Greenville-Spartanburg Airport

I am writing this in the terminal at the Greenville-Spartanburg Airport.  My wife and I are returning to Chicago after spending four wonderful days in the mountains on the border of North Carolina and Georgia.

Last week’s market was characterized by wild intraday moves culminated by daily upward moves approaching 2% on Thursday and Friday.  This two day 4% gain was preceded by four trading days where the market was down a total of  3%.  The continual change in sentiment from disaster to salvation is very trying and vexing for traders.   The focus is now on anticipation of QE3  and additional liquidity from the European Central Bank.

The broad indexes ended the week up 0.50% to 2.0%.  The final gain was the result of Friday’s continued push  upward after a 2% gain on Thursday.  Last week the Dow Jones Industrial Average closed at 13,0753.66  up 253.09 points or a gain of 1.97%.    The S&P 500 (SPX) ended the week up 23.31 points -  up 1.71% at 1385.97.  The NASDAQ 100 (NDX), despite disappointing earnings from Apple, responded with a gain of 25.99 points or plus .99% to close at 2,644.03.    The S&P 100 (OEX) gained 1.69% to close at 637.16. The Russell 2000 (RUT) lagged the other indexes by closing  at 796.00, a gain of 4.46 points – up 0.56%.  The VIX and other volatility indexes did not reflect the end of the week optimism as indicated by the rally on Thursday and Friday.    The VIX ended the week at 16.70% to close near recent lows and well down from the weekly highs.  The weekly trading range for the other volatility indexes reflected the schizophrenic attitude about the current market news.

Here is a capsule view of last week’s market numbers:

I participated in this rally only as an observer.   I had closed my options positions on Tuesday and Wednesday in anticipation of not being able to monitor and trade the market on Thursday and Friday.   As we monitored the market, my mountain host characterized watching the markets as akin to watching the antics of a drunk driver.   After calling 911, I am left with two choices – dropping to a safe distance behind to avoid danger or passing the drunk and hoping I do not get sideswiped.  I am choosing the former.  I need to remember that  “no position” is one of the most undervalued of trading strategies.

The coming week will be characterized by a continued focus on earnings combined with the meeting of the FOMC and a release of a plethora of employment reports.   Any of these events, individually, has the capability to influence the market to go in either direction. I will waiting for an opportune time to reenter the market.

Be careful.  Be aware.  Remember to focus on hitting singles and doubles.

Remember:

“Chance favors the Prepared Mind.” – Louis Pasteur

This week’s economic news (All times are Eastern Daylight Time.) Dates and times are subject to change:

Monday July 30:

Economic:  Dallas Fed Manufacturing Survey – 8:30.

Earnings:  BMO:  Arrow Electronics (ARW), Franklin Resources (BEN), CNA Financial (CNA), HSBC Holdings (HSBC), Loews (L), Roper Industries (ROP); AMC:  Andarko Petroleum (APC), Cirrus Logic (CRUS), Eastman Chemical (EMN), Forest Oil (FST), Herbalife (HLF), NewMarket (NEU), Seagate (STX), Texas Roadhouse (TXRH).

Tuesday July 31:

Economic:  ICSC Goldman Sachs Retail Store Sales – 7:45, Personal Income and Outlays – 8.30, Employment Cost Index – 8:30, Redbook – 8:55, S&P Case-Shiller Home Price Index – 9:00, Chicago PMI – 9:45, Conference Board Consumer Confidence – 10:00, State Street Investor Confidence Index – 10:00, Farm Prices – 3:00.

Earnings:  BMO:  Archer Daniels-Midland  (ABM), BP plc (BP), Cummins (CMI), Coach (COH), Deutsche Bank (DB), Ecolab (ECL), Honda Motors (HMC), Tyco (TYC), Pfizer (PFE), Revlon (), TYCO (TYC), Zebra Technologies (ZBRA);  AMC:  FMC (FMC), Hanesbrands (HBI), JMSTR), Peet’s Coffee & Tea (PEET), Pioneer Natural Resources (PXD), Papa John’s (PZZA), Regal-Beloit (RBC).

Other: FOMC Meeting Begins.

Wednesday August 1:

Economic:  Motor Vehicle Sales, MBA Purchase Applications – 7:00, Challenger Job-Cut Report – 7:30 , ADP Employment Report – 8:15,  PMI (Purchasing Manager’s Manufacturing Index) Index – 9:00, ISM Manufacturing Index – 10:00, Construction Spending – 10:00, EIA Petroleum Status Report – 10:30.

