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Markets opened this morning, gapping higher after yesterday's strong performance. SPX closed up $23 at $2075 and RUT closed at $1166, up $12. Volatility remained flat with the VIX unchanged at 14.5%. Trading volume remained above average but dropped from yesterday's highs with 2.8 billion shares of the S&P 500 stocks trading. Trading volume dropped 5% on the NYSE and was unchanged on NASDAQ.
There is no question that the bulls are firmly in charge of this market. The question in my mind is this: Are we returning to a strong bull market as we saw in 2013? Or is this more like earlier this year where the bulls aggressively bought every dip, but couldn't achieve a string of higher highs?
Evidence for a more constrained market posture comes from the Russell 2000 Index, made up of classic small cap stocks. These stocks lead bull markets higher and also are the first to be sold as the markets turn downward. RUT's chart is much weaker than SPX. When the markets bounced from the August 25 lows, they hit a high in mid-September before turning lower to retest support. SPX blew past those levels on October 7th, but RUT has yet to get back to those mid-September highs. Hmm...
Enjoy your weekend.
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The markets opened this morning in positive territory, but slowly weakened as the day wore on. SPX closed down $12 at $2019 and RUT lost $18 to close at $1145. Trading volume increased a bit with 2.4 billion shares of the S&P 500 trading, but this is still below the 50 dma at 2.5B. Trading increased 12% on the NYSE and increased 13% on NASDAQ. The VIX volatility index increased about 0.7 points to close at 16.5%.
No significant economic data was reported today.
All in all, it was a slow day in the markets, but the weakening as the day progressed is a little worrisome. Could we possibly retest the correction lows once again? I will be watching $1997 on SPX as the "line in the sand". A break down through that price would be a concern.
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IBM reported disappointing earnings after the close and is down about 5% in after hours trading. Will that affect the overall market? Possibly. This earnings season has been a bit of a mixed bag thus far. At the least, IBM's performance may worry analysts about the state of the overall economy. I doubt that it will force the market lower, but it could hold it down a bit, maybe to more of a sideways trend. SPX traded down about ten points from the open, but recovered to close up one dollar at $2034. I would term that as weakly bullish. RUT traded in a similar fashion, closing up two dollars at $1164. RUT traded down as low as $1155, the 50 dma, but bounced off that support and closed quite a bit higher at $1164. Trading volume was down across the board with 2.1 billion shares of the S&P 500 trading (the 50 dma = 2.5B). Trading was down 15% on the NYSE and down 7% on NASDAQ. Volatility was essentially unchanged with the VIX at 15%.
This is a weak week for economic news; the principal market moving events will be the earnings announcements.
I closed the November iron condor position in the Flying With The Condor™ service on Friday for a gain of 13.4%; this brings our year to date performance to 43%. Why aren't you with us?
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The markets seem to be slogging through molasses with small price moves, low trading volume, and declining implied volatility. SPX closed down $3 to $2031 while RUT lost one dollar to close at $1163. Volatility remains relatively low at 15.8%. Trading volume is sluggish with 2.1 billion shares of the S&P 500 trading today (flat with yesterday and below the 50 dma). Trading volume declined 1% on the NYSE and rose 6% on NASDAQ.
Housing starts for September came in at 1206 thousand, up from August's 1132 thousand. Building permits were on the opposite side with August's 1161 thousand declining to September's 1103 thousand. But the good news is that these data remain fairly positive for the real estate market with new housing construction running around a million units for 2015.
Earnings announcements continue to elicit strong responses with CMG down about $50 and ISRG up $35 in after hours trading. Playing these announcements is not for the faint of heart. For those of you who love the thrill ride, AMZN announces Thursday after the close.
The bulls appear to be in control of this market now; we are seeing the classic higher highs and higher lows. But trading volume is low and the price moves are limited in either direction. Are we returning to the sideways trend we saw earlier this year? Many of the large institutions have predicted a strong rally for the balance of this year, but we are starting to run out of time.
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The markets continued higher today with SPX closing up $9 at $2033; RUT wasn't quite so bullish, losing about fifty cents on the day. Volatility continues to contract, with VIX dropping nearly a full point today. VIX has been steadily dropping since its recent high of 28% on September 28th. Trading volume wasn't particularly high on this expiration Friday with 2.3 billion shares of the S&P 500 stocks trading today. Trading volume was up only 1% on the NYSE and moved down 11% on NASDAQ. Many analysts were looking for SPX to definitively break the recent mid-September highs around $2000, and we had our doubts earlier this week, but today's move higher was encouraging. Perhaps we can finally stop worrying about a retest of the flash Monday lows from late August.
Industrial production for September decreased 0.2%, slightly worse than August's -0.1%. Capacity utilization was essentially flat in September at 77.5% (August was 77.8%). The JOLTS job openings data came in at 5.370 million for August down from July's 5.668M. The University of Michigan's consumer sentiment survey reported 92.1 for October, up from September's 87.2.
I closed my November iron condor position on RUT today for a gain of $115 per contract or +13.4%. Even though this is an early close (34 days left), we were able to lock in 82% of the maximum potential gains. Why continue to be exposed to the market if you can lock in over 80% of the potential gains? This brings our year to date returns in the Flying With The Condor™ to +43%.
Enjoy your weekend.
