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It was only one week ago that we noted that SPX had bounced off support at the 50 dma; then SPX headed back up and challenged earlier highs around $1465. But that challenge failed and led to the huge decline Friday, closing at the 50 dma. Then SPX traded down as low as $1422 today before clawing its way back to close near the 50 dma at $1434. It was a quick round trip. SPX closed at $1434, up $1 and RUT closed at $821 down less than a dollar. If you look at the one minute chart, you will see that the last hour of trading saved the day for SPX. It appears we are trading in the $1430 to $1465 range in roughly one week cycles back and forth. Perhaps this is the pre-election dance?
Trading volume dropped off dramatically with 2.4 billion shares of the S&P 500 trading; trading on the NYSE declined 30% and volume dropped 26% on NASDAQ.
My Nov iron condor stands at a P/L of +$1,500 with position delta = +$48 and position theta = +$60. It will be interesting to watch AAPL this week through both a new product launch and an earnings announcement. After hitting that low at $610 Friday, AAPL was up over $24 today. And analysts wonder why individual investors are hiding under the bed?
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GOOG inadvertently released its earnings announcement during the trading
session today and spooked the markets. Trading opened a little weak
this morning based on weak unemployment claims data (388k vs. last
week's 342k), but had rebounded until about 12:30 pm ET when the GOOG
earnings announcement surprised the market. GOOG tumbled and then
trading in GOOG was halted, but the market averages tumbled with GOOG
and then continued for a couple of hours before recovering some of their
losses before the close. SPX closed down $4 at $1457 and RUT lost $5
before closing at $837. Trading volume bumped up a bit with 2.9 billion
shares of the S&P 500 (GOOG alone traded 12 million shares). Trading
on the NYSE increased 5% and trading volume on NASDAQ increased 15%.
Despite all of the excitement surrounding Google, volatility remained calm with the VIX at 15%.
My
Nov iron condor on RUT stands at a net gain of $1,800 with position
delta = +$13 and position theta = +$64. It will be interesting to see if
the GOOG debacle and Microsoft's earnings disappointment pull this
market back down tomorrow, or if it rebounds after today's GOOG shock.
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After the mildly positive jobs report about ten days ago, SPX tried to break through resistance at $1465 to new highs, but could not hold those levels. Ever since then, the market has been slowly deteriorating. But SPX has been testing support at $1430 over the past four sessions and it has held. Today, SPX opened at $1429, traded as high as $1441 and closed near that high at $1440. RUT ran up $5 to close at $828. And this occurred on higher volume with 2.6 billion shares of the S&P 500 stocks trading. Trading volume on the NYSE was up 9% and trading on NASDAQ was up 2%. VIX dropped almost a full percentage point to 15.3%.
Retail sales for September came in with an increase of 1.1%. The Empire Manufacturing Survey reported a drop of 6.2, but that was better than the previous month's -10.4. At this point, I'll take "less bad" as an improvement.
My Nov iron condor on RUT stands at a P/L of +$1,480 with delta = +$28 and theta = +$60.
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I speculated that support in the form of the 50 dma on SPX had held yesterday. Today's price action was certainly very convincing that the market has bounced off support and the bullish trend is very much alive. Should we"go all in" as the poker players say? I don't think so. I really am an optimist in my daily life. I'm not the pessimist that expects everyone I deal with to cheat me, and is pleasantly surprised when things turn out well. But one has to have his or her rose colored glasses firmly in place to ignore the serious economic issues facing this country and the world. So I may place some bullish trades (I did enter a Dec 660/690/720 call butterfly on AAPL yesterday), but I am still cautious and watching this market very closely. If nothing else, I think the high frequency trading crowd has given this market a higher level of volatility than ever seen historically - that alone gives me pause. SPX was hot today, rising $15 to close at $1455 and RUT followed right along, closing up $7 at $835. VIX traded down early, but ended the day unchanged at 15.2%.
One likes to see increased volume to reinforce the observed trend direction. And trading volume inched up today with 2.6 billion shares of the S&P 500 trading. Trading on the NYSE increased 6% and volume moved up 10% on NASDAQ.
The CPI was released with a rise of 0.6% for September. Industrial production turned positive at 0.4% up in September - a big change from the previous month's 1.4% decrease. And capacity utilization edged up to 78.3% for September from 78.0% last month.
My Nov iron condor on RUT is nearly delta neutral with a net gain of $1,660 with position delta = +$22 and position theta = +$61. We are up almost 10% with 30 days to go until expiration. That's a pleasant change from the struggles managing my condors in September and October.
One cannot deny the bullish trend of the current market, but pick your positions carefully and manage the stops conservatively. This market will react badly to the next negative news item coming out of Europe.
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SPX popped up at the open today, but couldn't hold those levels. By noon it had broken support at $1430 and repeatedly tested that level all afternoon, closing at $1429, down $4. RUT was even weaker, losing $7 to close at $823. Trading volume dropped with 2.5 billion shares of the S&P 500 trading today. Trading volume on the NYSE dropped 11% and trading decreased 3% on NASDAQ. VIX increased about one half of a percentage point to close at 16.1%.
SPX closed today right at support and the 50 day moving average. The market has dropped enough at this point that one either has to say the upward trend line since June has been broken or significantly redraw that trend line. If SPX breaks support at $1430, the next support at $1420 looks pretty weak; the next solid support is around $1400. So if we can't hold $1430, we may see $1400 in short order.
The University of Michigan consumer sentiment numbers came in very upbeat at 83.1, a big jump from last month's 78.3. The PPI increased 1.1% which was lower than last month's 1.7% rise, so that was reassuring to analysts watching for signs of inflation.
I closed the 790/800 puts in my Oct condor today. This leaves the Oct 900/910 call spreads to expire worthless next weekend. Assuming those spreads expire worthless, my October iron condor will post a loss of $320 or 2% on 20 contracts. The Nov condor stands at a P/L of +$1,100 with delta = +$37 and theta = +$56.
Have a great weekend.
