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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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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 markets opened strong this morning and steadily traded upward all day. The RUT and SPX have both reached critical areas on their respective price charts. SPX broke through the 200 day moving average (dma) at $1108 and closed at $1115. During much of May, the SPX traded in the range of $1100 to $1175. Today's close places the SPX right at the bottom of that range; tomorrow's price action will show whether it has truly entered a new trading range or whether it pulls back into the range of $1040 to $1105 of the past few weeks. The RUT chart is somewhat different in that RUT is well above its 200 dma at $634 and it has not yet broken out of its current range of $615 to $670. But RUT is similar to SPX in that it is sitting at the edge of the trading range - will it break out or pull back?
Trading volume continues to be rather weak and this does not bode well for a continued advance. Trading volume was up 2% on the NYSE and up 18% on NASDAQ, but the S&P 500 stocks traded about 3.8 billion shares, well below the 50 dma of 5 billion shares. I interpret this as a lack of conviction by the broad market that this rally has legs.
In the meantime, my condor positions are in excellent shape. The June 590/600 and 710/720 RUT iron condor stands at a P/L of +$1,096, delta = -$20 and theta = +$285. Normally, I wouldn't be in a condor position during expiration week, but the extreme volatility of the past few weeks has forced me to leave this trade open to salvage a gain. The put spreads are well outside of two standard deviations and the calls are just inside of two standard deviations, so this trade is well positioned.
My July 520/530 and 750/760 condor stands at a P/L of +$1540, delta =
-$26 and theta = +$88. This position is in excellent shape; if this rally continues, I will consider closing this position to lock in our current gains.
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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.
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Sorry to be late with the blog, but my web site had some back room
problems this afternoon and I could not get into the admin pages.
This morning the SPX appeared determined to
break through the 200 day moving average at $1108, but just fell short
at $1106. From about noon on, the markets slowly traded downward, giving
back virtually all of the early gains. RUT was unique among the major
indexes in that it retained some positive gains, closing up $3 at $652.
SPX traded up to $1106 and then gave it all back, closing down $2 at
$1090. Moody's downgraded Greece debt this afternoon and that didn't
help, but the market was already trading down. Trading volume remains
low, which argues against the substance of any possible bullish
break-out like this morning's run upward. Trading volume was up 10% on
the NYSE, but flat on NASDAQ and also flat on the S&P 500 stocks. The market appears to be holding in this basing pattern.
My iron condor positions are sitting pretty with the June iron
condors on RUT standing at a P/L of +$756 with position delta = +$16 and
theta = +$368. The July position stands at a P/L of +$1,180 with
position delta = -$5 and theta = +$96. But I expect today's market
volatility will continue this week, so it would be a mistake to assume
these trades are safe.
