- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1967
Markets closed much higher today, but the closes looked better than the intraday trading which was extremely volatile. Toward the end of the day many observers feared we were going to surrender much of today's gains. SPX opened higher this morning and continued to climb until around 1 pm ET, when SPX hit its high for the day at $1990, but then traded off by over forty points until just after 3 pm ET, and then traded strongly higher into the close at $1988, up $47 on the day. RUT behaved similarly, gaining $21 to close at $1154. After peaking around 53% on Monday, the VIX has now dropped to 25.7%, down almost five points just today. That level of volatility remains high, but it has come down significantly over the past couple of days.
Trading volume declined from yesterday with 3.2 billion shares of the S&P 500 trading, but this is still well above the 50 dma at 2.4B. Trading dropped 3% on the NYSE and declined 10% on NASDAQ.
The big economic news today was the second estimate of second quarter GDP, revised higher to +3.7%. This helped reassure investors that the recent market weakness was over-done. Pending home sales increased 0.5% for July, up from the -1.7% of June. Initial unemployment claims came in at 271k, down slightly from last week's 277k. Continuing unemployment claims increased by 13 thousand to 2.27 million.
The last two days of trading have been very strong, so much so that many analysts are skeptical that this correction is over. Today's last hour of trading certainly appeared to suggest that the bulls are back in charge. But it still pays to be cautious. Dip your toe in carefully.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1984
One of the measures of a strong bearish market is a close at the lows of the day, as we saw last Thursday and Friday on SPX. Monday plunged even lower, but recovered some of those losses before closing. Just as we caught our breath yesterday, the market fell out of bed late in the day to close at the lows once again. We finally saw a close hear the highs of the trading session today with SPX hitting a high at $1943, and closing at $1941, up $73. RUT traded even more bullishly, trading lower to match yesterday's close, and then RUT rallied higher to close at $1132, up $28. Volatility pulled back six points with the VIX closing at 30%, still a relatively high volatility level, but not nearly as high as Monday's intraday high at 53%.
Trading volume was unchanged from yesterday, but remains above average with 3.8 billion shares of the S&P 500 trading. Trading on the NYSE was up 6%, but trading volume on NASDAQ was up only 1%.
I think most market observers have concluded that we are not going over the cliff and starting a bearish trend, but instead, we are observing a relatively significant market correction of about 12%. The resulting question on everyone's minds is whether we have seen the bottom yet? The closing lows for SPX in the last significant correction (Oct 2014) were around $1862. Monday's intraday low and Tuesday's close were at $1867 and $1868, respectively. So it looks like the October correction low may provide support for this correction. But correction bottoms are always messy affairs. We will likely see some choppy markets before we see a definitive recovery begin.
For those of you willing to take a little more risk, selling OTM put spreads on the broad market indexes at these volatility levels is attractive. As volatility declines, it will make it easier to close for a larger percentage of the profits. Of course, this presumes we have seen the worst of this market decline. Therein lies the risk.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1989
When I looked at the futures this morning, I gasped. Then I gasped again after the market opened and SPX plunged down to $1867 in about 5 minutes. It slowly recovered much of the loss through early afternoon, but then weakened again to close the day at $1893, down $78. RUT lost $45 to close at $1112. Volatility spiked as high as 53% on the VIX, before settling to 41%, up 13 points. Trading volume also spiked, with 4.8 billion shares of the S&P 500 trading today. Trading rose 27% on the NYSE and was up 26% on NASDAQ. This spike in volume is even more significant when you consider that Friday was options expiration which propped up that volume number somewhat.
That initial spike lower on the markets resulted in a lot of discussion in all of the financial media, with repeated references to the May 2010 flash crash. The initial loss on the Dow actually surpassed the May 2011 flash crash.
My Flying With The Condor™ service is 100% in cash, so we are watching the turmoil with a 34% gain year to date. That feels good. But the bigger question remains: is this "V bottom" different? The close today brought the SPX to 11% below the late July high. Is this a correction or the beginning of a bearish reversal? I would be the first to acknowledge the mediocre nature of U.S. economic data, but the data don't warrant this market. Is China's slowdown all that is going on here? More questions than answers.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1970
I was encouraged a bit yesterday with a small bounce near the close; for once, we didn't close at the low of the day. Today SPX opened above yesterday's close and proceeded to recover a large proportion of yesterday's losses - too good to be true. The last hour of trading was ugly, resulting in a lower close at $1868, down $26. RUT also traded down $8 to close at $1104. The VIX peeled off nearly five points to close at 36% - still very high, so we are clearly not yet out of the woods. Trading volume began to contract with 3.7 billion shares of the S&P 500 companies, but the 50 dma is 2.3B, so this remains an elevated level. Trading volume declined 25% on the NYSE and also declined 26% on NASDAQ.
SPX is now down 9.3% for 2015 and this correction stands at a negative 12.2% since the recent high on July 20.
There wasn't any significant economic data reported today. The Jackson Hole symposium comes on Thursday and I am sure we will hear many sound bites from the participants and speculation from the analysts. The commentary will be breathless in the aftermath of Monday's flash crash.
It's too early to say we are near a bottom, but the initial signs are encouraging. At least the free fall ended today. But tomorrow is another day...
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1972
We have all seen our share of bear markets, but the past two days have been ones for the record books. Yesterday, SPX lost 2.1% of its value and I think of a one percent loss as a big day. But today, SPX traded down even more strongly, losing 3.2% of its value. SPX closed at $1971, down $65. SPX is now down 4.3% for the year. RUT didn't trade nearly as bearishly today as SPX, and at one point this morning, RUT actually looked like it might trade up to yesterday's close, but it couldn't hold and closed down $16 at $1157. Naturally, volatility has spiked with the VIX hitting 28% today, the highest level all year.
Trading volume was higher today, although at least some of that was due to option expiration. 3.5 billion shares of the S&P 500 traded today. Trading volume rose 28% on the NYSE and rose 25% on NASDAQ.
I was considering hedging my Oct RUT 1060/1070 put spreads this morning, but decided on the conservative path. This market is just too ugly. I closed those spreads for an 11% loss. This brings our year to date gains to +34%, way ahead of the S&P 500. If we get a bounce, I will work at re-establishing my October condor position.
SPX closed at its lows both yesterday and today - a very bearish pattern. After yesterday's extreme bear market, I expected a bit of a bounce, but that faded quickly and today's trading even exceeded the bearishness of yesterday's market. Next week will be interesting. And, by the way, don't tell me this is all about China.
