Dr. Duke's Blog


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 position in the Flying With The Condor™ account survived the 10% correction in October very nicely and was closed with a 13% gain. Through the July position, the Flying With The Condor™service is up 28% for the year, compared with +2.5% for the S&P 500. Check the Track Record in the Downloads section for details.

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

The Greek Malaise
Written by Dr. Duke   
Thursday, 25 June 2015 14:48

 It appears that our markets are simply not going to move until the Greek debt crisis is resolved. We have been hearing about deadlines for a deal for weeks, and the deadlines just seem to get postponed a few days. Is June 30 a solid deadline? I certainly hope so. The major indexes have retreated into their trading ranges of the past few months. SPX dropped $6 to $2102 but RUT only lost a dollar, closing at $1283. The theme of the small and mid-caps leading the market continues.Volatility increased nearly a full point to 14.1% on the VIX. That seems a little outsized compared to the market moves today - perhaps the traders losing patience are buying protection just in case this Greek saga does have some downside for our markets. Trading volume remains pretty flat with 1.9 billion shares of the S&P 500 trading (still below the 50 dma). Trading volume increased 7% on the NYSE, but decreased 2% on NASDAQ.

Initial unemployment claims reported at 271k, about flat with last week's 268k. Continuing unemployment claims increased by twenty two thousand to 2.25 million. Our unemployment numbers have stabilized very well. Unemployment numbers aren't increasing but we aren't seeing the hiring that goes with strong economic expansion. We aren't putting those people who have dropped out of the labor force back to work.

When the markets spiked upward last week, I closed the call spreads in my August 1100/1110 and 1350/1360 condor on RUT. Today, I rolled out a little farther and sold the 1360/1370 calls. This position now stands at a net gain of 2.5% with position delta = -$40 and position theta = +$66 on 20 contracts. Yesterday, I closed the July condor position for a 19% gain. The Flying With The Condor™service is now up 29% year to date.

Written by Dr. Duke   
Wednesday, 24 June 2015 15:37

Actually, I am losing patience with Greece and with all of the hand wringing about this miniscule problem in the world. The most valuable aspect of Greece is its object lesson for us.

In response to worries about Greece, the markets pulled back today with SPX losing $16 to close at $2109 and RUT pulling back $12 to $1284. Implied volatility jumped up over a point with the VIX closing at 13.3%. Trading volume edged up but remains below average. Trading in the S&P 500 stocks came in at 1.9 billion shares, up slightly from yesterday, but below the 50 dma. Trading volume on the NYSE increased 4% and trading on NASDAQ was nearly flat with a 0.2% rise.

The final estimate of first quarter GDP was released today at -0.2%, an improvement from the earlier estimate of -0.7%. We will get the first estimate of second quarter GDP growth on July 30th.

I closed our July iron condor on RUT today for a net gain of 19%. Our Flying With The Condor™ trade alert service now stands at a gain of 28% year to date, compared with +2.4% for the S&P 500.

Our watch of the Greek tragedy continues tomorrow (ironic that we know the ancient Greeks for those plays).

This Is Getting Old
Written by Dr. Duke   
Tuesday, 23 June 2015 14:31

The markets seem to be locked into this low volume, sideways to slightly higher trading range. I say slightly higher because of the last few days, but we could easily give that back at any moment. The bears can't seem to gain control, but the bulls aren't really very enthused either. SPX managed to gain one dollar today, closing at $2124. RUT closed up $3 at $1296. Volatility continued to contract with the VIX losing half a point to close at 12.2%. Trading volume remains below average with 1.8 billion shares of the S&P 500 trading today. Trading volume was roughly flat on the NYSE and NASDAQ, declining about a half a percentage point on both exchanges.

Durable goods orders were disappointing once again with a decline of 1.8% for May, slightly better than the 1.5% decline in April. But this is going in the wrong direction! Our economic data on manufacturing, services, and employment remain weak. New home sales increased in May to an annualized 546 million. This is the highest level since 2008 - one more positive sign for the real estate market.

This latest push higher in the markets has been led by the small-caps and mid-caps. In and of itself, that is a bullish sign. Both NDX and RUT tested lower prices today before posting small gains. The prevailing wisdom is that the markets are waiting on a deal on Greek debt before running higher. I'm not convinced, but I'm not on CNBC. I think Greece has run out of negotiating time, so hopefully, that news item is about to be put to bed. The question is whether that will propel our markets on to new highs? Technically, we are at new highs now. Could we sell the news?

