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SPX closed at $1946, up $28 and RUT gained $12 to close at $1022. VIX dropped over one point to close at 19.4%. Trading volume declined in the S&P 500 stocks with 2.5 billion shares. Trading on the NYSE dropped off by 12% and trading volume on NASDAQ declined 6%. Normally, these declines after option expiration would be expected, but Friday's trading volumes weren't dramatically higher as they usually are. Thus, today's small declines were also unusual.

No significant economic data were released today.

Today's close in VIX at 19.4% matches the previous low in VIX this year, on January 5th. This also places VIX at the bottom edge of its Bollinger bands. That sets up the possibility of VIX oscillating back to the upper edge of the Bollinger bands just as it did at the first of the year and also on the first of February. Or it could wander sideways for a while. Given the economic and political uncertainties, I doubt VIX will move much lower.

Today's close in SPX was about six points higher than the peak hit February 1st after bouncing back from the correction lows. So the first resistance level has been broken. Next is resistance at the 50 dma at $1950. Institutional traders will be watching that level closely.

SPX opened the day weakly and traded as low as $1902 before bouncing to recover all of its losses and closed unchanged at $1918. RUT was even more positive, closing at $1010 for a $5 gain. Volatility continued to contract with the VIX losing 1.1 points to close at 20.5%. Trading volume was surprisingly low for an options expiration Friday with 2.7 billion shares of the S&P 500 trading, down slightly from yesterday and well below the 50 dma at 2.9B. Trading volume rose 4% on the NYSE and increased only 2% on NASDAQ.

The latest Consumer Price Index (CPI) was released for January today with a net change of zero, up from the negative 0.1% change reported in December. Where does this data come from? My grocery bills have certainly not been flat.

Today's market action was most encouraging on several fronts:

1) Stocks resisted the decline in oil prices.

2) RUT behaved even more bullishly than SPX.

3) SPX recovered all of its losses into the close - a very bullish tape.

Update on the Flying With The Condor™ service: We closed the remaining spreads of the Feb position last Friday for a loss. The overall portfolio stands at a 5% loss on the year. But the March SPX condor now stands at a 10% gain, and April is up 3%. So we didn't miss the correction bullet, but we have already recovered nicely.

If any of you are planning to be in New York City next week for the Traders Expo, please let me know so we can get together.

Have a great weekend.

In a move reminiscent of 2015, the gains of the past few days were met with some measured pull backs today. SPX lost $9 to close at $1918 and RUT lost $6 to close at $1005. However, volatility continued to contract with VIX declining 0.7 points to 21.6%. Trading volume fell off significantly with 2.8 billion shares of the S&P 500 stocks trading today, below the 50 dma at 2.9B. This was the first day this year that S&P trading volume fell below the 50 dma. Trading on the NYSE dropped 11% and trading volume on NASDAQ declined 20%.

Investors Business Daily (IBD) moved from "Market in Correction" to "Market in Confirmed Uptrend" yesterday.

Initial unemployment claims reported today at 262k, down from 269k last week. Continuing unemployment claims rose by 30k to 2.273 million. The Philadelphia Fed manufacturing survey reported a value of -2.8, not good, but an improvement over the -3.5 reported last month.

It would be nice to see SPX make it back to $1940, where it ran into resistance at the end of January. The decline in VIX on a down day was encouraging. That suggests that traders are thinking that the worst is behind us. Tomorrow is expiration Friday, which will bring an increase in trading volume. We'll see whether the volume is into a bullish move up to $1940.


Markets opened strongly this morning and didn't slow down as the day progressed. SPX gained $31 to close at $1927 and RUT closed up $15 at $1011. Volatility continued to contract almost another two points with VIX closing at 22.3%. Trading volume was up with 3.1 billion shares of the S&P 500 trading. Trading on the NYSE increased 7% and trading on NASDAQ was up 9%.

The minutes from the last FOMC meeting were released this afternoon and traders were encouraged by the amount of discussion and concern about market volatility and uncertainty. Most analysts concluded that future interest rate hikes were at least deferred for several months.

A raft of economic data was released today. The PPI for January came in at +0.1%, up from December's -0.2%. Housing starts were down a bit in January at 1099k; December's starts were 1143k. Building permits were flat with 1202k in January and 1204k in December. Industrial production increased 0.9% in January, a big improvement from December's -0.7% decline. Capacity utilization was up slightly in January to 77.1%, from 76.4%.

