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Markets opened lower this morning and SPX sliced through the 200 dma and plunged to $2044 before bouncing. SPX traded higher in the afternoon and made a final push higher from about 2:30 ET until the close of trading. SPX closed at $2081, up $13 on the day and well above the 200 dma at $2055. RUT followed suit, but traded even more bullishly, closing up one dollar at $1248; RUT's 200 dma is at $1204. Volatility pulled back nearly a full percentage point, with the VIX closing at 16.1%. Trading volume spiked higher with 2.5 billion shares of the S&P 500 stocks trading today. Trading volume rose 26% on the NYSE and rose 23% on the NASDAQ.
The semi-official, or traditional start of the earnings announcement cycle starts Wednesday after the close with Alcoa. That string of announcements may take the attention off of Greece.
The only significant economic news was the May JOLTS job openings report at 5.363 million, up from 5.334 million. That doesn't look like stimulus for a buying spree. What about Greece? All of the articles I have read suggest Greece isn't offering anything new at the bargaining table, and the major powers in Europe are losing their patience with Greece. But we see a strong bounce here in our markets on stronger volume. Is this the beginning of a reversal higher?
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I checked the S&P futures late last night and it looked pretty ugly based largely on the Greek election results. By this morning, it remained negative, but not quite so bad. Then we opened and the markets dropped down but then quickly recovered. Maybe Greece isn't such a big deal after all. The Greek vote increases the probability of Greece leaving
the EU, but that prospect doesn't appear to have the same fears
associated with it now as it did several years ago, or even last week. Greek politicians have been "kicking the can down the road" for many years, but now, ordinary Greek citizens are the ones suffering.
SPX dropped down to $2058 before bouncing and closing at $2069, down $8 on the day. RUT handled Greece even better, closing down one dollar at $1247. Volatility popped up at the open, but settled lower during tarding, with the VIX closing at 17.2%. Trading volume was up a bit from Thursday with 2.0 billion shares of the S&P 500 trading. Trading on the NYSE and NASDAQ were both up 17%.
The ISM manufacturing index reported 53.5 for June, up from May's 52.8. The ISM services index reported 56.0, up from 55.7.
Perhaps we should be focusing on this earnings announcement cycle rather than Greece. We have both good and bad news. The good news is that the number of negative pre-announcements for the S&P 500 has declined to 80 for the second quarter of 2015 from 85 last quarter and 86 the previous quarter. The number of positive pre-announcements for the S&P 500 has increased to 27 from last quarter's 20. But the bad news is this: the number of companies in the S&P 500 issuing negative guidance for this quarter (80) is still above the five year average of 78, and the number issuing positive guidance (27) remains below the five year average of 33. This parallels the economic data we have been seeing - not terrible, but not booming ahead either. We continue to muddle along.
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It appears that our markets are simply not going to move until the Greek debt crisis is resolved. We have been hearing about deadlines for a deal for weeks, and the deadlines just seem to get postponed a few days. Is June 30 a solid deadline? I certainly hope so. The major indexes have retreated into their trading ranges of the past few months. SPX dropped $6 to $2102 but RUT only lost a dollar, closing at $1283. The theme of the small and mid-caps leading the market continues.Volatility increased nearly a full point to 14.1% on the VIX. That seems a little outsized compared to the market moves today - perhaps the traders losing patience are buying protection just in case this Greek saga does have some downside for our markets. Trading volume remains pretty flat with 1.9 billion shares of the S&P 500 trading (still below the 50 dma). Trading volume increased 7% on the NYSE, but decreased 2% on NASDAQ.
Initial unemployment claims reported at 271k, about flat with last week's 268k. Continuing unemployment claims increased by twenty two thousand to 2.25 million. Our unemployment numbers have stabilized very well. Unemployment numbers aren't increasing but we aren't seeing the hiring that goes with strong economic expansion. We aren't putting those people who have dropped out of the labor force back to work.
When the markets spiked upward last week, I closed the call spreads in my August 1100/1110 and 1350/1360 condor on RUT. Today, I rolled out a little farther and sold the 1360/1370 calls. This position now stands at a net gain of 2.5% with position delta = -$40 and position theta = +$66 on 20 contracts. Yesterday, I closed the July condor position for a 19% gain. The Flying With The Condor™service is now up 29% year to date.
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Now that Greece has officially defaulted and capital controls have been imposed on the Greek Banks, it doesn't seem like we are seeing European or global markets in disarray. The rumored "contagion" hasn't started yet. If the sky isn't falling, then what is going on with our markets? Has the Greek debt saga scared traders or is there something more bleak hidden within this downtrend of the past few days?
SPX bounced slightly today, but not enough to give traders any confidence. SPX gained $5 to close at $2063. RUT closed right at its 50 dma, up $7 at $1254. The VIX spiked higher this morning, but settled down to close at 18.2%, down 0.6 points. Trading volume rose a bit from yesterday's spike higher with 2.4 billion shares of the S&P 500 stocks trading. Trading volume rose 9% on the NYSE, but declined 1% on NASDAQ.
The Case Schiller housing price survey came in at +4.9% for April, essentially flat with March. The Chicago PMI reported 49.4 for June, up a bit from the previous 46.2. Analysts were predicting values of 50 to 51.
The small caps continue to trade stronger than the blue chips, which is a bullish sign. Whereas RUT closed today right at its 50 dma, SPX sliced through its 50 dma last Thursday and is hovering just above its 200 dma. SPX is trading right at the support level formed by the two pull backs in late March. The stronger pull back in early March bottomed at $2040. Breaking $2040 would raise my concern that this could turn into a true correction.
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Actually, I am losing patience with Greece and with all of the hand wringing about this miniscule problem in the world. The most valuable aspect of Greece is its object lesson for us.
In response to worries about Greece, the markets pulled back today with SPX losing $16 to close at $2109 and RUT pulling back $12 to $1284. Implied volatility jumped up over a point with the VIX closing at 13.3%. Trading volume edged up but remains below average. Trading in the S&P 500 stocks came in at 1.9 billion shares, up slightly from yesterday, but below the 50 dma. Trading volume on the NYSE increased 4% and trading on NASDAQ was nearly flat with a 0.2% rise.
The final estimate of first quarter GDP was released today at -0.2%, an improvement from the earlier estimate of -0.7%. We will get the first estimate of second quarter GDP growth on July 30th.
I closed our July iron condor on RUT today for a net gain of 19%. Our Flying With The Condor™ trade alert service now stands at a gain of 28% year to date, compared with +2.4% for the S&P 500.
Our watch of the Greek tragedy continues tomorrow (ironic that we know the ancient Greeks for those plays).
