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It appears the much anticipated Santa Claus rally has not materialized; of course, there were not many traders int he market this week, so anything is possible when everyone comes back after the holiday weekend. SPX closed down $5 at $1258 and RUT closed at $741, down $4. Ironically, after such a volatile year in the markets, the S&P 500 closed today exactly where it closed on 12/31/2010. I often have someone ask me where the Dow closed today or something similar and it usually surprises them when I say, "I don't know". I have never understood the fascination with following 30 stocks to monitor the health of the markets rather than following 500 stocks.
So, after a volatile year filled with riots and wars in the Middle East, a Japanese tsunami and subsequent disaster, a downgrade of US debt, and a year long fascination with the European debt crisis, we end up exactly where we started. If your portfolios ended the year in positive territory, no matter how small the gains, you beat the market - and not many professionals can claim that this year. The average hedge fund lost over 10% in 2011.
There was virtually no economic news today and the trading volume remained low with 1.6 billion shares of the S&P 500 trading. Volume was up 2% on both the NYSE and NASDAQ.
My Jan iron condor on RUT stands at a net gain of $1,300 with delta = -$90 and theta = +$242, so the theta/delta ratio remains healthy. The long weekend of time decay will help this position significantly, so I will be looking for an opportunity to take my profits next week. The Feb condor stands at a P/L of +$680 with delta = -$18 and theta = +$79. Our theta/delta ratio is even stronger for this position, but we still have 48 days to expiration, so the long weekend won't have as significant of an effect.
I thank all of you for your support and confidence this year. I appreciate your business, but I think of many of you as much more than business partners. I wish all of you and your families a happy and prosperous new year in 2012. Enjoy your long weekend.
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2011 has been a year for record volatility in the markets, and price action yesterday and today appeared to underscore that record. SPX gained $13 to close at $1263 and RUT gained $10 to close at $745. With this gain, SPX almost regained everything it lost yesterday. I have not kept track, but it seems like we have seen this type of whipsaw price action many times this year. What was an unusual event has become common. Trading volume remains low this holiday week; only 1.6 billion shares of the S&P 500 stocks traded today (the 50 dma is 3.0B). Trading volume dropped on the NYSE by 3% and dropped 5% on NASDAQ. The exchanges will be closed on Monday and we may see even lower trading volume tomorrow as traders leave for the long weekend. Some analysts were quick to declare the Santa Claus rally was on again after watching the markets rally back today, but one has to wonder about the logic.
The Chicago PMI came in at 62.5 for December, which was almost flat with November at 62.6. Unemployment claims jumped up to 381k from last week's 366k while continuing unemployment claims grew by 34 thousand to 3.6 million.
My Jan RUT condor now stands at a P/L of +$900 with delta = -$103 and theta = +$210. The Feb iron condor position on RUT stands at a P/L of +$500 with delta = -$26 and theta = +$81. The theta/delta ratios of both of these positions are healthy, but the call spreads of the Jan position are under pressure again. Assuming we can muddle through tomorrow, the three day weekend should help both positions. VIX dropped one point to 22.7% and that helped these negative vega positions a bit.
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The markets were open today, but very few people showed up to trade. SPX was in the black most of the day, but ended up closing at $1265 for no change on the day. RUT gained $3 to close at $751. Only 1.5 billion shares of the S&P 500 traded today; the 50 dma is 3.1B. Trading volume on the NYSE was up 2% and down 1% on NASDAQ. Interestingly, the VIX was up over one point to close at 21.9% and this rise occurred while the market was up this morning.
The Case Schiller home price index came out with a 3.4% decline in October, but consumer confidence jumped to 64.5 (up from the previous 55.2). Minimal news came out of Europe, which contributed to the market's lackluster pace.
I opened a new January iron condor on RUT last week, positioned tighter than normal at 670/680 and 770/780. This position stands at a P/L of -$400 with delta = -$111 and theta = +$175. My Feb RUT 590/600 and 840/850 condor stands at a P/L of +$160 with delta = -$34 and theta = +$79. Both positions contain 20 contracts. Absent any compelling news from Europe, we may see more slow, low volume days like today before we return to normal after New Year's.
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As expected, concerns about the European debt crisis resurfaced today. SPX lost $16 to close at $1250. RUT also lost $16 to close at $735. Significantly, SPX closed about $1 off its low of the day - a very bearish sign. Trading volume was up a bit from yesterday but still down significantly from the averages. Only 1.7 billion shares of the S&P 500 traded; trading volume on the NYSE increased 8% from yesterday's low numbers and NASDAQ increased 13%. The S&P 500 closed 2010 at $1258, so today's action took SPX back underwater for the year. It appears the Santa Claus rally didn't last very long.
No significant economic data was reported today, but unemployment claims and the Chicago PMI will be reported tomorrow.
My Jan RUT iron condor stands at a P/L of +$800 with delta = -$75 and theta = +$241. The Feb RUT condor has a net gain of $540 with delta = -$11 and theta = +$74. The Feb position is nearly delta neutral but has a long way to go before we can celebrate victory. If I can nurse the Jan condor into next week, I will be tempted to take my gains and run.
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Markets opened higher this morning and then climbed a bit higher around noon and didn't give any of it back as the afternoon wore on. SPX gained $10 to close at $1254 and RUT gained $5 to close at $746. SPX is nearing significant resistance at $1260 - $1270 with the 200 dma at $1259. That will be a critical level to monitor. VIX dropped again today, closing at 21.2%, seeming to suggest that most traders have accepted that Santa has arrived. Trading volume dropped at 2.7 billion shares of the S&P 500. Trading volume dropped 12% on the NYSE and 19% on NASDAQ.
Several media sources highlighted the drop in initial unemployment claims to 364k, just four thousand less than last week - I suppose we are desperate for good news. Continuing unemployment claims dropped from 3.63 million to 3.55M. Third quarter GDP grew 1.8% and the University of Michigan consumer sentiment indicator rose slightly from 67.7 to 69.9.
I will be watching SPX as it tries to break out above the 200 dma tomorrow; if it manages to close above $1260, I may believe in Santa Claus after all.
