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The markets tacked on a few more points today on average to below average volume. SPX closed at $1364, up $3 and RUT hit a new all-time high at $865, a gain of $4. RUT has now erased all of the damage done in 2008-2009. Trading in the S&P 500 hit the 50 dma at 3.4 billion shares while trading on the NYSE was down 7%. But trading on the NASDAQ was up 23%, perhaps due to all of the activity in RIMM and MSFT. This market is being driven by the Fed's QE II, which is driving the dollar lower and the markets higher. Commodities continue to trade upward without a pause. Oil hit $114/bbl intraday and gold traded as high as $1570 intraday and closed at $1556. More fuel for this bull market has been delivered by the earnings reports thus far. Over 300 of the S&P 500 companies have reported and over 80% have met or beat Wall Street's estimates.
My condors are being pressured by this relentless move upward; both positions are underwater and the theta/delta ratios are about one-to-one on both the May and June positions. The June condor is hedged with July calls, but I will soon have to roll the call spreads upward to remain in this position. We'll see if next week gives us a breather.
Here in Chicago, we are finally getting some warm weather so that means yard work. Enjoy your weekend.
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Initial unemployment claims startled traders this morning by going back up over 400k to 429k, up 25k from last week. But continuing unemployment claims dropped by 68k, although many of those are simply running out of benefits and dropping off the rolls rather than becoming employed. First quarter GDP came in at 1.8% which beat expectations of 1.7%. The net result was sideways trading throughout most of the day, but the bulls took charge about 2 pm this afternoon and tacked on some more gains. SPX gained $5 to close at $1360, while RUT set another high at $862, up $3. Trading volume was down on the S&P 500 with 3.1 billion shares changing hands. Trading only increased 1% on the NYSE and dropped 5% on NASDAQ.
My May iron condor stands at a P/L of -$828 with delta = -$74 and theta = +$154 while the June condor stands at a P/L of -$1,984 with delta = -$38 and delta = +$56. Both condors are being pressured on the top side. Current market levels are back to the spring of 2008. Can this bull market take us back to the highs of 2007?
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Yesterday's slow day appeared logical in light of the FOMC meeting starting today and issuing a statement tomorrow. But, just to shatter our predictions, the market took off to the upside today on strong volume. SPX traded up to its high at $1350 by noon and then traded largely sideways the balance of the day, closing at $1347, up $12. This is the first time SPX has been able to break through the high set in late February. RUT traded stronger than SPX in early April and although it closed up $9 at $853 today, it didn't reach the April highs. Trading volume on the S&P 500 was up sharply from yesterday's unusual lows with 3.3 billion shares, right at the 50 dma. Trading on the NYSE was up 29% and trading volume was up 40% on NASDAQ.
The Conference Board's consumer confidence index for April jumped to 65.4 from last month's 63.8. This report surprised traders and may have provided some of the bullish momentum today. The Case-Schiller housing price index reported a 3.3% decline.
My May iron condor on RUT stands at a P/L of +$42 with delta = -$56 and theta = +$86. The delta of the 890 calls is up to 13, so this position is reasonably solid at this point. But my June condor is feeling the pressure. I added some Jul $900 calls today to hedge the upside and the P/L = -$1,814 with delta = -$42 and theta = +$55. The delta of the Jun $900 calls = 21. So now we watch to see if the FOMC surprises the market in some way tomorrow or somehow fuels this bull market even further.
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The markets were rather subdued most of the day, hovering around the open by a few dollars. But after the FOMC announcement, and then especially after Bernanke's news conference, the bulls began to run. SPX closed up $8 at $1356 while RUT ran $5 to close at $858, and that sets a 2011 high for a close on RUT. Trading volume was slightly down from yesterday with 3.2 billion shares of the S&P 500 stocks trading. That is just below the 50 dma at 3.3 billion shares. Trading on the NYSE was up 5% and NASDAQ trading volume was essentially unchanged from yesterday. The FOMC announcement didn't really have any significant new revelations, and I suppose that was what triggered the rally. Bernanke is holding firm that rates will remain low for "an extended period" and is willing to risk moderate inflation to stimulate the economic recovery. So the fuel continues to flow for a bullish stock market.
Gold hit new highs at $1530 per ounce and silver hit a 30 year high at $48 per ounce. Durable orders for March increased 2.5%. This increase in durable goods orders would normally have been seen as bullish news, but it was swamped by all of the attention given to the FOMC's announcement and the first of a series of news conferences by Bernanke.
My May iron condor on RUT moved into the red with a P/L of -$438 and a position delta = -$84 and theta = +$97. I still have 10 contracts of the 890/900 call spreads that are pressuring this position. The delta of the 890 calls hit 18 today. The June condor presented an excellent illustration of the power of a hedging adjustment. Yesterday, I bought July $900 calls to hedge the upside and the net P/L of the position was -$1,814. After another $5 increase in RUT today, that position's P/L is virtually unchanged at -$1,834 with position delta = -$40 and theta = +$45. So the hedge is doing its job for now, but more serious adjustments will be required if RUT continues its upward trek. After the news conference with Bernanke was over, it appeared that all of the talking heads and analysts have decided we have resumed the bull market advance. We'll see. Often the market surprises us when we all run to one side of the ship. But in the meantime, we delta neutral traders will simply trade what the market gives us.
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A slow news day made for a slow day in the markets. I suspect the upcoming FOMC meeting also has traders hesitant to take any strong positions in advance of that announcement Wednesday. New home sales for March came in at 300k, up from 270k last month. SPX closed down $2 at $1335 and RUT closed at $844, down $1. Only 2.3 billion shares of the S&P 500 traded today; that is a record low for 2011. The only time we saw lower trading volumes recently was during the holidays at the end of 2010. Trading on the NYSE dropped 14% and trading on NASDAQ decreased 22%.
My May iron condor on RUT stands at a P/L of +$722 with delta = -$29 and theta = +$51. My June condor continues to sit near the adjustment point with a P/L of -$660 and delta = -$77 and theta = +$76. Unless the NFLX earnings announcement pushes the markets south (apparently a disappointing outlook was given), I suspect tomorrow's market behavior will be similar to today - yawn.
