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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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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.
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Traders opened the markets this morning in slightly positive territory and expanded the gains in the afternoon to basically return to where we started Monday morning before the S&P debt warning scared traders. SPX closed up $7 at $1313, the same as yesterday's opening price. RUT closed up $2 at $823. Trading volume declined from yesterday with 3.1 billion shares of the S&P 500 stocks trading; the 50 dma = 3.3B. Trading volume on the NYSE was down 20% and was down 7% on NASDAQ. Gold traded above $1500 for the first time today as traders continue to seek refuge from sovereign debt and global unrest. S&P's warning shot yesterday probably fueled this move to gold, but equity traders were unpersuaded.
Housing starts came in at an annualized number of 549k for March and housing permits came in at 594k; both figures were better than analysts expected.
My May iron condor on RUT is positioned at 720/730, 890/900, and 920/930 and continues to build gains with a P/L of +$612 and delta = +$10 and theta = +$46. This is a slow economic news week, so the markets will primarily be driven by earnings announcements. One of the biggest to watch will be Apple Computer, after the close tomorrow.
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AAPL's stellar earnings announcement boosted the markets today. Trading was choppy, but remained in positive territory all day, closing near the day's highs. The SPX closed at $1337, up $7 and RUT ran up $6 to close at $846. Trading volume was generally down today with 3.1 billion shares of the S&P 500 stocks trading. Trading volume on the NYSE was down 15% and trading on the NASDAQ was down 10%. Initial unemployment claims dropped 13k from last week to 403k and continuing claims were flat at 3.7 million. Leading indicators were up 0.4% but this was down from last month's +1% gain. The Philadelphia Fed survey was disappointing; it dropped form 43.4 for March to 18.5 for April. But the market shrugged off this mediocre economic data and chose to focus on the positive earnings reports of late, especially AAPL and IBM that are seen as broad economic bellwethers.
My May iron condor on RUT is doing well with a net P/L of +$192, delta = -$45 and theta = +$82. I opened my June iron condor at 690/700 and 900/910 earlier this week, but the market has moved upward against my call spreads almost every day since then. My position remains underwater with a delta = -$72 and theta = +$78. The delta of the 900 calls is up to 16 and the fact that the theta/delta ratio is near one to one shows we are nearing a point of needing to adjust this position.
The exchanges will be closed tomorrow, so enjoy the long weekend!
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Standard and Poors warned that it may be forced to downgrade US debt at some point in the future and changed its outlook on US debt from"stable" to "negative". This drove markets down sharply at the open this morning, but SPX bounced at $1295 about 11 am ET and began to recover some of its losses throughout the day. SPX closed at $1305, down $15. RUT lost $13 to close at $822. In my opinion, traders realized that nothing really had changed and started picking up some bargains in the market. After all, who is surprised that the US has a debt/spending problem? Trading volume was modestly higher with 3.6 billion shares of the S&P 500 stocks changing hands. Trading on the NYSE was up 4% and was up 1% on NASDAQ.
Today's move down was helpful for my May iron condor position; it has moved into the black with a P/L of +$362, delta = +$8, and theta = +$53.
One has to be impressed with the resilience of this market; we keep having a variety of news shocks take the market down and get the bears excited. But it has been well contained in every case. Trading volume has remained fairly low with the large institutions remaining on the sidelines. The continuation of the bull market trend may be in doubt, but the much anticipated emergence of a bearish trend has not developed. But my iron condors don't depend on my market predictions. I find it easier to trade what the market gives me.
