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The S&P 500 spent almost the entire day in negative territory but rallied at the close to end the day basically flat. Trading volume was up today, so while it may not qualify as a strong bullish day, the end of the day recovery is encouraging. SPX closed unchanged at $1291 and RUT closed up less than a dollar at $780. Trading volume in the S&P 500 rose to 3.8 billion shares and increased 12% on the NYSE. Volume was up 2% on NASDAQ. The Consumer Confidence Index of the Conference Board hit an eight month high of 60.6 in January, up from 53.3 in December. The Case Schiller Housing Price Index dropped 1.6% in November after a 0.5% drop the previous month. The FOMC meeting started today; their statement will be released tomorrow afternoon but most analysts don't expect any substantive changes.
I was encouraged this morning as AAPL, IBM and GOOG all traded upward while the overall market was trading downward. That behavior, coupled with the late day recovery is encouraging, but it still pays to be cautious. Employ good risk management.
My Feb iron condor on RUT continues to be well positioned with a P/L of +$2,520, delta = +$7 and theta = +$61.
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Large technology names like AAPL and GOOG made some nice gains today and led the broader market higher. IBM's bullish run since its positive earnings announcement last week has driven the Dow close to breaking the $12k level. SPX closed up $7 at $1291 and RUT closed at $779 for a $6 increase. Today's price action was certainly encouraging to the bulls, but SPX really needs to break through the high set last week at $1296 to confidently establish itself as having returned to the bullish uptrend. However, those market analysts looking for a healthy correction can't be too comfortable because last week's weakness didn't really qualify as a correction. Additional data on the bearish side of the camp would be the lower volume on today's positive price action. The market surged pretty strongly across the board, but trading volume was down. Only 3.2 billion shares of the S&P 500 traded, below the 50 dma. Trading was down 25% on the NYSE and was essentially flat (down 1%) on NASDAQ. No significant economic news was out today; the FOMC starts its meeting tomorrow and will issue a statement Wednesday. Nothing new is expected from the FOMC but the risk of a surprise can't be ignored.
My Feb RUT iron condor at 680/690 and 860/870 stands at a P/L of +$2,260 with delta = +$15 and theta = +$69. Some have asked me why I don't roll up the put spreads in this position to sweeten the potential gains. Normally that would be a possibility, but I have been concerned about a possible down turn in this market after having such a strong bullish run, and I felt more comfortable with that large safety margin on the downside. In addition, it is looking more probable each day that I can possibly come close to the full maximum gain for this position of $3300 on 20 contracts. That's about 20% on the capital at risk - that is an excellent gain. I don't want my greed to risk compromising that gain.
Watch tomorrow's open to see if this bullish run can continue. Strong follow through that pushes SPX above $1300 would be very bullish.
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Many of us have been expecting a pull back for some time but it seemed that every moment of weakness in the market was met with renewed buying.The markets opened down a bit this morning and about 10 am ET, it appeared that the buyers were going to buy the dip once again, but then the markets turned south and never looked back. SPX lost $13 to close at $1282 while RUT was hammered with a $21 loss to close at $787. Trading volume was above average but lower than yesterday with 3.4 billion shares of the S&P 500 stocks trading. Trading volume on the NYSE was down 5% but it was up 5% on NASDAQ. Housing starts for December fell 4.3% to 529k; 550k were expected. But December's building permits jumped 17% to 635k, the highest level since March 2010.
It isn't clear to me what precipitated this sell off. AAPL's and IBM's earnings announcements were stellar. GS's earnings beat expectations but they missed on revenues. There wasn't any obvious dreadful news to account for the selling. I was busy with some other work and had CNBC muted all day; I should have tuned in; I am sure the talking heads had some nice packaged answers.