Earnings:  BMO:  Allergan (AGN), Automated Data Processing (ADP), Comcast “A” (DMCSA), Devon Energy (DVN), Energizer Holdings (ENR), Hyatt Hotels (H), Harley -Davidson (HOG), InterContinental Exchange (ICE), MasterCard (MA), Phillips 66 (PSX), Stratsys (SSYSD), Time-Warner (TWX), Wisconsin Energy (WEC); AMC: Allegiant (ALGT), Andersons (AND), DaVita (DVA), First Solar (FSLR), General Probe (GPRO), MetLife (MET), Murphy OIL (MUR), Portfolio Recovery (PRAA), Prudential Financial (PRU), Sturm Ruger (RGR), Boston Beer (SAM).

Other:  FOMC Meeting Announcement – 2:15.

Thursday August 2:

Economic:    Chain Store Sales, Jobless Claims – 8:30, Bloomberg Consumer Confidence Index – 9:45, Factory Orders, EIA Natural Gas Status Report – 10:30.

Earnings:  Earnings:  BMO:  Ansys (ANSS), Apache (APA), Becton-Dickinson(BDX), Cardinal Health (CAH), CBOE Holdings (CBOE), CIGNA(CI), Clorox (CL), Duke Energy (DUK), General Motors (GM), Henry Schein (HSIC), Kellog’s (K), Kubota (KUB), Lear (LEA), Parker-Hannifin (PH), Time Warner Cable (TWC); AMC:  Agrium (AGU), Air Methods (AIRM), Atrion (ATRI), Sotheby’s (BID), CBC (CBS), Curtiss-Wright (CW), Dolby Labs (DLB), Fluor (FLR), Kraft Foods (KFT), LinkedIn (LNKD), Mohawk Industries (MHK), Public Storage (PSA), Sunoco (SUN).

Friday August 3:

Economic: Monster Employment Index, July Nonfarm Payrolls – 8:30, July Unemployment Rate – 8:30, ISM Non-Manufacturing Index – 10:00.

Earnings:  BMO: Buckeye Partners (BPL),Cubic Corp (CUB), Gartner (IT), Alliant Energy (LNT), Madison Square Garden (MSG), Northwest Natural Gas (NWN), Procter & Gamble (PG), RBC Bearings (ROLL), Viacom “A” (VIAA), Viacom “B” (VIAB).

Monday August 6:

Economic:  Treasury STRIPS – 3:00.

Earnings:  BMO:  American States Water (AWR), BroadSoft (BSFT), Cinemark (CNK), Dril-Quip (DRQ), Humana HUM), Sohu (SH), Tyson Foods (TSN); AMC:  CF Industries (CF), Chesapeake Energy (CHK), Concho Resources (CXO), Markel Corp. (MKL), Tumi (TUMO), Vornado Realty Trust (VNO).

Flag of Spain

The markets finished flat despite a sell off on Friday.  An increase in Spanish yield stirred some fear in a market where there appears to be no significant buyers or sellers.  Volume for the week indicated a lack of bullish or bearish sentiment  Positive earnings reports from Google, General Electric, and IBM put a positive spin on the market.  It appears the markets interpreted Ben Bernanke’s remarks before Congress as being bullish.  The prospect of further quantitative easing puts an damper on traders’ willingness to be short the market.

The markets were essentially unchanged for the week.  Last week the Dow Jones Industrial Average closed at 12,822.57  up 45.48 points or a gain 0.36%.    The SPX ended the week up 5.88 points -  up 0.43% at 1,362.66.  The NASDAQ 100 (NDX) responded to good earnings from Google with a gain of 33.07 points or plus 1.28% to close at 2,618.04.    The S&P 100 (OEX) gained 0.60% to close at 626.57. The Russell 2000 (RUT) bucked the upward trend by closing at 791.54, a loss of 9.45 points – down 1.18.  The continued weakness in the RUT is in response to perceived exposure to the European financial crisis.

The VIX continues to fluctuate between negative and positive sentiment.  The VIX ended the week at 16.27% to close near its recent lows.  The other index volatility measurements reflected the current mildly bullish stance by closing down from the previous week’s marks.

