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The bulls are still in charge. SPX closed slightly down less than a dollar, but holds at the all-time high of $2100. RUT continued to pile on with another all-time high, closing at $1228, up $3. The VIX opened higher this morning at 16.7%, but steadily declined to a close at 15.5%. As we observed last evening, the bulls are cautious and trading volume remains low and declining with 2.0 billion shares of the S&P 500 trading. Trading volume declined 4% on the NYSE and coincidentally, trading volume also declined 4% on NASDAQ.
The FOMC released the minutes from the last meeting this afternoon, but it didn't appear to have much effect on the markets. Most of the analysis I saw after the close blamed the weaker close of today's market on the Fed minutes, but if one takes a look at the one minute chart, he will see that the market rallied after the minutes were released. It is fair to say that markets were largely trading sideways before the announcement and SPX gained modestly after the announcement. The main news from the announcement is that the FOMC may begin to raise interest rates later than many believed, perhaps into the third or fourth quarter this year.
Housing starts for January came in at 1065 thousand, slightly less than December's 1087k. Building permits followed suit with 1053k, down slightly from 1060k. The PPI declined 0.8% in January, somewhat more than December's 0.3% decline. Capacity utilization was flat at 79.4%.
So we will watch as the market continues this slow grind higher. Unless Europe implodes, or something similar happens, it appears that the bulls will carry the market higher yet. Maybe I just jinxed that rally...
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For the second day in succession, the S&P 500 Index set a new closing all time high. Today SPX closed at $2100, only up $3, but that was enough for the record. RUT increased $2 to close at $1225. It is interesting to note that SPX set a high on Friday and the VIX dropped dramatically to 14.7%, back in the range of volatility in November and December after the correction was over. Today, VIX gapped open higher at 15.9% and closed essentially unchanged at 15.8%. I suppose the Greek debt negotiations have traders a bit on edge, but they are still buying stocks. The bulls are in charge. But the bulls are cautious. Trading volume remains sluggish with only 2.1 billion shares of the S&P 500 stocks trading; the 50 dma = 2.3 B. Trading volume declined 5% on the NYSE and dropped 9% on NASDAQ. Setting new all-time highs on lower volume isn't the most bullish scenario.
I sold new call spreads to complete the March iron condor position on RUT. I had closed those calls Friday for fear of a big spurt on Tuesday morning if Greece had reached an agreement over the weekend and then global markets traded up while ours were closed Monday. As it tuned out, that wasn't necessary, but with today's rise in volatility, I saved about $35 per contract by closing the old spreads Friday. Fortunately my March put spreads at 1020/1030 are about three standard deviations OTM, and I am not going to roll them upward. I think a sudden correction is too probable with Greece and Ukraine bubbling.
So we continue to trade bullishly with one eye peeled for some problem coming at us from Europe or wherever.
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If you detected some cynicism in my blog title, you know me well. I feel like this market has jerked me around so much of late with these so-called "V-bottom" corrections, I am skeptical of every market move. It is true that a basic underlying bullish bias has been present in the market over the past two months as it chopped sideways. There were several opportunities for the bears to make their case, but they couldn't do it.
SPX closed up 20 points today, closing within striking distance of all-time highs. RUT gained $15 to close at $1216, again nearing its all-time high. Volatility pulled back significantly, with the VIX losing 1.6 points to close at 15.3%. Consistent with all of this bullishness, trading volume was higher with 2.3 billion shares of the S&P stocks trading (but that isn't much above the 50 dma at 2.2B). Trading increased 4% on the NYSE and increased 16% on NASDAQ.
IBD returned their indicator to "Confirmed Uptrend" yesterday, so today's market fell right in line.
The weekly unemployment claims numbers came in at 304k, up a bit from last week's 279k. However, continuing unemployment claims decreased by 51k to 2.354 million. The University of Michigan's consumer sentiment number comes out tomorrow, and that is likely to stay pretty optimistic, given the lower gas prices. The only thing that may derail this bullish run is Greece, even though I consider that to be more of a tempest in a teapot. But the market has been nervous about those debt negotiations and the prospect of Greece leaving the EU. We'll see.
The exchanges will be closed Monday, so sell those credit spreads in the morning if you didn't think to do it today.
Have you prepared for Valentine's Day?
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SPX continued its ride higher, closing at $2095, up $6. RUT closed up $7 at $1223. And NASDAQ and all of the other indexes followed suit. In fact, if you looked at the small cap indexes and compared them to their big brothers, there was a pretty clear "risk on" trend. The bullish break-out is alive and well, and traders are excited. As you might expect, volatility dropped to its lowest level this year, closing down seven tenths of a point at 14.7%. The only negative sign was declining trading volume. 2.1 billion shares of the S&P 500 stocks traded and trading volume declined 5% on the NYSE. Trading on NASDAQ was down 6%.
On the other hand, we are looking at a three day weekend of the type where our markets are the only ones closed on Monday. So you can have huge pent up demand to push stocks one way or the other Tuesday morning, depending on what happened over the weekend and on Monday. Now add Greece and their negotiations with the Euro Zone. I can think of many possible scenarios that could result in a big move Tuesday morning.
Now you can see why I closed the call spreads on my February iron condor on RUT today; they were 2.8 standard deviations OTM, but I decided that saving the five cents it took to close them wasn't worth the risk of giving up more on Tuesday. I left the put spreads open; they are almost five standard deviations OTM. Assuming the put spreads expire worthless next weekend, the February position closes for a gain of 18%.
I also hedged my risk on the March position by closing the RUT 1270/1280 call spreads; this brings my position to break-even. It will return to a potential profit after I sell new call spreads next week. But, in the meantime, I will sleep better.
Have a great weekend.
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Today's market wanderings were blamed on Greece (again). The markets were flat with SPX unchanged at $2069. RUT lost $2 to close at $1202. Trading volume was also flat with 2.1 billion shares of the S&P 500 trading. Trading volume declined 2% on the NYSE but was flat on NASDAQ. Volatility came in a bit with the VIX closing at 17.0%, down about three tenths of a point.
There wasn't much in the way of economic data today. Tomorrow brings the unemployment claims and retail sales reports.
If you look at the SPX chart, you will note that the market tried to jump back on the bull bandwagon twice in January and was pushed back at $2065. Yesterday, SPX finally closed above that level, but today SPX dipped as low as $2058 before recovering to close at $2069. Technically, it remains above that resistance level, but I remain to be convinced. The battle between the bulls and bears remains very balanced at this point. It could go either way - or maybe we will just continue to wander sideways as we have for the past two months. It remains a stock picker's market.
My February iron condor on RUT stands at +18%, close to its maximum gains at 19%. I will close this position this week and take the risk off the table. The March condor is down to 36 days to expiration and is up 3% as of today's close.
