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It seems like I am almost continually commenting on this market's extreme volatility. Perhaps we need to re-define a volatile market, e.g., perhaps we should not comment on a wild day in the markets unless the Dow loses or gains at least 200 points! In any case, today was another one of those days. The markets opened and made a brief run upward before collapsing and then staged a huge rally to actually finish the day with gains! RUT opened the day and made a brief run up as high as $704 before dropping to $678 by mid-afternoon. RUT closed up $2 at $696. SPX traded similarly and closed at $1137, up $1. SPX traded as low as $1115 today, near Friday's close of $1111 - does this establish the area of $1111 - $1115 as a good support level? Maybe - two data points are slim support.
The only economic data of any significance was the Empire State Manufacturing Index. It reported a value of 19.1, down from last month's 31.9, but still showing positive gains; the employment index portion of this report rose for the fifth consecutive month. But the falling Euro and European fiscal concerns overwhelmed other news. But the Euro rebounded in the afternoon relative to the dollar, and the weakening dollar may have been behind the afternoon's rally.
My May iron condor continues to limp along with a position delta of +$48 and theta = +$924. That huge theta is helping erase some of the losses, but I should hasten to point out that I do not recommend having an iron condor position open during expiration week unless the remaining spreads are greater than two standard deviations OTM. But these are unusual times and I am trying to minimize losses in this position - remember when your parents used to say, "do as I say, not as I do"? By contrast, the June RUT iron condor is sitting fat and happy with delta = +$8 and theta = +$71. So, I will continue to nurse the May position along to gain as much time decay benefit as possible before closing this position.
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It was such a bad day in the markets that even my web hosting service lost their servers this afternoon!
Worries over the European debit crisis bloomed fresh today and markets in Europe and the US plummeted. RUT lost $16 to close at $694 while the SPX traded down $22 to close at $1136. Fortunately, buyers arrived for the last half hour of trading, recovering some of the losses and giving us some hope for Monday; but is it false hope? April retail sales increased 0.4% in April and the University of Michigan consumer sentiment survey reported out at 73.3, up from last month's 72.2. But this modestly positive economic news was ignored by today's market.
I heard an interesting factoid on CNBC today: there have been 11 triple digit days on the DJIA in the last 14 trading sessions - no wonder I feel tossed about by this market.
My May iron condor is still underwater but the greeks are actually pretty good with delta = +$29 and theta = +$537. But this trade is a loser; we are just attempting to minimize the loss at this point. My June iron condor on RUT is at breakeven and nearly perfectly delta neutral with delta = +$4 and theta = +$77. Now we wonder about Monday. Will some news from Europe calm the markets or will we see more losses Monday?
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The markets opened up strongly this morning and slowly but steadily traded higher all day. The Treasury Department reported a deficit for April of 83 billion dollars, much greater than the 53 billion economists expected. This was the largest deficit ever recorded for the month of April. The dollar traded up strongly today, up as much as 0.5% at one point. But the markets traded up in the face of this news. Gold continues to trade higher, reaching $1250 during the day and closing at $1243. I guess I should have listened to all of those commercials promoting gold.
The Russell 2000 Index (RUT) traded up $21 to close at $716 while the Standard and Poors 500 Index (SPX) closed at $1172, an increase of $16. Trading volume declined today across the board, down 15% on the NYSE and down 19% on NASDAQ. Trading in the S&P 500 stocks dropped to about 4.2 billion shares, just below the 50 day moving average. SPX just touched the 50 day moving average during the trading session, but couldn't break out above that level. The 50 day moving average is tracked by many large institutions as a technical support and resistance level. By contrast, RUT broke through the 50 day moving average resistance and is approaching its highs in April. Investor's Business Daily still had the market assessed as "Market In Correction" this morning, but today's action may have changed that rating. Just as last Thursday set historic records for the markets, this market's rapid reversal is also setting records. Yesterday, I wrote, "I think the unbridled enthusiasm that drove the markets in March has
been shaken." What a difference one day can make!
After adjusting my May condor down after last week's crash, my position is now being trampled to the upside! I have closed and rolled half of my call spreads and all of my put spreads; my long June calls are limiting some of the damage, but not enough. Current delta stands at -$59 and theta = +$253. The prospects of salvaging a gain from the May position are diminishing. By contrast, my June RUT iron condor spread is sitting pretty with a delta of -$23 and theta = +$73. The 790/800 calls are over one standard deviation OTM and the 580/590 put spreads are over two standard deviations OTM. But we have 36 days to expiration, and as we have seen recently, that is plenty of time for all kinds of things to happen!
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Trading opened up to the downside this morning and then traded upward, hit resistance and traded down all afternoon on lower volume. The only economic news was the initial unemployment claims report of 444k, down slightly from the 448k of last week. The number of continuing unemployment claims rose slightly to 4.63 million from 4.62 million last week. RUT traded as high as $720 in the morning but then declined the rest of the day to close down $6 at $710. SPX tried to break through its 50 day moving average (dma) at $1174 this morning, but was rebuffed and traded down to $1157, a loss of $14. Trading volume was flat to decreased with a 6% decrease on the NYSE and a 2% increase on NASDAQ. Trading in the S&P 500 stocks came in at 4 billion shares, below its 50 dma at about 4.5B shares.
Today I rolled the balance of my May 710/720 calls up to 730/740 and left the June 650 calls in place as a hedge to the up side. This brought the Greeks back in line at delta = -$28 and theta = +$473. The June RUT iron condor is positioned at 580/590 and 790/800 and stands at a P/L of -$520 with delta = -$31 and theta = +$107. So I am left nursing my May position to minimize its losses as we approach expiration week while the June condor is well positioned (for now).
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The markets opened up under continued concerns about Europe's financial problems, but soon turned positive and traded up most of the day; shortly before the close, much of the earlier gains were given back. RUT ran as high as $704 before turning back to close at $695, a gain of $6 for the day. SPX traded as high as $1170 but then gave it all back and then some to close at $1156, a loss of $4 on the day. Gold hit new highs for 2010 at $1220, a continuing response to the possibilities of financial problems in Europe spreading across the globe. Trading volume was down or flat today: down 19% on the NYSE and essentially flat on the NASDAQ. The S&P 500 stocks traded about 4.8 billion shares, just above the 50 day moving average.
Take a look at the RUT chart; I see a strong up move through most of February, then a brief period of consolidation before another strong push up for the first couple of weeks in March. That was followed by consolidation in the range of $675 - $690. Then we had a strong run upward in April, followed by the correction of the past couple of weeks. Therefore, that consolidation range $675 - $690 in late March is significant. I would see a strong close for RUT above that area as a bullish sign. And that appeared to be in the works today, but then RUT was pulled back into that consolidation range. SPX has traded in a similar pattern, but was pulled back even more strongly than RUT today. All of this suggests a cautious, sideways market for now; I think the unbridled enthusiasm that drove the markets in March has been shaken.
In summary, I think this market is rather fragile at this point in time; the wrong news report out of Europe could send it back down in a hurry. So be careful out there; be sure your stops are in place. But, in the absence of significant news, we may just chop up and down similar to what we saw today.
