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The markets opened down this morning and chopped sideways throughout the day on lower volume. RUT closed down $6 at $656 while the SPX lost $5 to close at $1120. Trading volume was flat to lower with 3.3 billion shares of the S&P 500 stocks traded, well below the 50 dma. Trading on the NYSE was down 2% while it was up 3% on NASDAQ.
Personal income and expenditure numbers came in flat for June while factory orders dropped 1.2%. Pending home sales dropped 2.6% in June. None of these reports were terrible, but it didn't paint a picture of a strong recovery either. Either this mediocre economic data discouraged traders or they were simply taking some profits after the recent gains. Either way, it made for a low volume, mostly down trading day.
My Aug condor remains at a tipping point with the delta of my short $680 calls at 26. Position delta = -$114 and theta = +$172, so time is starting to work for us in this position, but a strong move upward will close the trade. Even if RUT continues to wander sideways, the maximum profitability of this position is only about $500. Our multiple adjustments this month have kept us out of trouble, but have also worn down our maximum gains. The Sept condor has moved into the black with delta = -$18 and theta = +76.
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Disappointing GDP data drove the market down at the open, but reassuring Chicago PMI and consumer sentiment data appeared to bolster attitudes and all of the major market indexes ended the day unchanged. Second quarter GDP came in at positive growth of 2.4%, but that was down form the 3.7% of the first quarter - this reinforced the double dip viewpoint camp. But then the Chicago PMI came in at 62.3, up from 59.1 and the University of Michigan's consumer sentiment for July came in higher at 67.8 (from 66.5 last month). Both of these numbers were pleasant surprises to analysts. RUT closed unchanged at $651 and SPX closed unchanged at $1102. It is worth noting that RUT again touched its 200 dma at $640 before rebounding today. That price action is building a case for support at that level. All of this back and forth to an unchanged close occurred on lower trading volume. The S&P 500 stocks traded 3.7 billion shares, down from yesterday and well below the 50 dma. Trading on the NYSE was down 4% and was down 9% on NASDAQ.
My Aug iron condor on RUT at 510/520 and 550/560 and 680/690 and 705/715 stands at a position delta of-$87 and theta = +$134, not ideal, but still in the game. My multiple adjustments on this position have almost exhausted my profit potential. The Sept condor on RUT at 530/540 and 740/750 is still young with delta = -$12 and theta = +72.
Today's trading conference in Chicago was excellent; you can download the slides for my presentation in the Downloads section under Webinars. Have a great weekend and remember: if you are thinking about your trades this weekend, you probably aren't managing the risk appropriately!
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The SPX opened up this morning just below the 200 dma and traded lower as the day progressed; SPX closed at $1106, down $8. The 1% drop in durable goods orders for June was disappointing to the market and the Fed's Beige Book didn't help with a sobering assessment of business conditions across the country. Economic data continue to point to a very slow recovery at best and a double dip at worst. RUT dropped $11 to $651. Trading volume dropped off today, with a 10% drop on both the NYSE and the NASDAQ. Trading in the S&P 500 stocks dropped to about 3.3 billion shares, well below the 50 dma. That lower trading volume was good news in that it suggests the large institutional players were not selling in large numbers during today's decline. This market appears to be depressed, but not yet in panic mode.
Today's decline in RUT helped my Aug condor position. The delta of the short Aug $680 calls pulled back to 26 and I sold one of my Sept hedges. Position delta reduced to -$53 with position theta = +$125. So the theta/delta ratio is in a good position. I also opened my Sept RUT iron condor today after the risk of an extreme market move with the Fed Beige Book release this afternoon was past.
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Today's markets gave traders quite a ride. RUT opened up and ran to $658 before dropping to bounce off the 200 dma at $641 and then ran up to close unchanged at $650. SPX displayed a similar pattern but did not recover all of its losses in the afternoon, closing at $1102, down $5. Trading volume jumped up today across the board with an increase of 18% on the NYSE and 26% on NASDAQ. The S&P 500 stocks traded up to 4.2 billion, just below the 50 dma.
Initial unemployment claims dropped by 11k to 457k and continuing claims increased by 81k to 4.56 billion. Unemployment appears to be stubbornly holding pretty flat; it is hard to discern an upward trend from the data. Earnings reports by and large have been good, but the companies' outlooks have averaged luke warm at best. The bulls are struggling to find sufficient evidence to "buy at the lows" while the bears can't seem to get too enthused about selling off strongly. Until that mixed outlook of indecision changes, we aren't likely to see a strong trend in the market in either direction. But the increased volatility in the markets during this period of indecision is somewhat new - the fear quotient is still quite high, and this causes the rapid swings back and forth we saw today.
At the open today, I was happy I still had one of my Sept call hedges in place, but later I decided to sell that, thinking it wasn't necessary any longer. Then, of course, the market turned back upward and ended up right where it started. My Aug condor's 680/690 call spreads are too close to the fire with a delta of 24. The condor position delta stands at -$69 while theta = +$131; this theta/delta ratio confirms what we know: I have significant price risk to the downside and while my profit engine (theta) is still larger, it is not much larger. It is at times like this that I am amazed by the analysts on CNBC who sound so confident in their predictions. How do they do that?
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When the Conference Board reported their latest consumer confidence numbers were down to 50.4 from 54.3 last month, that sent the market lower. The Price Schiller home price index increased 4.6% in May, but that was largely discounted because of the government stimulus programs are believed to have artificially boosted that number. RUT traded down $3 to close at $662 while the SPX closed down $1 right at its 200 dma at $1114. Trading volume was mixed with an increase on the NYSE and a 4% decrease on NASDAQ. The S&P 500 stocks traded up to 4 billion shares from yesterday's 3.2 billion shares, just below the 50 dma at 4.3 billion shares. Some analysts are now saying the correction is over, but I would like to see some upward moves on strong volume before declaring the bulls have won. On the other hand, the SPX chart has definitely broken out of the down trend it had been tracing out since late April.
My Aug iron condor on RUT is sitting on the edge at this point, hedged to the upside, but on the verge of being repositioned or closed out. The position delta now stands at -$40 with theta = +$95.
