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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 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.
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Another down day - it gives one pause. However, SPX is still holding up rather well. SPX closed down $4 at $1370, but that is still above where it opened yesterday and not far off of recent highs set for this year. On the other hand, RUT has been weak since early February and has not been following SPX's lead higher. Today, RUT broke down out of its recent trading range from $810 to $832. RUT lost $13 today to close at $802. The next support level for RUT is at the 50 dma at $790. Is RUT the leading indicator for this market? Keep an eye on the $1340 support level for SPX; if that breaks, we may be in for the long-awaited correction. On the other hand, the market rarely does what the majority expect.
Trading volume in the S&P 500 fell off significantly today to 2.3 billion shares. Trading was down 14% on the NYSE and down 8% on NASDAQ. Today was a slow day for economic news, so most analysts attributed the market weakness to concern over rising oil prices and the uncertainty in the Middle East (that's new?).
My Mar iron condor on RUT at 730/740 and 860/870 stands at a P/L of +$2,530 with position delta = +$5 and position theta = +$149. My Apr condor on RUT at 700/710 and 910/920 stands at a P/L of +$280 and delta = +$10 and theta = +$63. The recent decline on RUT has brought both of these positions back to delta neutral, so we are well positioned. March is now down to less than two weeks to expiration, so that position looks good. But markets can change quickly, so we will continue to watch our positions carefully.
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Stocks traded lower again today and it appeared early today that the bears were gaining control of this market, but stocks rebounded this afternoon to erase about half of the losses for the day. SPX closed down $5 at $1364 and RUT gained $1 to close at $804. There wasn't much economic data reported today. Factory orders fell 1% in January and the ISM Services Index came in at 57.3 for February, slightly up from January's 56.8. Trading volume was mixed with 2.5 billion shares of the S&P 500 trading today which was up a bit from Friday. Trading volume on the NYSE was up 1% and volume was down 4% on NASDAQ.
Although many analysts have been expecting a correction after the market's strong run this year, the last few days certainly don't yet qualify. SPX has yet to even threaten its strong support level at $1340. SPX traded down to $1359 this morning but then rebounded to close at $1364. Even though RUT traded down more strongly than SPX on Friday, RUT actually gained a bit today. The $800 level on RUT appeared to offer resistance in late January before it broke out higher; now $800 appears to be offering support. RUT traded down to $796 today before rebounding higher to close at $804.
My Mar condor on RUT stands at a P/L of +$2,830 with position delta = +$4 and position theta = +$176. The put spreads are over two standard deviations OTM and the call spreads are just under two standard deviations OTM. The Apr iron condor on RUT stands at a P/L of +$780 with delta = +$20 and theta = +$50. Both condors are "sitting pretty" at this point, delta neutral and making money. But that can change with a moment's notice.
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Bernanke's comments to the effect that another round of quantitative easing was not in the works appeared to impact the markets negatively today, but one has to wonder if this is only a transient effect. I am inclined to think it was a knee-jerk reaction that is likely to be reversed tomorrow. SPX lost $7 to close at $1366 and RUT lost $13 to close at $811. But SPX is still well above the significant level of support at $1340, so it is much too soon to call it a correction (even though everyone is expecting one). Trading volume spiked up with 3.3 billion shares of the S&P 500 trading. Trading increased 27% on the NYSE and increased 18% on NASDAQ.
Economic news was actually pretty positive today with 3% growth in GDP reported for the fourth quarter and the Chicago PMI increased to 64.0 from 60.2. But those positive numbers appeared to be ignored by the traders today.
My Mar iron condor on RUT stands at a P/L of +$1,870 with delta = -$8 and theta = +$183. Today's move downward on RUT took this position back to delta neutral, which accounts for the large improvement in its profitability. But we'll see what tomorrow brings - it is too early to count our gains for March..
