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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 ended 2015 up 40%, 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"!

 

Markets continued lower today, but trading volume declined. SPX closed at $2051, down $12 and RUT lost $9 to close at $1113. The VIX increased a half point to 16.1%. This decline seems to be slowing as though it will settle into support at $2040, where the market hesitated in the first couple of weeks of April, before moving higher. The 50 dma is also at $2041. In three of the last four trading days, SPX has traded down to lows for the day and then recovered into the close. Closes at the lows for the day are the scary signs of a pull back that may turn into a correction.

Trading volume fell off today with 2.3 billion shares of the S&P 500 stocks trading. Trading volume was flat on the NYSE and declined 3% on NASDAQ.

ADP's private payrolls report came out at 156 thousand jobs for April, down from March's 194k. If that is a sign of a weak jobs report Friday, this recent market decline could get worse. Factory orders were up 1.1% for March, a big improvement over February's 1.9% decline. The ISM Services survey increased slightly to 55.7 for April, up from 54.5.

I closed the SPX May condor in the Flying With The Condor™  service for a nice gain of 16%. The June condor is positioned delta neutral in the Russell 2000 Index and is up 5%.

Today's trading volume decline may carry into tomorrow as traders look to the jobs report on Friday.

 

This market keeps traders on edge. I am starting to think that day traders may be better off than long term investors. At least, they may sleep better.

After Thursday and Friday's declines, Monday's rally was welcome. But then we gave it back today. SPX closed down $18 to $2063 and RUT lost $19 to close at $1122. The common denominator between Friday and today's trading was the late recovery. SPX dipped to $2055 today, but then recovered somewhat to close at $2063. That suggests that the bulls are still in the game; they haven't panicked and headed for the exits just yet. Maybe this is just a sideways consolidation market with high levels of price volatility. Many of us have been remarking on the exceptional price volatility for a couple of years now. Maybe it's time to admit this is part of the new world. Blame it on high speed computer algorithms or whatever, but it is what it is. If we are going to play this game, we have to accept the basic nature of the market.

The decline in implied volatility as measured by the VIX yesterday was given back today with VIX closing at 15.6%. Trading volume increased today with 2.5 billion shares of the S&P 500 companies trading. Trading increased 4% on the NYSE and increased 6% on NASDAQ.

We didn't have any significant U.S. economic news today. Tomorrow brings the ADP private payrolls number that many view as a precursor to the jobs report Friday. Sleep well...

Yesterday’s positive, but also rather weak, response to the FOMC announcement was interesting. On the one hand, you could take it as evidence that the bulls were still in control. But, it was definitely contained enthusiasm. As I mentioned in yesterday’s blog, it often takes the markets a day or two to fully digest the FOMC announcement. So, maybe today’s pull back was the “on further thought” reaction. And today's weak GDP report didn’t help.

SPX lost $19 to close at $2076. RUT closed down $14 to $1140. Trading volume rose again today with 2.7 billion shares of the S&P 500 stocks trading. Trading volume rose 3% on the NYSE and rose 12% on NASDAQ.

The first estimate of first quarter GDP growth came in at a meager +0.5%, positive, but certainly causing many to wonder about prospects of recession. Initial unemployment claims rose to 257k from 248k, but this remains in line with the flat trend of the past several months. Continuing unemployment claims dropped five thousand to 2.130 million.

I continue to believe this market will remain range bound for the immediate future, perhaps until after the election. Economic data simply don’t support a bullish path forward, even with the Fed supporting the market. But I don’t see the evidence for a new recession either (although today’s GDP data are a concern). We’ll see.

The FOMC passed on this opportunity to raise interest rates. The announcement stated that while the U.S. economy is growing only moderately, the risk from global turmoil has been reduced. Most Fed observers seem to be expecting the next rate hike to come toward the end of the year. The news was taken weakly favorably by the markets with SPX gaining $3 to $2095. RUT rose $3 to $1154. Volatility continued to contract with the VIX dropping to 13.8%. Trading volume spiked up above the 50 dma today with 2.6 billion shares of the S&P 500 trading. Trading was higher by 15% on the NYSE and rose 5% on NASDAQ.

