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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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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.
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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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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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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.