My Jan SPX iron condor has been teetering on the edge of disaster for a few days, so when the market dipped a bit this morning, I took the opportunity to close my 1300/1310 call spreads. Of course, if I had waited, I could have safely allowed those spreads to expire worthless. Assuming the 1210/1220 put spreads expire worthless, this position will lose $899 on 20 contracts or 5%. I hate that rear view mirror.
My Feb RUT iron condor is now in nearly perfect position with a P/L of +$1900, delta = -$14 and theta = +$81. And that sums up delta neutral trading rather well - some trades work out as planned and some don't. The trick is minimizing those inevitable losses. It is disappointing to start the new year with a loss, but our returns on the Feb condor may easily compensate for the losses in January. And that underscores the importance of risk management.
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In spite of stellar earnings reports, AAPL and GOOG have been trading off for the last couple of days. NASDAQ has lost ground for three days in succession. The S&P 500 (SPX) gained $3 to close at $1283 while RUT continued its losing streak to close at $773, down $5. In 2010, RUT outperformed SPX very consistently - not so this year. Trading volume was mixed; trading in the S&P 500 was flat at 4 billion shares; trading was up 5% on the NYSE but down 17% on NASDAQ. The market action on SPX has been interesting the past two days. Yesterday's price action revealed the classic hammer candlestick; the hammer often signifies the reversal of a downward trend since the market trades down, but finds buyers and trades back up, leaving the long lower shadow of the candlestick. Today's shooting star candlestick is essentially the opposite signal: the market trades up, but sellers take it back down to close near its open. That often signifies the reversal of an upward trend. Having these two signals back to back tells me this market is in stalemate between the bulls and the bears; neither group seems to be able to move decisively and make it stick. But that also means we may be subject to a big move one way or the other if pushed by the right piece of news or economic data. I had begun to establish some of my Feb spreads this week, but chose hold off on placing any additional directional trades today. I will give this market another day or two to settle down.
SPX settled at $1289.25 so my Jan SPX 1210/1220 put spreads expired worthless. This confirms the net loss of 5% for the Jan SPX iron condor. The Feb iron condor on RUT stands at a P/L of +$2,000 with position delta = +$20 and position theta = +$67 (on 20 contracts). For those of you with Jan condors on RUT, the settlement price = $782.92.
Have a nice weekend.
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It seemed as though there were no other stocks trading today. APPL was the topic of almost every analyst on CNBC. Of course, we expected some attention with the earnings announcement this evening, but the announcement of Steve Jobs taking a medical leave added a new layer of questions and speculation. AAPL opened at $330 this morning and traded as low as $326 before bouncing and recovering most of its losses, closing at $341. In after hours trading, AAPL was trading up to $355 after blowing away the earnings and revenue estimates, but was pulling back as I write this blog. After watching AAPL bounce off $326 this morning, I entered my February 310/320 call spread and was already up 17% at the close. GOOG was another stock worth watching today; while the overall market was trading sideways, GOOG gained $15 to close at $640 - very bullish action. I put on a calendar spread to take advantage of GOOG's ramp-up in IV before their earnings announcement Thursday.
The overall market wasn't nearly as exciting with choppy sideways trading most of the day. SPX closed up $2 at $1295 and RUT closed unchanged at $808. Trading volume was up with 4.7 billion shares of the S&P 500 stocks changing hands (the 50 dma = 3.4B). Trading volume increased 9% on the NYSE but was flat on NASDAQ.
My Jan iron condor on SPX is teetering on the brink of a loss for this first month of the new year. This position's theta hit $1363 today which erases a lot of position losses, but the SPX is breathing down the neck of the 1300 calls. The Feb iron condor is in excellent position with a P/L of +$800, delta = -$72, and theta = +$121.
The bears and bulls appear to be basically balanced at this point with neither camp able to take control of the ball. The largest concern appears to be the European sovereign debt issue at this point since most of the economic data here at home is consistently pointing to recovery, albeit a slow recovery. My crystal ball just clouded over, so I'm not sure what we have in store. So I will just trade what the market gives me.
