The Madison Letter

We are invested on our overall Market Call. Since inception, our overall timing return is 72.93% versus 41.56% on the S&P 500 for excess return of 31.36%. Scores change day to day.

We added a buy on iShares Core S&P 500 Index Fund ETF (IVV) and took gains on Tuesday 9/2.

We began to offer a buy and sell strategy via our Madison Market Timing Indicator at the beginning of April of 2007. There are now 24 open and closed winning trades to 8 closed losing trades with our market timing results.

madison market timiing

Scotland Stays In The European Union

European stocks are moving higher on the news that Scotland will remain part of the United Kingdom. The vote was 55% to 45%.

Scotland

Index ETF Materials Options Volume

Index ETF Materials Options Volume

We are going to highlight unusual options activity as well going forward. No names saw unusual options activity but several saw heavy put action.

  GEOT ETFs

The rows in the options matrix are as follows:

    • Curr Vlm = Current Option Volume for today
    • OpVol20 = 20 day Option Volume average
    • % Delta (sorted descending) = Curr Vlm/ OpVol20 * 100
    • Sym = Symbol
    • 20 HV 100HV 252HV = 20 day, 100 Day and 252 Day Historical Volatility
    • Slope = The slope of the historic vol
    • Delta = Change in slope
    • cOptInt = Call Open Interest
    • pOptInt =Put Open Interest
    • cVolum = Call Volume
    • pVolum = Put Volumed

Federal Reserve Decides To Take Its Time & House Does Its Job

The Federal Reserve yesterday decided that it would take its time before it concluding the historic easy money policy. Stocks rose ysterday and are rising this morning as well.

Federal Rserve

The House of Representatives did its job yesterday and as such avoided a government shutdown and extended the ability of the export-import bank to operate for another nine months.

House of Representatives

Morning Matters: Weekly Charts Updated

Each week we highlight charts below of the SP500, Russell 2000, NASDAQ Composite, UUP, EEM, TLT, HYG and LQD. The charts use the 50 day moving average slope indicator. When it is green we like the instrument we are tracking and when it is red we avoid the name/sector/asset class.

 We replaced CFT with LQD and that moved negative last week.

 chart

Index ETF Options Volume

Index ETF Options Volume

We are going to highlight unusual options activity as well going forward. The third column from the left will highlight such outliers. SPDR S&P 500 (SPY) had unusual volume and excess put action for the third day in a row along with the iShares MSCI EAFE ETF EFA). No ETFs had unusual call action.

  [Image 1]

The rows in the options matrix are as follows:

  • Curr Vlm = Current Option Volume for today
  • OpVol20 = 20 day Option Volume average
  • % Delta (sorted descending) = Curr Vlm/ OpVol20 * 100
  • Sym = Symbol
  • 20 HV 100HV 252HV = 20 day, 100 Day and 252 Day Historical Volatility
  • Slope = The slope of the historic vol
  • Delta = Change in slope
  • cOptInt = Call Open Interest
  • pOptInt =Put Open Interest
  • cVolum = Call Volume
  • pVolum = Put Volumed

Futures Mixed

In After Hours Trading

IPOs on deck today Civitas Solutions, rEVO Biologics and Tokai Pharmaceuticals. Secondaries on deck today BKEP PETX SXL.

In After Hours Trading (Best to Worst absolute beats/misses [+.02 or greater/-.02 or worse]): ADBE +.02.

IPO Financial provides our capital raise data.

What’s Happening This Morning

US futures: S&P 500 +0.25, Dow Jones +6 and NDX -2.50 with fair values lower helping open losses be muted. Asia mixed and Europe higher. Copper and silver lower with gold higher. WTI Crude lower and Brent Oil Futures higher. Natural Gas is higher. $ is higher vs Euro, lower vs. Pound and higher vs. Yen. US 10 year Treasury yield -1. Prices as of 7:55 a.m.

Earnings Expected

Earnings due after the close (by market cap descending): CLC UNFI.

Due Wednesday morning (by market cap descending): CAG IHS RAD PWE.

Selling Polo Ralph Lauren (RL) For A Gain

We added Polo Ralph Lauren (RL) to the Morning Matters Portfolio in Superstock Investor on March 4th. Since then, it has risen by $10.79 or 6.67%. In the same period, the S&P 500 rose by the exact same amount. Meanwhile, the SPDR Consumer Discretionary Select Sector Fund (XLY) has risen 2.06%.

The XLY reflects the inability of the consumer to spend and that is a problem. Our theory for consumer spending is that you want to invest in either high end retailers because the rich just keep getting richer. The middle class and lower middle class are still struggling so owning the Wal-marts of the world is out for the time being.

So when we look at the chart it appears the $175 is solid resistance so it is time to move on. More to point, we have access to new data from Phil Erlanger Research that tracks how short sellers do stock by stock since 1993.

In the case of Polo Ralph Lauren (RL), they have gotten it right 71% of the time when short selling gets heavy, as defined by Erlanger. The average drop is -10.4%. Given this fact, it makes no sense to stick around when there is a 71% chance of a -10% drop.

It’s All About The Federal Reserve Today

At 2:00 p.m. EDT the Federal Reserve Open Market Committee (FOMC) comes down from the mountain to update investors on current policy and then Federal Reserve Chairman Yellen speaks at 2:30 p.m. EDT. Wall Street opinions about this update and future updates is wide which could surprise markets.

FOMC

Options Activity

Options Activity By Volume

We are going to highlight unusual options activity as well going forward. The third column from the left will highlight such outliers. Chesapeake Energy (CHK) saw heavy volume and put action as it tries to find a bottom at $25. Monsanto (MON)saw excess call activity and the company presented lastThursday at the UBS Best of Americas Conference. Follow through buyers?

[Image 1]

[Image 2]

The rows in the options matrix are as follows:

  • Curr Vlm = Current Option Volume for today
  • OpVol20 = 20 day Option Volume average
  • % Delta (sorted descending) = Curr Vlm/ OpVol20 * 100
  • Sym = Symbol
  • 20 HV 100HV 252HV = 20 day, 100 Day and 252 Day Historical Volatility
  • Slope = The slope of the historic vol
  • Delta = Change in slope
  • cOptInt = Call Open Interest
  • pOptInt =Put Open Interest
  • cVolum = Call Volume
  • pVolum = Put Volumed