This market has been so extremely emotional that it is hard to be confident that we are really out of the woods. Oil prices were up again today, but that could change in a flash with the report of the next rumor. As I have explained, the U.S. stock market should not be so tightly correlated to oil prices, but that realization is only slowly sinking in. The next two resistance levels to watch on SPX are $1940 and the 50 dma at $1961. Bulls have to take comfort that SPX has gapped open on both of the last two trading sessions - very bullish. But nervous Nellies like me worry that these increases may be too strong... I closed or rolled several of my Feb positions out to March just to give myself some breathing room in case something happens tomorrow. My Mar put spreads in the Flying With The Condor™ service are up 5% and I added the call spreads today to complete the March position.

SPX gapped open higher this morning and gained $31 to close at $1896. RUT was also rallying with a close at $996, up $24. Volatility contracted a little over a point with VIX at 24.1%. That contraction seemed smaller than the bounce in the markets, causing me to wonder if there is more downside to come. SPX closed at its high for today, a strong bullish sign. Trading volume was strong, but not much higher than Friday with 3.0 billion shares of the S&P 500 trading. Trading volume on the NYSE was flat and volume was up 7% on NASDAQ.

The Empire manufacturing survey issued a report today at -16.6 for February, not very good, but an improvement over January's -19.4. The FOMC minutes will be issued tomorrow. It is hard to predict what might come out of reading those tea leaves.

Today's strong run on SPX took it back to the middle of the Bollinger bands. Keep in mind that the last bounce higher in SPX only made it to $1940 before collapsing.

But, on a positive note, today's run higher was a breath of fresh air for those with underwater put spreads going into Feb expiration. But I took my losses last week rather than sit on pins and needles all weekend.

Now we sit and wonder, is the "sky is falling" crowd correct? Is this only a temporary respite?

The markets opened strongly this morning and just kept on climbing the mountain all day. SPX closed at $1865, for a gain of $35, and RUT rose $18 to close at $972. A strong measure of the strength of a rally is the lack of profit taking. SPX just continued higher, closing precisely at its high for the day. That suggest that traders are expecting this rally to continue next week. Yesterday's markets were encouraged by comments from one of the OPEC countries appearing to be open to reducing oil production. That comment wasn't really relevant since it didn't come from the Saudis, but it caused oil to trade up yesterday and that trend continued today.

Let's consider that for a moment. We have been told that declining oil prices suggest weak industrial demand so stock prices should sell off. But when someone suggests that OPEC may cut oil production and therefore lower oil supplies, the stock market trades higher? An abundance of oil supplies has nothing to do with reduced industrial production. This point and several others illustrate how emotional and irrational this market has become. I was watching an interview this afternoon and when the interviewee assigned a low probability of an upcoming recession in the U.S., the talking head spoke over him and began to excitedly chatter on about the weak fourth quarter GDP number and so on. She seems to have forgotten that a recession is defined as two successive quarters of negative GDP growth. We have yet to have the first one. Sensationalism has invaded the financial media. Fear sells.

Retail sales increased modestly in January, up 0.2% and the University of Michigan consumer sentiment survey reported 90.7 for February, down from 92.0.

I would argue that we are seeing many signs on the charts of this market finding support. But the lack of rationality about the connection of oil prices to the U.S. stock market, and the excessively pessimistic financial press worry me. One could make a contrarian argument here for the bounce, but it seems as though the shrill cries from the "sky is falling" crowd are drowning out a rational discussion. Markets may easily go to extremes and stay there longer than expected; it is simply human nature.

I closed the remaining put spreads in my February SPX iron condor this afternoon. I can easily make the case for the bottom being behind us and this bounce continuing next week, but the excessive irrationality and wild swings back and forth worry me. So I closed Feb for a loss. We have already closed the January position for a nice gain; assuming our March position does well, we should be back to break-even shortly.

The markets will be closed Monday. Enjoy your long weekend.


The markets were rallying reasonably strongly today, until Yellen spoke. SPX traded as high as $1882 before losing all of its gains to close unchanged at $1852. RUT was also unchanged at $963. Volatility contracted about three tenths of a point with VIX closing at 26.3%, but VIX was down to 24% before Yellen spooked traders with talk of negative interest rates.

Today's market action underscores why the Fed should have stayed out of this market. The painful adjustments would have been made and we would be long past the financial crisis. Instead we have traders anxiously perusing every word from anyone associated with the FOMC. More importantly, FOMC intervention has introduced great uncertainty because we have no historical basis to even guess the implications of the Fed's intervention. Free markets are comparatively easy to evaluate. External manipulations always have unintended consequences.

Trading volume in the S&P 500 stocks dropped back to the 50 dma today at 2.9 billion shares. Trading on the NYSE dropped 7% and trading on NASDAQ was flat.

SPX still appears to be holding support around $1850. RUT is behaving similarly at $960. So one could reasonably argue that we have seen the worst of the correction. But today's pull back demonstrates the fragility of this market. It could go either way. However, I don't see the economic drivers for a new recession. I think the doom and gloom crowd have been given the headlines too often. It sells papers, as they say.

