Dr. Duke's Blog

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Written by Super User

Created: 28 July 2015

SPX and RUT both found support at the 200 dma yesterday, and when the overnight futures were positive, it made me wonder: another V bottom? Would buying the dip pay off once again? Well, so far, so good. SPX tacked on 26 points to close at $2093, recovering most of the losses for the past two trading sessions. RUT ran up $10 to close at $1225. The big institutional players must have relaxed; the VIX lost two points to close at 13.4% - quite a turnaround from the peak at 16.3% yesterday. Trading volume remains above average and steady with 2.5 billion shares of the S&P 500 stocks trading today. Volume rose 1% on the NYSE and 5% on NASDAQ.

The Case Schiller housing price index reported an annualized price increase of 4.9% for May, down a touch from April's 5.0%. The Conference Board's consumer sentiment survey came in at 90.9 for July, down from 99.8.

Probably the most significant overnight event for our markets was China's markets appearing to stabilize.

My September condor on RUT at 1090/1100 and 1350/1360 closed today up 17.4%. If we had closed this position today, the Flying With The Condor™ service would be up 38% year to date.

The FOMC meeting began today. Everyone will be watching the announcement tomorrow afternoon closely. It fascinates me how the guests and hosts on CNBC are so confident that they know when the Fed will increase interest rates. Confidence sells.

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Written by Super User

Created: 24 July 2015

Is it me or does it seem like this market just can't be happy? Many of us felt that worries about Greece were overblown, but the market traded off anyway. Then the market rebounded and now the market is concerned about global economic softness, especially China. I wrote in my newsletter last week that it looked like a good time to short the market as it started to flirt with previous highs. I was right. I wish I had taken that trade. I didn't because I was looking for a rational case one way or the other. Silly me.

SPX closed down $22 at $2080. RUT lost $19 to close at $1226. Volatility popped up a little more than a point with the VIX closing at 13.8%. Trading volume was essentially flat across the board with 2.4 billion shares of the S&P stocks trading today, same as yesterday. Trading volume rose 3% on the NYSE but was unchanged on NASDAQ. So the market slid a fair amount but it doesn't seem like traders are taking it very seriously so far.

SPX closed right at support at $2080. This level has played support several times since early April. SPX landed on the 50 dma yesterday, but opened there this morning and never looked back. The 200 dma is at $2064. If that breaks, the last correction ended at $2045.

The first estimate for second quarter GDP growth is due on July 30. A weak number could push this market lower given the current bleak mood. Sometimes it seems like no amount of bad news can slow down the bulls, but this isn't that market. Weak GDP data could really derail this market.

New home sales came in at 482k for June, down from last month's 517k (both annualized figures).

My September iron condor is doing well, up 17%. It is close to delta neutral, but today's drop pushed us a few dollars below the perfectly delta neutral spot.

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Written by Super User

Created: 22 July 2015

SPX declined another $5 to close at $2114, but RUT reversed its recent declines and traded higher by $4 to $1258. Is Russell now leading the markets higher? Or is the correct conclusion simply that we remain within the trading range? I think it's the latter. Neither the bulls or the bears have sufficient strength to dominate the trend.

It was interesting to watch the VIX today. When the markets opened lower, VIX rose as one might expect. But as the initial decline moved into a choppy sideways pattern, VIX actually closed slightly lower at 12.1%. That is bullish.

Trading volume rose with 2.5 billion shares of the S&P 500 stocks trading. Trading volume on the NYSE rose 9% and increased 17% on NASDAQ. Presumably this volume push was based on all of the stocks announcing earnings today and tomorrow.

I closed my August iron condor yesterday for a gain of 14.8%. This brings the year to date gains for the Flying With The Condor™ service to +32%. If I count the current gains of the open September position, it boosts our year to date results to +38%.

Check out my free webinar tomorrow. See the Coming Events page on this web site. Consider coming with me to New York City for the All Stars of Options Trading in September and/or the Traders Expo in Las Vegas in October. I would enjoy meeting with you in person.

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Written by Dr. Duke

Created: 20 July 2015

Many years ago, my mother would read me a children's book about a little train engine who kept saying, "I think I can. I think I can". This market reminded me of that little engine trying to climb the hill. SPX closed two dollars higher at $2128, and once again fell short of breaking out to new all-time highs. RUT fell back $7 to close at $1260. But NDX continued to make new highs, probably due to the internet stock boom started by Google.

