It appeared on Friday as though the bottom of this correction was in. SPX displayed a classic hammer candlestick on Thursday and then traded strongly higher on Friday. The S&P futures were positive this morning and the markets opened higher. Everything seemed to be lining up. But then those pesky bears came back, pulling SPX down to close at $1965 for a loss of three dollars. RUT traded even more weakly with a loss of $10 to close at $1095. SPX tried to break out above its 50 dma at $1975 and traded as high as $1978 before being pulled back down. Volatility popped back up about one point to 15.5% on the VIX. Trading volume fell off from last week with 1.8 billion shares of the S&P 500 stocks trading; this is below the 50 dma at 1.9 billion shares. Trading volume dropped 8% on the NYSE, but rose 5% on NASDAQ.

There was no significant economic news to drive the market one way or the other. Maybe the markets needed some additional positive news after the jobs report to continue the buying.

This sideways to slightly lower sideways churn is good for my iron condor trades. My October position only consists of the SPX 2080/2090 call spreads, which are essentially worthless now with less than two weeks to go. Assuming they expire worthless, the October position closes for a gain of 8.8%. The November SPX position was entered earlier than I do normally, and consists of the 1810/1820 put spreads and the 2090/2100 call spreads. Both spreads are far OTM and the position currently stands at a P/L of +$1,140 on 20 contracts or +7%. Position delta on 20 contracts is delta = +$5 and theta = +$57. The position is delta neutral and theta will continue to build.

We will see the minutes from the last FOMC meeting on Wednesday; that could move the market. Trading sideways into the earnings announcement cycle may be the best alternative for this overbought market. It allows the various indicators, such as the average P/E of the S&P 500, to move closer to long term averages without a dramatic market correction or crash. In any case, this market is dangerous; keep a close eye on it.