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The initial jobless claims data this morning was a little discouraging with another increase to 460k from last week's 442k, but the continuing claims total decreased from 4.681 to 4.550 million. The markets opened up weakly but then slowly climbed throughout the day to end nearly unchanged or with small gains. RUT closed unchanged at $700 after trading as low as $692. SPX gained $4 to close at $1186 after trading as low as $1175. This is actually a very bullish sign; it shows that whenever the prices drop very much at all, there are plenty of buyers that view those prices as bargains. So while there isn't sufficient incentive to buy strongly and drive the market higher, there isn't a strong bearish case either. Trading volume dropped across the board today with a 10% drop on the NYSE, and an 18% drop on NASDAQ. Trading on the S&P 500 stocks dropped back below its 50 day moving average. Minimal economic news is expected tomorrow but earnings announcements from the blue chips start next week with Alcoa on Monday and Intel on Tuesday. Those reports may push this market one way or the other.
My Apr condor is winding down and now stands at a P/L of -$625, delta = -$155 and theta = +$296. May's position stands at P/L of +$660, delta = -$58 and theta = +$74.
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The markets traded largely sideways this morning with many traders waiting on the treasury auction for clues; when strong demand for the treasury bonds resulted, stocks rallied briefly, but then began to falter. Some of the losses were erased in the last thirty minutes of trading. RUT matched yesterday's high of $703 but could not hold it, closing at $699, a loss of $2. SPX reached within $2 of yesterday's high before closing down $7 at $1182. Many of the talking heads attributed today's weakness to the financial difficulties in Greece, but I doubt that explanation. I think there is simply insufficient good news to propel this market higher; however, we have not had any bad news either. Hence we are caught in a narrow trading range. Trading volume was up 21% on NYSE and flat on NASDAQ; but it rebounded to above the 50 day moving average on the S&P 500. So we have increased volume on a down day - a bearish signal.
Today's candlestick on RUT was a classic Harami - a weak trend reversal signal. This particular harami is known as a Harami Cross, where the body of the candlestick is very small - essentially a doji. The psychology behind this pattern makes sense: a strong up day followed by a day of indecision - RUT traded up to yesterday's high and then down to a low and rebounded to close near the middle of its intraday range. At a minimum, we have a consolidating sideways trend, waiting for some news to drive the market one way or the other. If you want to learn more about candlesticks, read Japanese Candlestick Charting Techniques by Steve Nison; it is an excellent book.
Volatility rose a bit today and that, together with the price action, helped my embedded double calendar back to breakeven. In total, the April position now stands at -$841 with delta = -$129 and theta = +$288. May's iron condor is showing a gain of $520, with delta = -$58 and theta = +$81.
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Good economic news Friday and today encouraged the bulls to drive the markets higher today, setting 52 week highs on both RUT and SPX. Friday's jobs report showed a gain of 162k jobs in March, with only 48k of those due to hiring for the census. This was the largest growth in private jobs since May, 2007. The unemployment rate remains at 9.7%. But the ISM Service index reported out at 55.4 this morning, its highest level since 2006. As the market opened this morning, the remaining question was whether much of this good news was already priced into the market. But the markets just moved up stronger toward the end of the trading day; this is a very bullish pattern since one might expect a little profit taking toward the end of the session after such a strong run. On the other hand, all of this strong upward price run was accomplished in lower trading volume; trading on the NYSE was down 3%, down 10% on NASDAQ and trading volume for the S&P 500 fell even farther below its 50 day moving average than it was on Thursday. So, we have a higher high on lower volume - not reassuring. RUT closed up almost $14 at $698 and SPX closed at $1187, a gain of over $9.
My April iron condor on RUT stands at a P/L of -$1,515, delta = -$149 and theta = +$288. May stands at +$420, delta = -$68 and theta = +$82. If this bull run continues, I will have to make some adjustments this week.
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The S&P futures were lower this morning, but the markets quickly shrugged off that early weakness and rose to set new 52 week highs today; but trading was mostly sideways and gradually upward. The markets were waiting on the FOMC minutes to be released, but then traded weakly upward on that news. Trading volume was muted: up 7% on the NYSE, flat on NASDAQ, and still below the 50 day moving average on the S&P 500. The VIX dropped to 16.2%, approximately as low as it was in late March, but you have to go back to May of 2008 to see similar lows. RUT closed up less than $4 at $701 while the SPX closed at $1189, up $2; these are both 52 week highs. It appears that the bulls don't have sufficient conviction to chase the market higher, but no one is jumping out either. Every technical analyst is screaming overbought, but it doesn't phase the traders; they may not be buying in volume, but they are buying.
My condors are getting pushed into a corner by this slow relentless push upward. April now stands at a P/L of -$1,955 with a position delta of -$210 and theta = +$321. The double calendar I have embedded in this condor is right at its upper breakeven and now stands about $350 underwater. The May condor has surrendered some of its gains and stands at +$280, with a position delta of -$72 and theta = +$82. The fact that theta and delta are similar in absolute value shows the stress on this position. So we wait and see if the bulls can put another positive gain on the books tomorrow.
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The markets jumped up at the open but then began a slow decline that lasted until the last hour of trading this afternoon. Then the bulls came in and closed the major indexes for modest gains on the day. The SPX has been trading in the range between $1170 and $1190 and today was no exception, closing at $1178 after hitting a low of $1171 and trading as high as $1181. RUT closed at $684, up over $5 today. Trading volume was mixed with a 14% decline on the NYSE, and a 15% increase on NASDAQ. Trading volume for the S&P 500 declined again today; this is the lowest trading volume for the S&P 500 since March 8. The economic news was generally pretty positive today, but that apparently wasn't enough to drive the markets higher with the unemployment numbers anticipated tomorrow. Initial unemployment claims for last week dropped 6k to 439k while the continuing unemployment claims were essentially flat at 4.662M. The ISM manufacturing index reported out at 59.6, much better than expected and the best reading in five years. It appears that the strong run upward for the markets recently causes traders to believe most of the recent good news is already priced into the market.
My April condor position continues to trim its losses as we move closer to expiration; I added some ATM calendars today to boost the theta decay. The position now stands at a P/L of -$1,315, delta = +$10 and theta = +$207. The May position is in the black at +$360, delta = -$29 and theta = +$76.
Now the big question for the weekend: how will the market respond on Monday morning to tomorrow's unemployment numbers? Given the very balanced bull/bear tussle of the past several sessions, it will require some significant news to push this market one way or the other.
