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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 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.
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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 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 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.
