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Stocks opened today strongly, and the rally never faltered, with SPX closing at $2069, up $22 and near its high for the day. RUT ran up $7 to close at $1203. Volatility contracted a bit with the VIX closing at 17.2%, down 1.4 points. Trading volume was up modestly with 2.2 billion shares of the S&P 500 stocks trading today, but this is just at the 50 dma. Trading was up 1% on the NYSE and was up 8% on NASDAQ.
The markets have been caught in a sideways consolidation trading range since the markets rallied out of the October correction and hit highs around the beginning of December. But this has been a choppy, volatile trading range. SPX rallied to highs around $2064 on January 9th and then again on January 22nd. SPX closed right at that level last Thursday, but couldn't hold it, dropping Friday and Monday. The bulls took charge and drove into that area again today, closing at $2069. Can they hold it this time? The levels to watch on the top side of this consolidation range are $2075, the high from December 5th and $2091, the high from December 29th. Breaking through those levels will confirm the bulls' command of the market.
The only significant economic data released today was the JOLTS job openings for December at 5.028 million, up from November's 4.847 million. Some news outlets attributed today's bullish market to positive hopes for Greece to renegotiate their debt. I'm not sure where that hope is based. All the news I see has the Euro Zone holding firm to the previous agreements. But even the so-called worst case of Greece leaving the Euro Zone isn't a danger to the Euro Zone or our markets. A consolidation range of trading following such strong advances in 2013 and 2014 shouldn't be too surprising. The difference from previous markets is the extreme price volatility. At least part of the root cause for the volatility is the unprecedented Fed QE; we are in uncharted economic territory and traders are hitting the sell button at the least sign of trouble - and Greece qualifies.
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A few years ago (was it 2012?), our markets wobbled a bit as the Greek debt issue was in the forefront of the news. But a deal was reached and life went on. Now new leaders are elected in Greece by promising a return to good times, defined as spend whatever you want and don't worry about paying it back. It makes me wonder if anyone in D.C. is watching this and seeing the writing on the wall? Greece's finance minister is returning from Europe empty handed and the probability of bankruptcy appear to be increasing. Today, Standard and Poors downgraded Greek debt from B to B- (Junk bonds to even riskier Junk bonds). Today's market wasn't ripping higher, but this news from S&P did seem to give traders pause. SPX lost $7 to close at $2055 and RUT lost $3 , closing at $1205. Volatility increased a bit with the VIX gaining nearly a half point to 17.3%.
Trading volume rose to 2.5 billion shares of the S&P 500 companies trading. Trading volume on the NYSE rose 10% and trading rose a whole 1% on NASDAQ.
The jobs report came in at a respectable +257k, but well off the larger numbers from November and December (329k). Unemployment ticked up to 5.7%. But financial reporters appear to be largely of the glass half full perception these days and glowed over the report.
The bottom line is that we continue to trade sideways. Have a great weekend.
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The S&P futures were positive early this morning, and the markets opened higher, but then immediately reversed. It was looking as though we were breaking down to new lows. But then it recovered, and by the end of the day, SPX had tacked on $26 to close at $2021, near its intraday high. RUT followed suit, closing up $10 at $1176. Volatility pulled back by a point and a half, with VIX closing the day at 19.4%. Trading volume was down a bit with 2.5 billion shares of the S&P 500 trading, but that remains well above the 50 dma at 2.2B. Trading volume decreased 13% on the NYSE and declined 11% on NASDAQ.
The ISM manufacturing index came in at 55.0 for January, flat with December (55.1). Construction spending gained 0.4% in December after a decline of 0.2% in November.
Whether you are focused on the SPX chart as a sideways trading range with a floor at $1990 or a sideways wedge with a rising lower trend line around $1995, SPX dipped outside of that pattern this morning, but bounced nicely. I don't think we should do the happy dance just yet, but it is reassuring.
My Feb iron condor on RUT at 1070/1080 and 1300/1310 is now up 12% with 17 days remaining. Those put spreads are now 1.6 standard deviations OTM, which is reassuring given this market's weakness.
It seems as though I have been shoveling snow for the past 24 hours, but today was a beautiful day with blue skies and sun sparkling off the snow, and there is a low of snow. The official count was 17 inches. I can hear some of my friends down south now, but don't you miss the seasons? Hmm...
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SPX gapped open yesterday morning, ran up over 1% and broke through the 50 dma like a champ. Today it gave about half of that back, dropping $9 to close at $2042, and closing below the 50 dma at $2044. RUT lost $6 to close at $1191, but RUT remains well above its 50 dma at $1182. Both SPX and RUT remain solidly in a sideways trading range since the market peaks in mid-December. The volatility index, VIX, declined markedly yesterday, but tacked on a point to close up at 18.3% today, probably affected by the nearly one percent decline in SPX that occurred in less than ten minutes just before the close today. That was enough to get everyone's attention. That market move was apparently in reaction to the latest posturing in the Euro Zone/Greece debt negotiations. It will be interesting to see if markets continue to be weak tomorrow morning or if this was a bit of overreaction.
Trading volume remains above average with 2.7 billion shares of the S&P 500 trading (the 50 dma is at 2.2B). Volume rose 6% on the NYSE and rose 2% on NASDAQ.
The ADP private employment report came in at 213 thousand new jobs, down from last month's +253k. This has traders worrying about Friday's jobs report. The ISM services index reported out at 56.7 for January, slightly higher than December's 56.5.
My February iron condor on RUT stands at a net gain of 15% and is almost perfectly delta neutral. As long as the markets churn sideways, delta neutral traders will be happy. But this market remains nervous, as we were reminded late this afternoon as SPX fell out of bed. Don't take your eye off the ball.
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SPX fell out of bed this afternoon and closed at $1995, down $26 and near its low for the day. RUT also dropped, closing at $1165, down $25. Volatility spiked upward with the VIX gaining two points to close at 21%. Trading volume was strong with 3.0 billion shares of the S&P 500 trading. Trading volume rose 10% on the NYSE and rose 6% on NASDAQ.
The first estimate of GDP growth for the 4th quarter issued today at +2.6%, down to almost half of third quarter growth. The Chicago PMI for January came in at 59.4, up from 58.8. The University of Michigan consumer sentiment survey for January reported 98.1, roughly flat with December. This data doesn't seem to explain the severe sell-off today.
SPX is still holding support, but is certainly looking weak. Based on the commentary from CNBC guests, it appears as though more and more analysts are throwing in the towel. If you draw the upper and lower trend lines on the SPX price chart, you get a classic wedge, and today's close is sitting on that lower trend line. This chart pattern can go either way, bullish or bearish, with a break-out through one of the trend lines. Monday's open will be interesting.
The January Barometer of the Stock Trader's Almanac is officially complete with a bearish prediction for 2015. SPX opened January at $2059 closed at $1995 today. It isn't a pretty picture. My Feb and Mar iron condors on RUT are both in the black, so that was a comfort as I watched this market tank today.
Forget this market ugliness and enjoy your weekend.
