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After yesterday's surprising plunge, markets bounced back today with SPX tacking on $6 to close at $2115 and RUT gaining $7 to close at $1259. But trading volume fell off with 2.2 billion shares of the S&P 500 stocks trading. Trading volume increased 4% on the NYSE, but fell 6% on NASDAQ. The increase in VIX yesterday was recovered today as VIX fell about three quarters of a point to 12.4%.
The Case Schiller housing price survey gave us positive news today with a 5% increase in prices for February, up from January's 4.5% rise. The Conference Board's consumer confidence survey came in at 95.2 for April, down from March's 101.4, but this remains a very high level.
The market is treading water, waiting on the FOMC announcement tomorrow. We may see some volatility in prices tomorrow afternoon. Look at the candlesticks on SPX and RUT for the past week to ten days. There are many long upper and lower shadows on those candlesticks, denoting price extremes intraday that do not hold up into the close. In other words, the market is showing a lack of direction. Every time the bulls take charge and push prices higher, the bears pull it back, and vice versa. One could argue that this is a pretty accurate description for the market year to date. Many analysts were predicting a poor earnings season would tip this market over to the bears, but that hasn't happened. By and large, earnings are close to historical norms for the percentage of companies beating estimates so far. While the bulls appear to remain in control, the threat of the Fed increasing interest rates at some point seems to be holding traders in check. They are bullish, but nervous.
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The markets opened in positive territory this morning and SPX ran up to $2126 by 10 am ET, but then started a steady slide lower to close down $9 at $2109. RUT was much weaker with a decline of $15 to $1253. Volatility increased almost a full point to 13.1% on VIX. Trading volume increased with 2.4 billion shares of the S&P 500 stocks trading today. Volume increased 1% on the NYSE and increased 13% on NASDAQ (Apple frenzy?).
There was no significant economic news but there was a sell-off in biotech stocks, although no one seemed to understand why. Maybe that spooked the market. I had expected the markets to largely trade sideways until the FOMC announcement on Wednesday afternoon.
All of the financial news and CNBC coverage seemed to focus on Apple and the earnings announcement after the market closed. The financials were nothing short of spectacular and after hours trading had Apple only up a couple of dollars. That seemed surprising. Amazon doesn't even make a profit and its stock shot up $49 or 13% after its announcement last week. Go figure.
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The markets did a little stutter step out of the gate this morning, but then slowly gained throughout the balance of the day. SPX closed up $11 at $2108 (still being held by resistance at $2110) and RUT tacked on only a dollar to close at $1265. Volatility took another step lower today with the VIX closing at 12.7%, down about one half of a point. Trading volume was mixed, flat with the S&P 500 stocks, up 7% on the NYSE and down 2% on NASDAQ.
The only economic data today was the report of existing home sales for March, up from 4.89 million to 5.19 million (annualized).
My RUT condor trades continue moving along well with May up 18% and June up 11%.
Tomorrow is a big earnings day with Amazon, Microsoft, Starbucks and Google after the market close.
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The markets traded lazily this morning, but the bulls regained their strength around noon and pushed higher, with SPX briefly touching the all-time high at $2120, but it couldn't hold it, pulling back to close at $2113, up $5. RUT traded higher by $6 to $1272, but RUT didn't make it back to the highs it set last week. Volatility continues to contract with the VIX closing down 0.3 points to 12.4%. Trading volume popped up today with 2.3 billion shares of the S&P 500 stocks trading today. Trading volume rose 6% on the NYSE and increased 11% on NASDAQ.
Initial unemployment claims came in at 295k, flat with last week's 294k. Continuing unemployment claims increased by 50k to 2.33 million. New home sales dropped off from last month's annualized 543M to 481M for March.
I closed the May 1110/1120 put spreads in my May iron condor on RUT today for $0.08. That locked in a nice 17.6% gain for May and brings the Flying With The Condor™'s gains for the year to +17.1%. The June condor on RUT at 1100/1110 and 1350/1360 stood at a net gain of 11% at the close today.
I haven't seen a summary of all of the earnings announcements to date, but my perception is that the news has been better than expected. Maybe the bulls are encouraged and starting to jump back in this market.
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Let's recap: the market inexplicably takes it on the chin on Friday and then recovers virtually all of that loss on Monday. Today SPX tried to move higher, but hit resistance at $2110, the high from mid-March and pulled back to close at $2097 for a small loss of three dollars. Does this make any sense to anybody? The only constant in all of this back and forth is the continuing strength of the bulls to quickly recover from any loss. Maybe we are caught in this dance until a clear consensus appears out of the earnings announcements. RUT behaved similarly, closing down one dollar at $1264. In line with this sideways dance was an unchanged volatility index (VIX) at 13.3%. Trading volume rose modestly with two billion shares of the S&P 500 trading. Trading volume rose 4% on the NYSE and rose 5% on NASDAQ.
The remaining 1110/1120 put spreads in my May iron condor on RUT continue to slowly decay toward a maximum return of 18%. I will probably close them later this week. The June condor on RUT at 1100/1110 and 1350/1360 stands at a net gain of 10%.
Today's earnings announcements included a big disappointment for Chipotle, down $37 after hours, and a miss on both sales and earnings for Yahoo; apparently even a former Google superstar can't rescue Yahoo. Amazon and Google report Thursday; they often bring some stock-moving fireworks with their announcements. For those of you following my earnings announcement trades, I stand at an 89% win/loss ratio after nine trades this season. Tune into our next trading group meeting on May 7th for the details.