Keep in mind that we have a three day weekend coming up. Global markets will be open Monday, so that always introduces the possibility of large moves in the U.S. markets Tuesday morning.

The markets swung back and forth today, but ended up essentially unchanged on the day. SPX lost one dollar to close at $1852 after trading as low as $1835 and as high as $1868. RUT declined $5 to $964. Trading volume contracted somewhat with 3.3 billion shares of the S&P 500 stocks trading, but this remains well above the 50 dma at 2.8B shares. Trading declined 10% on the NYSE and also dropped by 10% on NASDAQ. The lock step between oil prices and stocks prices seems to be weakening. As oil prices declined farther this afternoon, SPX began its climb higher. And oil ended the day at $28, down about $1.35.

Today was a slow day for economic data; JOLTS job openings came in at 5.607 million for December, up from 5.346 million.

So we are left with the big question: are we testing support here or just pausing before we fall off the cliff? The price action hints at that scenario, but we can't be sure until we see some strong bullish days. Yesterday's bullish recovery was encouraging, but today didn't present the follow through one would like to see.


What can I say? Scary? Roller coaster? Volatile? Impossible to rationalize? I have run out of words to describe this market.

The markets dealt us another one of those days, plunging like there was no bottom, but then recovering much of the loss in the last hour of trading. One of the lessons I am learning is not to panic early; wait until late in the day to hedge positions. Of course, I still closed several stock positions this morning, but I waited to see if hedging my condor put spreads on SPX and RUT was necessary.

SPX lost $27 when the dust settled, closing at $1853. SPX hit a low earlier today at $1828, very close to the low hit intraday on January 20th. RUT traded similarly, closing at $956, down $16. Today's intraday low on RUT was $956, very close to the January 20th intraday low. The price action in the markets certainly looks like a retesting of correction lows, but the constant drumbeat of "end of days" commentary is disconcerting. The implied volatility on SPX, the VIX, rose to 26% today - hardly panic levels. Normally, I would interpret this volatility as suggesting that the large institutional players aren't that concerned. But that doesn't match any of the financial commentary.

Trading volume was mixed with increased volume of the S&P 500 stocks trading at 3.9 billion shares vs. the 50 dma at 2.8B. Trading on the NYSE was down 8%, but higher by 12% on NASDAQ.

What is a trader to do? In short, hide. I still have a few positions open, but I am mostly in cash. I thought we were seeing the bounce January 20th, and I ventured out and took a hit. I will be far more cautious about getting back in the market.

There wasn't any significant economic data out today. Oil prices were down modestly. It's unclear what drove the intense selling this morning. Speculation of an imminent recession here in the states was common as were the usual worries about China.

Take two aspirin and go to bed. I'm going to study my thesaurus. You millenials will have to Google that.

The weak jobs report this morning seemed to trigger a strong sell-off in the markets, even though the jobs report wasn't that bad. Economists were predicting a weaker number at +190k, and it came in at +151k. The unemployment rate dropped to 4.9% and hourly wages improved, so that was encouraging. But look at the big picture of the jobs numbers:

 Jobs data

Today's number was less than the last three reports, but in line with the two previous reports which were lower than the 200k+ reports last summer. Looking at the longer term picture leaves us concluding that the creation of jobs is roughly flat, so why the extreme market reaction this time? This is just one more data point for the general psychological state of the market - nervous, pessimistic, and obsessed with the Fed. I even read once again today of the Fed's plans to raise interest rates four times this year - have we not debunked that nonsense yet?

Another data point is the reaction to LNKD's earnings report. Market analysts appear to be consistently pleased with the results, but the market focused management guidance that they would be developing some projects with longer time frames that would ultimately make LNKD a stronger company. The result was a bloodbath. LNKD traded down $84 or 44% off of Thursday's close, and this bled over into the tech sector in general. Again, it seems the "sky is falling" crowd is in control.

SPX lost $35 to close at $1880 and RUT closed down $29 at $986. Trading volume was slightly lower for the S&P 500 at 3.4 billion shares. Trading volume declined 5% on the NYSE, but increased 14% on NASDAQ, reflecting the tech sector massacre.

Support roughly in the neighborhood of the August flash crash continues to hold for SPX; in fact, today's close was about $10 above the flash crash lows and about $20 above the lows set January 20th. RUT closed at support set at its recent low of January 20th. I can't see the future any more clearly than you, but the price action so far remains consistent with the choppy retesting of support after the lows of the correction. This period of back and forth trading lasted about a month after the August flash crash.

It's hard, but try to put this craziness behind you and enjoy your weekend. Reflect on what's really important.