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 downturn in October very nicely and was closed with a 13% gain. The December position closed with a 6% gain after several adjustments. The "V-bottom" corrections took their toll on the January position and it closed for a 7% loss, but we more than made up for that with an 18% gain in February. We closed the March position for a 9.5% gain and April for +12.6%. Flying With The Condor™ is up 11.2% for the year and is 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"!

Back To Normal
Written by Dr. Duke   
Monday, 20 April 2015 15:34

The market dips are occurring so fast that it is hard to buy the dip; if you blinked, you missed this buying opportunity. After opening Friday at $2103, and giving up $24, SPX opened higher this morning and nearly made it all back, closing up $19 at $2100. RUT bounced back by $13 to $1265. The VIX declined about six tenths of a point to 13.3%. Trading volume changes today don't mean much because Friday was options expiration and therefore was a high trading volume day.

No significant economic news was released today; in fact, there won't be much economic data all week. The big news this week will be earnings announcements. Whether those announcements start to form a pattern that moves the market is the question. Many analysts were bearish about this earnings season, but that doesn't appear to be materializing so far; but the week is young.

I closed my RUT May 1330/1340 call spreads today for $0.17. Our May position stands at a gain of 16% and the June iron condor on RUT is now up 11%.

Written by Dr. Duke   
Friday, 17 April 2015 16:10

NASDAQ and RUT gapped open lower this morning and set the tone for the day. SPX lost $24 to close at $2081, breaking through its 50 dma at $2085. RUT closed at $1252, down $21, but still well above its 50 dma at $1239. We expect trading volume on option Friday, but one would especially expect higher trading volume on a sell-off like today. Trading volume jumped to 2.4 billion shares in the S&P 500 stocks. Trading on the NYSE was up 13% and trading volume on NASDAQ increased 18%. The VIX wasn't up as far as one might expect on a day like this, closing at 13.9%, up 1.3 points.

The conventional wisdom on the street was to blame the market's concerns on Greece and China changing some of their trading regulations. But noting that we have a nervous market that sells off at any twitch has been said before. We'll see if there is much follow through next week. I follow IBD's Big Picture market indicator; they have been on "Uptrend Under Pressure" since March 9th and I have been surprised it has not shifted to "Confirmed Uptrend", but today's market action proved them correct.

Forget about today's market and enjoy your weekend. Dote on your kids, grandkids, other kids and your friends. That will recharge your batteries for Monday.

Written by Dr. Duke   
Wednesday, 15 April 2015 15:29

SPX ran up $11 to close at $2108, threatening the old record high. RUT did set a new all time high, closing at $1275, up $10. The NASDAQ composite is above $5,000 again, but remains below the all-time high set back in the dot-com boom. The last time NASDAQ was above $5,000 in mid-March, it was a good time to sell. Hmmm.

Volatility closed down almost one point at 12.8%. Trading volume finally perked up with 2.2 billion shares of the S&P 500 stocks trading today. Trading on the NYSE rose 27% and trading volume on NASDAQ increased 14% over yesterday.

The boost in the markets appeared to be on the back of higher oil prices. It certainly wasn't today's dose of economic data. The New York Fed's Empire manufacturing survey fell out of bed with a reading of -1.2 for April, down from +6.9. Industrial production for March dropped off 0.6%, a big change from February's small, but positive, +0.1%. Capacity utilization was nearly unchanged at 78.4% for March, down from 79.0%.

Tomorrow brings housing starts and the weekly unemployment claims, but I don't know if economic data matter to the bulls. This is the Fed's bull market... until it isn't. And I think that is what worries many market observers.

The Wandering Continues
Written by Dr. Duke   
Tuesday, 14 April 2015 15:04

Buoyed by favorable earnings from JPM before the open and better than expected retail sales, SPX opened higher, but then fell out of bed, trading down to $2083 before recovering late in the morning. SPX managed to hang onto a modest gain of $3 into the close at $2096. RUT traded flat, closing at $1265, down about twenty cents. The VIX fell back only about 0.2 points to close at13.8%. Trading volume in the S&P 500 was unchanged at 1.8 billion shares. But trading volume was up 7% on the NYSE and was also up on NASDAQ, but only marginally at +2%.

Retail sales came in at a gain of 0.9% for March, a big improvement over February's 0.5% decline. The Producers Price Index (PPI) rose 0.2% in March, up from last month's 0.5% drop.

