Do you know any trading coaches who publish the results of their trades daily, as the trade progresses? Dr. Duke analyzes the market and reviews the progress of his iron condor spreads in the Flying With The Condor™ service each day in this blog. If you have questions about any of the trades, Ask Dr. Duke.

The November 2014 position in the Flying With The Condor™ account survived the downturn in October very nicely and was closed with a 13% gain. We also dodged the flash crash on August 24th by going to cash the previous week. The Flying With The Condor™ service is up 34% for the year and is handily beating the S&P 500 Index. Check the Track Record in the Downloads section for details.

Dr. Duke practices what he preaches! You are entering the "No Hype Zone"!


I'm back. I had some web site issues and was unable to post a blog earlier this week.

The strong bull market trend of the past couple of years may not be back, but it at least appears that we have pulled back from the brink of a severe market crash. SPX gained $16 today to close at $1996 and RUT closed at $1153, up $19. Volatility continued to pull back with the VIX losing a full point to close at 18.4%. Trading volume was up with 2.7 billion shares of the S&P 500 companies trading. Trading volume on the NYSE increased 15% and volume increased 3% on NASDAQ.

The FOMC minutes and the weekly unemployment claims will be released tomorrow. That may slow down this market as traders wait for and then peruse those Fed minutes for clues.

I closed my RUT Oct 1040/1050 put spreads yesterday; I will allow the 950/960 puts to go into expiration and expire worthless. Assuming they do expire worthless (seems like a safe assumption), my second October position will close with a gain of 11.3%. You may recall I closed the first October position on August 21st for an 11% loss. Our RUT November 960/970 and 1280/1290 iron condor stands at a net gain of $112 per contract or +13% as of today's close. That brings our year to date performance in the Flying With The Condor™ service to +43%. And that assumes that the gains were not reinvested, so that is a conservative number.


Today's market was quite the carnival ride. When I checked the futures this morning, they looked modestly positive. But the jobs report took the steam out of the bulls, and the markets opened down and traded lower. That lasted until about 10 am ET and then the bulls just started a slow but steady climb higher - and it didn't stop. SPX climbed right into the close at $1951, its high for the day. RUT closed up $17 at $1114. Volatility came in almost two points with the VIX closing at 20.9%. Trading volume spiked upward with 2.8 billion shares of the S&P trading. Trading volume increased 11% on the NYSE and moved up 4% on NASDAQ.

The jobs report disappointed analysts with 142 thousand jobs, up slightly from last month's 136k, but far short of what traders were hoping. The unemployment rate stayed at 5.1%. Yesterday's unemployment claims data were more positive with continuing unemployment claims hitting a new low at 2.2 million. Factory orders also reported today at a negative 1.7% for August, even worse than July's -0.2%. So the economic data wasn't stellar, but it isn't signaling a recession either. The big question for traders is whether today was just a short covering splurge or if we have indeed seen the bottom of this correction. I suppose we will have to wait until next week to get some clues to the answer.

Have a great weekend.

Yesterday was pretty ugly with SPX losing $50 in a single day. But the futures were pointing higher this morning and traders moved the markets higher until about mid-morning. SPX weakened and hit its low for the day around 3:30 ET, but then it recovered to close at $1884, with a small two dollar gain for the day. RUT didn't fare as well, losing $7 to close at $1084. But that is consistent with recent trading, with RUT leading the broad markets lower. Volatility pulled back 1.2 points to 26.5%. Trading volume fell off today with 2.7 billion shares of the S&P 500 trading. Trading declined 1% on the NYSE and declined 6% on NASDAQ.

The Case Schiller housing price index moved to an annualized price gain of 5% for July, up slightly from June's 4.9%. The Conference Board's consumer confidence survey increased to 103.0 for September from 101.3. But this positive data was overwhelmed with concerns about a global slowdown.

I didn't expect the markets to retest the lows of the flash crash, but I was wrong - here we are. Interestingly, volatility remains lower than it was during the flash crash. Apparently, the big players aren't very anxious this time around. But that leaves us with the question of whether we are testing previous lows and rebounding or trading lower yet. I don't see the economic case for trading lower - but that betrays my presumption that rational thought guides the market.

Here is an interesting factoid I came across today: companies in the S&P 500 have issued fewer negative earnings pre-announcements and more positive earnings pre-announcements for the third quarter of 2015 relative to the past two quarters. So I continue to think our economy is plugging along, not the strong recovery we would like, but we are heading over the cliff either. So I think we are on the verge of bouncing higher.

It appears that the markets have simply replaced a higher sideways trading range with a lower sideways trading range. For several months, SPX wandered between $2040 and $2130, and now it appears that the new trading range is $1900 to $2000. Before the correction, one could argue that the S&P 500 was becoming overpriced with price to earnings and price to dividends ratios near historical highs. Those ratios remain slightly above historical averages, but maybe this correction was a healthy adjustment. And the longer we tread water, the more in-line those ratios will become. The markets opened higher this morning, but then declined to lows around noon. But then the bulls revived themselves and recovered most of the early losses. SPX closed at $1939, down $4, while RUT lost $3 to close at $1140. Trading volume declined across the board with 1.9 billion shares of the S&P 500 trading. Trading volume declined 17% on the NYSE and declined 21% on NASDAQ.

