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The stock markets opened flat this morning and traded sideways until around noon when the dollar declined and stocks rose. The markets held those gains into the close. An absence of economic data appeared to cause many to stay on the sidelines. Trading volume was way off from Friday with only 2.2 billion shares of the S&P 500 changing hands. That was the lowest trading volume for the S&P 500 recorded in 2011. Trading volume was down 25% on the NYSE and down 19% on NASDAQ. The SPX closed up $6 at $1346 while RUT closed at $843, up $9. Economic data will continue to be in short supply until Thursday when unemployment claims and the PPI will be reported. That will be followed by the CPI and the University of Michigan Consumer Sentiment survey results on Friday.
I closed the remaining 890/900 call spreads in my May condor on RUT today. This position now consists of ten contracts of the 920/930 calls and twenty contracts of the 720/730 put spreads. At this point, it appears likely I will allow the remaining spreads to expire worthless. The current position is up about $1,100 with delta = -$1 and theta = +$21. If the remaining spreads expire worthless, the May condor will gain $1,272 or 7% on capital at risk. The Jun iron condor on RUT stands at a P/L of +$316 with delta = -$61 and theta = +$90. So we continue to trade what the market gives us while others attempt to predict the future...
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All of the major stock indexes were up today, but trading volume declined from yesterday across the board. The jobs reports surprised analysts with 244k new non-farm jobs; analysts were expecting 185k. This drove the markets strongly upward, but the bulls couldn't hold the highs. SPX traded as high as $1354 before pulling back to close at $1340, preserving a gain of $5. RUT closed up $4 at $833. 3.2 billion shares of the S&P 500 stocks traded today, down from yesterday and below the 50 dma. Trading on the NYSE was down 8% and volume was down 9% on NASDAQ.
It is interesting to look at the SPX chart in candlestick format. Today's candlestick has a large upper shadow, underscoring that the bulls were unable to hold the highs; however the past three days have large lower shadows, showing that the bears could not hold the lows. So the market is certainly weak, but neither the bulls nor the bears have been able to make a decisive case for their viewpoints. Today's low trading volume reinforces this conclusion.
My May iron condor on RUT at 720/730 and 890/900 and 920/930 stands at a P/L of +$1,092 with delta = -$3 and theta = +$56. The June iron condor on RUT at 690/700 and 900/910 stands at a P/L of +$216 with a delta = -$56 and theta = +$91. Next Friday I will decide which of the May spreads I will close using my two standard deviation rule. If the market clearly resumes its up trend, then I will roll my June put spreads upward.
Enjoy your weekend.
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The markets largely traded sideways and slightly downward this morning, but selling pressure took the markets steadily lower most of the afternoon. But the bulls came in and picked up some bargains around 3 pm ET, helping the markets close off of their lows for the day. SPX closed at $1357, down $5, after hitting a low at $1350 earlier in the afternoon. RUT dropped even harder for the second day, closing down $11 at $844. RUT led the markets all of last year, seemed to falter in early 2011, but then again led in this latest bull run upward, but now the RUT is leading in the decline.
There wasn't much economic news today and no news that I know of to account for the markets selling off. Factory orders were up 3% for March, a big improvement over the 0.7% increase in February; but that news didn't seem to affect the markets. Trading volume was up across the board with 3.5 billion shares of the S&P 500 trading; volume was also up 11% on the NYSE and up 7% on NASDAQ.
This pull back by RUT was welcome relief for my iron condor positions. The May condor now stands at a P/L of +$852 with delta= -$25 and theta = +$65. The June condor stands at a P/L of -$1044 with delta = -$77 and theta = +$92. I removed the hedges from this position today; those adjustments cost me $184 but have kept me in the position with an opportunity to salvage a gain down the road. However, as you can see from the theta/delta ratio, this position isn't out of the woods yet.
The fact that SPX hit $1350 and bounced today is somewhat encouraging. It suggests that significant bullish support remains for this market. But we'll see. The only thing certain about this market is its uncertainty.
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Disappointing economic data sent the markets lower this morning. The major indexes recovered some of the losses before closing down for the day. SPX traded as low as $1341 before closing at $1347, down $9 on the day. RUT was once again weaker than the broad large cap indexes, losing $11 to close at $833. Trading volume was flat to down with 3.4 billion shares of the S&P 500 trading, down from yesterday and just above the 50 dma at 3.3B shares. Trading was up 5% on the NYSE and unchanged on NASDAQ.
The news of Portugal's bail-out took European markets down this morning and that might have set the tone for the opening of the US markets. But the economic data here didn't help. ADP reported 179 thousand new private payroll jobs, but analysts were expecting 200k. And the ISM services index dropped to 52.8 for April from March's 57.3.
Today's move downward took my May iron condor on RUT back to a delta neutral posture with a P/L of +$1,092 and delta = -$5 with theta = +$51. My RUT condor for June stands at a P/L of +$536 with delta = -$48 and theta = +$65. The market's recent weakness doesn't appear to have an obvious cause and effect. Perhaps the long awaited reaction to the end of the Fed's quantitative easing program is beginning?
It is fascinating to compare my directional trading portfolios to my delta neutral trading portfolios. When the market is trending strongly, the directional portfolio does well and the delta neutral trades struggle to minimize their losses. And now my directional trades are struggling and my delta neutral trades are flourishing. It makes a good case for diversifying your strategies.
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Trading was choppy at the open this morning and weakened as the day progressed. SPX closed down $9 at $1361 while RUT gave up $11 to close at $855. The VIX increased a bit to 15.99%, still pretty low for the past several years. The ISM manufacturing index came out at 60.4 for April; this was a drop from last month, but beat expectations. Construction spending was up 1.4% for March while analysts expected no change. Trading volume in the S&P 500 dropped to 3.0 billion shares, well below Friday's volume and below the 50 dma. Trading on the NYSE increased 4% and dropped 15% on NASDAQ. Meanwhile oil remains high at over $113/bbl and gold keeps setting new highs. It seems inconsistent to me that the "flight to safety" continues in gold at the same time that the stock market is soaring. Perhaps this simply shows the effects of the Fed's QE II. If so, what happens when that program ends?
The pull back by RUT took a lot of the pressure off my May and June iron condor positions. My May condor now stands at a P/L of +$212, with a position delta = -$63 and theta = +$99. The June condor is still hedged with July calls and stands at a P/L of -$1,744 with delta = -$40 and theta = +$58. We'll see what tomorrow brings.
