“And the beat goes on.” — Sonny and Cher

The beat does continue to go on and the drums are telling us it is a bull market.  How long has it taken for this to be beaten into our collective brains? Good economic news and increasing consumer confidence led to a new round of record highs in the equities.  On Thursday background noise about the possibility of the Fed discontinuing quantitative easy resulted in a 1% sell-off in the leading equity indexes.  The week finished very strongly on Friday with the Conference Board Leading Indicators and the University of Michigan/Reuters Consumer Index hitting multi-year highs.   Market pundits are talking about bears throwing in the towel.  The talk on financial media outlets discussed Dow 16.000, SPX 1,700, and RUR 1,000.  The largest rallies in individual stocks are the result of traders covering short interest in specific stocks.  There was a near absence of the omnipresent “fearcasting”.  Are we starting to see the glimmer of euphoria indicating the last leg of the bull market?

None of the individual equity indexes can be singled out as the star performer for the week.  All of them showed similar gains ranging from 1.5% to 2.0%..   The RUT reflected the focus on small caps by gaining 2.04% – up 19.84 points to close at 994.01.  The Dow Jones Industrials (DJIA) closed at 15,354.40 gaining 1.56% or 235.91 points.  The S&P 500 (SPX) closed at 1,666.12 – up 32.42 points or a gain of 2.04%.  The S&P 100 (OEX) closed at 746.75 – gaining 1.90% or 13.90 points..  The VIX and the other volatility indexes were down slightly for the week.  It appears the different volatility indexes have found a short-term support level.  These levels reflect the current lack of concern about downside risk.  The VIX closed last week at 12.45 – a loss of 0..14 – a weekly loss of 1.11%.  The other volatility measurements showed similar moves of minimal magnitude.  Here is a capsule view of last week’s market numbers:

Be prepared for the long Memorial Day weekend.  Wednesday is the big day for the week.   The absence of any significant earnings announcements switches the focus to Ben Bernanke’s congressional update about the economy on Wednesday.  The release of the minutes from the last
Fed meeting will be parsed for direction about the continuation of Fed financial  easing.   In addition, the Bank of Japan will make an announcement on future monetary policy.   The emphasis of the week’s economic reports will be housing.  The Dallas and Kansas City Feds will be releasing surveys on the state of manufacturing in their areas.  .

A number of stocks will be going ex dividend this week.  You must be aware of the dividend ex dates for the stocks you trade.  Any strategy with short in-the-money calls should be examined closely to assess the potential of early assignment of short calls.  Ignorance of the dividend dates may result in creating a taxable event if long stock positions are inadvertently closed, margin or capitals calls to cover short stock positions, or a short position in accounts not approved for these types of positions.  Some examples of the strategies include covered writes, call butterflies, call vertical credit spreads , and call calendars.  Be aware of the earnings date for any equities you trade.   I have scanned stocks with upcoming earnings using the following criteria:  Price > 20, 30 Day Implied Volatility > 20, and Average Daily Option Volume > 200 contracts.  It is your responsibility to confirm the earnings dates. Continue to be wary of trading any products where there is not adequate liquidity and narrow enough markets.  You should be aware of daily volume and open interest in any products you trade.   I am including a consensus earnings estimate for each stock.  Stick with your plan.    Remain disciplined.  Remain on top of market news and movers.  Singles and Doulbe – home runs are not needed.

Remember:

  “Chance favors the Prepared Mind.” – Louis Pasteur

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

Monday May 20:  

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

Other:  Markets closed in Canada, Austria, and Switzerland,

Optionable Earnings:

Tuesday May 21:

Economic:   ICSC-Goldman Sachs Retail Sales – 8:30,  Redbook – 8:55.

Other:  Germany PPI, UK CPI and PPI.

Optionable Earnings:  

Wednesday May 22:

Economic:  MBA Purchase Applications – 7:00, April Existing Home Sales – 10:00, EIA Petroleum Status Report – 10:30.

