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The jobs report buoyed the markets at the open this morning, but it didn't take long for Europe's debt problems to bring us back down. Moody's downgraded Spain and Italy's debt and that tanked our markets. It is interesting when you think about it; five years ago, Italy could have fallen into the ocean and our markets wouldn't have noticed. But any news out of Europe these days is scrutinized very carefully - and, when in doubt, traders sell on the news. SPX lost $10 to close at $1155 and RUT closed at $656, down $18. It was a volatile day of trading as SPX traded down as low as $1150 in early afternoon trade, and then, in the last hour of trading, ran up to $1169, near the day's high, and then collapsed back to the close at $1155. Many analysts were watching to see if SPX could break through the 50 dma at $1178, but it didn't even get close.
Trading volume dropped back a bit with 3.7 billion shares of the S&P 500 trading. Trading on the NYSE was up 3% and trading volume was down 7% on NASDAQ. My Oct iron condor on RUT stands at a P/L = -$1164 with position delta = -$2 and position theta = +$281. This condor is perfectly positioned with respect to price at this point with a large positive theta starting to ramp up. The Nov position stands at a P/L of +$300 with delta = -$16 and theta = +$100.
Have a great weekend.
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Markets traded higher once again yesterday (I'm late with my blog due to hosting my trading group last evening). SPX closed up $21 at $1165 and RUT gained $16 to close at $674. Trading volume dropped to just below the 50 dma on the S&P 500. But it is worthwhile to not that volume increased as the markets set new lows and bounced upward a couple of days ago - a bullish sign. The 50 dma at $1181 is the next hurdle for the markets. Breaking through that level easily would be another bullish sign. Otherwise, the default position one must take is that this market is trapped in a sideways trading range, and you could make the case for a downward trend that began in April. The market's reaction to the jobs report will be interesting, but will probably be muted unless a surprise number, higher or lower, is reported. In many ways, this market is being held hostage to news from Europe and the bad news is that I don't see any short term resolution to that crisis.
My RUT Oct iron condor stands at a P/L of -$1404 with position delta = -$37 and position theta = +$256. The RUT Nov iron condor stands at a P/L of +$60 with position delta = -$29 and position theta = +$101.
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I am running out of superlatives to describe this market. Yesterday was very ugly; based on the extent of that down move, I was expecting a bit of a bounce this morning, but no, it just wasn't quite as ugly. By noon, the market moved into positive territory, but then slowly sank, nearly to the lows of the day. Then around 3:15 pm EDT, the SPX ran from its low at $1080 to the close at $1124 in 45 minutes - wow! SPX gained $25 on the day, closing at $1124; RUT was even stronger, gaining $39 to close at $649. RUT stayed in positive territory most of the day and traded up about $40 in the last 45 minutes of the day. Why? I am unsure anyone knows. Even the talking heads on CNBC, who always seem to have an answer, appeared befuddled. The bottom line is that the extreme volatility of this market is downright frightening. Trading volume spiked upward again today with 5.1 billion shares of the S&P 500 stocks trading; volume was up 25% on the NYSE and was up 19% on NASDAQ.
Traders were expecting Apple to announce the iPhone5 today, but instead received an improved iPhone 4s. Thus, Apple shares were punished. Is this a buying opportunity for AAPL? Tomorrow will be interesting.
A bigger question is whether we have seen the bottom of this market decline. Today's spike upward on increased volume is certainly a bullish sign, but this market turns on a dime (or a rumor). Buying this market would be an aggressive speculation.
My Oct RUT condor with its put spreads at 500/510 stands at a net loss of $1204 with delta = +$14 and theta = +$67. If we have a few more positive days, perhaps I can get the call spreads back in place to complete this position.
Until we get some calming news out of Europe, it is hard to imagine this market settling down. VIX is still high, at 41%. I don't see an end to this volatility for some time. The jobs report Friday could be a significant market-moving event, or it could be ignored depending on what news is coming out of Europe.
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The markets appeared to do their best to trade down today, but finally traded upward for significant gains. SPX gained $20 to close at $1144 and RUT closed at $658, up $9 on the day. Trading volume dropped down a bit from yesterday with 4.2 billion shares of the S&P 500, but this remains above the 50 dma at 4.0B. Trading volume on the NYSE was down 28% and similarly, trading was down 18% on NASDAQ. The VIX dropped to 38% today, approximately in the middle of its range of 30% to 48% since early August. SPX broke through resistance at $1120 yesterday and tested that earlier today before trading higher. A lot of damage has been done since early August; the SPX chart is strongly trending downward at this point. It will require a break above the 50 dma at $1184 before anyone can even begin to hope for a bullish trend.
The ISM Services Index reported at 53.0 for September, down slightly from the August value of 53.3. This was the classic, "not bad news, but not good news either" report. It seems to support the idea that the economy isn't worsening rapidly, but it certainly isn't roaring back to life either. ADP reported 91 thousand new private payroll jobs, which isn't a bad number, but again, nothing to write home about either. This may be a precursor to Friday's Non-Farms Payroll Report.
I closed the Oct 500/510 put spreads on my Oct iron condor on RUT and also opened the Oct 740/750 call spreads. I will look for an opportunity tomorrow to roll my put spreads upward. My Nov iron condor on RUT stands at 490/500 and 780/790 with a P/L of +$440 with position delta = -$49 and position theta = +$137.
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More negative news from Europe sent traders to hit the sell button. It strengthened the US dollar and that also pushed the equity markets lower. SPX lost $32 to close at $1099 and RUT closed at $610, down $35. Trading volume in the S&P 500 stocks spiked upward with 4.4 billion shares trading; this is above the 50 dma of 3.9B. Trading volume on the NYSE increased 11% and trading on NASDAQ jumped up 25%. We had positive economic news this morning with the ISM manufacturing index coming in at 51.6 for September, up a small amount from August's 50.6. Construction spending was up 1.4% in August, as compared to a decline of 1.4% in July. But these data points were widely ignored. Every major market index booked losses. Many stocks hit 52 week lows.
Today's action broke the support levels that were set in the August crash and had been repeatedly tested, so this was significant. SPX broke through $1200 to close at $1099, and it closed at the low of the day - very bearish. RUT was even more bearish, closing at $610, well below the August lows at $650. For a couple of months we have been wondering if this was a correction in a bull market or the beginning of a bear market. Today's action strongly suggests the latter.
My Oct condor is unchanged with my holding only the 500/510 put spreads. I am still looking for the opportunity to re-position the call spreads.
