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The markets opened downward this morning based on some weak economic data from Europe, but the bulls quickly recovered and pushed the markets upward. SPX dropped to $1514 but then rallied and closed at $1521, up $1 on the day. RUT closed up $3 at $924. Trading volume bumped up a bit with 2.8 billion shares of the S&P 500 stocks trading. Trading on the NYSE increased 6% and also increased 6% on NASDAQ. VIX declined about one third of a point to 12.7%.
Initial unemployment claims decreased by 27 thousand to 341k and continuing claims decreased 130k to 3.1 million. We have a heavy dose of economic data tomorrow with the Empire manufacturing survey, industrial production, capacity utilization, and consumer sentiment data all reporting. JP Morgan decreased their GDP forecast for 2013 from +2.1% to +1.9%, based on a pessimistic forecast of the sequestration debate in Washington.
Some of you may recall the property tax referendum in CA many years ago. The state and local governments whined and predicted all kinds of dire consequences, but once they realized it was inevitable, they found the waste in their budgets and slashed it. The firefighters and teachers remained employed after all the dust settled. Maybe sequestration will force the same hard and painful budget reductions in Washington. But I guarantee the media will carry nothing but horrible stories of what will be lost between now and March 1. Have you seen any government office that couldn't afford to cut at least 10% of their expenses? They might have to drop their cousins off the payroll, but I think it could be done easily.
In the meantime, what about this bullish rally? It looked pretty dark this morning, but the bulls didn't miss a beat and quickly turned it around. SPX does seem to have flattened here at $1520, but there are few signs of a serious correction as yet. Recent candlesticks are getting some long lower shadows, but that is the only sign of any weakness. And that may only be my imagination.
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The markets just keep on trucking higher. Today was certainly a little more muted, but there is no sign of the correction so many expect. Perhaps that consensus is the sure sign that the bull run will continue. SPX gained $1 to close at $1520 while RUT tacked on $3 to close at $921. RUT's chart continues to outpace SPX, which in and of itself is a bullish sign. However, trading volume is still weak with 2.4 billion shares of the S&P 500 stocks trading. Trading on the NYSE was flat today and volume was up 3% on NASDAQ.
SPX hit its highs in the first couple of hours of trading this morning, but then pulled back and traded more weakly the rest of the day. As SPX hit its low for the day about one hour before the market closed, the bulls rallied and pushed the market back into positive territory. SPX traded as low as $1516 and as high as $1525 before closing at $1520. Today's candlestick was the classic doji, which often communicates a balance between the bulls and bears, or a measure of indecision. But shorting this market has been a mistake for a long time, so I will want to see some confirmation before suggesting this doji is signaling a market top.
Retail sales were up 0.1% in January, which wasn't anything to write home about, but was in line with analyst expectations.
I offer a warning for any Neanderthals in the audience - tomorrow is Valentine's Day. Enjoy!
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The Standard and Poors Index broke out of its trading range to new highs this morning and held those highs into the close. But before you get too excited, note that this break-out occurred with a big decrease in volume.
SPX closed up $9 at $1518 and RUT gained $6 to close at $914. Trading volume fell off to 2.2 billion shares of the S&P 500 stocks; the 50 dma stands at 2.5B. Trading volume fell 15% on the NYSE and dropped 7% on NASDAQ. As one might expect in the midst of all of this euphoria, the VIX dropped a half point to 13.1%. Apparently, traders don't think the threat of sequestration and treasury bond downgrades are anything to be concerned about. But as Clint Eastwood said on CNBC this morning, if the politicians in Washington don't think this is a problem, why should we?
There wasn't any significant economic news today, but it appeared that the Linked In and AOL earnings announcements encouraged traders. I must admit that I don't get it.
My Feb condor continues to wander along near break-even with a gain of $339 (+2%) with position delta = -$190 and position theta = +$176. I plan to take my best friend of 45 years to dinner at our favorite place, sip a glass of wine, and try to put the market and politics behind me. Enjoy your weekend.
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SPS broke out of its recent trading range Friday, but it was on much lower trading volume. This morning SPX opened weakly, trading down as low as $1513 before strengthening to close at $1517, down only $1 for the day. RUT also dropped off $1 to close at $913. But trading volume fell off once again with only 1.8 billion shares of the S&P 500 trading today while the 50 dma is 2.5B. Trading on the NYSE dropped off by 10% and trading on NASDAQ dropped 15%.
With more and more of the talking heads predicting a pullback or correction, this market's strong bullish bias appears to continue unabated. Just as the markets opened weakly this morning, it didn't take long for the major averages to bounce back. The run since mid-November has been unusually strong, but the correction has not yet appeared. However, a few weeks of sideways trading might serve just as well to give this market time to consolidate. But the sequester deadline of March 1 is coming closer and that may provide the stimulus for a market sell-off. Or perhaps S&P will counter the Justice Department's suit with a downgrade of our treasury bonds - that would be a market moving event.
I closed the 930/940 call spreads of my February condor today for $0.35. Assuming the 820/830 put spreads expire worthless this coming weekend, that will complete the February position with a 5% gain. No significant economic news is scheduled for a couple of days, so this market may just trade as it did today - choppy and sideways. We'll see.
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The markets opened in the red this morning, traded back into the black and then traded back down until about 2 pm ET when a rally developed and ran steadily into the close. SPX closed up $1 at $1512 while RUT gained $3 to close at $911. VIX dropped about a third of a a point to 13.4%. Trading volume dropped back down today, with 2.6 billion shares of the S&P 500 stocks trading. Trading volume on the NYSE decreased 2% and volume on NASDAQ declined 7%.
As I watch CNBC, it seems that everyone is now talking about a pullback or correction. Hmm... The market usually does its best to confound the majority opinion. Maybe this bull still has legs (whether it makes sense or not).
My Feb iron condor on RUT remains roughly at break-even with delta = -$169 and theta = +$260. I find it interesting that we are not being subjected to the incessant "sky is falling" chant in the media. As the fiscal cliff was approaching, one would conclude the end of the world was upon us. But the country's debt continues to spiral out of control, the President denies we have a spending problem, the economy continues to sputter, and we can't even muster enough responsibility to pass a budget.
But some of you connoisseurs of fine literature may recall Alfred E. Neuman's wise words, "What - me worry?"
