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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 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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The markets were barely in positive territory today until after Bernanke's press conference and the release of the FOMC policy statement. But traders sold off after Bernanke's remarks with all of the major indexes closing the day for losses. SPX closed down $8 at $1287 and RUT lost $7 to close at $800. Trading volume was down from yesterday's low levels with 2.4 billion shares of the S&P 500 traded. Volume was up 2% on the NYSE and down 13% on NASDAQ. Perhaps significantly, in spite of the late sell-off, the VIX actually closed down a bit to 18.5%. That VIX reading, together with the trading volume, tells me that the institutional players weren't very concerned about anything Bernanke had to say. There wasn't much new in Bernanke's news conference or the policy statement. Interest rates will remain low; the unemployment rate will remain high for an extended period of time; GDP growth will remain modest, but positive.
The SPX price chart remains in a down trend; the top edge of the trend line is around $1310, so we will have to see the index break out above $1310 decisively before we can declare this correction to be "over". Caution remains the prudent course of action. My iron condor positions are in excellent shape at this point, but they aren't exciting; I am just watching them make money slowly. The July iron condor on RUT stands at a P/L of +$2,580 with delta = +$8 and theta = +$78. The put spreads are over two standard deviations OTM and the call spreads are over 1.5 standard deviations OTM. The Aug condor stands at a P/L of +$760 with delta = -$24 and theta = +$64.
Greece has faded from the headlines for now, but a general feeling of negativity and pessimism persists. Perhaps we will have a low volume, sideways market for the summer. From a historical basis, that scenario has a lot of precedent.
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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.
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Traders were focused on Greece today, but the prevailing assumption is that Greece will be bailed out, so trading was generally positive, although the volume appears timid. SPX closed at $1296, up $17 and RUT gained $18 to close at $806. Trading volume was up from yesterday's low numbers but remains below long term averages. Trading in the S&P 500 came in at 2.7 billion, well below the 50 dma, while trading volume on the NYSE was up 8% from yesterday and, likewise, volume was up 14% on NASDAQ.
All eyes were focused on whether the Prime Minister of Greece would succeed in receiving his vote of confidence in the parliament. The fact that he did should boost the markets tomorrow, barring some contrary overnight news.
My July iron condor on RUT is now up $2,720 with delta = +$6 and theta = +$59. The Aug condor stands at a P/L of +$360 with delta = -$34 and theta = +$71. Now we watch for the FOMC policy statement tomorrow for any clues on the economy. The future direction of the markets is anyone's guess at this point. If the Greek debt problem receives sufficient resolution to get it off of the front page, then the upcoming earnings announcements will take over as the weather vane for the market. Of course, that assumes our own government can resolve our debt problems. Maybe that takes over on the front page.
