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Markets traded up again today after an extremely strong Friday, but volume fell off even further. SPX gained $3 to close at $1394 and RUT closed at $794, up $6. But trading volume fell to 2.2 billion shares of the S&P 500; trading on the NYSE decreased 15% and volume fell 12% on NASDAQ. SPX was up higher during the trading session, but gave back about half of its gains in the last half hour of trading. RUT ran as high as $797 before pulling back. That $797 level was the high on July 29 and 30 before the markets traded back down in the last cycle. That raises the question of whether this market can trade higher from here. Perhaps traders see the next FOMC meeting in September as too far away, so they are pulling back in their exuberance based on expectations of another round of quantitative easing. Declining volume at least supports that thesis. VIX remained essentially unchanged at 16%.
No economic news or reports came out today and it looks like a slow week for significant economic data being released. But Europe is the wild card; who knows what might happen or what Mario might say from day to day?
My Aug iron condor on RUT is up $2,340 on 20 contracts with position delta = -$22 and position theta = +$83. My Sep condor stands roughly at break-even with position delta = -$74 and position theta = +$92.
It is said that markets love to climb a wall of worry. If so, this market should have higher to go because we certainly have plenty to concern us: our weak economic recovery, the prospect of a second recession, Europe's sovereign debt situation leading to a global economic malaise, etc. My view is that we will continue with these mini-cycles up and back down with little forward progress. I always get cautious as I enter the August to October time period - it seems like bad things tend to happen this time of the year.
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Wow! That train left the station in a hurry! SPX gained $26 to close at $1391 and RUT stayed right in line with a $20 gain to $788. Surprisingly, trading volume wasn't up. Only 2.5 billion shares of the S&P 500 stocks traded today, down from yesterday's 2.8B and below the 50 dma at 2.7B. The VIX lost 2 points and ended the day at 15.6%. SPX powered through resistance at $1375 and broke the highs of a week ago. Now the resistance set at $1405 back in May is in sight. Can it break $1405? We'll see.
The non farm payrolls report, or the jobs report, started this ball rolling this morning with an announcement of 163 thousand new jobs in July, up from last month's anemic 64k. But unemployment stubbornly refuses to give in, rising to 8.3% - only a tenth of a percent, but not in the right direction. If hot air created jobs, we'd have a bunch of them; just look at all of the fuss over Chick-fil-A. Shame on them for creating all of those jobs. I guess free speech is no longer protected here.
The ISM Services Index also reported out today at 52.6, up slightly from June's 52.1. In spite of today's huge market run, the economic data remains pretty weak. I look for a bit of a correction next week, but maybe I'm wrong. Fortunately, my iron condor trading doesn't depend on my market forecasts being accurate. My Aug iron condor is up by $2,440 and the position delta on 20 contracts stands at -$11 with theta = +$41. Our Flying With The Condor™ service is up 35% so far this year and, if I count the gains from the open August position, we are crossing the 40% mark.
Enjoy your weekend. Express your opinions, but do it politely. And don't throw any red herrings into the discussion. That doesn't further the search for truth.
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The markets continued to basically tread water today, waiting to see if a new round of easing might come out of the Fed tomorrow. SPX closed down $6 at $1379 and RUT lost $5 to close at $787. Trading volume bounced upward today with 2.7 billion shares of the S&P 500, just under the 50 dma; trading on the NYSE was up 22% and trading volume on the NASDAQ increased 20%.
We had some modestly good economic data today, but no one was listening. The Case Schiller housing price index declined much less in May with a 0.7% decline (it dropped 1.9% in April). The Chicago PMI came in at 53.7 for July, up from last month's 52.9. Consumer confidence also rose to 65.9 in July, up from 62.7.
My Aug condor continues to build gains with a net gain of $2,260 with position delta = -$30 and position theta = +$46 (20 contracts). All eyes will be on the Fed tomorrow, but we may still see some reticence from traders with the jobs report looming Friday.
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Everyone was focused on the FOMC announcement this afternoon and the markets traded downward immediately after the announcement. SPX lost $4 to close at $1375. Interestingly, RUT didn't react to the Fed announcement, but then traded off very strongly in the last thirty minutes; RUT lost $16 to close at $771. VIX remained unchanged at 19%.
The FOMC announcement was almost identical to the last one, but appeared to be a little more negative in describing the state of the economy and used slightly stronger language about a possible intervention. That disappointed many traders who had positioned themselves bullishly in anticipation of another round of quantitative easing.
SPX traded down to support at $1375, but RUT sold off dramatically, breaking support at $775 before landing at $771. This divergence may be significant; several times recently, RUT has been a good market predictor when it diverged from SPX.
ADP reported the addition of 163k new private payroll jobs, down a bit from last month's 172k. The ISM Manufacturing Index came in at 49.8, about flat with last month. But one has to remember this index is structured in such a way that numbers below 50 indicate contraction, so two successive numbers under 50 isn't a good sign. We have the unemployment claims data tomorrow. Traders will be attempting to interpret that report together with today's ADP report to give them a preview of the jobs report Friday.
My Aug condor was pushed back to delta neutral by today's drop in RUT. It now stands at a P/L of +$2,340 with delta = -$6 and theta = +$52.
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Maybe traders woke up today and realized Bernanke may not pull the trigger on QE III this week? Or maybe they just think the market was getting a little ahead of itself before we have a definitive announcement. The FOMC meets tomorrow and Wednesday with the statement issued Wednesday afternoon. SPX dropped $1 to close at $1385 and RUT lost $4 to close at $792. But trading volume fell off dramatically with 2.3 billion shares of the S&P 500 stocks trading (the 50 dma is 2.7B). Trading on the NYSE and NASDAQ both dropped 29% (curious coincidence). I think this indicates a fair amount of uncertainty before the FOMC announcement. In spite of minimal market movement, the VIX moved up 1.3 points to close at 18%.
We did not have any significant economic data or reports issued today, but the balance of the week is loaded: Tuesday has the Chicago PMI, consumer confidence, and Case Schiller; Wednesday brings the ISM Index, ADP employment data and the FOMC announcement; Thursday has the weekly unemployment claims data and Friday has the granddaddy of economic reports: the U.S. Nonfarm Payrolls Report. So seeing a slow day in the market today and probably also tomorrow makes sense in light of some of the market-moving data due later in the week.
My Aug iron condor on RUT stands at a P/L of +$2,360 with position delta = -$30 and position theta = +$29. With 17 days to go, our 650/660 put spreads are far OTM and the 850/860 call spreads are about one and a half standard deviations OTM. Absent a major market move, this position will likely expire worthless. But time will tell. Large market moves have become common the past couple of years.
