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We ended last week worried about Greece; on Monday, all of those pesky problems have been solved. Of course, I am being sarcastic. The volatility of these markets over the past few years has been extremely challenging for traders. The markets jumped at the opening today and stayed pretty steady throughout the session. But SPX appears to be finding it tough to hold much above $1350. Today it closed at $1352, up $9. RUT ran up $11 to close at $825. Trading volume dropped off today with 2.5 billion shares of the S&P 500 trading; trading volume dropped 8% on the NYSE and dropped 10% on NASDAQ.
No significant economic reports were issued today.
My Feb iron condor on RUT stands at a P/L of +$1,500 with delta = -$46 and theta = +$477. The Mar position is underwater by $1,760 with delta = -$95 and theta = +$148. Now we wait to see what tomorrow brings - let's see: markets down Friday, and up Monday; tomorrow must be a down day.
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European finance ministers rejected Greece's austerity plans today, making it more likely that Greece will default on their bonds. The markets took it badly. SPX lost $9 to close at $1343 and RUT closed at $813, down $12. But this wasn't the panic selling one might have expected; trading volume actually dropped from yesterday with 2.7 billion shares of the S&P 500 trading. Trading volume dropped 2% on the NYSE and dropped 18% on NASDAQ. VIX spiked upward two points to close at 20.8%.
The University of Michigan consumer sentiment survey reported 72.5 for February, down a bit from January's 75.0.
My Feb RUT condor stands at a P/L of +$460 with delta = +$15 and theta = +$354. My Mar RUT position stands at -$1,460 with delta = -$64 and theta = +$138. I removed the call hedges from the March position today. The Feb condor is nearly perfectly delta neutral and theta is building rapidly.
Enjoy your weekend. It looks like I will be shoveling snow this weekend in Chicago.
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The markets continued to follow the Greek drama this morning and markets opened up lower and traded lower. But similar to yesterday, the market averages regained most or all of their losses by the end of the session. SPX closed up $3 at $1347 and RUT closed down $1 at $827. Trading volume rose a bit from yesterday at 2.7 billion shares of the S&P 500, but remains below the 50 dma at 2.9B. Trading volume rose 6% on both the NYSE and NASDAQ. I am impressed by the resilience of the bulls in this market. I had imagined after such a strong January, that any hesitation might lead to a round of profit-taking, but that hasn't been the case. Trading volume remains low which suggests a lot of spectators on the sidelines. But none of the news thus far has resulted in any panic selling.
The only economic data forthcoming today was Consumer Credit from December, $19.3 billion. Analysts were surprised; they had estimated $8.5 billion - that doesn't seem to indicate that we have learned our lesson!
My Feb condor on RUT stands at a P/L of -$1,070 with delta = -$49 and theta = +$328. The Mar iron condor is also underwater with a P/L of -$2,090 and delta = -$24 and theta = +$78. Both positions are hedged with long calls in Mar and Apr. And I rolled my Feb 840/850 call spreads up to 850/860. Many technical indicators are flashing "overbought", but the bulls seem to be firmly in control of this market thus far, containing any selling efforts to result only in the slight pause of the past couple of days. Several analysts that I respect have been predicting a correction, but so far, the bears can't seem to hold a down market into the close.
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The markets surprised many of us with a very strong performance in January. Then we expected it to pull back in early February, but it didn't. We thought SPX couldn't break through $1330, but it did. Now, for the past several sessions, the markets open weak and trade lower. But in every case, the bulls trade it back up and close the day roughly even or for a slight increase. The bears just cannot generate any lasting case for their position. Many technical indicators support the "overbought" case, but the market just grinds higher. In the meantime, the Greek drama continues to unfold. But it appears that the stranglehold that the European debt crisis once held on the markets is loosening and may be gone altogether. If Greece defaults, it will be an interesting test of that theory. SPX gained $2 to close at $1352 and RUT closed down $3 at $825. Trading volume is holding steady with 3.1 billion shares of the S&P 500 (the 50 dma is at 2.9B). Trading volume on the NYSE was down 1% and trading volume was up 9% on NASDAQ.
The VIX closed up a bit for the second day in succession while the market was making modest gains. This may be an aberration, but it is worth watching. VIX closed at $18.6%, up about half of a point. Initial unemployment claims decreased to 358k from last week's 373k and continuing unemployment claims stand at 3.5 million.
My Feb RUT iron condor position stands at a P/L of +$140 with position delta = -$93 and theta = +$377 (20 contracts). This position is squeezed a little tightly on the call spread side, but time is now working in our favor. The Mar position is $1,800 underwater with delta = -$21 and theta = +$85. Both positions have strong theta/delta ratios.
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The financial news from last night into this morning seemed to be focused on the unfolding Greek drama. As a result, trading was subdued today, but the lows of the morning couldn't be held and the broad markets closed close to unchanged for the day - pretty bullish behavior. SPX closed down less than a dollar at $1344 and RUT closed down $3 at $828. Trading volume fell off significantly from Friday with 2.5 billion shares of the S&P 500 trading; trading volume on the NYSE was down 24% and volume was down 22% on NASDAQ. SPX is holding right at the high set in late July. Given all of the "impending doom" news about Greece's economic woes, and this rather tentative market reaction on much lower volume, one has to wonder if a Greek default isn't already priced into this market. I believe the consensus developing among analysts is that Europe's economic problems aren't going to result in a global recession. Of course, the minute we see any news to suggest that isn't true, it could get ugly in a hurry as people run for the fire exits. To be perfectly honest, I'm not sure where the truth is; I have seen compelling arguments that some of the complex credit default swaps and the like will bring down our large multinational banks, but others are arguing the exposure is minimal. So the prudent trader is left with the only true "secret" in this business: manage the risk. Be sure you are adequately hedged; use stop losses; and follow your rules.
There were no economic reports of consequence today. The VIX is holding steady just below 18%. I thought it a little odd that VIX didn't rise this morning as the market opened weakly. But it didn't, so I suppose everyone is fat and happy...
My Feb iron condor position stands at a P/L of -$1,430 with position delta= -$32 and theta = +$271 with 20 contracts. The Mar condor has a P/L of -$2,090 with delta = -$22 and theta = +$74.
