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The markets basically wandered sideways today on reduced volume. SPX closed unchanged at $1371 and RUT lost $3 to close at $814. Trading volume fell off with 2.2 billion shares of the S&P 500 trading; trading on the NYSE was down 11% and trading on the NASDAQ dropped 15%.
The FOMC meeting is tomorrow; perhaps traders are sitting on the sidelines, waiting to see if the Fed has another round of quantitative easing up its sleeve.
A surprising data point today came from the VIX that closed at 15.6%, down from Friday's close just above 17%. That is the lowest VIX reading since last July, just before the August crash. Hmm... that gives one pause, doesn't it?
My Mar condor position on RUT only consists of the 730/740 put spreads at this point, which are far OTM and will presumably expire worthless this coming weekend. That will close the March position for a 20% gain and bring our year to date return to 17%. The Apr RUT iron condor at 700/710 and 910/920 stands at a P/L of +$1,240 with position delta = +$17 and position theta = +$57 (20 contracts).
So we wait to see what Bernanke has to say. Most likely we won't see a big market move, but you never know. If he surprises traders, it could make a difference.
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The markets opened strong this morning on the news of the Greek debt swap deal being completed. Traders pulled back a bit this afternoon when it was announced that the Greek debt swap would qualify as a "credit event" for purposes of triggering the credit default swaps. SPX ran as high as $1375 before pulling back to close at $1371, up $5. The recent high close for SPX was $1374 on March 1. RUT closed up $11 at $817. This strong run by Russell put it back into its February trading range; although RUT still lags SPX, today's strong action helped close the gap. Trading volume was largely flat with 2.6 billion shares of the S&P 500 trading; trading volume was unchanged on the NYSE and was down 2% on NASDAQ.
The jobs report was viewed positively by most analysts with the addition of 227k jobs, although that was below last month's 284k increase. Unemployment remains at 8.3%.
I closed the 860/870 calls in the RUT Mar iron condor position today based on my two sigma rule. Assuming the 730/740 put spreads expire worthless next weekend, that will result in a gain of $3,410 on 20 contracts or a 20.2% return on capital at risk. This brings the year to date return on the Flying With The Condor™ portfolio to 17%. The Apr iron condor position at 700/710 and 910/920 stands at a P/L of +$1,320 with position delta = +$6 and theta = +$50.
Have a great weekend.
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The markets rebounded today, as though Greece's problems have been solved - happy days are here again. SPX gained $9 to close at $1353 while RUT closed up $9 at $796. Trading volume fell off with 2.6 billion shares of the S&P 500 stocks trading; trading volume dropped 16% on both the NYSE and NASDAQ. The key areas to watch on SPX are $1340 and $1375. If SPX breaks through $1340, we could see a serious correction; on the other hand, if SPX breaks the recent highs at $1375, then the bullish trend has resumed. If we compare RUT and SPX, the damage on RUT is far from erased and RUT has lagged behind SPX of late. RUT will have to trade back to $810 before it is even back in the trading range it occupied for most of February.
ADP's employment report moved up once again to 216k new jobs for February, up from the previous report of +173k. Could this be a prediction of an improved jobs report Friday?
My Mar RUT iron condor at 730/740 and 860/870 stands at a P/L of +$3,150 with delta = +$27 and theta = +$116. The Apr condor stands at a P/L of +580 with delta = +$30 and theta = +$50. On Friday, we will apply the Two Sigma Rule to our Mar position. As it now stands, we may have a rare event where both spreads are over two standard deviations OTM. Has this market resumed a sideways trading range pattern as it had late last year? Or is a nasty correction about to begin? Or will the bulls take charge once again? Who knows? All I can do is trade what the market gives me.
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The markets roared back today and have almost erased the damage done earlier in the week, although not much damage was done - certainly not anything worthy of being called a correction. SPX gained $13 to close at $1366, knocking on the door of recent highs in the neighborhood of $1375. RUT also gained, closing up $10 at $806. It is worth noting that SPX has further strengthened that support level at $1340 with this recent downward move, so be sure to mark that on the chart. I noted in an earlier blog that it was troublesome that while SPX was making new highs, RUT was being left behind. And this latest move is another parallel - RUT has not quite moved back into the trading range of $810 - $832 that it was caught in while SPX was making new highs in February. To trade as strongly as SPX has this year, RUT would have had to trade upwards of $865, the highs set in 2011. I am not a market statistician, but bull markets are normally led by the mid-caps, not the large blue chips. That is why this lagging RUT index has grabbed my attention. But the basic bullish nature of this market can't be denied - the pattern this week was one more indicator. The bears had their opportunity but couldn't make it stick. On the other hand, I don't see a bullish run resuming without RUT participating. Perhaps the result is a trading range for a "cooling off" period.
Trading volume was basically flat today with 2.5 billion shares of the S&P 500 trading. Trading volume on the NYSE was down 1% and volume was down 2% on NASDAQ. The only economic news of significance was the initial unemployment claims report which rose to 362k from last week's 354k. Continuing claims remain at 3.4 million. What does that say about tomorrow's jobs report? Briefing.com is predicting an increase of 250k jobs, probably based in part on the favorable ADP report earlier this week. But this market can probably withstand some negative news; so even a flat number may not cause any damage. We will also hear the final count on the participation in the Greek bonds deal tomorrow, but I am unsure what reaction that news will create; it seems like one day the market cares about Greece and the next day, it doesn't.
My Mar RUT condor stands at a P/L of +$3,390 with delta = +$9 and theta = +$109. The Apr position is also sitting pretty well delta neutral at a P/L of +$880 with delta = +$24 and theta = +$52. Tomorrow I will apply the Two Sigma Rule to the Mar spreads and determine whether the spreads need to be closed in advance of expiration week.
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The long awaited pullback occurred or simply continued today and analysts attributed it to concerns that an orderly default of the Greek bonds won't be able to occur. It appears that very few of the current bondholders have agreed to the terms of the bailout engineered by the ECB. It seems surprising to me that the attitude of traders appears to go hot and cold on whether a Greek default matters. Perhaps the talking heads just have to have some explanation for the decline. SPX lost $21 to close at $1343. SPX hit support at $1340 intraday, but bounced back up. RUT broke through its 50 dma and closed at $787, losing $17. Trading volume popped up with 3.0 billion shares of the S&P 500 trading; trading on the NYSE increased 23% and volume rose 11% on NASDAQ.
No significant economic data was released today. The VIX spiked up to 21% today. In the larger scheme of things, that isn't that high. VIX remains well within the range of the past month or two.
My Mar iron condor on RUT stands at a P/L of +$2,430 with delta = +$52 and theta = +$170. The call spreads are now over two standard deviations OTM and the puts are just inside two standard deviations OTM, so this position remains very solid. The Apr iron condor on RUT stands at a P/L of +$220 with delta = +$38 and theta = +$45. The Apr 700/710 put spreads are still well over one standard deviation OTM, but are starting to feel some pressure as RUT drops. So now we wait to see what traders worry about tomorrow.
