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Our markets opened down this morning, primarily in response to losses in overseas markets, but by about 10:30 am, the markets began a steady climb upward, led by the financials. SPX closed the day at $1293, up $9 while RUT gained $7 to close at $808. The Consumer Sentiment Survey from the University of Michigan reported 72.7 for January, down from December's 74.5 and below expectations. The December Consumer Price Index (CPI) rose 0.5% in December, higher than expected and also in line with the higher than expected PPI earlier this week. These numbers caused some concern about inflation beginning to grow. But while this economic data stoked some anxieties, JPM's earnings report beat expectations and this appeared to energize the markets.
I decided to keep the call spreads of my Jan SPX condor open until after the long weekend to benefit from the additional time decay, but that could be a costly mistake if this bullish run continues Tuesday. The Feb RUT condor is well positioned with P/L of +$680, delta = -$72 and theta = +$101. The trades from my trading group continue to perform well. I closed the NFLX Jan 165/175 call spread today for a 30% gain and our NVDA calls are up over 300%. The trading group track record now stands at +55% since the group started in April last year.
Google a copy of Martin Luther King's "Dream" speech and read it this weekend. I think you will be impressed.
Enjoy the long weekend!
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Unemployment claims took an unexpected jump this morning and that appeared to set the tone for a sideways trading day. Initial unemployment claims came in at 445k, up from last week's 410k. While continuing unemployment claims dropped to 3.88 million from last week's 4.13 million, most analysts dismissed that as being the result of unemployment benefits expiring rather than claimants finding new jobs. The Producer price Index (PPI) increased 1.1% in December, raising inflation concerns with some analysts. The markets traded largely sideways on flat volume in the face of these economic reports. SPX closed down $2 at $1284 and the Russell 2000 Index (RUT) closed at $801 for a loss of less than one dollar. Trading in the S&P 500 stocks was up slightly from yesterday at 3.6 billion shares; trading volume declined 3% on the NYSE and increased 3% on NASDAQ.
My Jan SPX iron condor is still teetering on the edge with a P/L of -$1739, delta = -$217 and theta = +$358. The 1200/1210 put spreads are greater than two standard deviations OTM, but the $1300 calls have a delta of 25. My Feb iron condor on RUT is standing at a gain of $640, with delta = -$63 and theta = +$106.
Before the opening bell in the morning, traders will be watching for the earnings announcement of J.P. Morgan Chase (JPM); this could set the tone for Friday's trading. The financials led the bull run in December and could be expected to continue that leading role if this bull market is destined to continue higher.
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The markets started the morning in positive territory but selling pressure quickly turned the tide. But the bulls reasserted themselves and recovered the losses before the market closed this afternoon. The earnings announcement season officially started last evening with Alcoa. Although Alcoa reported better than expected earnings, profit taking took the stock back a bit today. The earnings announcements and the sovereign debt problems in Europe are being watched closely by traders. The market appears to be teetering back and forth with neither the bulls nor the bears able to take control. SPX traded as low as $1270, but closed up $5 at $1274. RUT traded up $3 to $795. Trading volume pulled back a bit today with 3.2 billion shares of the S&P 500 changing hands. Trading volume declined 2% on the NYSE and increased 2% on NASDAQ.
My Jan SPX iron condor stands at -$1139, with delta = -$95 and theta = +$424. Theta is really starting to ramp up now that we are less than two weeks to expiration. The Feb condor on RUT stands at a gain of $780 with delta = -$48 and theta = +$97. The market is caught between the downward pressures of a slow economic recovery and sovereign debt concerns, and the upward pressures of the Fed's QE II and and a large amount of cash coming out of bonds into equities. So far, a clear direction has not revealed itself. Although I would argue that the bias is to the upside. In recent trading, every market dip has been met with buyers, as it was today. We'll see.
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Successful debt auctions yesterday in Greece and today in Portugal reassured traders and the markets traded in positive territory all day. SPX ran up $11 to close at $1286 and RUT closed at $801, up $7. Trading volume edged up a little with 3.5 billion shares of the S&P 500 stocks trading; this is slightly above the 50 dma. Trading was up 3% on the NYSE but down 1% on NASDAQ. The Fed's Beige Book was released today, but it didn't reveal anything new - just more anecdotal evidence of a slowly recovering economy.
My SPX Jan iron condor is being pressured on the call spread side as we get down close to the wire. The January position's Greeks deteriorated significantly today with delta = -$220 and theta = +$253. Absent a pull back, I will have to close the call spreads early. My Feb iron condor on RUT stands at a $580 gain with delta = -$58 and theta = +$102.
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I'm sorry I missed getting my blog out earlier today. A friend entered the hospital this afternoon and I am just returning home. A brief observation on the markets: notice how strong the support level appears to be at about $1260 on SPX. Once again today, the buyers appeared when the market neared that level. I conclude that if or when SPX breaks $1260 going down, it may get ugly in a hurry.
My Jan SPX iron condor is nearing break-even with a P/L of -$439, delta = -$84 and theta = +$270. The Feb RUT condor stands at a P/L of +$600, delta = -$30 and theta = +$92. Have a pleasant evening. I will check back in tomorrow.