Other:  Federal Reserve Chairman Ben Bernanke will testify on the outlook for the U.S. economy before the Joint Economic Committee of Congress – 10:00, FOMC minutes – 2:00.  Bank of Japan issues interest-rate decision

Optionable Earnings: 

Thursday May 23:

Economic:  Weekly Jobless Claims – 8:30, PMI Manufacturing Index Flash – 8:58, FHFA House Price Index – 9:00, Bloomberg Consumer Comfort Index – 9:45, April New Home Sales- 10:00, EIA Natural Gas Report – 10:30, Kansas City Fed Manufacturing Index – 11:00..

Other:  UK GDP, China Flash Manufacturing PMI.

Optionable Earnings:

Friday May24:

Economic:  April Durable Goods Orders – 8:30, University of Michigan/Reuters Consumer Sentiment – 9:55, Leading Indicators – 10:00.

Other:   Minneapolis Federal Reserve Bank President Narayana Kocherlakota on panel on monetary policy and financial regulation at the University of Chicago Booth School – 1:45

Optionable Earnings:

Monday May 27:

Memorial Day – All U.S. Markets Closed

Tuesday May 28:

Economic:  S&P Case-Shill Home Price Index – 9:00, Consumer Board Consumer Confidence -10:00, Richmond Fed Manufacturing Index – 10:00, State Street Investor Confidence  Index – 10:00, Dallas Fed Manufacturing Survey – 10:30.

Other:   

Optionable Earnings:

The upward trend continues. The S&P 500 (SPX) and the Dow Jones Industrials (DJIA) set multiple record closes and intraday trading highs.  These markets are confounding the professionals.  A leading technical analyst at one of the major investment banks told me “This market is on crack.”  When I pressed him for more a more detailed analysis he repeated his blunt statement.  The message I carried away from this encounter is that, like crack addicted individual, this market cannot be trusted.  The financial media is very focused on the possibilities of the equity markets.

The headlines in the week’s BARRON’S give us a hint of the confusion afflicting observers of and participants in the financial markets.  Here is a partial list:  “Searching for Signs of a Market Top”, “How to Protect Your Winnings”, “New Leaders Drive the Bull’s Charge”, “Record Dow:  Where’s the Euphoria? We don’t see it yet”, and “The Stock Market is losing its Base of Support”.  Other media outlets are publishing articles with similar and sometimes conflicting sentiments. At times I am reminded by the mantra of one of the best traders I have ever known, “What is the market going to do? It’s going to break as many hearts as possible in the shortest possible time.”  Be wary.

This week’s star performer for the week was the Russell 2000 (RUT).   The RUT reflected the past week’s decision to make small caps the flavor of the week by gaining 2.26% – up 21.49 points to close at 974.17.  The Dow Jones Industrials (DJIA) closed at above 15,000 by closing at 15,118.49 gaining 0.97% or 144.53 points.  The S&P 500 (SPX) closed at 1,633.70 – up 19.28 points or a gain of 1.19%.  The S&P 100 (OEX) closed at 732.85 – gaining 0.99% or 7.20 points..  The VIX and the other volatility indexes were down for the week.  These levels reflect the current lack of concern about downside risk.  The VIX closed last week at 12.59 – a loss  of 0.26 – a weekly loss of 2.02%.  The other volatility measurements showed equal or greater losses.  Here is a capsule view of last week’s market numbers:

This earnings cycle has ended.  The emphasis switches to a plethora of economic news this week.  Major reports include:   April Retail Sales, March Business Inventories, April Import Prices, April PPI, April Industrial Production April Capacity Utilization, April CPI, April Housing Starts, May Philadelphia Fed Survey and the April Leading Indicators.  The markets are anxiously awaiting the PPI and CPI numbers. “Speechifying” by members of the Federal Reserve Board will continue this week.  Expect a continuation of parsing of their words by the financial talking heads. These speeches will be closely examined in an attempt to predict future Fed behavior.

