Netflix, Inc. (NASDAQ:NFLX) has been a powerhouse on and off the charts, with the shares trading near their mid-April record high following yesterday's confirmation the streaming giant has inked a production deal with former President and First Lady Barack and Michelle Obama. What's more, the FAANG stock is sounding a rare signal that has had bullish implications in the past, suggesting it could be time to join NFLX on its next leg north.

Specifically, implied volatilities on the stock's front-month options are unusually low, from a volatility standpoint. Its Schaeffer's Volatility Index (SVI) of 26% ranks in the 5th percentile of its annual range, indicating short-term calls on NFLX stock have rarely priced in lower volatility expectations.

Additionally, Netflix stock was last seen trading up 0.3% at $332.94 -- not far from its April 18 all-time peak of $338.82. This is just more of the same for an equity that's more than doubled in value year-over-year, powered higher by support from its 50-day moving average. Plus, the shares are on track for their sixth straight monthly win, a feat last accomplished in the first half of last year.

This impressive price action could be far from over, too. According to Schaeffer's Senior Quantitative Analyst Rocky White, there have been six other times since 2008 the stock has been trading within 2% of new 52-week highs while its SVI was ranked in the bottom 20th percentile of its annual readings. In the wake of these signals, Netflix was up, on average, 5.26% one month later, and was positive 67% of the time.

The stock could certainly stand to benefit from a round of well-deserved bullish brokerage attention. Of the 32 analysts covering Netflix stock, 14 still maintain a "hold" or "strong sell" rating, while the average 12-month price target of $333.24 is in line with current trading levels.

And those wanting to bet on more upside for the FAANG stock should certainly consider options. In addition to a low SVI, the equity's Schaeffer's Volatility Scorecard (SVS) reading stands at a lofty 96 out of a possible 100. This means NFLX has tended to make outsized moves relative to what the options market has priced in -- a boon to potential premium buyers.

Small-cap stocks have been on fire recently, with the Russell 2000 Index (RUT) notching a fifth straight all-time high today, peaking at 1,639.88 earlier. Amid its recent surge, the RUT broke north of a trendline that had marked lower highs in 2018, and took out its January all-time closing high at 1,610, which coincides with a round 10% above the February closing low. As such, the small-cap index is already up 6.3% in May -- set for its best month since November 2016. However, if history is any indicator, the RUT could take a short-term breather soon.

May Flowers Could Bring June Showers

If the RUT finishes May with a gain of 5% or more, the index could cool off in June, if past is precedent. Looking at data since 2010, when the RUT ended the month higher by 5% or more, it went on to average a gain of just 0.19% the following month, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. For comparison, the small-cap barometer averaged a gain of 0.75% the month after locking in a gain of 0% to 5%, and soared nearly 2%, on average, following a monthly loss of up to 5%.

But RUT Could Finish 2018 Strong

Meanwhile, after the RUT notched a monthly win of at least 6%, it's averaged a next-month return of just 0.67%, looking at data since 2010. That's about half of its average anytime one-month return of 1.12%.

Nevertheless, the index has tended to outperform three and six months after a monthly gain of 6% or more. Specifically, three months out, the RUT was up another 4.67%, on average. Six months out, the index was higher by 8.87%, on average. Plus, the RUT was in the black 85% of the time in both instances. For comparison, the small-cap index averages three- and six-month gains of just 3.08% and 6.19%, respectively, looking at anytime data since 2010. Also noteworthy, the average six-month loss after a monthly gain of 6% is just 0.56%, compared to 6.92% anytime.

In conclusion, should the Russell 2000 Index maintain its healthy May lead, small-cap stocks could catch their breath in June, if past is prologue. However, history also indicates the RUT could resume its outperformance in the second half of 2018.

Home improvement retailer Lowe's Companies, Inc. (NASDAQ:LOW) is slated to report first-quarter earnings before the open tomorrow, May 23. Today, however, the firm is making headlines after announcing J C Penney CEO Marvin Ellison is leaving the department store to be president and CEO of Lowe's. After initially soaring on the news, LOW stock is down 1% at $86.52, at last check.

