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The unemployment claims data brought the bears out on a selling spree today. Initial unemployment claims hit a new high of 500k from 488k last week, while continuing claims decreased by 13k to 4.478 million. Then the Philadelphia Fed survey came out at -7.7, down markedly from last month's 5.0. RUT dropped $17 to close at $611 while the SPX dropped $19 to close at $1076. SPX fell through its 50 dma at $1088 like a knife through butter. All of this carnage occurred on increased trading volume. The S&P 500 stocks traded 3.9 billion shares, just above the 50 dma at 3.7 billion shares. Trading on the NYSE increased by 15% and ran up 26% on NASDAQ.
I decided to allow all of the spreads in my AUG iron condor go into expiration; they will all certainly expire worthless with one possible exception for the 590/600 puts, but they have a safety margin of $11. If they expire worthless, this position ends with a $923 gain or 6% on capital at risk. The Sept position stands at a P/L of +$700 with delta = +$46 and theta = +$63. Normally, expiration Friday is a high volume day of trading; it will be interesting to see if volumes are up from today's high levels.
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The markets opened a bit lower this morning but recovered quickly and
closed with modest gains on lower volume. Both the RUT and SPX charts
were displaying the classic doji candlestick pattern, indicative of
indecision among the traders, i.e., neither the bulls nor the bears were
able to take charge and drive the market today. RUT closed up $2 at
$628 while the SPX gained $2 to close at $1094. SPX tried unsuccessfully
to break through $1100 once again today. If and when SPX closes above
$1100, that will be a significant bullish signal. Trading volume was
down across the board with a 5% drop on the NYSE and a 4% drop on
NASDAQ. The S&P 500 stocks traded 3.2 billion shares, down a bit
from yesterday and still well below the 50 dma.
My Aug iron condor on RUT stands at a P/L of +$753 with position delta =
+$24 and theta = +$243. All of the spreads in this condor are now
greater than two standard deviations OTM so I will probably allow them
to expire worthless. But this depends on tomorrow's market movement.
Even a small move down will cause me to close the 590/600 put spreads.
The Sept position stands at a P/L of +$1,220, delta = +$24, and theta =
+$72.
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Markets opened lower this morning but then traded sideways to slightly upward throughout the day. The SPX dropped as low as $1070 before bouncing back to close unchanged at $1079. RUT dropped to $605 at the open before recovering to close up $6 at $615. Trading volume was flat to down for the day. The S&P 500 stocks traded 2.6 billion shares, down from yesterday and well below the 50 dma. Trading on the NYSE was down 8% but unchanged on NASDAQ. The NY Fed Empire Manufacturing Index posted an increase to 7.1 from last month's 5.1, and the NAHB Housing Market index decreased to 13 for August from the previous month's value of 14. But tomorrow brings the Housing Starts and Building Permits reports, which will be more definitive data for the housing market.
I should not have my Aug condor on RUT still open, but I have been squeezed into this corner, attempting to salvage a gain or at least minimize the loss. The position with 550/560 and 590/600 put spreads and 680/690 and 705/715 call spreads (10 contracts of each) now stands at a P/L of -$727 with a position delta of +$110 and theta = +$397. The theta/delta ratio is good but the large value of delta emphasizes the price risk for this position, with RUT so close to the 590/600 put spreads. My Sept 530/540 and 740/750 iron condor on RUT stands at a P/L of +$660, delta = +$42 and theta = +$62 (20 contracts). So the question remains: have we found the bottom? Today's price action on the SPX seems to suggest that, but the low trading volume doesn't give one any confidence.
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The markets opened strong this morning and just kept on climbing through most of the day. The major indexes gave back some of their gains in the late afternoon, but still closed for significant gains. The SPX broke through the 50 dma at $1088 and even tried to break through the next resistance level at $1100 before being turned back and closing at $1093, for a gain of $13. RUT behaved similarly, trading as high as $630 before closing at $626 for a gain of $11. Home Depot posted better than expected earnings and Wal Mart posted in-line earnings; those results may have helped the overall market mood. Economic data was mixed to positive with a 1.7% increase in housing starts for July, but building permits dropped 3.1%. Industrial production increased 1.0% while the PPI increased 0.2%.
Trading volume increased with today's rally. The S&P 500 stocks traded 3.4 billion shares, up from yesterday but still below the 50 dma at 3.8 billion shares. Trading jumped 23% on the NYSE and increased 8% on the NASDAQ. Today's market action was rather bullish, with SPX breaking a significant resistance level on higher volume. If you are a directional trader, I would be cautious about going "all in", but perhaps we will avoid going over the cliff for a "double dip".
Today's gains strengthened my Aug condor position, resulting in a P/L of +$383 with delta = $43 and theta = +$438. The Sept condor sits at a P/L of +$1,260 with delta = +$26 and theta = +$61.
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The University of Michigan Consumer Confidence Survey reported out at 69.6, a small improvement from last month's 67.8. That report served to keep the markets trading near the unchanged line for most of the day. But after about 2 pm ET, the markets slowly declined into the close, but trading volume was greatly reduced. Trading was down 15% on the NYSE and over 27% on NASDAQ. Trading volume in the S&P 500 stocks dropped to 2.7 billion shares, well below the 50 dma. This was the lowest trading volume for the S&P 500 for this year. The SPX traded within $2 of its 50 dma at $1088 before pulling back to close down $4 at $1079. $1088 on SPX will be a key resistance level to watch for a measure of the market. RUT pulled back a bit more to close at $609, a loss of $7 on the day.
My Aug RUT condor closed the day with a P/L of -$1917 with delta = +$133 and theta = +$204. All of these spreads are greater than two standard deviations OTM except the 10 contracts of the 590/600 put spreads. I will be looking for an opportunity to close them on Monday. The Sept condor is in the black with a P/L of +$440, delta = +$50 and theta = +$47.
Have a great weekend.