Here is a capsule view of last week’s market numbers:

The market did not exhibit the previous week’s intraday volatility.   Earnings could have a major influence on market movement.  Earnings announcements reach their peak this week.  The highlight will be earnings from Apple (AAPL) Tuesday after the market close.  The consensus estimates are for earnings of $10.39 per share.  Other important earnings are McDonald’s on Monday, Ford Motor, Caterpillar, Boeing, Pepsico, and Visa on Wednesday, and Colgate-Palmolive, Facebook and Exxon Mobil on Thursday.  These earnings have the capability of sending the markets in either direction.

We are approaching the one year anniversary of the Congressional brinkmanship which lead to last year’s major sell-off.  Media focus on last year will bring the focus to the possibility of the current “financial cliff.”  The major economic reports are weekly initial unemployment on Thursday, and second quarter estimate GDP on Friday.  Be wary of the impact of a revision of the first quarter GDP.  Traders looking to  the GDP announcement as an indicator of the state of the U.S. economy.

The past week’s market behavior is not an indication everything is “all right”  Be careful.  Be aware.

Remember:

“Chance favors the Prepared Mind.” – Louis Pasteur

This week’s economic news (All times are Eastern Daylight Time.) Dates and times are subject to change:

Monday July 23:

Economic Chicago Fed National Activity Index – 8:30.

Earnings:  BMO:  Cal-Maine Foods (VALM), Eaton Corp (ETN), General Electric (GE)Halliburton (HAL), Hasbro (GAS), McDonalds (MCD), RPM International (RPM);  AMC:  Baidu (BIDU), Celanese (CE), Seacor Holdings (CKH), Crane (CR), Gulfmark Offshore (GLF), Jacobs Engineering (JEC), Olin (OLN), Texas Instruments (TXN), United Stationers (USTR), VMware (VMW).

Tuesday July 24:

Economic:  ICSC Goldman Sachs Retail Store Sales – 7:45, Redbook – 8:55, PMI Manufacturing  Index Flash – 8:58, FHFA Housing Price Index – 10:00, Richmond Fed Manufacturing Index – 10:00.

Earnings:  BMO:  Air Products & Chemicals (APD), Anixter International (AXE), Avery Denison (AVY), BE Aerospace (BEAV), Biogen Idec (BIIB), Peabody Energy (BTU), Rockwell Collins (COL), Ceradyne (CRDN), EI DuPont de Nemours (DD), Dominos Pizza (DPZ), EMC (EMC), Illinois Tool Works (ITW), Lockheed Martin (LMT), Lexmark (LXK), Neogen (NEOG), Paccar (PCAR), Potlatch (PCH),  Polaris Industries (PII),  Ryder System (R), Reynolds American (RAI), Rogers Communications (RCI), SAP AG (SAP), Simon Property Group (SPG), Six Flags (SIX), ATT&T (T), Under Armour (UA), United Parcel Service (UPS)Westinghouse Air Brake WAB), Whirlpool (WHR);  AMC:  Apple (AAPL), ACE (ACE), AFLAC (AFL), Buffalo Wild Wings (BWLD), Cabot Oil & Gast (COG), Chicago Bridge & Iron (CBI), Illumina (ILMN), iRobot (IRBT), Netflix (NFLX), Panera Bread (PNRA), Questcor Pharmaceuticals (QCOR), Valmont Industries (VMI), .

Wednesday July 25:

Economic: MBA Purchase Applications – 7:00, New Home Sale – 10:00, EIA Petroleum Status Report – 10:30.

Earnings:  BMO:  AOL (AOL), Airgas (ARG), Boeing (BA), Bristol-Myers Squibb (BMY), Canon (CAJ), Caterpillar (CAT), Canadian National Railway (CNI), ConocoPhillips (COP), Canadian Pacific Railway (CP), Diebold (DBD), Ford (F), General Dynamics (GD), Corning (GLW), WR Grace (GRA), Hess (HES), Eli Lilly (LLY), Lorillard (LO), Motorola Solutions (MSI), Northrop Grumman (NOC), Pepsico (PEP), Praxair (PX), Regeneron Pharmaceuticals (REGN), Rockwell Automation (ROK), Southern Co. (SO), SolarWinds (SLI), Tupperware (TUP), WellPoint (WLP);  AMC:  Angie’s List (ANGI), Avalonbay (AVB), CR Bard (BCR), Crown Castle (CCI), Citrix Systems (CTXS), Graco (GGG), InterDigital (IDCC), Kaiser Aluminum (KALU), Kirby (KFX), Morningstar (MORN ), Raymond James (RJF), Shutterfly (SFLY), Tactor Supply (TSCO), Visa (V).

