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The markets traded flat to modestly higher through most of the day, but then surrendered all of the gains and then some during the last hour of trading. A weaker dollar didn't appear to help the markets today. The ADP private payroll report showed a loss of 23k jobs in March; even though this was the smallest loss in some time, many traders were expecting to see some positive growth in jobs. And it fueled speculation about the government's jobs report Friday. Many are predicting those numbers to show some uptick due to the hiring of census workers, but today's ADP report is causing some traders to be pessimistic about the private sector's job growth. The Chicago PMI dropped to 58.8 in March from 62.6 in February, so that didn't help the mood. RUT traded as high as $688 in today's session, but then fell to $679 at the close, for a loss of almost $5 on the day. The SPX traded in a narrow range, closing down $4 to $1169. RUT and SPX have been trading in a very narrow range over the past seven sessions. Whenever the bulls have pushed prices higher, the bears have pulled them back, but the bears have also been unsuccessful in holding lower prices. Trading volume was surprisingly low, given the expected surge in end of the quarter trading. Trading on the NYSE was up 5% but down 1% on the NASDAQ. Trading volume for the S&P 500 rose from yesterday but remains below the 50 day moving average.
Today's move down on RUT pushed my April iron condor to a nearly perfectly delta neutral position, which is good since this trade is limping along at this point from the damage done earlier in March. The P/L stands at -$1,445, delta = -$3 and theta = +$159; the May position stands at +$440, delta = -$15 and theta = +$69.
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The markets opened up positively this morning on the basis of reasonably good news. The consumer confidence index reported an increase to 52.5 for March, up from 46.4 in February. And the Case Schilling Housing Index reported a 0.7% drop in existing home sales prices for January (December was down over 3%); this was the smallest drop in this index for three years. But then the markets succumbed to selling pressure for most of the day. But the last hour and a half brought the bulls back in to recoup most of the losses. RUT closed up less than $2 at $684 while the SPX closed unchanged at $1173. Trading volume was mixed with the NYSE being down 6% and NASDAQ up 10%. The S&P 500 traded at successively lower volume for the third consecutive trading session. The SPX price action for today was the classic doji candlestick - not a definitive trend reversal signal by itself, but it does reinforce the other action we have been seeing - basically a balance of the tug of war between the bulls and the bears. Friday's unemployment report will probably be the catalyst to push the market one way or the other. Since the market will be closed Friday, the trading tomorrow and Thursday will reflect traders' predictions or may just reflect defensive precaution, i.e., take your profits and wait and see what Monday brings from a safe cash position.
My April iron condor continues to improve its position as time decay kicks in; it is now at a P/L of -$1,525 with delta = -$13 and theta = +$160. The May position has now moved into the black with a strong theta/delta ratio over 2:1.
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The Commerce Department reported this morning that 4th quarter GDP grew 5.6% and the University of Michigan's Consumer Sentiment survey for March came in at 73.6, up from 72.5. This seemed to fuel some modest gains for the markets this morning, but then the bottom fell out around noon and by the close, most markets were nearly flat. RUT closed at $679, essentially unchanged while the SPX gained less than a dollar to close at $1167. Both the RUT and SPX charts appear to be establishing a sideways trading range. For the past several sessions, there appears to be some profit taking whenever the market gains much, but then buyers come in whenever the market dips. The case for the bullish trend appears to still be in place, but the recent extreme gains have to be digested.
My April condor is treading water, trying to salvage a small gain or at least a minimal loss. It is now about $2,700 underwater, but the Greeks are excellent with delta = +$10 and theta = +154. We still have a hope of getting out of this position with a small gain, but it will be touch and go. I decided to go back in the water today and established my May condor position at $590/$600 and $750/$760 for a credit of $3,100 (20 contracts). At the close, the position delta stood at -$15 and theta = +72.
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The markets traded down most of the day, but started a strong rebound at 2:30 ET and managed a small gain, but on lower trading volume. The S&P 500 dropped back below its 50 day moving average; volume on the NYSE fell 6% and NASDAQ trading volume fell 17%. The dollar was down today but strengthened a bit as the day wore on. Personal income data for February was flat while personal expenditure rose only 0.3%; core personal expenditures were unchanged (core expenditures exclude food and energy). RUT closed at $682, up a little over $3 and near its intraday high of $683. The pattern for SPX was similar with a rise of $7 to close at $1173. $1175 appears to be establishing itself as resistance for the SPX. Several recent trading days have displayed intraday highs that could not be held. The big question is whether this is just classic consolidation behavior after a strong gain or the setup for a correction. Many traders are already discussing their concerns that the market will be closed Friday when the unemployment numbers are reported. We may see some money taken off the table this week in anticipation of that report. Although the ADP numbers on Wednesday and the new and continuing unemployment claims numbers on Thursday may influence how the big players position themselves.
My April condor is still underwater but the greeks are excellent with a delta of +$21 and a theta of +$155. The May position is still very young but has a strong theta/delta ratio over 4:1.
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The Labor Department started the markets off on a positive footing this morning by reporting initial unemployment claims fell by 14k to 442k this past week and continuing claims fell from 4.702 million to 4.648 million. Much of the news early in the day was optimistic about plans for bailing out Greece's fiscal mess, but as the day wore on, skepticism about the details of the plans grew and this took the euro down and strengthened the dollar, reversing the market's earlier gains. Trading volume was up about 11-12% on the NYSE and NASDAQ. RUT closed down almost $5 at $679 after running as high as $693. SPX followed a similar pattern, closing at $1166, down $2.
This type of wide market swing makes life difficult (and costly) for the delta neutral trader. I was forced to enter an adjustment for my April iron condor position this morning, but then took it off before the market closed this afternoon. That cost me about $300 on a 20 contract position. But that is the cost of insurance. If you are looking for the silver lining in this market action, it certainly isn't boring!
