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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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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.
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The S&P futures were initially buoyed this morning by the 1.9% growth in first quarter GDP, which was in line or beat most estimates. Durable goods orders grew 1.9% in May, providing more good news. But the selling began almost immediately after the open, and the markets traded downward all day. SPX closed down $15 at $1268 and RUT closed at $798, losing $5. Trading volume in the S&P 500 was essentially flat from yesterday and remained above the 50 dma. Trading volume was up 9% on the NYSE and was up 38% on NASDAQ.
The question on everyone's mind remains whether this is a correction in a bullish trend or a new bearish trend. A couple of facts stand out on the SPX chart. A clearly defined downward trend can be drawn since early May, now down about 7%. One could draw a sideways consolidating range of trading for the past two weeks, but the market could break out of that range to either direction. Bottom line: for my directional trades, I am largely in cash and waiting for a direction to emerge. For my delta neutral trades, I don't worry about where it is going - I trade what the market gives me.
My July iron condor on RUT at 700/710 and 880/890 stands at +$2,500 with delta = +$23 and theta = +$79. My Aug iron condor on RUT at 670/680 and 890/900 stands at +$500 with delta = -$12 and theta = +$70. The July condor now has three weeks left until expiration, so those far OTM spreads are looking pretty solid. The Aug condor looks good for now, but a lot of time remains for the market to look me up. Maybe he has forgotten about me... or is it a she?
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Today's markets were steadily positive all day, but the volume dropped dramatically. Perhaps the July 4th weekend holiday has started early. SPX gained $12 to close at $1280 while RUT closed at $805 for a $7 gain. Trading in the S&P 500 dropped to 2.5 billion shares, well below the 50dma. Trading on the NYSE dropped 32% and trading volume was down 40% on NASDAQ. In fairness, some of the volume Friday was due to rebalancing the Russell indexes, but I think this decline was more than that alone. In any case, this decline in volume forces us to look at the gains today with some suspicion. One must conclude that we remain in a downtrend; at best, we are consolidating sideways.
My July iron condor on RUT is just treading water and making money these days with a net P/L of +$2,780 and position delta = +$9 and theta = +$84. The 880/890 call spreads are nearly two standard deviations OTM and the 700/710 put spreads are over two standard deviations OTM. So this position is pretty safe at this point. My Aug iron condor is up $600 with delta = -$26 and theta = +$73.
I will be hosting a free webinar this Wednesday evening on "Adjusting the Iron Condor in Bear Markets". Click the Coming Events tab to learn more and register for the webinar.
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The markets opened weak this morning and traded lower.The SPX hit its 200 day moving average around 11 am ET and bounced upward from there. Then news of a economic bailout for Greece boosted the market as the trading session came to an end. The dollar strengthened overnight and that may have started the market's downward plunge. Oil prices dropped dramatically today. It was interesting to listen to the talking heads on CNBC explain why dropping oil prices were dragging the market lower this morning - not too long ago, the same experts were explaining why high oil prices were killing stock prices. Everyone has a prediction for tomorrow's market and when tomorrow comes, everyone is anxious to explain why it is up, down or unchanged. If you don't think about it too much, they sound very knowledgeable.
SPX lost $4 to close at $1284 while RUT actually gained $3 to close at $803. Trading volume was up with 3.2 billion shares of the S&P 500 trading; this is above the 50 dma at 2.9 billion shares. Trading volume was up 29% on the NYSE, and coincidentally, also up 29% on NASDAQ.
The bounce of SPX off of the 200 dma was encouraging. It is worth noting it also bounced off the 200 dma last Thursday. Perhaps we are finding the bottom of this correction. Today's candlestick, known as a hammer, with the long lower shadow is also an encouraging sign of a trend reversal at the bottom.
My July iron condor on RUT stands at a P/L of +$2,460 with delta = +$17 and theta = +$85. The Aug condor is up $560 with delta = -$23 and theta = +$69.