Thursday July 26:

Economic:    Durable Goods Orders – 8:30, Jobless Claims – 8:30, Bloomberg Consumer Confidence Index – 9:45, June Pending Home Sales Index – 10:00, EIA Natural Gas Status Report – 10:30, Kansas City Fed Manufacturing Index – 11:00.

Earnings:  BMO:  Arctic Cat (ACAT), Barrick Gold (ABX), Amylin Pharmaceuticals (AMLN), Ashland (ASH), AstraZeneca (AZN), Brunswick (BC), Ball Corp (BLL), BorgWarner (BWA), Cabela’s (CAB), Colgate-Palmolive (CL), CME Group (CME), Covidien (COV), Carters (CRI), Carbo Ceramics (CRR), Dunkin Brands (DNKN), Dow Chemical (DOW), Dr. Pepper Snapple (DPS), Goodrich (GR), Starwood Hotels (HOT), Hershey (HSY), IMAX (IMAX), Imperial Oil (IMO), International Paper (IP), Kimberly-Clark (KMB), L# Communications (LLL), Moody’s (MCO), McGraw-Hill (MHP), 3M (MMM), Monro Muffler Brake (MNRO), Mylan (MYL), Noble Energy (MYL), Occidental Petroleum ((OXY), Precision Castparts (PCS), Pulte Homes (PHM), Potash (POT), Royal Dutch Shell )RDS.A), Radware (RDWE), Reliance Steel (RS), Raytheon (RTN), Rayoneer (RYN), Teledyne (TDY), Tenneco (TEN), Timken (TKR), Unilever plc (UL), United Technologies (UTX), Vulcan Materials (VMC), Waste management (WM), Exxon Mobil, (XOM),  Zimmer Holdings (ZMH); AMC:  Amgen (AMGN), Amazon (AMZN), Chubb (DB), Columbia Sportswear (COLM) Coinstar (CSTR), Deckers Outdoor (DECK), Dun & Bradstreet (DNB), Expedia (EXPE), Facebook (FB), Gilead Sciences (GILD), McKesson (MCK), Mettler-Toledo (MTD), NetSuite (N), Netgear (NETG), Starbucks (SBUX),

Friday July 27:

Economic: GDP – 8:30, University of Michigan/Reuters Consumer Sentiment – 9:55.

Earnings:  BMO: Chevron (CVX), DTE Energy (DTE), Legg Mason (LM), Merck (MRK), Newmont Minning (NEM), Newell Rubbermaid (NWL), Total SA (TOT), Weyerhaeuser (WY).

Monday July 30:

Economic:  Dallas Fed Manufacturing Survey – 8:30.

Earnings:  BMO:  Arrow Electronics (ARW), Franklin Resources (BEN), CNA Financial (CNA), HSBC Holdings (HSBC), Loews (L), Roper Industries (ROP); AMC:  Andarko Petroleum (APC), Cirrus Logic (CRUS), Eastman Chemical (EMN), Forest Oil (FST), Herbalife (HLF), NewMarket (NEU), Seagate (STX), Texas Roadhouse (TXRH).

Stocks traded lower the first four sessions of the week .  This was in response to a dearth of positive new.  The focus was on concern s about the U.S. economy combined with fears of a Chinese hard landing, poor tech sector earnings, and continued Eurozone concerns.  This six day losing streak in the markets (includes two days from the previous week) was ended by a 1.6% rally on Friday.  This apparent change in sentiment was fueled by stronger than expected earnings reports by JPMorgan Chase (JPM) and Wells Fargo (WFC).  These earnings were viewed by many as confirming evidence of the relative financial strength of the U.S. banking system.

The markets were essentially unchanged for the week.  Last week the Dow Jones Industrial Average closed at 12,777.09  up 4.62 points or a gain 0.04%.    The SPX ended the week up 2.10 points -  up 0.16% at 1,356.78.  The NASDAQ 100 (NDX) confirmed weakness in the tech sector with a loss of 27.32 points or minus 1.05% to close at 2.584.97.    The S&P 100 (OEX) gained 0.42% to close at 622.83. The Russell 2000 (RUT) closed at 800.99 , a loss of 6.15 points – down 0.76% 1.08%.  The VIX continues to fluctuate between negative and positive sentiment.  The VIX ended the week at 16.74% to close near its recent lows.  The other index volatility measurements were essentially unchanged for the week.