Since gapping lower after earnings in late February, LOW stock has struggled beneath the round-number $90 level. This region is now home to the security's descending 80-day moving average -- a trendline that the shares briefly surpassed at today's intraday peak.

Digging into its earnings history, LOW stock has posted a negative return the day after the last four reports. Overall, the stock has averaged a one-day post-earnings swing of 4.5% over the past two years, regardless of direction. This time around, the options market is pricing in a slightly larger-than-usual 6.8% next-day move, per data from Trade-Alert.

Caution looms around Lowe's earnings, too, as just last week, sector peer Home Depot (HD) reported a first-quarter earnings miss. In the options pits, LOW's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 0.69. While this indicates that bought calls have exceeded bought puts on an absolute basis, the ratio sits in the 76th percentile of its annual range, suggesting LOW puts have been purchased over calls at a faster-than-usual clip during the past two weeks.

Echoing this, Lowe's stock's Schaeffer's put/call open interest ratio (SOIR) of 0.74 ranks in the 80th percentile of its annual range. Though the ratio indicates that short-term calls still outnumber puts on an absolute basis, the elevated percentile tells us that near-term traders have rarely shown a greater preference for puts over calls in the last year.

Traders have a long weekend coming up as markets are closed next Monday, May 28, for Memorial Day. This week, I’m looking at some seasonality trends to see how stocks have typically behaved during the holiday week. Additionally, I’ll list some stocks that have tended to do well and not so well next week.

Memorial Day Week Has Been Bearish in the Bull Market

Memorial Day officially became the last Monday of May in 1971. Since then, it has been a bullish week for stocks with the S&P 500 Index (SPX) averaging a gain of 0.54% -- which beats the typical weekly return since then of 0.16%.

Recently, however, the upcoming week has been dreadfully bearish. Since 2010, the first full year of the current bull market, the index has lost an average of 0.93% during the week of Memorial Day. Only three of the eight returns have been positive. While the market has done outstanding since 2010, this coming week of Memorial Day has been an exception.

Buyer Beware on Thursday

In the table below, I show how the S&P 500 has performed each day from the Friday before Memorial Day to the end of the holiday week. The week has underperformed each day except for Thursday. The worst day of the week, though, is clearly the Friday at the end of next week. The last day of the holiday week has averaged a loss of more than 1%. Six of the eight returns have been negative. For whatever reason, the last day of Memorial Day week has tended to sell off quite severely.

On the bright side, barring a sell-off over the next few days, the S&P 500 should be positive heading into Memorial Day. That has been a good omen for stocks for the rest of the year. When the index is positive through Memorial Day, it averages a 6.54% gain over the rest of the year with 78% of the returns positive. When it’s down heading into the long weekend, it has lost an average of 1.38% for the rest of the year, with less than half of the returns positive. 

Best and Worst Stocks to Own During Memorial Day Week

As promised, below are the S&P 500 stocks that have done the best and worst over the past 10 years during Memorial Day week. Technology hardware companies and healthcare/pharmaceutical companies make up a decent portion of the bullish stocks, while oil and banking are the two sectors that show up the most on the bearish list.

Apple (AAPL) will kick off its annual World Wide Developers Conference (WWDC) on Monday, June 4, with updates to its iOS and macOS software expected. Ahead of the highly anticipated event -- and the more imminent Memorial Day weekend -- two Apple suppliers are giving off bullish signals. 

Skyworks Stock Could Break Past Key Trendline

Skyworks Solutions Inc (NASDAQ:SWKS) recently found itself on Schaeffer's Senior Quantitative Analyst Rocky White's list of the best-performing stocks on the S&P 500 Index (SPX) during Memorial Day week. Over the past 10 years, SWKS has averaged a gain of 2.7% in the four days following the holiday, and has been positive 80% of the time. 

A move of similar proportion next week would push SWKS shares past resistance at their 80-day moving average, a trendline that has stifled breakouts since late March. The security has gained 16% since falling to an annual low of $86.13 on April 30 to trade at $99.63. 

In the options pits, SWKS' Schaeffer's put/call open interest ratio (SOIR) of 1.17 ranks in the low 5th percentile of its annual range. In other words, speculative players have rarely been more skewed toward calls over puts, looking at options that expire in the next three months -- even as puts outnumber calls on an absolute basis.

Those that are purchasing premium on Skyworks are in luck, too. The stock's Schaeffer's Volatility Index (SVI) of 24% ranks in just the 7th annual percentile, suggesting short-term options have rarely been cheaper, from a volatility standpoint.

AVGO Could Get A Shot In The Arm Next Week

Fellow Apple supplier Broadcom Inc (NASDAQ:AVGO) also found itself on White's list of Memorial Day week outperformers. The stock boasts an average weekly return of 3.13%, finishing positive three-quarters of the time. However, Broadcom shares have struggled recently, shedding 13% in the last six months to trade at $237.78, with breakout attempts in March and April thwarted by their 200-day moving average.  

Despite the stock's struggles, analysts remain committed. Of the 25 brokerages covering AVGO, 23 rate it a "buy" or "strong buy," with not a single sell on the books. In addition, the equity's average 12-month price target of $310.65 sits well above its current perch. 

In the option pits, short-term options traders are more call-skewed than usual. The security's Schaeffer's put/call open interest ratio (SOIR) of 0.50 ranks in just the 9th percentile of its annual range.

The U.S. stock market will be closed next Monday, May 28, for Memorial Day, and the holiday-shortened week has been bullish for the S&P 500 Index (SPX) over the long term. This pair of Apple suppliers have been notable outperformers during the four-day trading week, though fellow chip stock Advanced Micro Devices, Inc. (NASDAQ:AMD) can't say the same.

In fact, according to data from Schaeffer's Senior Quantitative Analyst Rocky White, AMD has been one of the worst SPX stocks during Memorial Day week, averaging a loss of 2.51% over the last decade. What's more, the semiconductor concern has finished the week with a gain just once.

A move of this magnitude would put a small dent in AMD's recent price action. Since hitting an annual low of $9.04 in early April, the stock has gained more than 44%. Today, Advanced Micro Devices is up 0.5% to trade at $13.05 -- on track for its highest close since Feb. 1. As such, the security's 14-day Relative Strength Index (RSI) was last seen well into overbought territory at 74.9, which heightens the chance for a near-term retreat.

There's plenty of skeptics bracing for a pullback, too. AMD's Schaeffer's put/call open interest ratio (SOIR) of 1.07 ranks in the 81st annual percentile, meaning short-term speculators are more put-skewed than usual. Data from the major options exchanges shows significant buy-to-open activity at the July 9 and 10 puts, though some of this could be protective in nature.

Plus, although short interest pulled back from its mid-April peak in the most recent reporting period, there are still 179.4 million shares sold short. This accounts for more than one-fifth of AMD stock's available float, or three times the average daily pace of trading. And while some bullish brokerage buzz is starting to swirl, the majority of analysts still maintain a "hold" or "strong sell" rating.

Whether traders want to bet on continued upside for AMD stock, or roll the dice on a pullback, it's an opportune time to do so with options. The equity's Schaeffer's Volatility Index (SVI) of 36% ranks in the lowest percentile of its annual range, indicating premium on short-term strikes is relatively cheap at the moment, from a volatility standpoint.

Apple suppliers will continue to grab headlines leading up to Apple's WWDC event in two weeks. However, there are other semiconductor stocks out there to target in the meantime. Cypress Semiconductor Corporation (NASDAQ:CY) stock is throwing up a significant bullish signal, in fact, and options are attractively priced to boot.

Cypress Semiconductor stock has given back 13% since climbing to a six-year high of $18.87 on March 13. The shares' recent attempts to dig out of that hole were met with resistance at the $16.50 level and a prompt pullback to their 200-day moving average. However, this could have bullish implications for the stock based on previous signals, and now may be the time to buy the CY dip.

Over the past three years, there have been eight occasions where CY has come within one standard deviation of its 200-day moving average after an extended stint above this trendline, according to Schaeffer's Senior Quantitative Analyst Rocky White. One month later, the security was higher all eight times, averaging a return of 12.73%. A bounce of similar proportion off its current perch of $16.32 would put CY stock around $18.40 -- back within a chip-shot of multi-year highs. 

In the options pits, the attitude has been quite bearish recently. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 0.51 ranks 4 percentage points from an annual high. While the ratio shows that calls are preferred on an absolute basis, puts have been bought to open at a much faster-than-usual clip during the past two weeks. Should CY rally once again, an unwinding of these bearish bets could nudge CY higher.

And those wanting to bet on more upside for the chip stock can pick up near-term options at a relative bargain. The equity's Schaeffer's Volatility Index (SVI) of 29% ranks in the 13th percentile of its annual range, indicating premium on short-term contracts is relatively cheap at the moment, from a volatility standpoint.

Shares of Barrick Gold Corp (NYSE:ABX) have been trending higher since they touched a two-year low of $11.07 in early March. The gold mining stock has recently consolidated some of these gain near a trendline with historically bullish implications. And with front-month implied volatilities low, it could be time to bet on ABX's next leg higher with call options.

Taking a closer look at the charts, the stock rallied nearly 25% from its March low to its late-April peak at $13.80. ABX has since pulled back to within one standard deviation of its 40-day moving average, and according to Schaeffer's Senior Quantitative Analyst Rocky White, there have been six other times this has occurred in the last three years after the stock has been trading above the trendline 60% of the time in the past two months, and in eight of the previous 10 trading days.

Today, ABX shares are up 0.8% at $13.44, rising in step with gold prices amid geopolitical uncertainty. Should the stock continue to bounce from its 40-day trendline, there's plenty of skepticism priced in, which could help fuel the fire. For starters, most analysts remain on the sidelines, with 13 of 17 maintaining a "hold" or worse rating on Barrick Gold -- leaving the door open for upgrades to draw buyers to the table.

Plus, short-term options traders are more put-heavy than usual, per the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.09 -- in the 75th percentile of its annual range. Peak front-month open interest of 37,751 contracts resides at the underfoot June 13 put, which could create a level of options-related support as the hedges related to these bets unwind.

Those wanting to bet on more near-term upside for Barrick Gold stock may want to consider options. The equity's Schaeffer's Volatility Index (SVI) of 23% ranks in the 7th annual percentile, meaning short-term options are pricing in lower-than-usual volatility expectations at the moment.

Oil prices are pulling back from three-year highs this week, following yesterday's surprise jump in domestic crude inventories, and amid concerns that the Organization of the Petroleum Exporting Countries (OPEC) could decide to boost output next month. Against this backdrop, several energy stocks are taking a breather, and blue chips Chevron Corporation (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM) could be facing some short-term seasonal headwinds as well.

CVX Stock Set for Back-to-Back Down Weeks

Chevron stock was last seen 1.9% lower at $126.25. The equity is pacing for a second straight weekly drop -- something we haven't seen since March -- and is set to close beneath its 20-day moving average for the first time in over six weeks. Just last week, CVX shares peaked above $131, coming within a chip-shot of January's three-year high.

What's more, Chevron stock could endure a third weekly loss next week, if history is any indicator. Over the past 10 years, CVX has been one of the worst stocks to own during Memorial Day week, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. Specifically, the Dow stock has averaged a holiday-week loss of 1.35%, and has ended the week higher just 10% of the time.

Should CVX extend its slide, a mass exodus of option bulls could translate into additional headwinds for the blue chip. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than four Chevron calls for every put in the past two weeks. The 10-day call/put volume ratio of 4.09 is in the 98th percentile of its annual range, pointing to a much healthier-than-usual appetite for bullish bets over bearish lately.

Likewise, a continued drop could spook some analysts. Currently, CVX boasts 13 "strong buy" endorsements, compared to three lukewarm "holds."

