- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1723
The equity markets sold off pretty strongly today, led by tech stocks. SPX closed down $8 at $1329, right at its support level at about $1330 - $1335, set in early April and mid-May. An open tomorrow farther down may be a very bearish sign for this market. RUT closed at $823, down $13. RUT is in a similar position as SPX on its chart having closed just below the lows set in early May and approaching the $815 low of mid-April. As in previous down sessions, trading volume remains anemic with 2.7 billion shares of the S&P 500 stocks. Trading on the NYSE was up 1% and was up 7% on NASDAQ. So we have traded to the bottom of the trading range; which way will it tip?
The NY Fed Empire Manufacturing Index plummeted to 11.9 for May from last month's 21.7. Otherwise, there were minimal economic data reports today.
My June iron condor on RUT stands at a P/L of +$1,276 with a position delta = -$9 and theta = +$84. This condor is well positioned as the market sits at this tipping point; the puts spreads are way down at 690/700. The 900/910 call spreads are now about 1.5 standard deviations OTM. So we watch to see if the bullish trend resumes or the correction deepens, but our condor is in good shape.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1668
The markets opened basically flat this morning but quickly turned south when the dollar strengthened. SPX lost $11 to close at $1338 while RUT dropped $12 to close at $836. Trading volume was down across the board with 2.8 billion shares of the S&P 500 trading.Volume dropped 6% on the NYSE and dropped 13% on NASDAQ. The CPI increased 0.4%, in line with analysts' estimates. The University of Michigan Consumer Sentiment Survey reported an increase to 72.4 in May from April's 69.8. But traders seemed to ignore this economic data and just took their money off the table. Although the low volume suggests the institutions are largely sitting on the sidelines.
I applied my "Two Sigma" rule to the remaining spreads in my May iron condor on RUT. The 920/930 call spreads are over three standard deviations OTM while the 720/730 put spreads are over four standard deviations OTM. So I will allow both spreads to expire worthless and book an 8% gain for May. This brings the recommendations of the Flying With The Condor™service to a 19% gain for this year, handily beating the S&P 500 which is up a little over 6%. The June iron condor on RUT stands at a P/L of +$756 with position delta = -$53 and position theta = +$92.
Have a good weekend.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1646
The dollar rebounded today, pressuring the stock markets. SPX lost $15 to close at $1342. RUT again was more volatile than SPX, closing at $841, down $15 (greater percentage drop than SPX). Trading volume bumped up a bit at 3.0 billion shares of the S&P 500, but this remains below the 50 dma. Trading on the NYSE was up 16% and was up 12% on NASDAQ. The markets appear to be trapped in a trading range. The key levels to watch on SPX are $1330 on the downside and $1370 on the top side. If SPX breaks $1330 going down, we may see some real damage. However, if SPX can break-out above the previous high at $1370, the bulls may be off to the races again.
My May condor is coasting to the finish line with the remaining spreads at 920/930 and 720/730 likely to expire worthless. Both spreads are far OTM (greater than two to three standard deviations). The June iron condor on RUT stands at a P/L of +$136 with delta = -$56 and theta = +$107. The markets' indecision has been good to my condors. Tomorrow will feature the unemployment claims report and the PPI. A sizable increase in PPI could spook the markets. Many analysts are concerned about rising inflation and a big increase in PPI could cause some selling. Fortunately, my June put spreads are down at 690/700 on RUT - that should be safe (he said as the ice berg looms ahead).
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1635
The markets were weighed down at the open this morning by lower markets overseas as well as a stronger US dollar. But then the dollar turned over and the stock markets revived. SPX gained $7 to close at $1349 while RUT also gained $7 to close at $847. Trading volume was flat with three billion shares of the S&P 500 trading; volume was down 2% on the NYSE and down 1% on NASDAQ. Initial unemployment claims were reported as 434k this week, greater than expected, but down from last week. Continuing unemployment claims were flat at 3.8 billion. The Producer Price Index (PPI) increased 0.8%, a little higher than the 0.5% increase predicted by analysts.
My May iron condor on RUT is near its maximum profit with delta = +$2 and theta = +$63. Unless something dramatic happens, I will allow both the 920/930 call spreads and the 720/730 put spreads to expire worthless. The June iron condor on RUT stands at a P/L of -$44 with delta = -$79 and theta = +$103.
So now we watch to see if this market can sustain a trend one way or the other. It seems we have the Fed's QE II and a series of strong earnings reports pushing the markets upward, but many economic headwinds holding the markets down. For now, the tug of war is a dead heat.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1665
The markets opened up strongly this morning, but even more impressively, the bulls added a few points in the last couple of hours of trading. The SPX is nearing its recent 52 week high at $1365; SPX closed today at $1357, up $11. RUT has also retaken its role as market leader, tacking on $13 to close at $856. Trading volume was up from yesterday's abysmal showing, but still remains at historic lows with 2.6 billion shares of the S&P 500 trading, well below the 50 dma. Trading volume was up 8% on the NYSE and up 23% on NASDAQ. The VIX pulled back under 16%.
Economic data was almost non-existent but wholesale inventories reported up 1.1% in March. That is a bullish sign for the economic recovery; it suggests businesses are forecasting increased demand. If we saw inventories building during a booming economy, that would suggest a slowing of demand.
My May RUT iron condor stands at a P/L of +$1,142 with position delta = +$2 and theta = +$48. The June condor is feeling the pressure of this most recent bullish run upward with a P/L of -$784 and delta = -$103 and theta = +$102. The delta of the 900 call is at 17 and the theta/delta ratio being approximately one to one shows the strain on the position. I will have to adjust soon. So my delta neutral positions are under stress and my bullish directional trades are happy as clams (I don't personally know any clams, but...).