Volatility, as measured by the VIX, rose slightly to close at 12.2%, but this remains a relatively low level. Trading volume declined across all major markets with two billion shares of the S&P 500 stocks trading. Volume on the NYSE dropped off by 10%, but only declined 2% on NASDAQ.

Earnings announcements make up most of the market news this week. IBM took it on the chin once again this evening. AAPL, CMG, GPRO, ISRG, MSFT and YHOO report after the close tomorrow. Many traders are watching AMZN (reports Thursday amc) after Google and Netflix blew out earnings last week.

The longer SPX bumps up against that previous high and retreats, the more likely we will see at least a minor pull back into the trading range. But NDX is motoring higher. Can it pull the blue chips along?

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Written by Dr. Duke

Created: 15 July 2015

A more cautious tone took over the markets today as traders contemplated the possibility of China dragging the world into recession and Greeks rioted in the streets outside the parliament.  Maybe the Greeks are headed out of the Euro after all. But does it matter? However, the economy of China does matter. Repercussions of a recession in China will be felt globally.

SPX dropped back by two dollars to $2107 and RUT declined $9 to close at $1265. Volatility was essentially flat with the VIX at 13.2%. Trading volume rose with 2.1 billion shares of the S&P 500 stocks trading. Volume on the NYSE rose 12% but trading volume on NASDAQ was essentially unchanged (down 0.3%).

It seems as though earnings announcements thus far have been neutral to encouraging, but we are early in the cycle. Intel and Netflix traded higher this evening after their announcements.

My August iron condor on RUT at 1100/1110 and 1360/1370 is almost perfectly delta neutral and up 12%. The September RUT iron condor at 1090/1100 and 1350/1360 stands at a net gain of 11%.

The results of the vote in the Greek parliament should be out this evening, so we will see what the futures look like in the morning.

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Written by Dr. Duke

Created: 13 July 2015

From watching the markets trade today, one would think all is well with the world. Whatever was ailing China's market last week is all gone? This may be easier when the government can simply tell traders not to sell stocks, but has the basic economic picture changed? The Greek debt crisis is thought to be over, but the Greek parliament has to agree to a tougher deal than what was offered before Tsipras backed out of negotiations and called for the referendum. So is this the last we hear of Greek debt? Notably, the yield on Greek treasuries is higher now than before the deal. Hmmm. My point is simple: remain cautious.

SPX gained $23 to close at $2100 while RUT gained $13, closing at $1265. The VIX shed almost three points, closing at 14.1%.  SPX closed right at its 50 dma - quite a turnaround for an index that was trading below its 200 dma at the open Friday. Significantly, trading volume was light with 1.8 billion shares of the S&P 500 trading. Trading on the NYSE was up 1% and trading on NASDAQ increased 5%. Rather than declaring that the bulls are back in charge, I think it safer to say we are firmly back within the trading range.

We have several important earnings announcements this week that will influence traders' moods. JP Morgan Chase reports in the morning and Wells Fargo reports tomorrow evening; Goldman Sachs will report Thursday morning. And, of course, we have several earnings announcements that always draw a lot of speculation and trading: Netflix, Google, and Yahoo.

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Written by Dr. Duke

Created: 09 July 2015

Traders were relieved that China's market appeared to stabilize yesterday, so markets opened stronger this morning, but uncertainty remains about the Greek debt negotiations. Many analysts worry about the global impact of China and Greek economic problems. The VIX momentarily topped 20% today, closing at 19.9%, up 0.3 points. SPX gapped open and ran up as high as $2074 but then slowly declined throughout the day, closing at $2051, up $5. RUT gained $5 to close at $1234. Trading volume was down slightly with 2.2 billion shares of the S&P 500 stocks trading. Trading volume was way up on the NYSE due to yesterday's outage, but trading declined 2% on NASDAQ.

Initial unemployment claims were released at 297k, up from last week's 282k. Continuing claims also rose almost 75 thousand to 2.33 million.

My iron condors on the Russell 2000 Index are doing well with the August position up 6% and the September position up 5% at the close today.