Here is a capsule view of last week’s market numbers:

The intraday volatility is masked by the lack of movement between the closings of the past two weeks.  The difference between Thursday’s low’s and Friday’s close was nearly 2.5%.  This sort of movement requires near constant monitoring of positions.  Be willing to take profits and recenter or reverse positions.  These types of markets require the trader to be nimble and constantly aware.

Another QE?

The main focus of the Week will be Ben Bernanke’s testimony before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday.  Expect him to take Congress to task for playing a game of financial brinkmanship and taking the economy to a “financial cliff.” Financial pundits and traders will engage in constant parsing of his comments to divine whether any fiscal stimulus is on the near horizon.  The earnings cycle is in full force this week.   The beginning of the week starts with announcements from financial sector giants Citigroup (C) on Monday, Goldman Sachs (GS) on Tuesday, and Bank of America (BAC) on Wednesday.  Other earnings announcements include Morgan Stanley, Coca-Cola, Intel, CSX, American Express, QUALCOMM, Google, IBM, Abbott Labs, Microsoft, Intuitive Surgical, Union Pacific, Baxter, Schlumberger, and General Electric.  With expectations low, a number of analysts see a greater chance for upside surprises in this cycle. A more comprehensive list of the companies and associated earnings dates is below.  The guidance provided in the accompanying conference calls will set the tone for future market performance.

I hate to be a broken record.  I continue to be confused about predicting market reaction to news- good and bad.  I feel the price movement is scripted by Allen Funt.  He is famously remembered for saying, ” Remember… when you least expect it… someone… somewhere…… may walk up to you and say, ‘Smile. You’re on Candid Camera.”  His alternative version of the same saying “When you least expect it, expect it” sums up the behavior of today’s markets.

Be careful.  Be aware.

Remember:

“Chance favors the Prepared Mind.” – Louis Pasteur

This week’s economic news (All times are Eastern Daylight Time.) Dates and times are subject to change:

Monday July 16:

Economic:  June Retail Sales – 8:30, Empire State Manufacturing Survey – 8:30, May Manufacturing/Trade Inventories and Sales. – 10:00.

Earnings:    BMO:  Citigroup (C), Gannett Co.(GCI); AMC:  Brown & Brown (BRO), Cintas (CTAS), Equity Lifestyles Properties (ELS), ICU Medical (ICUI), JB Hunt Transport Services (JBHT), Lincare Holdings (LNCR), Packaging Corp of America (PKG).

Other:  Japanese markets closed.

Tuesday July 17:

Economic:  ICSC Goldman Sachs Retail Store Sales – 7:45, June Build/Fax Remodeling Index – 8:00, June Consumer Price Index – 8:30, Redbook – 8:55, June Real Earnings (Avg. Hourly Wages) – 8:30, May Treasury International Capital – 9:00,  June S&P/Experian Consumer Credit Default Index – 9:00, June Industrial Production/Capacity Utilization – 9:15, July NAHB/Wells Fargo Housing Index – 1:00.

Earnings:  BMO:  TD AMERITRADE (AMTD), Comerica (CMA)m, Forest Laboratories (FRX), Goldman Sachs (GS), Johnson & Johnson (JNJ), Coca-Cola (KO), Kansas City Southern (KSU), Mattel (MAT), McMoRan Exploration (MMR), Mosaic (MOS), Omnicom (OMC), Patni Computer (PTI), Charles Schwab (SCHW), State Street (STT), Westamerica Bancorp (WABC);  AMC:  AAR (AIR), Albemarle (ALB), CSX (CSX), Interactive Brokers Group (IBKR), Intel (INTC), MB Financial (MBFI), Pinnacle Financial (PNFP), United Rentals (URI), Wynn Resorts (WYNN), Yahoo (YHOO).

Other:  Federal Reserve Chairman Ben Bernanke to speak before the Senate Banking Committee to give his semi-annual monetary policy testimony – 10:00.. IMF releases its updated World Economic Outlook .report

Wednesday July 18:

Economic: MBA Purchase Applications – 7:00, June Housing Starts – 8:30, EIA Petroleum Status Report – 11:00.

Earnings:  BMO:  Abbott Labs (ABT), AO Smith (AOS), Amphenol (APH),Bank Of America (BAC), BlackRock (BLK), Check Point Software (CHKP), First Republic Bank (FRC), W.W. Grainger (GWW), Hanesbrands (HBI), Honeywell (HON), Northern Trust (NTRS), PNC Financial (PNC), St. Jude Medical (STJ), Stanley Black &Decker (SWK), U.S Bancorp (USB);  AMC:  American Express (AXP), Crown Holdings (CCK), Core Laboratories (CORE),  Cohen & Steers (CNS), eBay (EBAY), F5 Networks (FFIV), International Business Machines (IBM), Kinder Morgan (KMI), Noble Corp. (NE), Newfield Exploration (NFX), Plexus (PLXS), QUALCOMM (QCOM), Stryker (SYK), Universal Forest Products (UFOI), Xilinx (XLNX), Yum! Brands (YUM).

