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The markets opened in the red this morning and basically chopped sideways all day. If you were waiting for a correction, this certainly wasn't it, since we saw only very modest losses today. SPX dropped off $3 to close at $1561 and RUT lost $1 to close at $952. VIX ended the day unchanged at 11.4%, so traders haven't changed their bullish outlook.
As one might expect for a quadruple witching expiration, trading volume was elevated today with 3.5 billion shares of the S&P 500 stocks. Trading on the NYSE was up 106% and trading volume increased 33% on NASDAQ.
Many economists have been predicting that the flood of monetary stimulus by the Fed will spur inflation, but minimal evidence has appeared thus far. Yesterday's PPI report came in with an increase of 0.7% and the CPI came in today with an increase of 0.7% for February. Is this the beginning of some inflationary pressure? If so, this could force the Fed's hand sooner rather than later.
Industrial production increased 0.7% in February and capacity utilization ticked up to 79.6 for February from 79.2. The University of Michigan consumer sentiment numbers for March decreased to 71.8 from 77.6. The Empire manufacturing survey decreased to 9.2 for March from the previous month's 10.0. So the economic data today was mixed, and some suggested that the softening consumer sentiment data was the cause of today's market weakness but, in the absence of much more negative data, this bullish rally appears very solid.
SPX settled at $1557.08 and RUT settled at $953.58 for March. This confirms the worthless expiration of my March 810/820 put spreads, locking in an 8% gain for my March iron condor position.
Enjoy your weekend.
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Markets opened strongly this morning, presumably boosted by the unemployment claims data. SPX jumped about $6 out of the box and then climbed a bit more in afternoon trade. What was a little surprising was a bump of over a dollar in literally the last minute of trading. On the one minute chart, SPX had traded down to $1562 and then jumped to a little over $1563 in that last minute. I'm not sure what caused that last minute spurt. SPX closed at $1563, up $9 and just under its all time high of $1565. RUT showed the same last minute spurt and closed up $9 at $953. Trading volume was up from yesterday, but remains relatively low. Trading in the S&P 500 came in at 2.2 billion shares as compared to the 50 dma at 2.6B. Trading on the NYSE was up 13% and trading volume on NASDAQ was up 5%.
The initial unemployment claims came in at 332k, down 10k and this surprised analysts who were predicting a good result, but not quite this good. Continuing unemployment claims also dropped to 3.0 million, down 89 thousand.
I will be watching tomorrow to see what happens if SPX punches through $1565 or hesitates before making that break-out. No one can deny the strength of this bull market, but one has to worry about the potential bad news out of Washington with respect to the debt ceiling debates and the debt rating agencies standing in the wings. I continue to be concerned about a sudden and severe pull back. We'll see.
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The markets were pretty lazy today and started out in the hole but moved into positive territory by noon. SPX made a new high at $1556, up $5 on the day, but RUT closed flat on the day at $943. It seems like this market is slowing as SPX moves closer to its historic high. Now the question (for me at least) becomes how this market consolidates these highs - a big correction or just a sideways move for a while? A correction is more likely if we get surprised by some bad news; in the absence of that, maybe today's market is more typical: small gains and small losses for a few weeks or months.
Trading volume continued to be pretty weak; trading on the NYSE dropped off 13% and volume was up 1% on NASDAQ.
There wasn't any economic data to move markets today, and I don't see any market moving data coming out this week, although a surprise is always possible. Retail sales will be released Wednesday; unemployment claims and PPI report on Thursday and then CPI comes out Friday.
In the meantime, the market grinds higher??
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I am in Phoenix and will be traveling back to Chicago later today, so I am posting my blog early, before the market closes. I was invited to speak for the POINT options trading group here in Phoenix last evening. For any of you who live in this area, I recommend you check out this group - a very knowledgeable and supportive group of options traders. If I lived down here, I would be part of this group.
With a little over two hours until the market closes, SPX is trading at $1555, up $2 and RUT is trading at $943, up $3. Trading volume remained relatively low yesterday with about 2.3 billion shares of the S&P 500 stocks trading. In fact, trading volume in the S&P 500 has only touched the 50 day moving average once in the last ten trading sessions. And the preliminary indications suggest another low volume trading day today. Perhaps I am not the only trader that remains a bit apprehensive of this market, in spite of a continuing push higher. The markets traded lower this morning, but then recovered to begin making gains by late morning, but the trading volume remains low.
If you take a look at the SPX chart, you have to be impressed with those lower shadows on the candlesticks the past few days. SPX has started out weaker the last three mornings and dipped down to around $1548 before recovering, but that level is holding so far. This shows the underlying bullish strength of this market, while the sideways trading at low volume is characteristic of the market's weariness after such a strong rally upward. Markets always take pauses on their climbs higher; sometimes those pauses take the form of a strong correction; sometimes the market just trades sideways for a period of time - the so-called "consolidation" phase.
Retail sales came out with a gain of 1.1% for February, surprising analysts with this strong showing - but the markets opened weakly on the backs of that data. I don't recall a market environment quite like this. The strong gains we have seen recently would normally be causing euphoric excess - the classic "betting the farm" syndrome. But traders recognize the Fed's supporting role in this rally and seem to be nervous that the punch bowl will be taken away and spoil the party. The market's reaction to the Italian elections a couple of weeks ago demonstrates the nervousness of this market. Be careful.
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The non-farm payroll report, aka the jobs report, was generally more positive than expected with 236 thousand new jobs. The unemployment rate dropped to 7.7%, but a large factor in that drop was 130 thousand people dropping out of the search for work. One of the quirks of our government's method for calculating unemployment is that they use a survey of households to determine the labor force participation rate - as that number decreases the unemployment rate decreases. We don't count as unemployed those people who have given up searching for work. If the labor participation rate were 66%, as it was in December of 2007 before all hell broke loose, the unemployment rate today would be 10.7%. That may help you reconcile what you are seeing in your neighborhoods with the published unemployment rates.
A large factor in the increase in the jobs number was a bump up in construction due to a rebounding real estate market. And that is certainly welcome news. The positive jobs report surprise continued to fuel this bullish market run even higher. SPX tacked on another $7 to close at $1551 and RUT closed at $943, up $8. VIX dropped another half point to 12.6%.
Trading volume continues at anemic levels. Trading in the S&P 500 was 2.4 billion, still below the 50 day moving average. The last time we saw above average volume was on February 25th when the market pulled back, and the following day when it bounced. Trading on the NYSE dropped 1% and decreased 4% on NASDAQ. This trading volume picture seems odd. I see reports of the individual investor returning to the markets and bonds being sold to move to equities. That is consistent with a bull market, but where is the trading volume?
I applied my Two Sigma Rule to the March position today, but the 810/820 put spreads are far, far OTM, so I left them open to expire worthless. I closed the call spreads a little over a week ago.
Enjoy your weekend.