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Written by Dr. Duke

Created: 08 July 2015

China's market turned downward sharply yesterday and it boiled over to our markets today. Of course, the Greek drama still haunts us as well. Trading on the NYSE was stopped for over three hours today; early word blamed it on a software glitch. I would have thought that might push the market even lower, but nothing really changed after trading resumed this afternoon. Of course, stocks that trade on NYSE  trade on other exchanges, so the markets weren't really disadvantaged. But it doesn't do much for individual investor confidence.

SPX closed down $35 or 1.7% at $2047, while RUT lost $19 or 1.5% to close at $1229. The NASDAQ Composite was down 1.8%. RUT and NDX are both well above the 200 dma, but SPX sliced through its 200 dma at $2056 today.

Trading volume didn't spike as one might expect on a day like this one, so it isn't clear that the bears have really gained the upper hand just yet. 2.2 billion shares of the S&P 500 stocks traded today, down from yesterday. Of course, trading volume was way off at the NYSE, but one might have expected NASDAQ to have spiked hugely higher on the NYSE outage. But it didn't; trading on NASDAQ declined 11% from yesterday.

But traders were spooked a bit by the uncertainties created by China, Greece and the NYSE technical glitch. The VIX popped up almost four points to 19.7%.

The Fed minutes from the last meeting came out today. The discussion appeared even more dovish than was previously thought from the formal announcement. Several members of the FOMC are concerned about the weak first quarter GDP number. I think the probability of increasing interest rates during 2015 is decreasing.

Alcoa began the earnings parade after the close with an earnings miss, but a revenue beat. The stocks was essentially unchanged in after hours trading.

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Written by Dr. Duke

Created: 07 July 2015

Markets opened lower this morning and SPX sliced through the 200 dma and plunged to $2044 before bouncing. SPX traded higher in the afternoon and made a final push higher from about 2:30 ET until the close of trading. SPX closed at $2081, up $13 on the day and well above the 200 dma at $2055. RUT followed suit, but traded even more bullishly, closing up one dollar at $1248; RUT's 200 dma is at $1204. Volatility pulled back nearly a full percentage point, with the VIX closing at 16.1%.  Trading volume spiked higher with 2.5 billion shares of the S&P 500 stocks trading today. Trading volume rose 26% on the NYSE and rose 23% on the NASDAQ.

The semi-official, or traditional start of the earnings announcement cycle starts Wednesday after the close with Alcoa. That string of announcements may take the attention off of Greece.

The only significant economic news was the May JOLTS job openings report at 5.363 million, up from 5.334 million. That doesn't look like stimulus for a buying spree. What about Greece? All of the articles I have read suggest Greece isn't offering anything new at the bargaining table, and the major powers in Europe are losing their patience with Greece. But we see a strong bounce here in our markets on stronger volume. Is this the beginning of a reversal higher?

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Written by Dr. Duke

Created: 06 July 2015

I checked the S&P futures late last night and it looked pretty ugly based largely on the Greek election results. By this morning, it remained negative, but not quite so bad. Then we opened and the markets dropped down but then quickly recovered. Maybe Greece isn't such a big deal after all. The Greek vote increases the probability of Greece leaving the EU, but that prospect doesn't appear to have the same fears associated with it now as it did several years ago, or even last week. Greek politicians have been "kicking the can down the road" for many years, but now, ordinary Greek citizens are the ones suffering.

SPX dropped down to $2058 before bouncing and closing at $2069, down $8 on the day. RUT handled Greece even better, closing down one dollar at $1247. Volatility popped up at the open, but settled lower during tarding, with the VIX closing at 17.2%. Trading volume was up a bit from Thursday with 2.0 billion shares of the S&P 500 trading. Trading on the NYSE and NASDAQ were both up 17%.

The ISM manufacturing index reported 53.5 for June, up from May's 52.8. The ISM services index reported 56.0, up from 55.7.

Perhaps we should be focusing on this earnings announcement cycle rather than Greece. We have both good and bad news. The good news is that the number of negative pre-announcements for the S&P 500 has declined to 80 for the second quarter of 2015 from 85 last quarter and 86 the previous quarter. The number of positive pre-announcements for the S&P 500 has increased to 27 from last quarter's 20. But the bad news is this: the number of companies in the S&P 500 issuing negative guidance for this quarter (80) is still above the five year average of 78, and the number issuing positive guidance (27) remains below the five year average of 33. This parallels the economic data we have been seeing - not terrible, but not booming ahead either. We continue to muddle along.