You must be aware of the dividend ex dates for the stocks you trade.  Any option with short in-the-money calls should be examined closely to assess the potential of early assignment of short calls.  Some examples of the stragies include call butterflies, call vertical credit spreads , and call calendars.  Also be aware of the earnings date for any equities you trade.   I have scanned stocks with upcoming earnings using the following criteria:  Price > 20, 30 Day Implied Volatility > 20, and Average Daily Option Volume > 200 contracts.  It is your responsibility to confirm the earnings dates. Continue to be wary of trading any products where there is not adequate liquidity and narrow enough markets.  You should be aware of daily volume and open interest in any products you trade.   I am including a consensus earnings estimate for each stock.  Stick with your plan.    Remain disciplined.  Remain on top of market news and movers.  Do not chase profits and disregard risk.

Remember:

  “Chance favors the Prepared Mind.” – Louis Pasteur

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

Monday May 13:  

Economic:  Retail Sales – 8:30, Business Inventories – 10:00. Ameritrade IMX – 12:30.

Optionable Earnings:

Tuesday May 14:

Economic:   NFIB Small Business Optimism Index – 7:30, ICSC-Goldman Sachs Retail Sales – 8:30,  , Import and Index Prices – 8:30, Redbook – 8:55.

Other:  Philadelphia Federal Reserve Bank President Charles Plosser speech on the economic outlook to SNS in Stockholm – 2:00 AM.

Optionable Earnings:  

Wednesday May 15:

Economic:  MBA Purchase Applications – 7:00, Producer Price Index (PPI) – 8:30, Empire State Manufacturing Survey – 8:30, Treasury International Capital – 9:00, Industrial Production – 9:15, Housing Market Index – 10:00, E-Commerce Retail Sales – 10:00, EIA Petroleum Status Report – 10:30.

Other:

Optionable Earnings:

Thursday May 16:

Economic:  Consumer Price Index (CPI) – 8:30, Housing Starts – 8:30. Weekly Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, Philadelphia Fed Survey – 10:00, EIA Natural Gas Report – 10:30.

Other:  Philadelphia Federal Reserve Bank President Charles Plosser speech on the economic outlook in Milan – 3:45 AM,  Boston Federal Reserve Bank President Eric Rosengren speech on the impact of austerity on monetary policy, in Milan – 7:45,   Dallas Federal Reserve Bank President Richard Fisher speech on monetary policy at NABE energy conference in Houston, Texas – 9:00,  Federal Reserve Bank Gov. Sarah Bloom Raskin speech on prospects for recovery to National Economists Club in Washington – 12:30,   San Francisco Federal Reserve Bank President John Williams speech on the economy in Portland, Oregon – 2:30.

Optionable Earnings:

Friday May17:

Economic:  University of Michigan/Reuters Consumer Sentiment – 9:55, Leading Indicators – 10:00.

Other:   Minneapolis Federal Reserve Bank President Narayana Kocherlakota on panel on monetary policy and financial regulation at the University of Chicago Booth School – 1:45

Optionable Earnings: None meeting criteria

Monday May 20:

Economic:  TD Ameritrade IMX – 12:30.

Optionable Earnings:

The upward trend continues. Last week the markets professed their love for the FOMC by echoing Jackie Wilson’s soul-stirrer, “(Your Love Keeps Lifting Me) Higher And Higher.”  The bull market in stocks and bonds continued on Friday’s stronger than expected April jobs report.  The private sector added 165,000 jobs and unemployment fell to 7.5% from 7.6%.  The current unemployment rate is the lowest since the 4^th quarter of 2008.  The equity and bond markets ignored reports showing a slowing of U.S. manufacturing growth and the biggest decline in factory orders in seven months,  The spate of new record highs continues with the markets are showing that the trend is king,  The tech sector lead the way with gains of over 5% for the week.  On Friday, two bellwether numbers held sway over trading.  The Dow Jones Industrials (DJIA) traded above 15,000 and the S&P 500 (SPX) traded and closed above 1,600.  We can expect chatter from the financial media about NASDAQ 100 (NDX) 3,000 and Russell 2000 (RUT) 1,000.  A new focus is how “deflationary pressures” – lower cost of money and cost of goods – is pushing cyclical stocks to higher valuations.  The new media buzz topic is inflation, deflation and associated asset valuation.

