With Stocks at Record Highs, Hedging Heats Up Amid Earnings

Well-received earnings from Boeing (BA) helped propel the Dow past 20,000

Jan 27, 2017 at 2:59 PM
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It was a wild week on Wall Street, with the Dow taking its inaugural trek north of 20,000. Specifically, it was a well-received batch of corporate earnings that provided the fuel for the blue-chip barometer, and Boeing Co's (NYSE:BA) post-earnings pop helping to finally push the Dow over the psychologically significant mark. The renewed Trump rally spread to other parts of the Street, too, with the S&P 500 Index (SPX) climbing north of 2,300 for the first time ever, and Nasdaq Composite (COMP) notching an all-time peak of 5,669.61. Although the major market indexes are taking a breather today -- though this streak appears to be firmly intact -- they are still headed for solid weekly gains.

As traders' appetite for risk grew, the CBOE Volatility Index (VIX) -- also known as the market's "fear gauge" -- slumped, falling to levels not seen since July 2014. Nevertheless, call buying has picked up steam on VIX in recent weeks, per data from Schaeffer's Quantitative Analyst Chris Prybal. Given the elevated level of short futures positions on VIX, it's possible this increased activity -- as well as the interesting options activity seen on the SPDR Gold Trust ETF (GLD) -- could be indicative of hedging.

There's certainly plenty of action on both the economic and earnings calendars to spark volatile moves in the stock market, too. While the health of the economy was called into question with this morning's lackluster gross domestic product (GDP) and durable goods data, these indicators are likely to be in focus during next week's Federal Open Market Committee (FOMC) policy-setting meeting.

Plus, earnings could possibly stoke big moves, too, as was evident in this week's price action. In addition to BA and DuPont (NYSE:DD), shares of tech firms Seagate Technology PLC (NASDAQ:STX) and Texas Instruments Incorporated (NASDAQ:TXN) popped in the wake of their earnings reports. Not all the post-earnings action was to the upside, though, with Verizon Communications Inc. (NYSE:VZ) slumping after its results -- which also came under the M&A spotlight, as did this retailer -- and Starbucks Corporation (NASDAQ:SBUX) failing to serve up a well-received earnings report.

Alphabet Inc (NASDAQ:GOOGL), meanwhile, offered a glimpse into what could be in store for next week's big batch of tech earnings, with the shares last seen down 1% in the wake of last night's results. Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB) will certainly be ones to watch, with pre-earnings options premiums on the former docked near attractive levels and the latter staring down a historically tough stretch of time.

While events such as earnings are certainly worth traders' attention, it's also imperative to keep an eye on the charts, too. As oil prices charged higher this week, we tracked this batch of energy stocks that appear poised to resume their longer-term uptrend. Plus, these four stocks look attractive to our senior trading analyst, based on their current position in relation to their Bollinger Bands. What's more, Church & Dwight Co., Inc. (NYSE:CHD) and Coty Inc (NYSE:COTY) could be worth watching going forward, given their recent bullish crossover of this trendline.

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