendar is light but the Treasury sells $34 B in 5-year notes and the MBA reported mortgage applications rose 4.0% in the week ended January 20.

 

Stock Stories:

Boeing (BA) – Flying High! – The aircraft-maker posted better than expected earnings this morning as both top-line revenue and EPS beat expectations. The company sees 760 deliveries in 2017 but did guide revenue slightly lower in 2017. The lower guidance is not hurting the stock as the shares are up over 1% ahead of the opening bell.  

 

Abbot Labs (ABT) – Earnings – The pharma company posted quarterly results that were in line with expectations this morning. The company reaffirmed guidance and the shares are basically flat ahead of the Wall St open.

 

Major Economic Reports:

6:00 am CT – MBA Mortgage Applications – up 4%

9:00 am CT – FHFA House Price Index

9:30 am CT – Oil Inventories

12:00 pm CT – 5-Year Note Auction results

                                                                                                                             

Notable Earnings:   

Wednesday – 1/25:

Before Market:   ABT, BA, EAT, FCX, HES, ITW, MKC, NSC, NVS, PGR, STT, TXT, UTX, VRTS

After Market:  T, CTXS, EBAY, FFIV, LVS, MCK, MUR, QCOM, TER, VRTX, XLNX

 

Thursday – 1/26:

Before Market:  ADS, BHI, BIIB, BX, BMY, BC, CAT, CELG, CMCSA, DOW, F, JBLU, NOC, POT, PHM, RTN, SHW, UL

After Market:   ETFC, GOOG, INTC, JNPR, KLAC, MSFT, PYPL, SBUX, VMW