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 June position, the Flying With The Condor™service is up 21.2% for the year, compared with +1.4% 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"!

FOMC Minutes
Written by Dr. Duke   
Wednesday, 20 May 2015 14:48

The FOMC released the minutes from the last meeting this afternoon. At first, the market rallied, but it didn't take long for that spike to dissipate and the markets closed roughly unchanged. SPX lost two dollars to close at $2126, while RUT gained two dollars to close at $1258. Volatility remained unchanged with the VIX at 12.9%. Trading volume contracted with 1.9 billion shares of the S&P 500 stocks trading. Volume declined 5% on the NYSE and was flat on NASDAQ.

The Fed's announcement continued the theme started by Yellen a few days ago with this phrase, "valuations remain stretched for some asset classes". Maybe that phrase poured cold water on the initial bullish response to the minutes.

SPX remains above the old resistance level of $2120, but it appears to be softening, unable to hold the new highs. Maybe we are in for a repeat of late February and late April, when the markets hit new all-time highs, but then pulled back into the trading range.

April's housing starts were announced yesterday with an annualized rate of 1135k, the highest number in seven years. Building permits followed alongside with 1143k, up from last month's 1038k. Tomorrow brings the unemployment claims data, but that isn't likely to move this market; those numbers appear to be stabilized and in a slow decline.

My July iron condor on RUT is now up 11% or about half of its maximum potential gain. This position is delta neutral with a delta of -$2 on twenty contracts and theta of +$45.

New High, But...
Written by Dr. Duke   
Monday, 18 May 2015 16:11

SPX closed at $2129, up $6 and establishing a new all-time high for the S&P 500 Index. RUT is still lagging behind, but it did accelerate today, breaking through its 50 dma (finally), and closing at $1258, up $14. Volatility closed up a fraction of a point with the VIX closing at 12.7%. Trading volume fell off with 1.7 billion shares of the S&P 500 stocks trading. Decreased trading volume after option expiration this past weekend is normal, but 1.7B remains a low volume number. Trading volume contracted 15% on the NYSE and 3% on NASDAQ.

In short, we are still in this odd space of "sorta bullish".  The blue chips are trading higher, but on reduced volume. The small caps are trading higher but only broke out above their 50 dma today.

My July iron condor position on RUT at 1120/1130 and 1360/1370 is up $82 per contract or +10% on capital at risk. This brings our year to date performance in the Flying With The Condor™ service to +25%.

The market trend is bullish, but be sure to have stops in place for all of your bullish trades. It remains a nervous market.

The Ball is in Your Court, Mr. Bull
Written by Dr. Duke   
Friday, 15 May 2015 14:36

The markets almost appear to be teasing us once again. The more I trade, the more the market seems like a living, breathing malevolent beast. I need professional help. But I digress. SPX closed at a new high yesterday and I was watching the open this morning for a clue as to the future direction - break-out or not? SPX opened this morning at $2122, one dollar higher, but then dropped back a bit to $2117 and then recovered to close at $2123, up $2 for the day. In short, it was a boring day in the markets with an open and close very close to each other. RUT behaved similarly, declining $1 to close at $1244. Volatility continued to decrease with the VIX closing at 12.4%. But this leaves us with the question of whether or not the bulls are going to finally break out to new highs or pull back into the trading range.

Industrial production reported at a decline of 0.3% for April, equal to the decline in March. Capacity utilization for April declined slightly to 78.2% from March's 78.6%. The University of Michigan's consumer sentiment survey reported out at 88.6% for May, down from April's 95.9. Maybe the lower gas price euphoria has dissipated.

So we will wait until Monday to see if the bulls can push this market out of the consolidation range. In the meantime, enjoy your weekend.

Can the Bulls Do It?
Written by Dr. Duke   
Thursday, 14 May 2015 14:57

The bulls looked pretty strong today, making large advances across the board - but on relatively weak trading volume. SPX gained $23 to close at a new closing high of $2121. RUT is still much lower relatively on its price chart. RUT gained $13 to close at $1245, but it hasn't even broken its 50 dma yet. The VIX contracted by another full point to close at 12.7%. Trading volume was down modestly with the S&P 500 stocks trading for 1.9 billion shares. Trading on the NYSE was down 1%, but trading was up 4% on NASDAQ. This amounts to pretty modest trading volume for a break-out. The bulls are making a run to break out of this sideways consolidation trading range; can they do it this time? Tomorrow's open on SPX will be a key indicator. Will traders take profits and hide, or confidently buy?