Greece Again
Written by Dr. Duke   
Monday, 22 June 2015 14:49

Rumors (or futile hopes) of a deal on Greece's debt drove the market higher at the open today. The markets calmed a bit as the day progressed, but most of the gains held into the close. SPX tacked on $13 to close at $2123. RUT jumped up $8 to close at $1292. Volatility pulled back with the VIX losing one point to close at 12.8%. 1.8 billion shares of the S&P 500 companies traded today, well below the 50 dma at 2.02 billion shares. Percentage losses in excess of 50% on the NYSE and NASDAQ didn't mean much since trading volume was so high on expiration Friday.

The only economic data today was existing home sales for May, running at an annualized rate of 5.35 million, up from 5.09 million. New home sales and durable goods orders come out tomorrow with the final estimate of first quarter GDP on Wednesday.

The bulls seem to be gaining the upper hand after taking a few days to think about the FOMC announcement last week. As long as interest rates remain at near zero, it is hard to see a bearish case for stocks. The soap opera in Greece is causing the market some jitters, but we have had several years to adjust for the possibility of Greece defaulting and leaving the EU. It is hard to imagine those events having much of an effect, unless you bought Greek bonds!

Good News and Bad News
Written by Dr. Duke   
Wednesday, 17 June 2015 14:29

The FOMC announcement and Yellen's news conference contained two messages: 1) The economy is improving, but 2) the improvements are so small, we must leave interest rates effectively at zero. The markets appear to be satisfied with this message, having traded up after the announcement, although it is far from a strong bullish reaction. SPX gained $4 to close at $2100, while RUT declined slightly (one dollar) to $1268. The VIX contracted by about a third of a point to 14.5%.

Based on the FOMC members' forecasts for 2015, it appears they either still hope to increase interest rates this year, or have failed to adjust their forecasts lower. Fourteen FOMC members have forecasts of 0.63% for the Fed discount rate at the end of 2015. Those forecasts would probably require at least two interest rate hikes before the end of the year. But the Fed has also lowered its estimate of 2015 GDP growth to 1.9% and continues to use very modest language to describe employment growth.

Trading volume picked up a bit today with 1.8 billion shares of the S&P 500 stocks trading, but this remains below the 50 dma at 2.0 billion. Trading volume rose 10% on the NYSE, but only increased 3% on NASDAQ.

So where does this leave the market? Historical market trends are largely on the side of sideways to weaker trading during the summer months. This Fed announcement assures traders that the Fed is unlikely to move soon or very quickly thereafter to increase interest rates. The market largely sees that as free money. The sideways trading of the past couple of months appears likely to continue. The bulls' strength is evidenced in how quickly each decline is being bought. But you also see the highs being pulled back in short order. Neither side can make a strong case, so, for now, we are range-bound.

My July iron condors on RUT stand at a net gain of $168 per contract or +21%. The August position is up 9%. While today's reaction to the Fed announcement was muted, that may not be the case tomorrow and Friday. Stay alert.

Written by Dr. Duke   
Tuesday, 16 June 2015 16:39

Trading involves a great deal of uncertainty. This is the reason many investment advisers and brokers appear so confident and give you the impression that they understand what just happened in the markets and the underlying reasons for the move. We are looking for that confidence. The markets traded upward today. Why? The Greece problem remains unsolved. The FOMC announcement is still ahead of us. I remained unconvinced that the Greece problem is our problem and whatever interest rate increases are likely to come out of the Fed are probably already priced into the market. But who really knows? All we can do is control our risk in whatever position we take.

SPX closed at $2096, up $12. RUT gained $8 to close at $1270. Trading volume fell off with 1.6 billion shares of the S&P 500 trading. Volume declined 4% on the NYSE and decreased 5% on NASDAQ.

Housing starts dropped a bit in May with 1.036 million, down from 1.165 million. However, building permits were up, increasing from 1.140 million in April to 1.275 million in May. The real estate market remains pretty solid. It is somewhat ironic that real estate lending is where the financial crisis began, and the real estate market has largely recovered, and yet the broad economy remains in the doldrums. Many of the people who lost their jobs in 2008 remain unemployed.

Markets will probably be volatile immediately after the FOMC announcement tomorrow. Don't jump too quickly. The move in the first couple of minutes is often quickly reversed.

Waiting on the Fed or Greece?
Written by Dr. Duke   
Monday, 15 June 2015 15:52
With the losses Friday and today, we are roughly back to the lows of last Wednesday. Today's markets opened even lower, but then recovered to minimize today's losses. SPX closed at $2084, down $10 and RUT closed down $4 at $1261. Volatility popped up today about two points with the VIX closing at 15.4%. Trading volume increased on the S&P 500 stocks to 1.8 billion shares, but this remains below the 50 dma. Trading increased 7% on the NYSE and trading volume on the NASDAQ increased 24%.
If you read the financial web sites today or listened to the analysts on CNBC and Bloomberg, everyone blames the current market weakness on concerns about Greece defaulting on its sovereign debt. But this potential issue has been brewing and well publicized for several years. If Greece defaults, the only people hurt outside of Greece will be the speculators who have bought the bonds in hopes of a settlement; they are yielding about 24% at this point.
Another reason for the market to be soft is the upcoming FOMC announcement Wednesday afternoon; traders are waiting for news on the timing of the Fed raising interest rates.

