The Week Ahead: Jobs, manufacturing, money in and out, and world trade

The employment situation report will be published on Friday at 8:30 a.m. New York time. Easily the most widely watched economic report, it will either comfort or afflict us light of the Federal Open Market Committee's decision last week to, once again, leave interest rates unchanged.

Employment will get a sneak preview in the form of the privately produced ADP employment report on Wednesday at 8:15 a.m.

Other majors to hit the Street's consciousness during the week: The Institute of Supply Management manufacturing  on Monday at 10 a.m., personal income and outlays on Tuesday at 8:30 a.m. and international trade on Friday, also at 8:30 .m.

Leading indicators (in descending order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, at 4:30 p.m. Thursday.

The average hourly workweek in manufacturing from the employment at 8:30 a.m. Friday.

Manufacturers' new orders for consumer goods and materials from factory orders at 10 a.m. Thursday.

Vendor performance, also called the deliveries times index, from the ISM manufacturing survey.

The S&P 500 index, reported continually during market hours.

Average weekly initial claims for unemployment from the jobless claims report at 8:30 a.m. Thursday.

Manufacturers' new orders for non-defense capital goods from factory orders at 10 a.m. Thursday.

The Economic Singularity: Artificial Intelligence and the Death of Capitalism by Calum Chace

New format for Prospects

Notice the new format for the daily Prospects post, designed to accommodate the recent strategy additions.

Please send suggestions my way as comments on this informational post, and also add your (non-spamming) comments to any post on Private Trader. The only thing I enjoy more than trading is talking about trading.

-- Tim Bovee, Portland, Oregon, July 30, 2016

Monday's Prospects

I've identified 10 prospective trades out of the two datasets and four strategies that I'm using.

This week, for options trading, I reviewed 474 symbols in my large-cap stocks and exchange-traded funds, and for share trading, I reviewed 953 symbols of stocks and funds of all capitalizations. For both I reviewed 1,412 companies publishing earnings.

I use four strategies in my trading, in response to trading signals (such as breakouts above the 20-day price channel), high implied options volatility, and persistently rising trends on a chart, and in anticipation of events ( such as earnings announcements).

Initial screening of options is governed by my volatility guidelines: Price of $20 or greater, average volume of 3 million shares a day or greater, and implied volatility at the 50th percentile or greater of the one-year range.

Initial screening of shares is governed by my small-lots guidelines: The trade must be bullish with a bullish profile from Zacks Investment Research and must be listed on the commission-free brokerage Robinhood Financial.

Here's table below showing the association between the datasets and strategy and the number of symbols passing initial screening on Friday, July 20.

	options	shares
signals	N/A	3
events	0	4
volatility	2	N/A
trends (beta)	N/A	1

I shall make final trading decisions after further analysis on Monday, Aug. 1.

For the Love of Money: A Memoir by Sam Polk

Below are the candidates for analysis for each cell of the quadrant.

Friday's Outcomes

I traded eight symbols using my small-lots strategy, entering a position on MAC timed to coincide with an earnings announcement and exiting positions on BCOV, CBS, HUN, INVA, NLNK, OMCL and PFG. See Friday's Small Lots for details.

-- Tim Bovee, Portland, Oregon, July 29, 2016

Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley by Antonio Garcia Martinez

Friday's Small Lots

I entered a position on MAC timed to coincide with an earnings announcement.

sym	shares	entry date	exit date	entry price per share	exit price per share	result $	result %	annual rate	days held	tactic
MAC	1	7/29/2016		89.76						earns

I exited seven positions, four profitably and three for  loss. The average gain was 2.0% over 1.29 days, or a 952% annual rate.

sym	shares	entry date	exit date	entry price per share	exit price per share	result $	result %	annual rate	days held	tactic
BCOV	5	7/28/2016	7/29/2016	9.68	10.99	1.31	11.92%	4351%	1	earns
CBS	1	7/28/2016	7/29/2016	53.69	52.36	-1.33	-2.54%	-927%	1	earns
HUN	3	7/26/2016	7/29/2016	15.94	15.01	-0.93	-6.20%	-754%	3	earns
INVA	4	7/28/2016	7/29/2016	11.79	12.81	1.02	7.96%	2906%	1	earns
NLNK	5	7/28/2016	7/29/2016	11.09	10.20	-0.89	-8.73%	-3185%	1	earns
OMCL	1	7/28/2016	7/29/2016	36.32	39.33	3.01	7.65%	2793%	1	earns
PFG	1	7/28/2016	7/29/2016	44.59	46.47	1.88	4.05%	1477%	1	earns

Here's how I handled the exits:

I raised the sell alert level up to one day's average true range, which triggered alerts on HUN and NLNK. I did this because the 5x ATR I was using is simply too insensitive to change. 