This week’s star performer for the week was the NASDAQ 100 (NDX).   The NDX reflected the heavy weighting of the technology sector in its valuation by gaining 3.66% – up 104.04 points to close at 2,944.59.  The Dow Jones Industrials (DJIA) closed at 14,973.96 gaining 1.78% or 261.41 points.  The S&P 500 (SPX) closed at 1,614.42  – up 32.18 points or a gain of 2.03%.  The S&P 100 (OEX) closed at 725.65 – gaining 1.86% or 13.25 points..  The VIX and the other volatility indexes were down for the week.  These levels reflect a growing lack of concern about downside risk.  The VIX closed last week at 12.85 – a loss  of 0.76 – a weekly loss of 5.58%.  The other volatility measurements showed equal or greater losses.  Here is a capsule view of last week’s market numbers:

This will be a relatively quiet week for news.  A number of Federal Reserve Governors will be speaking this week.  These speeches will be closely examined in an attempt to predict future Fed behavior.  The earnings season is winding down, yet , there is still potential for market moving earnings or guidance.     Announcements Sysco, Tyson Foods, Progressive, Williams Co., Symantec, Marathon Oil, Emerson Electric, McKesson, Walt Disney, CF Industries, Monster Beverage, Green Mountain Coffee, Public Storage, NVIDIA, Apache, and Priceline.com,    The announcements can increase the prices and implied volatility of individual options. You should be aware of the earnings date for any equities you trade.   I have scanned stocks with upcoming earnings using the following criteria:  Price > 20, 30 Day Implied Volatility > 20, and Average Daily Option Volume > 200 contracts.  It is your responsibility to confirm the earnings dates. Continue to be wary of trading any products where there is not adequate liquidity and narrow enough markets.  You should be aware of daily volume and open interest in any products you trade.   I am including a consensus earnings estimate for each stock.  Stick with your plan.    Remain disciplined.  Remain on top of market news and movers.  Do not chase profits and disregard risk.

Remember:

  “Chance favors the Prepared Mind.” – Louis Pasteur

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

Monday May 6:

Economic:  TD Ameritrade IMX – 12:30.

Optionable Earnings:

Tuesday May 7:

Economic:   ICSC-Goldman Sachs Retail Sales – 8:30,  Redbook – 8:55,

Other:  Federal Reserve Governor Jeremy Stein on panel on dollar funding and lending by global banks at Chicago Fed banking conference – 9:30.  SEC Chairman Mary Jo White testifies on the agency’s budget to a House committee.

Optionable Earnings:  

Wednesday May 8:

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

Other:  Federal Reserve Governor Jeremy Stein on panel on dollar funding and lending by global banks at Chicago Fed banking conference – 9:30.  Bank of England holds monetary-policy committee meeting ahead of an interest-rate decision expected Thursday.

Optionable Earnings:

Thursday May 9:

Economic:  Chain Store Sales, Jobless Claims – 8:30, Productivity and Costs – 8:30, Bloomberg Consumer Comfort Index – 9:45, Wholesale Trade 10:00,  EIA Natural Gas Report – 10:30.

Other:  Richmond Federal Reserve Bank President Jeffrey Lacker speech on ending too big to fail in New York – 10:00.

Optionable Earnings:

Friday May10:

Economic:  University of Michigan/Reuters Consumer Sentiment – 9:55.

Other:  Federal Reserve Chairman Ben Bernanke speech at Chicago Fed banking conference – 9:30, Kansas City Federal Reserve Bank President Esther George speech on the economy in Jackson, Wyoming – 2:00.

Optionable Earnings:

Monday May 13:

Economic:  TD Ameritrade IMX – 12:30.

Optionable Earnings: