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The markets traded downward until late morning and then began a gradual climb upward for the balance of the day. The SPX bounced up against resistance at $1300 right before the close and pulled back to close at $1298, up $4. RUT gained $3 to close at $811. A weak home sales report set a negative mood at the outset this morning. New home sales for February dropped 17% to 250k, down from January's 301k. Analysts were expecting 288k. News that Portugal's parliament had rejected the austerity plans also weighed on the afternoon's trading.Traders continue to be concerned about the global economy slowing due to higher oil costs. I think traders are also somewhat reluctant to "go all in" as we anticipate the Fed ending its quantitative easing program. In summary, there are many headwinds for this market that make the likelihood of resuming the strong upward trend less probable. On the other hand, the market has held up rather well in spite of Middle East unrest, a Libyan revolution, natural disasters and fears of a nuclear mishap. This leads me to expect the markets to continue to trade sideways or slightly upward.
My April iron condor on RUT is benefiting from this trading range; it now stands at a P/L of +$1,660, delta = +$14 and theta = +$68. So we will just continue to play what the market gives us. Don't fall asleep.
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The markets opened upward a bit this morning, but immediately hit technical resistance and traded sideways and down the rest of the day. SPX hit $1299 right after the open, but never got close to $1300 again all day, closing down $5 at $1294. RUT closed at $809, down $4 on the day. Trading volume was very low with only 2.8 billion shares of the S&P 500 stocks trading today; this is the lowest trading volume in the S&P 500 this year. Similarly, trading on the NYSE was down 17% and trading volume was down 6% on NASDAQ. Traders continue to be focused on the unrest in the Middle East and Libya; oil traded above $105 today. The good news is that the markets have not broken down to test recent lows, but the bad news is that the bulls have not regained control of the markets. Based on today's volume, it appears most traders are on the sidelines watching and waiting.
My April iron condor on RUT at 700/710 and 900/910 is in excellent shape with both spreads about two standard deviations OTM. The current P/L is +$1,300 with a position delta of +$14 and a position theta = +$93.
So we continue to watch for signs of a renewed bullish trend or a continued correction. Or do we muddle sideways for a while?
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The markets opened strongly this morning but then proceeded to steadily give it back throughout the day. SPX closed at $1279, up $5 but only $3 off its low for the day. RUT closed up $9 at $795. Trading volume was up strongly from yesterday with 4.3B shares of the S&P 500 stocks trading. Trading was up 52% on the NYSE and trading volume was up 30% on NASDAQ. Options expiration probably drove most of this volume. SPX Mar options settled at $1287.71 and RUT settled at $793.28. Today's candlestick on SPX was the classic shooting star; when the bulls cannot hold the highs, it isn't a good sign.
All of the spreads of my Mar iron condor at 730/740 and 875/885 expired worthless today for the maximum gain of $4,160 or 24% on capital at risk. The Apr condor stands at a P/L of +$700 with a position delta of +$39 and theta = +$59.
Enjoy your weekend!
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The markets gapped up at the open this morning but then largely traded sideways all day. SPX hit resistance at $1300, but held up pretty well, closing at $1298, up $19. RUT traded up more strongly, breaking through resistance at $807 to close at $813, up $18. Traders were calmed by improving news from efforts to bring the nuclear reactors in Japan under control and the UN's efforts in Libya. Oil prices remain high, but that didn't weigh on the market today. Trading volume dropped from Friday with 3.7 billion shares of the S&P 500 changing hands, but this is still above the 50 dma. Trading on the NYSE dropped 36% and trading volume dropped 32% on NASDAQ. It isn't clear as yet, from a technical standpoint, that this market correction is over. I would like to see follow through tomorrow with an open above $1300 on the SPX. The only economic data reported today was existing home sales for February at 4.88 million, down from January's 5.40 million, but traders didn't seem to take notice.
An excellent example of the irresponsible media hype was a headline on an article that read "Radioactivity Discovered in Foods", relating to tests of vegetables from areas of Japan near the stricken nuclear plants. But upon further reading, one finds that the level of radioactivity measured was equivalent to less than a quarter of the exposure of a single x-ray in your doctor's or dentist's office. Journalists once held their lack of bias as a measure of their integrity, but more and more, journalists pride themselves on pushing their own agenda as they write their stories.
VIX dropped to 21% today and this helped my Apr iron condor on RUT at 700/710 and 900/910. It now stands at a P/L of +$1,820 with delta = +$26 and theta = +$25. Theta for our position is rather low at this point because the call spreads are almost worthless. If RUT continues to trade higher, we will be able to close this condor early for most of our 14% profit potential. Delta of the short puts is at 6 whereas the delta of the $900 call is less than one.
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The headline news has traders in a pessimistic mood, moving assets to cash. The SPX lost $25 today to close at $1257 while RUT closed down $9 at $782. Trading volume jumped up again today from high levels yesterday. 4.7B shares of the S&P 500 stocks traded today. Trading volume was up 11% on the NYSE and up 10% on NASDAQ. SPX bounced off support at $1260 yesterday and traded higher, but today it closed below that key support level. If it cannot hold $1260 tomorrow, we could see some real damage. The next support level is just below $1230, the peak set in November. SPX is now down 6% from the peak in February; a drop to $1230 would make it an 8% drop. Most corrections have historically averaged around 7-9%.
Economic data didn't create any confidence for traders to offset all of the bad news from Japan, the Middle East and Libya. Housing starts for February came in at 479k, down from last month's 6187k. Building permits were also down at 517k from last month's 563k. In addition, PPI spiked up with a 1.6% increase, fueled by energy and food price increases.The only less-than-bad news was oil prices remaining around $99/bbl.
My March iron condor continues to make its way to expiration with a P/L of +$3,660, delta = +$42 and theta = +$617. The 740 puts remain over three standard deviations OTM; unless the market tanks further tomorrow, I will allow all of the March spreads to expire worthless for the max gain of 24%. The Apr condor on RUT stands at a P/L of -$160 with delta = +$50 and theta = +$46. The delta of the Apr 710 put closed at 17.6 and is right at one standard deviation OTM.
So my iron condor positions are weathering the storm well, but most of my AAPL trades are underwater. The exception is my AAPL LEAPS that I have been selling calls against; those LEAPS remain profitable even after today's big drop. So now we watch to see if the indexes continue to drop or if traders realize that the US economy isn't that bad.
