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The markets opened modestly higher this morning, but, similar to yesterday, the indexes were pulled back into negative territory quickly and the pace downward accelerated in the afternoon. SPX decisively broke through support at the 200 dma ($1111) to close at $1095, losing $18 on the day. RUT traded similarly, dropping $14 to close at $646. Both RUT and SPX have been pulled back into the trading ranges defined over the past several weeks. For RUT, that range is roughly $610 to $670, and $1040 to $1105 on SPX. Trading volume continues to be either flat or declining as it has been over the last several trading sessions. Volume on the NYSE was up only 3% and was flat on NASDAQ. Trading in the S&P 500 stocks continues to run around 3.5 billion shares, well below the 50 dma at 5 billion shares.
Weak home sales (down over 2%) certainly didn't help the mood in the markets, but it appeared as though the markets were following the Euro as it traded lower this afternoon. News of so-called "savage austerity" measures for several government budgets in Europe appeared to worry traders - although one could argue those measures will be beneficial in the long term. The home sales data also started much more serious discussions of the possibility of a "double dip" in real estate bleeding over into the economy. In general, the mood on the street appears pretty gloomy. All news is being viewed from a pessimistic bias. Trading may be confined within the range of the past few weeks for a while.
When I was evaluating my positions after the close yesterday, I was surprised to see how much of the potential profit for the July iron condor was available. This morning, I closed the RUT July 520/530 750/760 iron condor for $0.20 on each side, resulting in a net gain of $2,140, 73% of the maximum profit available at July expiration. This $2,140 gain represented a 13% gain on capital at risk. I may consider opening my August condors a little earlier than normal to take advantage of the current sideways trading range.
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The markets opened very strongly this morning on news that China might allow its currency to float more freely on the world markets. But it was a short-lived rally. After running as high as $1131, the SPX pulled back to close down $4 at $1113. Similarly, RUT appeared to be finally breaking above resistance at $670 and traded up to $677 before pulling back to $660, down $7 on the day. It appeared that the strength of the U.S. dollar versus the Euro pulled the U.S. stock markets back from their gains. Trading volume was down across the board with a 30% drop on the NYSE and a 4% drop on NASDAQ. Trading in the S&P 500 stocks dropped to 3.5 billion shares, well below the 50 dma at 5 billion shares. The SPX traded down through the 200 dma at $1111, but recovered to remain in the tight trading range of the past several sessions. The Russell 2000 Index (RUT) also remains in a tight trading range, unable to break through $670 to the upside.
My July iron condor on RUT stands at a P/L of +$2,480, delta = +$9, and theta = +$37. I will be looking for an opportunity to close this position and confirm most of the potential profit for July.
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Today's batch of economic data caused many economists to begin to worry that the economic recovery has hit a wall. The Consumer Price Index was the only good news of the day with a 0.2% decrease. New unemployment claims increased by twelve thousand to 472k; many economists were expecting 450k. Continuing unemployment claims also rose by 88k to 4.57 million. Then the Philadelphia Fed Index came in at 8.0, a big drop from last month's reading of 21.4. The major indexes spent most of the day in negative territory, but managed to recover most of the losses by the close. RUT closed unchanged at $666 while the SPX rose by $1 to close at $1116. RUT has been unable to break through resistance at $670 whereas SPX has been stalled since breaking through the 200 dma. The price charts suggest a high level of indecision on the part of the traders with neither the bulls nor the bears being able to sustain a run; the low levels of trading volume underscore that observation. Trading on the NYSE dropped 1% and dropped 7% on NASDAQ. Trading in the S&P 500 was flat at 3.5 billion shares, well below the 50 dma.
For all intents, my June 590/600 710/720 iron condor on RUT is at its end; I will allow the options to expire worthless. The gain is $1,336 or 8.1% on capital at risk. The July condor is in an excellent position with a P/L of +$1,760, delta = -$20 and theta = +$84.
No significant economic news is due tomorrow, but we have quadruple options expiration, so the trading may be choppy and likely at higher volume. Of course, any kind of overnight news from Greece, Spain, North Korea and others may trip this market. Stocks are cheap by most any measure, but the economic recovery is beginning to be in doubt.
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The market continues to chop back and forth, seeking direction. Trading volume was up today, but nothing like was expected for a quadruple witching Friday. Trading volume ran up 33% on NYSE, and 11% on NASDAQ, but only 3.9 billion shares of the S&P 500 stocks traded, marginally up from yesterday and way below the 50 dma at 5 billion shares. The last three candlesticks on the SPX chart have been variations on the doji, the classic signal of market indecision. RUT closed up $1 at $667 and the SPX raised $1 to close at $1118. SPX has solidly held its support, but it has not pushed forward either. RUT has been unable to break through resistance at $670. RUT's settlement price is $669, so my June condor spreads will expire worthless. The July spread is well positioned with a P/L of +$1,980, delta = -$11 and theta = +$78.
So the watch continues. Will the bull market resume or will we tip over to a new bear market? Traders appear to be more and more skeptical of our economic recovery, so some poor economic news next week might have serious consequences in the stock market.
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It was a wild ride in the markets today; after opening down, the markets recovered quickly but then traded back and forth all day, ending the day with minor losses. RUT traded as high as $672 and closed down $3 at $666; SPX closed unchanged at $1115 after trading from $1107 to $1119 during the day. Trading volume remains low with a 2% increase on the NYSE, and flat on NASDAQ. Trading in the S&P 500 stocks dropped to 3.5 billion shares, well below the 50 dma at 5 billion shares. RUT does not seem to be able to break out of its recent trading range from $615 to $670.
The economic news today was not reassuring for the bulls. Housing starts for May came in at 593k, well below the 680k expected by analysts. Similarly, building permits came in below expectations at 574k. The PPI declined 0.3% and capacity utilization rose to 74.7 from 73.7. Top that off with weak earnings forecasts from Nokia and FedEx and it was hard for the bulls to hold any momentum. On the other hand, the bears have not been able to hold any of the intraday declines.
My June RUT condor stands at a P/L of +$1,176 with delta = -$2 and theta = +$462. July is also in good shape with a P/L of +$1,440, delta = -$22 and theta = +$103.
