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I missed my blog on Friday. I was in West Virginia with my wife as she sold her mother's house and settled the estate. On Friday afternoon, a severe storm came through and all of the electricity went out. In fact, it still wasn't on Saturday morning when we left.
Today's markets largely traded sideways today and seemed hesitant to add to Friday's huge gains. But then then the floodgates opened in the last hour of trading. This was a little surprising after the ISM manufacturing index reported out at 49.7 for June. This was the first time this index has indicated a contraction in manufacturing (any numbers below 50) since July 2009. Perhaps traders are seeing improved prospects for QE III if we receive more poor economic data? If so, this is strange reasoning: the economy is tanking so I'm bullish because the Fed will bail us out? Really? It will be interesting to see what the jobs report brings us Friday. Fewer jobs being added and higher unemployment numbers will cause the market to rally?
SPX closed at $1366, up $3, but RUT really took off in the last hour today: up $9, closing at $808. Trading volume dropped off to 2.4 billion shares of the S&P 500. Trading on the NYSE dropped 25% and volume dropped 5% on NASDAQ.
VIX fell slightly to 16.8%, so fear has lessened, but certainly has not disappeared. The holidays this week are a bit of a complication. The largest overhanging negative for this market is bad news out of Europe. Whenever our markets are closed and the rest of the world's markets are open, I worry a bit.
My July iron condor on RUT stands at a net gain of $1,920 on 20 contracts with delta = -$61 and theta = +$88. My Aug condor at 650/660 and 850/860 stands at a P/L of -$940 with delta = -$98 and theta = +$89.
Remember that the exchanges will close early tomorrow and be closed all day Wednesday.
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The supreme court surprised everyone today by ruling ObamaCare constitutional. I didn't see that one coming. Most analysts see this as negative for businesses and hiring. Hence the markets traded down. SPX traded as low as $1313 before recovering to close at $1329, down $3. SPX rallied almost $13 in the last hour and a half of trading. RUT closed almost unchanged at $776. Today's trading is one more data point for the strength of the $1310 support level. Perhaps traders see the costs of ObamaCare as "baked into" current stock prices. Trading volume jumped up a bit with 2.8 billion shares of the S&P 500 trading; trading on the NYSE jumped 19% and increased 5% on NASDAQ. VIX spiked above 21% but then settled to 19.7%.
Final GDP numbers for the first quarter came in at an annualized growth rate of 1.9% - not great, but not a recession either. Initial unemployment claims dropped six thousand to 386k and continuing unemployment claims dropped fifteen thousand to 3.3 million. These aren't great numbers, but they aren't dreadful either.
My July condor position stands at a 15% gain with delta = -$13 and theta = +$32. I haven't seen any news out of the European Summit. Is Germany going to bail out the rest of Europe or kiss them good bye?
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Trading wasn't too bad today; the markets opened weakly, but started to gain modestly in afternoon trade. The Conference Board's consumer confidence survey came in this morning at 62.0 for June, down over two points from May. That put a damper on morning trade. European debt woes overshadow everything now. But the good news is that support in the market indexes appears to be holding for now. Probably the best we can expect is a choppy sideways market for the near future. However, additional poor economic data here in the states or more bad news out of Europe could easily push us over the edge. SPX closed at $1320, up $6 while RUT moved up $3 to close at $765. Trading volume was flat with 2.5 billion shares of the S&P 500 trading today. Trading volume on the NYSE was down 2% and volume was up 8% on NASDAQ. VIX dropped a bit, closing at 19.7%.
The Case Schiller housing price index dropped 1.9% in April, but the market was expecting a worse number, so this actually buoyed some buying, especially in the home builders. Trading will likely remain subdued in advance of the European Summit, but this market is rather fragile. Ironically, no one really expects any permanent solutions to come out of the summit, but everyone is focused on it anyway. I wouldn't want to trade the markets based on a sideways prediction at this point. Any little news clip could tip it over.
My July iron condor on RUT at 610/620 and 850/860 is roughly unchanged with a net gain of 15% and delta = -$2 and theta = +$20 (on 20 contracts).
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Some modestly good economic numbers were enough to boost this market today, but the fear is still running high as evidenced in the VIX at 19.5%. Durable orders came in with a 1.1% increase for May and pending home sales were up 5.9% in May. This brought out some buyers who drove the SPX up $12 to close at $1332. RUT rose $11 to close at $776. Trading volume remains flat with 2.3 billion shares of the S&P 500 trading; trading volume on the NYSE was down 3% and trading on NASDAQ was up 2%.
While everyone is focused on the European Summit, it also seems like everyone on CNBC is telling us they don't expect anything substantive to come out of the summit. So we have heightened fear of what might come out of Europe coupled with low expectations. That is a formula for sideways choppy trading and I expect that is exactly what we are in for. The supreme court ruling on ObamaCare isn't likely to move the overall market much, in my opinion, but I could be wrong. We'll see. I think that event will be more fodder for the talk radio shows rather than market moving.
My July iron condor on RUT stands at a 15% gain with delta = -$17 and theta = +$27. At this point, there isn't much time value in those options, so the theta decay is pretty small. The primary question with this position at this point is whether to close it early or not. On the one hand, I can capture a nice 15% gain and go take a nap. On the other, the debits to close, while small, add up to real money on several hundred contract positions. We'll see. One thing I am not considering is rolling spreads up or down to increase my gains. I have learned the hard way that when I stretch for those additional gains, I often get in trouble... Some will accuse me of being boring, but I'm up over 30% at mid-year!
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The markets tumbled at the open today and then traded sideways the rest of the day. It appears that traders started the week with very little confidence that the upcoming European summit meeting will yield anything substantive. The expected supreme court ruling on ObamaCare probably doesn't help the mood. Many traders are simply taking off risk and sitting on the sidelines until the turmoil subsides. SPX opened at the resistance level at $1335 where it closed Friday, but it immediately traded down from there. SPX closed at $1314, down $21. RUT also opened at a key resistance level at $775 and traded down to close at $762, down $13. RUT closed right at the 200 dma - will that act as support?
Trading volume dropped off dramatically with 2.6 billion shares of the S&P 500 stocks trading. Trading on the NYSE dropped 20% and volume on NASDAQ dropped 34%. VIX spiked up over 21% but closed at 20.4%. So traders are certainly not calm, but the drop in trading volume and relatively low VIX seems to suggest a lack of panic. But the wild card is whatever news may hit the wire tomorrow - this type of market is very susceptible to big moves off seemingly minor stories.
My July condor continues to fare well with a net 15% gain and a position delta of +$0.09 - that is the smallest delta I have ever had on an iron condor in one of my accounts. This week is likely to be a wild ride in the markets. Keep your positions hedged and try to stay calm. Don't make any big bets either way.
