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The news out of Europe appears to be getting better with at least a temporary solution, and the markets responded accordingly. The Greek debt problem hasn't been solved, but who cares? Politicians are kicking the can down the road. SPX opened down this morning but started climbing at 10 am ET and never stopped. SPX closed at $2110, up $12, within a few cents of its intraday high. Many analysts had suggested $2100 would give resistance, but SPX motored through that level without hesitation. RUT followed suit, but not quite so strongly, closing up $4 at $1232. The VIX declined one full point to 14.3%. Today was expiration Friday, so we usually see some increased trading volume, but it wasn't significant with 2.1 billion shares of the S&P stocks, still below the 50 dma. Trading on the NYSE increased 2% and trading increased 11% on NASDAQ.
SPX settled at $2094.87 and RUT settled at $1228.33. This confirmed the closing of our February RUT 1070/1080 put spreads, resulting in an 18% gain.
For those of you that trade SPX and VIX options, be sure you note the new trading hours beginning in March. Those options will trade five days per week from 2:00 am CT until 8:15 am CT. Trading in the new hours will begin for VIX options on March 2nd, and begins March 9th for SPX. Check the CBOE web site for more information.
Enjoy your weekend.
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Markets continue to steadily move higher, albeit on weak trading volume. SPX closed at $2097, down $2. What, not another all-time high? RUT was flat at $1228. The NASDAQ composite is nearing a break of the all-time high from back in the dot com era. Volatility continues to slowly contract (with one eye on Greece, I think) with the VIX closing at 15.3%, down 0.2 points. Take a look at the candlesticks for the last three days of trading on SPX. Each day SPX has pulled back to $2090, but then bounced to close higher. These long lower shadows of the candlesticks are confirming support at $2090. The markets aren't running full out to the upside, but there is slow, steady bullish pressure.
New unemployment claims dropped down to 283k from last week's 304k, but the number of continuing unemployment claims rose from 2.367 million to 2.425 million. We have been seeing a series of small ups and small downs in this data for several months; the good news is the stability; the bad news is that unemployment seems so stubborn in this recession. What's different this time?
The Philadelphia survey of manufacturing dropped from 6.3 in January to 5.2 for February.
I allowed my RUT Feb 1070/1080 puts to go into expiration to expire worthless. They are over 12 standard deviations OTM; assuming the world doesn't end tonight, this will close the Feb position for a gain of 18%. The March condor on RUT at 1020/1030 and 1290/1300 stands at break-even.
It is interesting to watch the Greek/Euro Zone debt debate. Our national debt now stands at 74% of GDP. It was 34% in 2007. When the Greeks first required a bail-out, their debt was about 110% of their GDP.
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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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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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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.