Other: Federal Reserve Chairman Ben Bernanke to speak before the House  Financial Services Committee to give his semi-annual monetary policy testimony 10:00.

Thursday July 19:

Economic:    Jobless Claims – 8:30, Bloomberg Consumer Confidence Index – 9:45, June Existing Home Sales – 10:00. Philadelphia Fed Business Outlook Survey – 10:00, EIA Natural Gas Status Report – 10:30, Beige Book – 2:00.

Earnings:  BMO:  Alliance Data Systems (ADS), Auto Nation (AN), Arbitron (ARB), Baxter International (BX), BB&T (BBT), Quest Diagnostics (DGX), Danaher (DHR), Diamond Offshore Drilling (DO), Ecopetrol (EC), GATX (GMT), Genuine Parts (GPC), Goodrich (GR), Hubbell (HUB.B), Johnson Controls (JCI), US Airways (LCC), Lincoln Electric (LECO),Southwest Airlines (LUV), Monro Muffler Brake (MNRO), Nucor (NUE), Novartis (NVS), Phillip Morris (PM), Pool Corp (POOL), PPG (PPG), Sherwin-Williams (SHW), Snap-on (SNA), Sonoco Products (SON), Safeway (SWY), Travelers Companies (TRV), Textron (TXT), Union Pacific (UNP), VF Corp (VFC), Verizon (VZ); AMC:  Align Technology (ALGN), Acme Packet (APKT), Athenahealth (ATHN), BJ’s Restaurants (BJIR), Badger Meter (BMI), Cubist pharmaceuticals (CBST), Chipotle Mexican Grill (CMG), Capital One (COF), Cytec (CYT), Google (GOOG), Intuitive Surgical (ISRG), NCR (NCR), Microsoft (MSFT), SanDisk (SNDK).

Other:

Friday July 20:

Economic: ECRI Weekly Leading Index – 10:30.

Earnings:  BMO: American Electric Power (AEP), Baker Hughes (BHI), Dover Corp (DOV), IDEXX Labs (IDXX), Ingersoll-Rand (IR), Manpower (MAN), Schlumberger (SLB), Sensient Technologies (SXT).

Other: Monday July 23:

Economic:  Chicago Fed National Activity Index – 8:30.

Earnings:  BMO:  Cal-Maine Foods (VALM), Eaton Corp (ETN), General Electric (GE)Halliburton (HAL), Hasbro (GAS), McDonalds (MCD), RPM International (RPM);  AMC:  Baidu (BIDU), Celanese (CE), Seacor Holdings (CKH), Crane (CR), Gulfmark Offshore (GLF), Jacobs Engineering (JEC), Olin (OLN), Texas Instruments (TXN), United Stationers (USTR), VMware (VMW).

The week and the third quarter started with another display of fireworks and it ended with a boom.   The week started with equities following their strongest June since the 90′s with continued gains .  The post 4th of July markets took back these gains with worries about the world economy, Eurozone finances, the financial sector, and U.S. job growth.  The talking heads are ignoring the fundamentals of the markets.  The markets continue to be driven by news.

We have reached the point where many are positing that bad news is good news for the market, i.e. the Twilight Zone (editor’s addition).   A common theme is whether the numbers are bad enough to inspire the Fed to institute a new round of quantitative easing.  The net result is the market moves on conjecture, not reality.  Intraday market movement has been characterized by gaps followed by reversals.  These moves require the trader to be nimble.

The markets were essentially unchanged for the week.  Last week the Dow Jones Industrial Average closed at 12,772.47  down 107.92 points or a loss of 0.84%.    The SPX ended the week down 7.49 points -  up 2.03% at 1,362.17.  The NASDAQ 100 (NDX) lost 3.53 points or minus 0.13% to close at 2,612.39.    The S&P 100 (OEX) lost 0.58% to close at 620.20. The Russell 2000 (RUT) closed at 807.14 , a gain of 8.65 points – up 1.08%.  The VIX continues to fluctuate between negative and positive sentiment.  This week the VIX returned to end the week near recent lows.  The VIX and the other index volatility measurements were also unchanged.

