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Ho hum. I expected a slow day on the street today and I wasn't disappointed. SPX lost $7 to close at $2074, but RUT gained $2, closing at $1242. Volatility was unchanged with the VIX closing at 15.7%. Trading volume was anemic with 1.9 billion shares of the S&P 500 stocks trading. Trading volume was down 5% on the NYSE and up 1% on NASDAQ.
The only economic news for the day wasn't reassuring. Housing starts fell markedly in February, down to an annualized rate of 987k, down from 1081k. You might think this was weather related, but that was only part of the story; the decline was present across the country. Building permits held steady with 1092k in February, up a bit from last month's 1060k.
Tomorrow may be a volatile day in the markets with so much attention focused on the FOMC and the prospect of increasing interest rates. This topic has taken on "bogeyman qualities", with traders and institutions behaving as though the Fed will move interest rates from zero to 10% overnight and crash the economy. If you don't believe me, tune in to CNBC tomorrow afternoon and listen to the breathless commentary surrounding whether the word, "patient", is present in the announcement.
My April iron condor on RUT at 1110/1120 and 1310/1320 is delta neutral with delta = $1.50 per contract, and stands at a net gain of 7.3% with 30 days to expiration. We closed the March position last week, locking in a 9.5% gain.
Get your popcorn ready, tomorrow afternoon should be interesting. Or maybe it turns out to be a non-event. The market likes to fool us.
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The markets roared back once again - how many times is this "buy the dip" strategy going to work? It will be painful when it doesn't. SPX gained $28 to close at $2081. RUT wasn't quite as enthusiastic, but then again, it didn't fall as far either. RUT closed at $1240, down $8. Volatility contracted a bit with the VIX dropping almost a half point to 15.6%. But it wasn't a super-enthusiastic rally. Trading volume declined across the board with two billion shares of the S&P 500 trading and trading declined 5% on the NYSE. Volume also declined 8% on NASDAQ.
The Empire manufacturing survey came in at 6.9 for March, down from February's 7.8. Industrial production increased 0.1% in February, somewhat better than January's 0.3% decline. Capacity utilization dropped off a bit in February, from 79.1% to 78.9%. Housing starts and building permits issue tomorrow and then the big kahuna, the FOMC announcement, on Wednesday. Did traders get a hint of that announcement and that set off the rally?
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The divergence between SPX and RUT yesterday appears to have been an early warning signal for the return of the bulls, but I wouldn't bet the farm on it just yet. SPX gained $26 to close at $2066, just barely above the upper edge of the January trading range. RUT popped up $21 to $1237. And the VIX dropped one and a half points to close at 15.4%. So everything appears to be on the bulls' side, except trading volume. Trading in the S&P 500 stocks was slightly better than yesterday at 2.2 billion shares, right at the 50 dma. Trading volume was down 1% on the NYSE and up 2% on NASDAQ.
I expected retail sales to push this market one way or the other, but I was wrong. Retail sales came in this morning down 0.6% for February, slightly better than January's 0.8% decline. Initial unemployment claims decreased to 289k from last week's 325k, but that is roughly where it has been running for several months now. Continuing unemployment claims decreased five thousand to 2.4 million, essentially unchanged.
Today's pop in the indexes pushed my March condor on RUT to an almost perfectly delta neutral stance (+$4 on 20 contracts). The net P/L at the close was +11%. I will likely close the position tomorrow to free up capital for another position. The April condor is up 5% with position delta of -$19 on 20 contracts.
The PPI and the University of Michigan consumer sentiment data come out tomorrow, but those aren't normally market-moving events.
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Once again, we see the market whip higher one day and then give it all back the next. It wasn't quite that bad, but it does wear on you. SPX closed down $13 today at $2053, after gaining $26 yesterday. RUT lost $5 to close at $1232. Volatility rose a bit with the VIX closing up 0.6 points at 16.0%. At the worst of it today, SPX did in fact give back all of yesterday's gains, but it recovered somewhat in the last hour of trading this afternoon. Trading volume was flat to slightly higher with 2.1 billion shares of the S&P 500 stocks trading today. Trading volume was up 7% on the NYSE, but flat on NASDAQ.
The Producer Price Index (PPI) came in with another negative number for February, -0.5%. This was not quite as bad as last month's -0.8%, but this consistent string of low to negative numbers is beginning to alarm economists who fear a deflationary environment, similar to what Japan has suffered through for the past ten or fifteen years. This probably comes in on the delay raising interest rates side of the Fed's scorecard. The University of Michigan's consumer sentiment survey continues to be pretty high at 91.2 for March, down from 95.4 in February.
I closed my March iron condor on RUT at 1050/1060 and 1290/1300 today, locking in a gain of 9.5%. Both spreads passed my Two Sigma Rule, but the swings of this market back and forth have me a little concerned, so I decided to lock in a nice gain and go to cash. My April position stands at a net gain of 5% today, but this position has more room for adjustments if they prove necessary, so I am more comfortable with that position.
Have a nice weekend. It is actually teasing us here in Chicago with almost warm weather - not really, but at least the snow is melting and I can see the sun.
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I was surprised to see SPX and RUT move in opposite directions today. SPX closed lower by $4 at $2040, but RUT actually traded higher, closing at $1216, up $7. The VIX increased by a couple of tenths to 16.9%, so there wasn't much change there. Trading volume fell on all fronts, with 2.1 billion shares of the S&P 500 stocks trading today, below the 50 dma of 2.2B. Trading volume declined 7% on the NYSE and declined 3% on NASDAQ.
There wasn't any significant economic data issued today, but we will get both retail sales and the weekly unemployment numbers tomorrow. A solid retail sales number could calm this market, but recent retail sales data have been weak.
Perhaps this mixture of a lower SPX with a higher RUT suggests an equilibrium being reached? If so, maybe we are back into the sideways trading range from January. But a weak retail sales number tomorrow could easily push us lower to test that 200 dma on SPX around $2002.
My March condor on RUT stands at a net gain of 6.2%; the delta of the short 1160 put is 8 today. It is borderline whether we will close the put spreads Friday with the Two Sigma Rule. If volatility expands, we will be closing the March put spreads; if not, we may be able to safely leave them open through the weekend.