There weren't any significant economic data reported today, and that may have contributed to the lackluster trading day.

On the Friday before the flash crash on Monday, 8/24, I closed the October position we had on RUT for an 11% loss. That took the year to date gains on the Flying With The Condor™ service to +34%. I recently opened a new October iron condor on RUT positioned at 950/960, 1040/1050 and 1240/1250 (the put spreads are split over the 950/960 and 1040/1050 strikes). This position now stands at a net gain of $76 per contract or +9%. Our November iron condor on RUT at 960/970 and 1280/1290 stands at a net gain of $63 per contract or +7%. If we were to close both positions today, we would stand at a net gain of 40% for the year; maybe we should just go lie on the beach for the rest of the year. No, that sounds like retirement in the rocking chair - too boring.

My conclusion drawn from all of the traders and finance professionals I have dealt with over the past couple of weeks was that the Fed wasn't going to raise interest rates and that was good. They feared a rate hike would tank the market. The Fed didn't raise interest rates and now it is stating to look like the market will trade lower on that news - but it is early to draw that conclusion. The market will have to continue to digest the FOMC announcement and other economic data. But today's market didn't look good. SPX lost $32 to close at $1958 while RUT closed down $17 at $1163. Volatility rose almost two points, with the VIX closing at 22.8%. Trading volume on this expiration Friday was high as usual, so that wasn't the reinforcing sign to the bearish day as it might normally have been. Trading in the S&P 500 companies rose to 3.8 billion shares, well above the 50 dma at 2.4B. Trading volume popped up 56% on the NYSE and increased 60% on NASDAQ.

There wasn't any significant economic date released today, so today's market action may be primarily attributed to the market trying to decide what the FOMC announcement means for the future of the U. S. markets.

I just came back from the All Stars Options Conference held in the NYSE. This is a first class conference - highly recommended. While waiting to get in the building one morning, I noticed a statue and plaque across the street. I stood on the steps of Federal Hall where George Washington took the oath of office for the presidency in 1789. Federal Hall was built as a city hall by the British in 1703 and it was the home of the first U.S. Congress and Supreme Court. The NYSE also has a rich history. They have the letter on display written by Thomas Edison to the exchange offering his ticker tape quotation machine, one of the first treasury bonds issued after the revolutionary war and many other interesting displays - cool place to visit.

Have a great weekend.

The FOMC met yesterday and today and issued their announcement this afternoon. They opted to leave interest rates "as is" and cited concerns about a global economic slowdown as well as continuing low inflation. Four committee members predicted that there will be no interest rate hike this year. The sentence in the announcement on "global slowdown" surprised analysts, who felt the FOMC should only be looking at the U.S. economy. However, our economy is clearly much more intertwined with other economies in the world than it used to be; in that sense, I found the squabble on CNBC on this point a little silly. It was also one more example of the decline in common respect and manners. Is it no longer considered polite to allow someone to express their idea without another person interrupting and speaking over them? The greater human intellect cannot grow when the loudest and rudest person is allowed to dominate the discussion.

Markets have been trading higher this week leading up to the announcement, but declined immediately after the announcement this afternoon. Then the markets spurted higher, only to trade off in the last hour to close at losses on the day. SPX closed down $5 at $1990. But RUT gained $5 to close at $1181. RUT had traded higher than SPX earlier in the day, so the pullback going into the close left RUT with a net gain on the day. Volatility chopped around quite a bit today, but closed about two tenths of a point lower at 21.1%.

Initial unemployment claims came in 11k lower at 264k and continuing claims declined 26k to 2.24 million. Housing starts for August dropped to an annualized rate of 1126k from July's 1161k. However, building permits rose 40k in August to 1170k. The Philadelphia Fed survey declined markedly for September, down to -6.0 from August's +8.3.

The lingering question that seems to be on everyone's mind is whether the low we hit August 25th is the end of the correction or whether it will turn and fall further yet. The price chart pattern on the indexes has been trending pretty steadily higher. The close today on SPX is right at the high hit a few days after the crash. If SPX closes above that $1990 mark a couple of times, I would feel more confident that the storm was behind us. I think the markets are bit confused about the Fed message today. It may take a few days to see a resulting trend establish itself.