Here is a capsule view of last week’s market numbers:

The earnings cycle starts up  this week with Alcoa’s (AA) announcement on Monday.  Google announces on Thursday.  On Friday, JP Morgan Chase will announce earnings.  Details of the impact of the recent trading fiasco are expected to be announced in conjunction with the earnings release.  The picture of the state of the U.S. banking industry will be further defined by announcements by Wells Fargo on Friday and Citigroup on Monday, July 13.  Equity analysts are expecting minimal earnings growth this quarter.

China will be announcing CPI and PPI on Sunday.  This announcement, coupled with Japanese Machinery Orders, could have a significant impact on Monday’s market.  Mario Draghi, president of the ECB, has strongly suggested the world economy may be headed for a downward move.  Draghi is speaking again on Monday.  Domestic and foreign markets have the potential to be roiled by the opinions he offers.  I continue to be confused about predicting market reaction to new – good and bad.  We have entered a “Twilight Zone” where good news is bad and bad news is good for the markets.

Be careful.  Be aware.

Remember:

“Chance favors the Prepared Mind.” – Louis Pasteur

This week’s economic news (All times are Eastern Daylight Time.) Dates and times are subject to change:

Monday July 9:

Economic:  May Consumer Credit – 3:00.

Earnings:    AMC:  Alcoa (AA), PriceSmart (PSMT), A. Shulman (SHLM), WD-40 (WDFC).

Other:  ECB President Mario Draghi speaks on current economic and monetary developments.

Tuesday July 10:

Economic:  ICSC Goldman Sachs Retail Store Sales – 7:45, NFIB Small Business Optimism Index – 7:30, Redbook – 8:55.

Earnings:  BMO:  Helen of Troy (HELE), Hi Tech Pharmacal (HITK), Shaw Group (SHAW), Wolverine World Wide (WWW), Zep (ZEP);  AMC:  ADTRAN (ADTN), Healthcare Services Group (HCSG).

Other:  St. Louis Federal Reserve Pres. James Bullard delivers the OMFIF Golden Series Lecture, in London.

Wednesday July 11:

Economic: MBA Purchase Applications – 7:00, May International Trade – 8:30, May Wholesale Trade/Inventories – 10:00, EIA Petroleum Status Report – 11:00.

Earnings:  AMC:  Marriott International (MAR), Texas Industries (TXI).

Other:   FOMC minutes – 2:00.

Thursday July 12:

Economic:    Jobless Claims – 8:30, June Import and Export Prices – 8:30, Bloomberg Consumer Confidence Index – 9:45, EIA Natural Gas Status Report – 10:30, June Treasury Budget – 2:00.

Earnings:  BMO:  Commerce Bancshares (CBSH), Fastenal (FAST), Infosys (INFY), Progressive Corp. PGR), Washington Federal (WAFD);  AMC:  Google (GOOG), JDA Software (JDAS), Bank of the Ozarks (OZRK), Resources Connection (RCN).

Other: San Francisco Federal Reserve Bank Pres. John Williams speaks to the Community Leaders in Portland, Oregon – 3:40.  Bank of Japan interest rate announcement.

Friday July 13:

Economic: June Producer Price Index – 8:30, Reuters/University of Michigan Consumer Sentiment – 9:55, ECRI Weekly Leading Index – 10:30.

Earnings:  BMO: iGATE (IGTE), JPMorgan Chase (JPM), Webster Financial (WBS), Wells Fargo (WFC).

Other: Atlanta Federal Reserve Bank Pres. Dennis Lockhart speaks to the Mississippi Economic Council – 1:20.

Monday July 16:

Economic:  June Retail Sales – 8:30, Empire State Manufacturing  Survey – 8:30, Business Inventories – 10:00.

Earnings:  AMC:  Citigroup (C), Gannett Co.(GCI); Equity Lifestyles Properties (ELS), ICU Medical (ICUI), JB Hunt Transport Services (JBHT), Lincare Holdings (LNCR), Packaging Corp of America (PKG), Wynn Resorts (WYNN).

Frank Fahey is a mentor with DiscoverOptions, the educational arm of OptionVue Systems.  Inquiries should call 847-816-6610 or email info@DiscoverOptions.com.

