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I am tempted to use terms like roller coaster and wild swings, but I feel like I have been using terms like those for at least the past year! SPX closed today up $2 at $2086 and RUT closed down $2 at $1209. That sounds calm enough, but today's market was anything but calm. SPX plunged to $2052 shortly after the market opened, down $32 at the worst of it. Then SPX bounced all the way back to turn in a small gain on the day. What can I say? This market is not for the timid. I bought a few of this week's SPX 2060 puts yesterday and closed them this morning for a gain of about 220%. I didn't close them because I saw this bounce. I closed them to lock in an extraordinary gain. But imagine if I had held on for an even larger gain...
Trading volume bounced higher with 2.6 billion shares of the S&P 500 stocks trading. Trading volume increased 12% on the NYSE and increased 10% on NASDAQ.
The news I referred to yesterday for China, retail sales and industrial production, did come in slightly lower for July than in June, but apparently market analysts started to realize their panic was a bit over done as the day wore on. China's retail sales came in at +10.5% in July, down from June's +10.6%. Industrial production increased +6.0% in July, down from June's +6.8%.
The price volatility continues.
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Yesterday looked like the start of another run to the top of the trading range, but the market threw a surprise at traders today. Maybe more correctly, China threw traders a curve ball when they devalued the yuan. That has caused some analysts to think there may be more weakness in China's economy than previously thought. Industrial production and retail sales data come out for China tonight, so tomorrow's market could get hit again. SPX closed down $20 at $2084. RUT gave back $12, closing at $1211. The VIX tacked on one and a half points to close at 13.7%. Trading volume was up from yesterday with 2.2 billion shares of the S&P 500 stocks trading. But that only takes S&P volume back to the 50 dma. Trading on the NYSE increased 2% and trading volume on NASDAQ was up 8%.
Some analysts are convinced that this market is on the verge of tipping over into a severe correction, but their rationale isn't convincing. The argument basically boils down to "it's been too high for too long". I am more inclined to think we are stuck in the trading range until the Fed announces the first interest rate hike.
However, it is prudent to be cautious in the meantime. I nibbled at some SPX puts today, but I'm not risking much. This market is just too fickle and unpredictable.
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ADP's report on private payrolls disappointed analysts today with 185 thousand jobs for July, down from last month's 229k. There isn't a perfect correlation with the non-farm payrolls report that will be issued by the Labor Department Friday, but it often serves as an early warning. However, SPX seemed encouraged this morning, opening and running up to $2113 before pulling back to close at $2100, up $7. RUT traded in a similar pattern, and gained $3 to close at $1232. Both indexes effectively regained what they lost yesterday.
Trading volume picked up a bit with 2.4 billion shares of the S&P 500 trading. Trading volume was up 8% on the NYSE and up 15% on NASDAQ. Volatility contracted a bit with the VIX losing about half a point to close at 12.5%.
So are we feeling more bullish? Or is this just the same old ebb and flow we have been watching all year?
The ISM Services survey reported today at 60.3, up from 56.0. According to the ISM surveys, both manufacturing and services have continued to expand with manufacturing contracting a bit, but services surging forward.
With the market appearing rather undecided and fragile, I am concerned about being very exposed to the jobs report Friday. It is hard to predict how that data will impact this market. Perhaps the market will continue to tread water until we get the FOMC announcement on interest rates.
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Buying the dip worked once again! The markets opened up strongly today after posting a lot of red ink last week. SPX gained $27 to close at $2104 and RUT closed up $16 at $1223. Volatility contracted with the VIX dropping a full point to 12.2%. But don't confuse this with a strong bullish move. Trading volume declined with 2.0 billion shares of the S&P 500 stocks trading. Volume was flat on the NYSE and declined 12% on NASDAQ. So the low trading volume, sideways trading continues. One of these days, buying the dip will not work...
There wasn't any significant economic data reported today to account for the bounce higher. The main economic news expected this week is a continuation of earnings announcements, although most of the popular names that inspire speculation have already reported.
I closed my September iron condor position last week for a 20% gain. I only have the put spreads in play so far for the October position, but they stand at a net gain of 2.5% today. If the market can trade back closer to the upper edge of the trading range, I will sell the call spreads to complete the October iron condor position. The Flying With The Condor™ service stands at a net gain of 38% for the year.
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This market keeps teasing us. Some days, it plunges and all of the "sky is falling" folks come out of the woodwork. Then it rallies and the bulls speculate about new all-time highs. Today started out more bullishly, but then weakened and the major indexes ended the day slightly underwater. SPX lost $5 to close at $2093. RUT closed at $1229, down $3. Volatility rose about three tenths of a point to 12.8%, remaining close to the lows for volatility this year.
Trading volume remains close to the 50 dma with 2.2 billion shares of the S&P 500 companies. Trading volume on the NYSE dropped 2% and volume declined 1% on NASDAQ.
The only economic data today were factory orders, up 1.8%, a nice improvement from the 1.1% decline last month. Tomorrow brings the ADP private jobs data, a warm up for Friday's jobs report.
A common discussion these days concerns what the market's reaction will be when the Fed finally decides to raise interest rates. Will all of this sideways trading avoid a big drop when interest rates rise? Probably not. If nothing else, we will see the high frequency algorithms drive a knee jerk reaction downward. In the meantime, we wander sideways and my condors are doing well; my September position is up 21% and October is up 5%.