The goal of this strategy is to get outta Dodge quickly if the anticipated results don't occur. The trades happen in response for events that will produce an immediate result: Earnings announcements or trading signals. There's no point in hanging around if the immediate result isn't evident.

CBS didn't have an exit alert, but I closed it anyway based on the trend of the chart. 

And that may be the best way to do it. An uptrend is a higher high and higher low, and a downtrend is a lower high and lower low. If I'm doing trades for immediate results, then the trend of the chart alone shows what the results are without a need for ATRs or any other math.

-- Tim Bovee, Portland, Oregon, July 29, 2016

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

Friday's Agenda

My lone prospect today as a small-lot earnings play on MAC.

-- Tim Bovee, Portland, Oregon, July 29, 2016

Illusions of Wealth: Actively Manage Your Investments or Expect Losses in this Volatile Economy by Doug Eberhardt

Friday's Prospects

On Thursday, July 28:

Of 501 large-cap stocks and exchange-traded funds in my analytical universe, none meet my criteria for further consideration as options plays and  qualify for small-lots stock trades.

There are no prospects for trades coinciding with earnings announcements.

Out of 840 symbols put through Turtle Trading analysis market close, none broke beyond the upper boundary of their 20-day price channels.

Out of 55 potential earnings plays, one qualifies for a trade with a bull Zacks rating and a positive Zacks Investment Research earnings surprise predictor.

I shall do further analysis of trades on Friday, July 29.

The next earnings season began on July 11 and will last for six weeks, through Aug. 19.

Thursday's Outcomes

I entered seven small-lot positions coinciding with earnings announcements, in BCOV, CBS, CUBE, INVA, NLNK, OMCL and PFG. See Thursday's Small Lots for details.

I prepared a list of earnings announcements for next week. See Earns Prospects 8/1-8/5.

-- Tim Bovee, Portland, Oregon, July 28, 2016

Illusions of Wealth: Actively Manage Your Investments or Expect Losses in this Volatile Economy by Doug Eberhardt

Earns Prospects 8/1-8/5

Out of 1,412 stocks publishing earnings the week of Aug. 1 through Aug. 5, three qualify for further analysis as options volatility plays.

action	sym	earns date	am/mid/pm	IV percentile
8/1	PFE	8/2	am	9.37
8/1	TAP	8/2	am	65.79
8/4	ATVI	8/4	pm	40.38

At this point only TAP fully qualifies; it's implied volatility is above the 50th percentile of its most recent range. However, volatility changes rapidly, and I won't make a final decision on that and other elements until action day.

'

I'll screen earnings for price-channel breakouts and other small-lot trades during the week as action day approaches.

-- Tim Bovee, Portland, Oregon, July 28, 2016

Visual Guide to Elliott Wave Trading by Wayne Gorman

Thursday's Small Lots

I've bought shares of seven companies under my small lots rules for earnings plays. Each has a bullish ranking from Zacks Investment Research and also a positive earnings surprise predictor from Zacks.

The purchases were made using Robinhood Financial as a broker, which offers trading without commissions or fees.

sym	shares	entry date	exit date	entry price per share	exit price per share	result $	result %	annual rate	days held	tactic
BCOV	5	7/28/2016		9.68						earns
CBS	1	7/28/2016		53.69						earns
CUBE	2	7/28/2016		29.05						earns
INVA	4	7/28/2016		11.79						earns
NLNK	5	7/28/2016		11.09						earns
OMCL	1	7/28/2016		36.32						earns
PFG	1	7/28/2016		44.59						earns

-- Tim Bovee, Portland, Oregon, July 28, 2016

Heads I Win, Tails I Win: Why Smart Investors Fail and How to Tilt the Odds in Your Failure by Spencer Jakab

Thursday's Agenda

There are no options volatility prospects of any sort on my desk this morning.

Also, no small-lots stocks gave trading signals in the prior day's trading.

However, seven earnings plays qualify under my small-lots rules. They are, sorted in descending order of Zacks Investment Research earnings surprise predictor:

7/28	INVA	7/28	pm
7/28	BCOV	7/28	pm
7/28	NLNK	7/29	am
7/28	CUBE	7/28	pm
7/28	CBS	7/28	pm
7/28	OMCL	7/28	pm
7/28	PFG	7/28	pm

If I decide that I need to cut back on the number of trades, I shall consider those at the top of the list first.

-- Tim Bovee, Portland, Oregon, July 28, 2016

How to consistently Beat the Market: Zacks Proven Formula for Making 26% a Year for More than Two Decades by Mitch Zacks

Thursday's Prospects

On Wednesday, July 27:

Of 501 large-cap stocks and exchange-traded funds in my analytical universe, none meet my criteria for further consideration as options plays.

There are no prospects for trades coinciding with earnings announcements.

Out of 949 symbols put through Turtle Trading analysis market close, none broke beyond the upper boundary of their 20-day price channels.