Initial unemployment claims came in at 264k, almost exactly as last week at 265k. And the number of continuing unemployment claims came in precisely at last week's number, 2.229 million. The Producers Price Index (PPI) came in with a 0.4% decrease for April, a change in the wrong direction from last month's +0.2%.

I will be watching the opening tomorrow of both SPX and RUT. If RUT doesn't jump on this bullish bandwagon, it throws doubt on the prospects for a bullish break-out. Historically, small caps lead the bullish markets.

Ho Hum
Written by Dr. Duke   
Wednesday, 13 May 2015 15:17

The markets opened higher this morning, but had given up most of those gains by late morning. Then we wandered sideways and slightly lower into the close. SPX lost one dollar to close at $2098. RUT also lost a dollar, closing at $1232. Volatility was unchanged with the VIX closing at 13.8%. Trading volume was slightly higher in the S&P 500 stocks with two billion shares, just below the 50 dma at 2.1B. Trading increased 2% on the NYSE and decreased 2% on NASDAQ.

Retail sales were flat in April (zero change), after a 1.1% growth rate in March.

The markets feel like old champagne (very flat). The longer this persists, the more likely the move higher or lower will be strong. The coiled spring analogy is historically accurate.

Confusion Reigns
Written by Dr. Duke   
Tuesday, 12 May 2015 15:12

One of the newsletters I read had a great headline recently: Rotation Bewilderment. In the best of times, the talking heads on CNBC and their guests appear to have two note cards. One is the explanation if the market is up today, the other is the explanation for the market trading lower. Deliver these explanations with an air of confidence and everyone is reassured, “He understands!”. But more and more analysts are throwing in the towel. It is hard to fathom this market’s moves. The futures were looking pretty ugly this morning, and the market did open down. But then it recovered almost all of those losses. Rotation bewilderment indeed.

SPX closed down $6 at $2099 after hitting a low of $2086. RUT behaved similarly, trading down to $1218 before recovering to close at $1233, down just three dollars. Volatility was unchanged with the VIX closing at 13.9%. Trading volume was roughly flat with 1.8 billion shares of the S&P 500 stocks trading. Trading was up 6% on the NYSE, but was down 1% on NASDAQ.

Looking at the economic data for answers wasn’t helpful. The only significant news today was the JOLTS job opening report with 4.99 million openings for March, down from February’s 5.14 million. Market movement would suggest that this slightly negative report was revised higher later in the morning, but it wasn't. The economic news of late has generally been mediocre; analysts predicted doom and gloom for this earnings season, but it was a surprisingly normal earnings cycle. Perhaps that is the basis for this market, just wandering sideways, much as the overall economy. Couple that with the price volatility resulting from the high frequency algos and you have this market.

Tomorrow brings retail sales data, but will that make a difference?

Looking Weaker?
Written by Dr. Duke   
Wednesday, 06 May 2015 15:03

The markets plunged today, but traders resumed buying at the close and slowed some of the bleeding. SPX broke through its 50 dma and closed at $2080, down $9. RUT actually booked a gain of $4, closing at $1219. This was accomplished by strong buying in the last hour or so of trading this afternoon. Trading volume was higher with 2.3 billion shares of the S&P 500 stocks trading.  Trading was up 3% on the NYSE and was up 6% on NASDAQ. Volatility spiked up over 16% on the VIX, but settled down to 15.1% at the close.

RUT hit $1220 as its high in December, and the trading yesterday and today seem to reinforce that as a significant support level. While that looks encouraging, the fact that SPX easily sliced through its 50 dma is disconcerting. We may have more weakness ahead. The next support level to watch on SPX is $2065. Look at the chart in January; after correcting 4%, two rallies failed at $2065 before breaking out higher.

