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The FOMC released the minutes from the last meeting this afternoon. At first, the market rallied, but it didn't take long for that spike to dissipate and the markets closed roughly unchanged. SPX lost two dollars to close at $2126, while RUT gained two dollars to close at $1258. Volatility remained unchanged with the VIX at 12.9%. Trading volume contracted with 1.9 billion shares of the S&P 500 stocks trading. Volume declined 5% on the NYSE and was flat on NASDAQ.
The Fed's announcement continued the theme started by Yellen a few days ago with this phrase, "valuations remain stretched for some asset classes". Maybe that phrase poured cold water on the initial bullish response to the minutes.
SPX remains above the old resistance level of $2120, but it appears to be softening, unable to hold the new highs. Maybe we are in for a repeat of late February and late April, when the markets hit new all-time highs, but then pulled back into the trading range.
April's housing starts were announced yesterday with an annualized rate of 1135k, the highest number in seven years. Building permits followed alongside with 1143k, up from last month's 1038k. Tomorrow brings the unemployment claims data, but that isn't likely to move this market; those numbers appear to be stabilized and in a slow decline.
My July iron condor on RUT is now up 11% or about half of its maximum potential gain. This position is delta neutral with a delta of -$2 on twenty contracts and theta of +$45.
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SPX closed at $2129, up $6 and establishing a new all-time high for the S&P 500 Index. RUT is still lagging behind, but it did accelerate today, breaking through its 50 dma (finally), and closing at $1258, up $14. Volatility closed up a fraction of a point with the VIX closing at 12.7%. Trading volume fell off with 1.7 billion shares of the S&P 500 stocks trading. Decreased trading volume after option expiration this past weekend is normal, but 1.7B remains a low volume number. Trading volume contracted 15% on the NYSE and 3% on NASDAQ.
In short, we are still in this odd space of "sorta bullish". The blue chips are trading higher, but on reduced volume. The small caps are trading higher but only broke out above their 50 dma today.
My July iron condor position on RUT at 1120/1130 and 1360/1370 is up $82 per contract or +10% on capital at risk. This brings our year to date performance in the Flying With The Condor™ service to +25%.
The market trend is bullish, but be sure to have stops in place for all of your bullish trades. It remains a nervous market.
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The bulls looked pretty strong today, making large advances across the board - but on relatively weak trading volume. SPX gained $23 to close at a new closing high of $2121. RUT is still much lower relatively on its price chart. RUT gained $13 to close at $1245, but it hasn't even broken its 50 dma yet. The VIX contracted by another full point to close at 12.7%. Trading volume was down modestly with the S&P 500 stocks trading for 1.9 billion shares. Trading on the NYSE was down 1%, but trading was up 4% on NASDAQ. This amounts to pretty modest trading volume for a break-out. The bulls are making a run to break out of this sideways consolidation trading range; can they do it this time? Tomorrow's open on SPX will be a key indicator. Will traders take profits and hide, or confidently buy?
Initial unemployment claims came in at 264k, almost exactly as last week at 265k. And the number of continuing unemployment claims came in precisely at last week's number, 2.229 million. The Producers Price Index (PPI) came in with a 0.4% decrease for April, a change in the wrong direction from last month's +0.2%.
I will be watching the opening tomorrow of both SPX and RUT. If RUT doesn't jump on this bullish bandwagon, it throws doubt on the prospects for a bullish break-out. Historically, small caps lead the bullish markets.
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The markets almost appear to be teasing us once again. The more I trade, the more the market seems like a living, breathing malevolent beast. I need professional help. But I digress. SPX closed at a new high yesterday and I was watching the open this morning for a clue as to the future direction - break-out or not? SPX opened this morning at $2122, one dollar higher, but then dropped back a bit to $2117 and then recovered to close at $2123, up $2 for the day. In short, it was a boring day in the markets with an open and close very close to each other. RUT behaved similarly, declining $1 to close at $1244. Volatility continued to decrease with the VIX closing at 12.4%. But this leaves us with the question of whether or not the bulls are going to finally break out to new highs or pull back into the trading range.
Industrial production reported at a decline of 0.3% for April, equal to the decline in March. Capacity utilization for April declined slightly to 78.2% from March's 78.6%. The University of Michigan's consumer sentiment survey reported out at 88.6% for May, down from April's 95.9. Maybe the lower gas price euphoria has dissipated.
So we will wait until Monday to see if the bulls can push this market out of the consolidation range. In the meantime, enjoy your weekend.
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The markets opened higher this morning, but had given up most of those gains by late morning. Then we wandered sideways and slightly lower into the close. SPX lost one dollar to close at $2098. RUT also lost a dollar, closing at $1232. Volatility was unchanged with the VIX closing at 13.8%. Trading volume was slightly higher in the S&P 500 stocks with two billion shares, just below the 50 dma at 2.1B. Trading increased 2% on the NYSE and decreased 2% on NASDAQ.
Retail sales were flat in April (zero change), after a 1.1% growth rate in March.
The markets feel like old champagne (very flat). The longer this persists, the more likely the move higher or lower will be strong. The coiled spring analogy is historically accurate.
