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Last week's inexhaustible run upward was most unusual, so today's pause was very natural and probably expected by many traders. SPX dropped back by $2 to close at $1338 and RUT gained $2 to close at $842. Trading volume was down with 2.3 billion shares of the S&P 500 trading (well below the 50 dma of 2.9B). Trading volume decreased 3% on the NYSE and volume dropped 7% on NASDAQ.
Moody's downgraded Portugal's debt today and the market dropped but then immediately traded back up to roughly where it was before the announcement. This downgrade wasn't a surprise for traders so I'm not sure why the market dropped. Factory orders increased 0.8% in May after decreasing 0.9% in April, but most analysts were expecting a 1% increase.
My July iron condor on RUT stands at +$3,060 with delta = -$47 and theta = +$94. The Aug condor stands at a P/L of -$140 with delta = -$100 and theta = +$71. The delta of the short 890 calls = 18, so we are near the point of adjusting this position.
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Many analysts, including me, were doubtful this rally would continue after month-end. but we were proved wrong big time today - wow! SPX gained $19 to close at $1340 while RUT closed up $13 at $840. The Jun ISM Manufacturing Index came in at 55.3, up from last month's 53.5. This wasn't really much of a move upward, but analysts were expecting a decline, so this fed the Bulls' predisposition to keep the rally going. The University of Michigan Consumer Sentiment Survey came in at 71.5, down slightly from last month's 71.8.
The next significant resistance level on SPX is $1345, the peak hit at the end of May before the market collapsed hard from there. Trading volume was down even further today with 2.5 billion shares of the S&P 500 trading. Similarly, trading volume was down 11% on the NYSE and was also down 10% on NASDAQ. It will be interesting to see what happens next week after everyone returns from the holiday.
My July condor on RUT stands at a P/L of +$2,700 with delta = -$61 and theta = +$114; the 880/890 call spreads in this position are still over one standard deviation OTM, so this strong rally hasn't stressed the July position very much. The Aug iron condor on RUT stands at a P/L of -$380 with delta = -$93 and theta = +$78. The delta of the short 890 call stands at 18, so we will have to adjust this position next week unless the market pulls back. The theta/delta ratio also reaffirms the stress this market run is applying to this position - it has dropped below one.
Have a great holiday weekend everyone! Fly the flag proudly and enjoy those cookouts.
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The broad market indexes tacked on another positive day and managed to get trading volume up to recent averages. SPX closed at $1307, up $11 and RUT gained $3 to close at $820. The SPX tried hard to get to $1310, but could not manage it. It hit $1309 twice, but pulled back each time. Many analysts are viewing $1310 as "the line in the sand" defining the end of the correction and resumption of the bull market trend. Pending home sales rose 8.2% in May, quite a contrast with the 11% decline in April. The VIX pulled back to 17.2%, somewhat encouraging for the bulls. The RUT candlestick was the classic doji, the sign of indecision and a possible turning point. But SPX had a strong bullish day. This three day rally may be due to institutional buying and selling at the end of the quarter; if that is the case, the market's move on Tuesday after the holiday will be interesting. Trading volume was up from yesterday, but trading in the S&P 500 was simply up to the 50 dma. Trading on the NYSE was up 15% and trading was up 7% on NASDAQ.
My July iron condor on RUT continues to grind out its gains with a net profit at this point of $2,820 with delta a modest +$12 and theta a substantial $122. Condors are fun at this point - unlike the times when you only established the trade a week ago and you are already scrambling to adjust the position to avoid being run over. The Aug condor position stands at a P/L of +$860 with delta = -$49 and theta = +$71. This condor is "muddling along" at this point: not in a great position, but not sufficiently stressed to be adjusted either.
Check out our free webinar this evening. I will be discussing trading the iron condor in bear markets. Webinar attendees will receive a $100 discount on my new course, Delta Neutral Options Trading, that will begin next week.
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The broad market indexes continued to tack on positive gains today, albeit with low trading volume. The question prominently in my mind these days is, "What happens after the holiday?" After everyone returns from vacation, will this bullish run continue on stronger volume? But one cannot deny that the last few days have definitively broken the indexes out of the downward trend. An alternative explanation for the recent bullishness is that this is simply the
result of end of quarter institutional buying and selling, but I would
have thought we would see more trading volume if that were the case. SPX closed at $1321, up $13 and RUT gained $8 to close at $827. Trading volume was down with 2.9 billion shares of the S&P 500. Trading volume on the NYSE was flat and up 3% on NASDAQ.
Initial unemployment claims reported at 428k, basically unchanged from last week and the continuing claims remain flat at 3.7 million. The Chicago PMI came in at 61.1 for June, a big improvement from last month's 56.6.
My July condor on RUT is up $3,300 with delta = +$1 and theta = +$40. The Aug position stands at +$740 with delta = -$57 and theta = +$74. We will probably see trading volume fall off even more tomorrow and it seems likely the markets will take a breather from this strong upward trend before the holiday weekend.
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Trading opened upward this morning and never paused, plotting a steady upward path all session. SPX gained $17 to close at $1297 while RUT closed at $817, up $12. But trading volume was down a bit even from yesterday's low numbers with 2.5 billion shares of the S&P 500 trading; volume fell 4% on the NYSE and dropped 2% on NASDAQ. But the market remains cautious - note the VIX, closing at 19.2% in spite of two strong up days in succession. Also note that the SPX has not broken through the highs set last week before it turned back downward. The downtrend on the SPX defined from about May 1 needs a clear break through the range of $1300 - $1310 before it may seem safe to begin some bullish positions. Perhaps this recent upward move is due to end of quarter buying?
My July iron condor stands at a P/L of +$2,860 with delta = -$10 and theta = +$95. The Aug position is showing some strain with a P/L of +$660 and delta = -$41 and theta = +$71. The theta/delta ratio dropping below 2:1 is a warning sign. Delta of the 890 call has risen to 10; it is too early to adjust, but the Greeks show the early stresses posed by these two strong upward moves.