XOM Shares Could Breach Key Chart Level

Exxon Mobil stock is down 2.1% to trade at $80.46. Earlier this month, as oil prices rallied, XOM popped above its 320-day moving average for the first time since early February, before the equity was in the throes of a post-earnings tailspin. Today, however, the Dow stock is set to close beneath that trendline, which is in the same vicinity as a 50% Fibonacci retracement of XOM's drop from late January to its April lows.

Aside from CVX, Exxon is the only other Dow stock on our list of worst Memorial Day week performers. The shares have finished the week higher just once in 10 years, and averaged a loss of 1.76%.

Again, should XOM extend its recent pullback, several option bulls could be shook. The stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 3.17 is in the 79th percentile of its annual range, suggesting traders have picked up Exxon Mobil calls over puts at an accelerated clip in the past two weeks.

Unlike Chevron, however, Exxon isn't adored by analysts. The security sports just three "buy" or better ratings, compared to 11 "hold" or worse recommendations.

Trade talk continues to swirl around the auto sector. This week, President Donald Trump threatened to impose new tariffs on auto imports, citing concerns over national security, even as China said it will lower its excise tax on vehicles and parts. Car rental name Avis Budget Group Inc. (NASDAQ:CAR) has proven resilient amid the back and forth -- pacing toward a healthy 1% weekly gain -- and with the stock trading near a trendline with historically bullish implications, it could be time to bet on its next leg higher.

Specifically, since topping out at a near-term peak north of $50 in late April, CAR stock has pulled back to within one standard deviation of its 200-day moving average after spending a lengthy amount of time trading north of this trendline. In the four other times this signal has flashed over the past three years, the equity has gone on to average a 21-day gain of 10.83%, with two-thirds of those returns positive. Another move of this magnitude would put Avis Budget shares back above $47, based on their current perch at $42.49.

The stock has already put in an impressive technical performance over the long run, boasting a nearly 90% year-over-year lead. Nevertheless, there's still plenty of skepticism priced into the shares. For starters, half of the analysts covering Avis Budget maintain a "hold" or "strong sell" rating. This leaves the door open for upgrades, which could draw more buyers to the security's table.

An extended round of short covering could also create bigger tailwinds for the shares. Short interest dropped 15% in the most recent reporting period, but there are still 12.91 million CAR shares sold short. This represents a whopping 23.8% of the stock's available float, or nearly a week's worth of pent-up buying demand, at the average pace of trading.

Those looking to bet on this CAR stock buy signal to play out once again may want to consider doing so with options. The equity's Schaeffer's Volatility Index (SVI) of 34% ranks in the 3rd annual percentile, meaning low volatility expectations are being priced into short-term contracts -- a boon to potential premium buyers.

UnitedHealth Group Inc (NYSE:UNH) stock is near the top of the Dow today, last seen 0.7% higher at $244.47, as traders digest a long-term partnership with Quest Diagnostics (DGX). What's more, UNH shares could once again lead blue chips during the holiday-shortened week, if recent history is any indicator, and the insurance concern's short-term options are attractively priced, to boot.

UnitedHealth stock has rallied roughly 17% since its early February lows. The shares gapped higher in mid-April thanks to the company's stellar earnings report, and earlier this week peaked at $249.17 -- within a chip-shot of their late-January record high of $250.79.

As alluded to earlier, UNH stock could extend its upward momentum after Memorial Day, if past is prologue. The equity has been the best Dow stock to own during the holiday-shortened week, looking back 10 years. Specifically, UNH has averaged a weekly gain of 0.89%, and has ended the week higher 80% of the time, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

Despite the security's recent uptrend, UnitedHealth Group's short-term options are a bargain. The stock's Schaeffer's Volatility Index (SVI) of 17% is in just the 17th percentile of its annual range, implying that near-term options are pricing in relatively low volatility expectations.

