Sunday, July 20, 2014

* Preparation: Must Know for the Week to Come; Must Know from Last Week

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This week it's more earnings (AAPL, FB, MSFT, NFLX, AMZN), and a raging turn in momentum and market volatility.

We are in a different market as of... right now.

Last Week: Must Know
Last week we saw a complete reversal of the week before, with all of the major indices (except one...) rising.

Data provided, Yahoo! Finance, Charles Schwab optionsXpress

Small caps are often cited as a measure of risk appetite... investors seem less hungry.  But the risk story goes so much further than the Russell 2000. Buckle up, this is a ride you will want to be prepared for.

Last week we also saw a repeat of the week before and now there is no arguing: momentum has shifted violently in the market.  We'll take a look at some charts (below) to see the radical shift, but here's a simple stat:

The S&P 500 had not seen a 1% daily move (up or down) for over 60 trading days (~3 months).  Thursday and Friday were both 1%+ moves (-1.18% on Thursday and +1.03% of Friday). A new streak begins... That streak = volatility.

7-17-2014: Chart of the Day
Headline "Malaysian airline crash amplifies move to safer assets" pushed VIX up 35% to 14.88%.

Provided by Livevol

And that's not even the most interesting part of last week.

In this market, volatility to the upside is as abrupt and risky as the downside.

Building Block of Humanity: Destruction is faster and more violent than creation.

Last Week: Phenomena We Must Know
* NFLX - Earnings Preview: Never Been Seen Before: A Building Block of Humanity is Breaking Down
* YELP - A Growth Story or a Bust? 7 Charts & a Video

Bank of America (BAC) - Earnings Preview: Four Facts; Video Blog

Last Week: Stats Must Know
Momentum totally flipped last week, and has maintained that turn. An argument can made that nothing has changed in the market in the last two-weeks, the only problem is, that argument is wrong.

* As of Friday: 53.1% of stocks are now trading above their 50-day MA
* As of a month ago: 72.2% of stocks are now trading above their 50-day MA
* As of 8-weeks Ago: 40.8% of stocks were trading above their 50-day MA

Provided by

But there's more... Check out the 20-day moving average numbers:
* As of Friday: 36.0% of stocks are now trading above their 20-day MA
* As of two weeks ago: 75.9% of stocks were trading above their 20-day MA

That's incredible... in two weeks short-term momentum went from very positive to significantly negative.  That's how quickly this market can shift. It started two weeks ago and maintained last week, even as the major indices were up.

A little perspective is needed given those enormous change in momentum, and here it is.  A one-year chart of the percentage of companies trading above their 50 day moving average.

Provided by

Look at the one-week move in the 50-dma (two weeks ago), from right at an annual high, to filling a gap now just barely "bullish" (above 50% could be considered the "neutral" zone). Last week there was a small rise, but it's fair to say, for now, ultra-ultra bullish internals are gone.

Last Week: Must Know Headlines:

* Two signs a market crash is coming

* Malaysian airline crash amplifies move to safer assets

* U.S. official warns banks of lawsuits over mortgage misconduct

* We’re in the third biggest stock bubble in U.S. history

* Intel Corporation Soars as Diversified Strategy Delivers Q2 Earnings Surprise

* Citi to pay $7 billion in mortgage settlement — but it may have gotten off easy 

This Week: Must Know
This week has LOTS OF EARNINGS...

  • AAPL (7-22-2014)
  • MSFT (7-22-2014)
  • NFLX (7-21-2014)
  • FB (7-23-2014)
  • AMZN (7-24-2014)

Below you will find all that we need to prepare for the week to come. All data and images for this report are provided by Charles Schwab optionsXpress.

This Week: Economic Calendar

Note the leading indicators, CPI (inflation), jobs and durable orders numbers.

Partial List of Noteworthy Earnings This Week
Fact #1: The Technology sector has the highest projected earnings growth rate among the 10 S&P sectors.

Fact #2: Implied EPS growth for the tech sector has been 5.4 percentage points above the S&P 500 on average over the past 10 years, but it is now just 1.0 percentage point above the benchmark index.

Another reminder, though not on that list above, NFLX reports Monday after the close. Here's an earnings preview: NFLX - Earnings Preview: Never Been Seen Before: A Building Block of Humanity is Breaking Down

This is trade analysis, not a recommendation.

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  1. What do you think of KKR which reports this week?
    Do you like GILD? Thanks, Mike

    1. KKR vol seems low; certainly relative to prior earnings.
      GILD vol looks "fair" relative to the past.

  2. Please comment on KKR and GILD which report this week! Thanks