This market wandering is doing wonders for my condors; the May position is up 13% and the June position is already up 5% even though we still have 65 days until expiration. We were able to open the June position early because we closed April early and freed up capital.

Get your black arm bands ready for tomorrow...

Still In the Channel
Written by Dr. Duke   
Monday, 13 April 2015 16:01

The bulls were still in charge this morning as the market opened, but they lost their "mojo" around 10 am ET, and the market just steadily traded off the rest of the day. The end result was to give back essentially all of Friday's gains. SPX closed at $2092, down $10; this is right at the $2090 support level, but really just in the middle of the larger trading range from $2040, the low from mid-March, and $2120, the high set in late February. But RUT was a somewhat different story; it traded off its intraday high at $2172, but managed to close up one dollar at $1266. Volatility was quick to react, with the VIX gaining 1.4 points, closing at 14.0%. 

There was some weak economic data out of China, suggesting a slowing of that economy, but no significant U.S. economic data was reported today.

Trading volume fell off today with 1.8 billion shares of the S&P 500 trading. Trading volume declined 6% on the NYSE, and only rose 2% on NASDAQ. Perhaps traders are awaiting the earnings announcements from J.P. Morgan and Wells Fargo tomorrow morning. So much news has been made about the ill effects of the strong dollar, that one is tempted to predict it was overkill, but we'll see. One of the problems with contemporary journalism is that original thought is rare.

Can the Bulls Push to New Highs?
Written by Dr. Duke   
Friday, 10 April 2015 15:25

SPX made short work of the resistance at $2090 by closing for the second day above that resistance set back in December but reaffirmed several times over the past couple of weeks. SPX closed up $11 at $2102 and RUT followed suit with a close at $1265, up $6. Volatility continued to contract with the VIX dropping another half point to 12.6%. In mid-March, SPX broke out above $2090 but was stymied around $2110, so that is the next resistance to be broken before tackling new all-time highs above $2117.

Trading volume was pretty flat today with 2.0 billion shares of the S&P 500 trading; that is slightly higher than yesterday but remains below the 50 dma at 2.2B. Trading volume was down on both the NYSE (-7%) and NASDAQ (-12%).

As I explained yesterday, traders may be in a "wait and see" mode for now. Below average trading volumes seem to support that thesis.

My May iron condor on RUT stands at a net gain of 12% today and my June iron condor on RUT is up 5%.

I'm off to start my weekend of working out in the yard for the first time this year. Unlike some of you, we are just starting to see some green sprouts. I wish you all a pleasant weekend.

The Bulls Are In Control
Written by Dr. Duke   
Thursday, 09 April 2015 16:27

I noted yesterday the apparent trading channel of $2040 to $2090 for the SPX. The bulls pushed the market higher today and SPX closed up $9 at $2091. So SPX is right at that resistance level that has been so resistant for the past few weeks. But RUT pulled back $4 to close at $1259. So I am not convinced we have seen a break-out just yet. An open and close above $2090 tomorrow would be encouraging, but the true confirmation of the bullish trend continuing would be a break-out to a new all-time high above $2117. Some of the large banks and Goldman Sachs will be announcing earnings next week. Perhaps that will give the bulls the ammo they need to push higher. We'll see.

Watching the market trade higher on increased volume would be a bullish sign - one that didn't occur today. Trading in the S&P 500 stocks was flat with yesterday at 1.9 billion shares, below the 50 dma. Trading volume was flat on the NYSE and only increased 3% on NASDAQ. Traders are not concerned about the bottom falling out anytime soon; the VIX dropped another point to 13.1% today.

The weekly unemployment claims report was a mixed bag today. Initial claims rose 14 thousand to 281 thousand, while continuing claims dropped 23 thousand to 2.3 million. No significant economic data is due out tomorrow; will it be a slow day in the markets or will it surprise us? My guess is that traders will sit on the sidelines waiting for the earnings announcements scheduled for next week.

Steady Sideways
Written by Dr. Duke   
Wednesday, 08 April 2015 15:48

SPX displayed some extreme volatility just after the FOMC minutes were released this afternoon, but then it settled to about where it was before the announcement. SPX closed at $2082, up $6. RUT traded up $9, closing at $1263. Volatility dropped almost a full point with the VIX closing at 13.98%. Trading volume was modestly higher with 1.9 billion shares of the S&P 500 stocks trading. Trading on the NYSE was up 10% and volume was up 7% on NASDAQ.