Waiting on the Fed. I don't recall any time in my long history of trading that I have heard that phrase more often. On the other hand, I can't think of another time in history when the Fed was so intertwined in our markets. But that is the reality; we are anxiously awaiting the FOMC announcement to see if the Fed has decided to start the slow tick higher of interest rates. Then the question will be the market's reaction. Everyone has an opinion, but those pronouncements are really just guesses. Higher interest rates normally slow down the economy since it effectively increases the cost of capital. But a quarter or half point increase from here doesn't seem like it would hinder much in the economy. One could argue that an interest rate hike has been priced into this market for some time, so it shouldn't have a devastating effect. One could even reason that a rate hike would be taken as an endorsement of the state of the economy and the market would trade higher. Who knows? So we wait on the Fed.

SPX closed down $8 at $1953 today and RUT lost $4 to close at $1153. Volatility increased a bit with the VIX closing one point higher at 24.2%.

Trading volume fell way off with only 1.8 billion shares of the S&P 500 stocks trading; the 50 dma is 2.4B. Trading volume on the NYSE dropped 5% and volume fell 13% on NASDAQ.

Today's low volume, sideways to lower trading will probably be typical until Thursday afternoon. Even then it will be at least 24 hours before we see the full effect on the stock market. Sometimes traders have to read the announcement and sleep on it before they are convicted of a course of action. If you are on the sidelines, don't jump too quickly on Thursday. In fact, I don't plan to make a move until Friday or possibly even Monday.

The markets opened positively this morning, but started weakening in the early afternoon and ended the day in negative territory. SPX lost $27 to close at $1942 and RUT closed down $14 at $1148. The VIX rose over one point to 26.3%. Trading volume was flat to slightly higher with 2.3 billion shares of the S&P 500 stocks trading (down a bit from yesterday), but the NYSE trading volume rose 5% and trading on NASDAQ rose 4%.

The JOLTS job openings for July increased from 5.323 million to 5.753 million. There wasn't any other significant economic news. Apple's announcement of new iPhone and iPad models didn't seem to excite investors as Apple traded lower. Maybe it was just following the overall market. Oil prices pulled back and that may have contributed to market weakness. It is hard to say. This is a nervous market; it doesn't take much to move it.

Fears about China appeared to take a back seat and the markets traded back rather strongly with SPX gaining $48 to close at $1969. RUT gained $26 to close at $1162. And volatility pulled back quite a bit with the VIX closing at 24.8%, down three points today. Trading volume was slightly higher with 2.3 billion shares of the S&P 500 stocks trading, but this remains slightly below the 50 dma at 2.4B. Trading volume rose 5% on the NYSE and rose 10% on NASDAQ.

SPX opened higher this morning, in line with higher European markets today, and then basically traded sideways until about 1:30 pm ET, when SPX began to trade higher, closing the session at $1969, nearly its high for the day ($1970). That was pretty bullish chart action, but was missing the strong trading volume one would like to see confirm that bullish trading. SPX closed twenty dollars shy of its recent high after the crash, but RUT's close was within one dollar of its post-crash high.

I jumped back into the market after the crash and split my October put spreads on RUT between 950/960 and 1040/1050. Both spreads are now profitable. The lower spread is quite safe, but the 1040/1050 spread could require hedging if the market tests support again. A series of re-tests of support after a strong correction is common historically. But last October's correction was followed by a straight-up recovery. V-bottoms seem to be the new normal. But the jury is still out on this correction.

Maybe it isn't too safe to jump into this market. Analysts are telling clients that many excellent stocks should be snatched up at what they regard as bargain prices. That may be true, but the time frame is the question. How long before the market bounces and I make money on these investments if I jump today? I am inclined to think we have hit the bottom, but we could wander sideways with days like today for some time before this market stabilizes. In fact, it seems likely to me that we won't see a clear direction higher or lower until after the FOMC meeting in a couple of weeks. It is hard to buy confidently with the Fed's actions a mystery.

SPX lost $30 to close at $1921. RUT traded down as well, closing at $1136, down $9. That marked a 1.5% decline for SPX, but only -0.8% for RUT. RUT is normally the "risk off" index. Should I be encouraged?

Trading volume also declined again today with 2.2 billion shares of the S&P 500 stocks trading. Trading on the NYSE declined 6% and volume dropped 13% on NASDAQ. Trading volume has been declining pretty steadily since August 24th. I find that encouraging; declining trading volume isn't a sign of traders in a panic and selling before the impending collapse. However, traders are concerned and at least somewhat fearful as indicated by the VIX moving up over two points today to 27.9%. The VIX spiked to over 53% on 8/24, but has declined since then. But a VIX level of 28% can't be ignored.

The jobs report contained mixed signals with a weak jobs number of 173k, but a lower unemployment rate of 5.1%. And the labor force participation rate stayed flat so this decline didn't just reflect people giving up and leaving the labor force. Will that lower unemployment rate push the Fed to move on interest rates?

The last couple of weeks have been stressful for traders. I hope you can put this all aside and enjoy a nice long holiday weekend. Labor Day is an important celebration. The American work ethic has formed the foundation of our prosperity, coupled with the freedom to take risk and compete. Relax and pat yourself on the back. You deserve it.