Out of 255 potential earnings plays, SEVEN qualify for trades with a bullish Zacks rating and a positive Zacks Investment Research earnings surprise predictor.

I shall do further analysis of trades on Thursday, July 28.

The next earnings season began on July 11 and will last for six weeks, through Aug. 19.

Misbehaving: The Making of Behavioral Economics by Richard H. Thaler

Wednesday's Outcomes

I entered small-lot positions on BMY, ELY and SXC timed to coincide with earnings announcements.

sym	shares	entry date	exit date	entry price per share	exit price per share	result $	result %	annual rate	days held	tactic
BMW	1	7/27/2016		75.61						earns
ELY	5	7/27/2016		10.39						earns
SXC	6	7/27/2016		8.04						earns

I exited a small-lot position on CLGX for a loss.

sym	shares	entry date	exit date	entry price per share	exit price per share	result $	result %	annual rate	days held	tactic
CLGX	1	7/25/2016	7/27/2016	40.38	38.96	-1.42	-3.64%	-665%	2	earns

I analyzed SYF as an options position coinciding with an earnings announcement but declined to take it because of the level of risk required by the grid.

-- Tim Bovee, Portland, Oregon, July 27, 2016

Illusions of Wealth: Actively Manage Your Investments or Expect Losses in this Volatile Economy by Doug Eberhardt

SYF Analysis

The consumer financial services company Synchrony Financial (SYF), headquartered in Stamford, Connecticut, closed Tuesday with implied volatility sufficiently high and continues to meet my standard requiring volatility at the 50th percentile of its annual range or higher.

[SYF in Wikipedia]

SYF

I shall use the SEP series of options, which trades for the last time 51 days hence, on Sept. 16.

Ranges

Implied volatility stands at 29%, which is 2.2 times the VIX, a measure of volatility of the S&P 500 index. SYF’s volatility stands in the 53rd percentile of its annual range. The price used for analysis was $28.11.

Ranges implied by options and earnings

Week	SD1 68.2%	SD2 95%	Earns
Upper	30.76	33.42	N/A
Lower	25.46	22.80	N/A
Gain/loss	±$2.65	±$5.31

Implied volatility 1 and 2 standard deviations; central tendency earns move

The Long Depression: Marxism and the Global Crisis in Capitalism by Michael Roberts

Small Lots

I've entered three small lots positions:

sym	shares	entry date	exit date	entry price per share	exit price per share	result $	result %	annual rate	days held	tactic
BMW	1	7/27/2016		75.61						earns
ELY	5	7/27/2016		10.39						earns
SXC	6	7/27/2016		8.04						earns

-- Tim Bovee, Portland, Oregon, July 27, 2016

For the Love of Money: A Memoir by Sam Polk

Wednesday's Agenda

Implied volatility on SYF is above the 50th percentile of its one-year range and so the symbol qualifies for further analysis and perhaps a trade.

FB, which publishes earnings after the closing bell on Wednesday, continues to fail to meet my implied volatility standard. The IV percentile is presently the 44th. I'll move forward with further analysis if it rises to the 50th or above during the day.

Three stocks qualify for trades coinciding with earnings announcements under my small lots strategy. They are BMY, ELY and SXC. A fourth, WGP, was eliminated from consideration due to calendar change.

-- Tim Bovee, Portland, Oregon, July 27, 2016

How to consistently Beat the Market: Zacks Proven Formula for Making 26% a Year for More than Two Decades by Mitch Zacks

Wednesday's Prospects

On Tuesday, July 26:

Of 501 large-cap stocks and exchange-traded funds in my analytical universe, none meet my criteria for further consideration as volatility options plays.

There is one prospect for a volatility trade coinciding with an earnings announcement.

Out of 949 symbols put through Turtle Trading analysis,  none both broke beyond the upper boundary of its 20-day price channel and has a bullish rating from Zacks Investment Research and so are disqualified from small-lot trades.

Out of 238 potential earnings plays, four qualify for small-lot trades because they have a bullish Zacks rating and a positive Zacks Investment Research earnings surprise predictor.

I shall do further analysis of trades on Wednesday, July 27.

The next earnings season began on July 11 and will last for six weeks, through Aug. 19.

Chaos Monkeys: Obscene Fortune an Ranom Failure in Silicon Valley by Antonio Garcia Martinez

Tuesday's Outcomes

Small lots

I entered a position on HUN and exited a position on CTXS for a profit. Both were stock positions.

sym	shares	entry date	exit date	entry price per share	exit price per share	result $	result %	annual rate	days held	tactic
HUN	3	7/26/2016		15.94						earns
CTXS	1	7/25/2016	7/26/2016	88.21	88.58	0.37	0.42%	152%	1	turtle

-- Tim Bovee, Portland, Oregon, July 26, 2016

Heads I Win, Tails I Win: Why Smart Investors Fail and How to Tilt the Odds in Your Failure by Spencer Jakab