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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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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%.
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All eyes were on the Fed statement this afternoon, but there wasn't much of anything new for analysts to digest. The FOMC noted an improved job market, but are looking for higher inflation numbers and also feel business investment remains too soft. SPX traded up on the FOMC statement, closing at $2109, up $15. RUT gained $5 to close at $1230. SPX is now solidly above its 50 dma, but RUT remains well below the 50 dma. SPX has returned to the middle of the trading range, but RUT is lagging behind.
Volatility continued its pull back with the VIX closing at 12.6%, down almost one point. Trading volume declined in the S&P 500 stocks with 2.3 billion shares trading today. Volume declined 4% on the NYSE and trading volume declined 7% on NASDAQ. So the market was up today, but the enthusiasm was subdued.
Pending home sales were released today with a decline of 1.8% for June, down from May's +0.6%.
The first estimate of GDP growth for the second quarter will be released in the morning. Hopefully, it won't be negative, following a negative first quarter GDP. That could be a problem for this fragile market.
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SPX took us on a wild ride today, trading down below its 50 dma to $2095 (yesterday's open), but then recovering to close unchanged at $2109, within pennies of yesterday's close. RUT tacked on $2 to close at $1232, but RUT remains well below its 50 dma. Volatility continued to contract with the VIX dropping about a half point to 12.1%.
Trading volume fell back down to the 50 dma with 2.1 billion shares of the S&P 500 companies trading. Trading volume dropped 10% on the NYSE, but increased 2% on NASDAQ.
Initial unemployment claims increased by 12k this week to 267k, and continuing claims grew by 46k to 2.26 million. The first estimate of second quarter GDP came in at +2.3%, while the first quarter number was revised upward to a positive 0.6%. All of these revisions don't inspire confidence.
Investor's Intelligence surveys investment advisers every week and reported that this is the fifth week in succession that bullish advisers number less than 50%. Bearish advisers have grown to 39%. If you are contrarian by nature, this should tempt you to sell the farm and buy stocks. Or do you think the advisers know something you don't? Maybe they just realize we are entering the worst two months of the year for stock market gains. According to the Stock Traders Almanac, August is the worst performing month of the year for the Dow and the S&P 500 for the years 1988 to 2014, and September is a close second.
My September iron condor on RUT is now up 22%.
The Chicago PMI and consumer sentiment reports tomorrow. Today's market action seems to reinforce the range bound nature of this market.
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SPX and RUT both found support at the 200 dma yesterday, and when the
overnight futures were positive, it made me wonder: another V bottom?
Would buying the dip pay off once again? Well, so far, so good. SPX
tacked on 26 points to close at $2093, recovering most of the losses for
the past two trading sessions. RUT ran up $10 to close at $1225. The
big institutional players must have relaxed; the VIX lost two points to
close at 13.4% - quite a turnaround from the peak at 16.3% yesterday.
Trading volume remains above average and steady with 2.5 billion shares
of the S&P 500 stocks trading today. Volume rose 1% on the NYSE and
5% on NASDAQ.
The Case Schiller housing price index reported an
annualized price increase of 4.9% for May, down a touch from April's
5.0%. The Conference Board's consumer sentiment survey came in at 90.9
for July, down from 99.8.
Probably the most significant overnight event for our markets was China's markets appearing to stabilize.
My September condor on RUT at 1090/1100 and 1350/1360 closed today up 17.4%. If we had closed this position today, the Flying With The Condor™ service would be up 38% year to date.
The
FOMC meeting began today. Everyone will be watching the announcement
tomorrow afternoon closely. It fascinates me how the guests and hosts on
CNBC are so confident that they know when the Fed will increase interest
rates. Confidence sells.