ADP's private employment data came in at +169k for April, down from March's +175k. FOMC chair Janet Yellen referred to the stock market's valuations as "quite high" at a financial conference today; those remarks coupled with the disappointing ADP data probably caused traders to take some gains off the table. Tomorrow's trading may be hesitant and choppy in advance of the jobs report on Friday, especially after the ADP report today. I always take a look at the S&P futures when I get up in the morning to get a sense of the day ahead. But several times lately, I have been surprised by positive futures numbers in advance of the opening, only to have a dismal day in the markets. One newsletter I read used a great phrase to describe this market, "Rotation Bewilderment".

Back and Forth
Written by Dr. Duke   
Tuesday, 05 May 2015 15:56

I am almost becoming accustomed to these sudden down days (almost). SPX peeled off $25 to close at $2089 while RUT lost $18, closing at $1215. Volatility rose about one and a half points on the VIX, closing at 14.3%. In my opinion, the most bearish aspects of today's trading were all of the major indexes closing near their lows for the day, and on higher volume across the board. Trading in the S&P 500 stocks hit 2.2 billion shares while trading volume on the NYSE rose 15%. Trading on NASDAQ increased 22%. RUT broke the support level at $1220 set in December and reaffirmed as support last Thursday. SPX closed right at the 50 dma - but will it hold tomorrow?

The ISM services index reported at 57.8 for April, up from 56.5.

I took this opportunity to close the remaining put spreads of my June iron condor on RUT. This closes June for a gain of $103 per contract or +12.8% and brings the year to date gains for the Flying With The Condor™ service to 21%.

I will be watching closely as the market opens tomorrow to see if the mayhem continues. Or will this be another "buy the dip"?

Another Whipsaw
Written by Dr. Duke   
Friday, 01 May 2015 15:22

SPX lost $21 yesterday and proceeded to gain $23 today, closing at $2108 and thus making up all of the lost ground. It would be nice if I could explain why this happened, but I can't. And I recommend skepticism toward whoever claims they understand this back and forth dance. This nervous whipsaw trading even affects the professionals. IBD moved from Confirmed Uptrend to Uptrend Under Pressure yesterday and, unless something changes, I expect they will be moving back to Confirmed Uptrend in short order. RUT traded back higher by $8 to close at $1228, not as strong a move as SPX. Volatility contracted with the VIX closing at 12.7%, down almost two points, a large move for one day. Trading volume fell off markedly today with 2.1 billion shares of the S&P 500 trading. Trading volume decreased 26% on the NYSE and dropped 18% on NASDAQ.

The ISM manufacturing index was flat for April at 51.5. Construction spending declined 0.6% in March, down from a slightly positive 0.1% in February. The University of Michigan consumer sentiment survey was unchanged at 95.9 for April - everyone's happy! I thought today was the day for the jobs report - the first Friday of the month, but I apparently didn't get the memo; the jobs report will be released next Friday, May 8th.

Have a nice weekend.

Down Again?
Written by Dr. Duke   
Wednesday, 29 April 2015 16:26

The markets traded down today and actually hit the lows of the day before the FOMC announcement, and then recovered somewhat before the close. SPX lost $8, closing at $2107. RUT closed at its 50 dma, $1247, down $12. NASDAQ finally made its all-time high last Friday, but it seems like each time the NASDAQ composite makes a high, we trade downward thereafter. The previous NASDAQ peak was March 20th and the markets pulled back after that high as well.

Trading volume in the S&P 500 stocks popped up today with 2.4 billion shares and the NYSE trading volume increased by15%. But NASDAQ volume fell off by 8%.

First quarter GDP came out today at +0.2% - a huge miss! Economists were expecting +2.2%. Pending home sales also fell off with aa annualized growth rate of +1.1% for March, down from February's +3.6%. The big news of the day was the FOMC announcement, but it wasn't really news. It was fun to watch the financial news outlets trying to talk about the announcement and fill their time slots, but there was no news! Interest rates remain low and the Fed will increase rates when employment is strong and the inflation rate nears the targeted +2%. In other words, it was the same old story. But the mediocre economic data is starting to weigh on expectations for an interest rate hike. More and more analysts are seeing that event pushed into 2016.

So now we look forward to the jobs report Friday. Will it accentuate market weakness or boost optimism?

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