SPX is locked in the trading channel from $2040 to $2090. One could place the upper end of the range at $2120, the high from early March, but resistance at $2090 is proving strong; SPX has been unable to hold $2090 several times over the past few days.

Many Fed observers were anxious to understand from the March minutes why the FOMC removed the adjective, patient, from the announcement discussing timing of the expected interest rate hikes. I think they were disappointed. It seems that the committee simply wanted to be free to address that question at each meeting based on the data. Once again, trying to read the tea leaves proved frustrating.

Alcoa reported mixed results on earnings after the close with the stock trading down a bit after hours. Perhaps most significantly, Alcoa raised their forecast of global aluminum demand from +7% to +9%. That is an encouraging economic data point since aluminum is used in many different industries.

Tomorrow brings the latest unemployment claims data; we don't have any significant economic data due for the balance of the week. The earnings reports more likely to move the markets begin next week with J.P. Morgan, Goldman Sachs, and others.


Three Up Days Would Be Too Much
Written by Dr. Duke   
Tuesday, 07 April 2015 15:51

SPX had traded up for the past two days and spent almost all of today's trading session in the black, but then dove in the last twenty minutes of trading to turn in a $4 loss, closing at $2076. RUT traded in a similar pattern, except that RUT fell out of bed just before 2:00 ET and lost $7 to close at $1253. So why did the market sell off this afternoon? As usual, determining a clear answer is difficult at best. Some analysts think traders began to look forward to the FOMC minutes being released tomorrow and Alcoa's earnings after the close tomorrow. My answer is more basic. I don't know anyone who is comfortable with this bull market; we know it is largely artificial and built on the Fed's unprecedented experiment. As a consequence, Joe Trader has some nice gains, but is very nervous that the party will end abruptly and perhaps badly. Hence, he sells whenever he even sees a twitch he doesn't like.

Trading volume was down today with 1.7 billion shares of the S&P 500 stocks trading. Trading on the NYSE declined 11% and was down 6% on NASDAQ. Volatility has remained nearly flat for the past three days with the VIX around 14.8%. It is interesting that this afternoon's sell-off didn't raise volatility even a few tenths of a point.

The only economic data released today was relatively positive with the JOLTS job openings report at 5.133 million for February, up from 4.965M.

My May iron condor on RUT at 1110/1120 and 1330/1340 stands at a net gain of 9% today and is delta neutral at a position delta of -$1.30 per contract. We still have 37 days left in this position, but it is developing nicely.

It will be interesting to see how earnings season plays out. The expectations are pretty low, due to the expected effects of a strong dollar. Perhaps the relative weakness in the market for the past month has that disappointment priced in.

What Jobs Report?
Written by Dr. Duke   
Monday, 06 April 2015 15:07

When I saw that anemic jobs report on Friday, I thought the worst about today's market open. And the futures were down early this morning, although not as badly as I feared. The markets indeed opened lower, but it didn't last long. Those poor bears were frustrated once again as the bulls bought the dip. SPX closed up $14 at $2081 and RUT added $5 to close at $1261. Interestingly, the VIX was flat at 14.7%. Trading volume was up with two billion shares of the S&P 500 stocks trading. Trading volume rose 5% on the NYSE and increased 6% on NASDAQ.

We start the earnings announcement cycle this week. Normally Alcoa is considered the opening of earnings season, although it won't be the first announcement this quarter. But it will be closely watched as always since aluminum plays a key role in so many industries. Many analysts are expecting a mediocre series of announcements because of the effects of a strong dollar on the multinationals. It is true that we have had a record low number of positive earnings guidance announcements this quarter and a relatively high number of companies guiding negatively. We'll see. More importantly, will it matter to the market?

I read an interesting note about our government's unemployment rate calculation today. If the labor force participation rate were the same today as it was in 2007, our current unemployment rate would be 10%. As people have given up on looking for work, that reduces both the numerator and the denominator of the calculation. Ten per cent unemployment fits my sense of the labor market; I know far too many people that have been out of work for a year or more. We have yet to recover from this recession. In fact, we are setting a record for the slowest economic recovery in history. Maybe we should try capitalism.

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