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 August position, the Flying With The Condor™service is up 32% for 2015, compared with +2.9% 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"!

Wild Ride
Written by Dr. Duke   
Thursday, 30 July 2015 16:23

SPX took us on a wild ride today, trading down below its 50 dma to $2095 (yesterday's open), but then recovering to close unchanged at $2109, within pennies of yesterday's close. RUT tacked on $2 to close at $1232, but RUT remains well below its 50 dma. Volatility continued to contract with the VIX dropping about a half point to 12.1%.

Trading volume fell back down to the 50 dma with 2.1 billion shares of the S&P 500 companies trading. Trading volume dropped 10% on the NYSE, but increased 2% on NASDAQ.

Initial unemployment claims increased by 12k this week to 267k, and continuing claims grew by 46k to 2.26 million. The first estimate of second quarter GDP came in at +2.3%, while the first quarter number was revised upward to a positive 0.6%. All of these revisions don't inspire confidence.

Investor's Intelligence surveys investment advisers every week and reported that this is the fifth week in succession that bullish advisers number less than 50%. Bearish advisers have grown to 39%. If you are contrarian by nature, this should tempt you to sell the farm and buy stocks. Or do you think the advisers know something you don't? Maybe they just realize we are entering the worst two months of the year for stock market gains. According to the Stock Traders Almanac, August is the worst performing month of the year for the Dow and the S&P 500 for the years 1988 to 2014, and September is a close second.

My September iron condor on RUT is now up 22%.

The Chicago PMI and consumer sentiment reports tomorrow. Today's market action seems to reinforce the range bound nature of this market.

FOMC Punts Again
Written by Dr. Duke   
Wednesday, 29 July 2015 15:07

All eyes were on the Fed statement this afternoon, but there wasn't much of anything new for analysts to digest. The FOMC noted an improved job market, but are looking for higher inflation numbers and also feel business investment remains too soft. SPX traded up on the FOMC statement, closing at $2109, up $15. RUT gained $5 to close at $1230. SPX is now solidly above its 50 dma, but RUT remains well below the 50 dma. SPX has returned to the middle of the trading range, but RUT is lagging behind.

Volatility continued its pull back with the VIX closing at 12.6%, down almost one point. Trading volume declined in the S&P 500 stocks with 2.3 billion shares trading today. Volume declined 4% on the NYSE and trading volume declined 7% on NASDAQ. So the market was up today, but the enthusiasm was subdued.

Pending home sales were released today with a decline of 1.8% for June, down from May's +0.6%.

The first estimate of GDP growth for the second quarter will be released in the morning. Hopefully, it won't be negative, following a negative first quarter GDP. That could be a problem for this fragile market.

Another Bounce?
Written by Dr. Duke   
Tuesday, 28 July 2015 15:36

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.

Global Economic Worries
Written by Dr. Duke   
Friday, 24 July 2015 15:43

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.

The Market Softens a Bit
Written by Dr. Duke   
Wednesday, 22 July 2015 15:31

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.

Turning Back
Written by Dr. Duke   
Tuesday, 21 July 2015 15:19

As I have watched the various market indexes over the past few days, the divergences have been the early warning signs. NDX made a new all-time high on Friday and then pushed a little higher yesterday, but posted a small loss today.  RUT was the early warning indicator, when it turned back and started to lose ground on Friday, even as SPX continued to post gains Friday and Monday. But SPX turned back today, losing $9 to close at $2119. RUT lost $6 to close at $1255. It isn't a violent correction, at least not so far. Volatility remains rather low with the VIX at 12.2%. The markets are just pulling back into the sideways consolidation range of the past few months.

No significant economic data were released today. Earnings announcements are the news. Apple turned in excellent third quarter numbers, beating the street's estimates, but they disappointed traders with their forward guidance. I still find it difficult to believe that it is now legal for companies to speculate about the future. It seems to me that speculation should remain with speculators. Chipotle posted a 27% increase in earnings, but analysts worry about their future sales. Yahoo posted another loss, nothing new there. But Microsoft reported its largest quarterly loss in the company's history.

The earnings parade continues tomorrow.

I Think I Can...
Written by Dr. Duke   
Monday, 20 July 2015 16:16

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?

The Mood Darkens a Bit
Written by Dr. Duke   
Wednesday, 15 July 2015 15:48

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.

All Clear?
Written by Dr. Duke   
Monday, 13 July 2015 15:26

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.

Uncertainty and Fear
Written by Dr. Duke   
Thursday, 09 July 2015 15:04

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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