Since 2008, there have been just five other times at which UNH stock was trading near annual-high territory while simultaneously sporting an SVI in the bottom 20% of its annual range. One month later, the blue chip was higher each time, averaging a gain of 3.06%.

"Circle June 12 and June 13 on your calendar, with June 12 marking the date that President Donald Trump will meet with North Korean leader Kim Jong Un. But as much press as this meeting will receive, the meeting that could have heavier market implications is the Federal Open Market Committee (FOMC) gathering on June 13."
-- Monday Morning Outlook, May 14, 2018

"Stocks Slide After North Korea Summit Called Off"
-- CNBC TV, May 24, 2018

If you circled June 12 on your calendar, you can now erase it -- at least for now, as President Donald Trump canceled the summit with North Korean leader Kim Jong Un. As stocks slid initially in Thursday’s trading in reaction to this news, I commented to my colleagues that equities have rallied for years without a North Korean summit on the calendar. 

The implication was that Thursday’s session was likely the "usual noise" that we have seen before, including the "war of words" between President Trump and his North Korean counterpart that gave market participants jitters for a few days in mid-August 2017. Indeed, by Thursday’s close, the market rallied well off its morning lows, before giving back a little ground on Friday, heading into a long Memorial Day weekend.

"If a pullback occurs, bulls want to see support on the SPY come into play between $266.86 -- its 2017 close -- and the $270.43 level"
-- Monday Morning Outlook, May 14, 2018

The S&P 500 Index (SPX - 2,721.33) and SPDR S&P 500 ETF Trust (SPY - 272.15) traded more than 1% lower in that Thursday session, with lows at 2,707.38 and $270.78, respectively -- above the upper-end of a support zone that I discussed two weeks ago. For those of you that do not remember, SPY $270.43 was the close when the Fed last raised rates in March. It was a resistance level in between the March and early May Federal Open Market Committee (FOMC) meetings, with this resistance mark giving way in the aftermath of the Fed holding rates steady in early May. 

Moreover, the SPY $270 level corresponds with the round 2,700 century mark on the SPX. The fact that these levels were not revisited on Thursday is indicative that market participants are currently at the ready to accumulate stocks or cover short positions at the slightest hint of a pullback.

While bulls have the upper hand, the SPY has been directionally challenged since the breakout above the trendline connecting the January and March highs. When this breakout occurred on May 11, this trendline that is on the radar of many technicians was around $272, which is the site of Friday’s close. Said another way, buyers of this breakout have yet to make money and could grow impatient if the SPY does not sustain a move above $272 in the coming days and weeks.  

One group that has benefited during this two weeks of trading-range behavior is index option premium sellers, as volatility, as measured by the Cboe Volatility Index (VIX - 13.22), has remained tame. 

Speaking of volatility, concurrent with the SPY and SPX’s mid-May breakout above resistance, large speculators on VIX futures moved back into a net short position, per Commitments of Traders (CoT) data. As many of you know by now, this group is an excellent contrarian indicator when in an extreme position. The group is rarely net long VIX futures, and since moving into a net long position in early February, VIX futures have declined sharply, as displayed in the chart immediately below.

You will also see on the chart that while large speculators are net short, they are far from an extreme short position. With that said, Schaeffer's Quantitative Analyst Chris Prybal ran a study this past week looking back at how the SPX has behaved after large speculators move out of a net long position into a more normal short position.

We looked at data since 2010, since this is when volume on VIX futures began to grow. Per the table below, the one- through four-week performance stands out as particularly bullish. However, the period beyond four weeks indicates the market tends to struggle. I found this study interesting because the four-week period after the most recent signal ends around mid-June, when the FOMC is scheduled to meet again and is widely expected to raise rates.  

The study lines up with a scenario I have discussed in prior commentaries -- the market rallies into the June FOMC meeting, but struggles in the immediate aftermath of a rate hike, like it has typically done during this tightening cycle and as we move through the summer months. 

Continue reading:

• Indicator of the Week: 25 Best and Worst Stocks to Own Next Week
• The Week Ahead: Jobs Data, Retail Earnings Slated for Holiday Week