"Chance favors the prepared mind."-- Louis Pasteur

The markets ended the week with an early display of fireworks.  Equities had their strongest June since the 90′s.  The last hour of trading on Thursday saw a reversal of early losses with gains of over 1%  off the lows in the indexes.   This rally continued on Friday with gains of 2% to 3% in the indexes.  A number of factors contributed to the euphoria.  The primary impetus was the announcement of a deal to recapitalize European banks while centralizing authority.  In addition, end of the quarter “window dressing” contributed to the gains.  The net result was the best June for the S&P 500 since 1999 and for the Dow since 1997.  It should be noted the numbers for the second quarter are not as rosy.  The DJIA was down 3.9% and the SPX was down 3.3%.

Last week the market action continued to be daily reaction to news – real and imagined.  The Dow Jones Industrial Average closed at 12,880.39 – up 239.61 points or a gain of 1.90%.  The Russell 2000 (RUT) closed at 798.49 , a gain of 23.33 points – up 3.01%.   The SPX ended the week up 27.15 points -  up 2.03% at 1,362.17.  The NASDAQ 100 (NDX) gained 30.29 points or plus 1.17% to close at 2,585.53.    The S&P 100 (OEX) gained 12.10% to close at 623.83.  The VIX continues to fluctuate between negative and positive sentiment.  This week the VIX returned to near end the week near recent lows.  The VIX and the other index volatility measurements were down approximately 6%.

Here is a capsule view of last week’s market numbers:

Next week will be a shortened trading week.  Equity markets will close early on Tuesday July 3.  All U.S. markets will be closed on the 4th of July to celebrate Independence Day.  The shortened week should not be devoid of additional fireworks.  The financial press has started calling the week with the first Friday of the month “Employment Week.” This week’s employment announcements will be compressed into the final two days of the week.  Thursday brings the Challenger Job-Cut Report, the ADP Employment Report, and the Weekly Jobless Claims .  These reports will fuel anticipation for June’s Non-farm Payrolls and Unemployment Rate.  These numbers will be parsed by economists in an attempt to divine the future direction of the U.S. economy.

U.S. employment will not be the only factor affecting market sentiment.  Do not assume downside risk is gone. Last Friday’s euphoria could easily be tempered as details of the European “solution” are released.  In addition, new concerns have been raised about a slowdown of the Chinese economic engine.  Eurodollar levels will provide an ongoing indicator of sentiment about the Eurozone.  There are very few scheduled earnings announcements.  Equity traders should remember to check ex-dividend dates for the stocks they have positions in.

Do not allow yourself to be surprised by “wild card” or unscheduled announcements.  Be nimble.  Be willing to take profits and recenter risk.

Be careful.  Be aware.

Remember:

“Chance favors the Prepared Mind.” – Louis Pasteur

This week’s economic news (All times are Eastern Daylight Time.) Dates and times are subject to change:

Monday July 2:

Economic:  Purchasing Manager’s Manufacturing (PMI) Index 9:00, ISM Manufacturing Index – 10:00, Construction Spending – 10:00.

Earnings:    Acuity Brands (AYI).

Other:  Results of Mexico’s presidential election on July1 announced.

Tuesday July 3:

Economic:  ICSC Goldman Sachs Retail Store Sales – 7:45, Redbook – 8:55, Factor Orders – 10:00.

Earnings:  None optionable.

Other:  U.S equity exchanges close at 1:00 PM.  Options which normally close at 4PM EDT will close at 1:00 PM.  Options which normally close at 4:15 will close at 1:15 PM.

Wednesday July 4:

Other:   U.S. Holiday:  Independence Day – Bond and Equity Markets Closed.

Thursday July 5:

Economic:    Chain Store Sales, MBA Purchase Applications – 7:00, Challenger Job-Cut Report – 7:30, ADP Employment Report – 8:15, Jobless Claims – 8:30, Bloomberg Consumer Confidence Index – 9:45, EIA Natural Gas Status Report – 10:30, , EIA Petroleum Status Report – 11:00.

Earnings:  BMO:  International Speedway (ISCA).

Friday July 6:

Economic: Monster Employment Index, June Nonfarm Payrolls – 8:30, June Unemployment Rate – 8:30.

Earnings:  BMO: None optionable

Monday July 9:

Economic:  Consumer Credit – 3:00.

Earnings:  AMC:  Alcoa (AA), PriceSmart (PSMT), A. Shulman (SHLM), WD-40 (WDFC).

Frank Fahey is a mentor with DiscoverOptions, the educational arm of OptionVue Systems.  Inquiries should call 847-816-6610 or email info@DiscoverOptions.com.