The Empire manufacturing survey reported  -2.0 for June, down from +3.1 in May. Industrial production decreased 0.2% in May, slightly better than the -0.5% in April. Capacity utilization  remains basically flat with a 78.1% report in May, only slightly different from April's 78.3%. Housing starts and building permits report tomorrow and the FOMC announcement is scheduled for Wednesday afternoon. Thursday brings the CPI and the Philadelphia Fed manufacturing survey.

I doubt we will see much happen in the markets until after the Fed announcement.
Are the Bulls Already Out of Breath?
Written by Dr. Duke   
Thursday, 11 June 2015 14:52

The bullish push higher of the past couple of days sputtered out today. The major indexes posted minor gains on lower volume. SPX opened strongly and traded up to $2115, but then pulled back to close at $2109, up $4 on the day. RUT traded similarly, posting a small gain of $2, closing at $1269. Volatility contracted a bit, with the VIX losing about a half of a point to close at 12.8%. The last two days saw weak gains in trading volume, but trading fell off today with 1.8 billion shares of the S&P 500 trading. Trading volume fell 7% on the NYSE and decreased 9% on NASDAQ.

Initial unemployment claims for the week rose by two thousand to 279k and continuing claims rose by 61 thousand to 2.27 million. Retail sales perked up in May with a gain of 1.2%, but that wasn't enough to get this market excited.

The good news is that all the doom and gloom folks can't seem to get a selling spree started, but the bad news is that the bulls appear to have exhausted all of their energy just maintaining the status quo. So we continue to drift sideways in lower trading volume.

The July iron condor position on RUT in our Flying With The Condor™ service stands at a 16% gain today and the August position is up 6%.

The Bulls Win
Written by Dr. Duke   
Wednesday, 10 June 2015 15:13

The bulls continued the strong push that began yesterday and tacked on $25 on SPX to close at $2105. RUT gained $17 to close at $1267. And the VIX pulled back a full point, closing at 13.5%. Trading volume was up with 2.0 billion shares of the S&P 500 stocks trading today. But to be fair, that only pushed volume back up to the 50 dma. Trading volume rose 6% on the NYSE and increased 1% on NASDAQ.

RUT's close is near the highs around $1268 back in late March and within striking distance of the all-time high at $1275. SPX is digging itself out of a deeper hole, having just managed today to break above its 50 dma at $2102.

There wasn't much in economic data reported today. We get unemployment claims and retail sales tomorrow.

The talking heads gave credit for today's bullish market to the prospects of a compromise on Greek debt, but this run started yesterday. Look back at the SPX chart for several months and note the candlesticks with long lower shadows. Many times they signal a bullish move. That was what prompted my bullish trade on AAPL yesterday for our trading group. That position is up 10% after just one day - a nice way to start the trade.

Written by Dr. Duke   
Tuesday, 09 June 2015 14:57

The markets opened weakly again today, but then surprised traders by rebounding. Are we nearing the bottom of this most recent pull back? SPX traded as low as $2072 before bouncing back to close a dollar higher at $2080. RUT traded down to $1242 but couldn't erase all of its losses, closing at $1250 for a loss of $4. But RUT has not traded as weakly as SPX during this pull back; RUT is trading very close to its 50 dma at $1251, whereas SPX is well below its 50 dma at $2101. In line with the rebounds, volatility contracted a bit with the VIX closing at 14.7%, down six tenths of a point. Trading volume was modestly higher with 1.9 billion shares of the S&P 500 trading. Volume was up 3% on the NYSE and also up 3% on NASDAQ.

Each day it appears more and more likely that the Greece debt crisis is destined to self-destruct. Greece's political leaders are behaving like children who assume the Euro Zone owes them something. The question for us is whether Greece's flame out will impact U.S. markets. Greece serves as a warning of what happens when the entitlement mentality spreads in a country.

The only significant economic data reported today was the JOLTS job openings of 5.367 million for April as compared to March's 5.109 million.

I have positioned the put spreads for my condors well OTM to be safe, and both positions are doing well. The July iron condor on RUT stands at a net gain of 14% and the August position is up 8%. Our Flying With The Condor™ service is up 28% year to date.

Was the "Sell in May" crowd correct?

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