SPX is nearing the "fish or cut bait" stage. November's high at $2110 and the all-time high at $2131 are nearby and support has formed over the past couple of weeks around $2075 to $2080. The price trend seems to have slowed as SPX approached these previous highs. Today's Fed announcement didn't supply the energy to drive the market strongly higher. However, it is true that market reaction to FOMC announcements often take 24 hours to "gel", so we will see what tomorrow brings.

Markets continued to trade quietly on lower volume as traders focus on the FOMC announcement due tomorrow afternoon. SPX gained $4 to close at $2092, but RUT gained $13, closing at $1151. Volatility was flat with the VIX virtually unchanged at 14%. Trading volume remains below the 50 day moving averages (dma), but rose a bit today with 2.2 billion shares of the S&P 500 stocks trading. Trading volume rose 7% on the NYSE and rose 15% on NASDAQ.

Markets are holding up rather well as the uncertainty of the Fed's actions weigh on traders. That tells me the general mood remains bullish. Absent a surprise from the Fed tomorrow, we are probably headed higher once again.

Durable goods orders came in higher by 0.8% in March, a big improvement from February's 3.1% decline that spooked the markets. The Case Schiller housing price survey continues to post annualized price increases above 5%, with 5.4% for February. The real estate market may not be booming, but it isn't declining. The Conference Board's consumer confidence survey reported at 94.2 for April, down a bit from March's 96.1.

Members of my trading group sold a weekly iron condor on CMG today in advance of the earnings announcement this evening. Based on after hours trading, this trade looks like it may gain 35% or more tomorrow. Join us at our next meeting on May 5th.

Trading volume dropped off significantly today with two billion shares of the S&P 500 stocks trading, well below the 50 dma at 2.5B. Trading dropped 10% on the NYSE and declined 22% on NASDAQ. SPX traded as low as $2078 before recovering to close at $2088, down $4 on the day. Today's trading reinforced the $2080 level as support for SPX. RUT fell nine dollars to $1138. Volatility rose a full percentage point with the VIX closing at 14.1%. This is probably due to additional hedging ahead of the Fed announcement Wednesday.

New home sales dropped from an annualized rate of 519 thousand in February to 511 thousand for March. Real estate isn't booming, but it is far healthier than many sectors of the economy.

Will the FOMC raise interest rates at this meeting? Or will they use this announcement to prepare the market for an interest rate hike in June? In either case, we may see the market pull back in reaction. Much of the downside push in January came from the silly analysis that suggested four rate hikes in 2016 (I say "silly" because those analysts drew that conclusion from the economic projections for the next 12 months made by committee members. Since when do we take economic forecasts seriously?)

The FOMC meeting begins tomorrow but the announcement won't come out until Wednesday afternoon. I would be surprised if we see much trading volume or price movement tomorrow. Traders will probably just be waiting on the Fed...

 

Fresh from filing my tax return, I am greeted by an article today telling me 45% of Americans pay zero taxes. Is that their fair share?

Markets appear to be slowing as they enter the neighborhood of all-time highs. SPX continued to rise today, tacking on $6 to close at $2101. RUT only gained a dollar, closing at $1140. NASDAQ lost $20 to close at $4940. Trading volumes picked up with 2.3 billion shares of the S&P 500 companies trading today. Trading volume rose 6% on the NYSE and also rose 9% on NASDAQ. Trading volumes on SPX and the NASDAQ Composite remain below the 50 dma.

Housing starts came in at an annualized rate of 1089k for March, almost flat with February's 1194k. Building permits were right in line with 1086k, up from February's 1177k.

Passover begins Friday evening and the markets have historically softened just before Passover, according to the Stock Traders Almanac. Perhaps a large number of traders close positions to take their profits before taking off for the holiday.

So far, the markets have chosen to ignore most of the bad news coming out of the earnings announcements, but that may not last long. We also have a FOMC meeting coming next week. That may start to give traders pause.

 

March was a very strong month for the markets, and many bulls argued the trend would continue and new highs were soon to be achieved. But the markets have slowed as they approached the recent highs from December. SPX closed today at $2081, down $2 and RUT closed up $2 at $1131.

The recent highs in SPX were $2078 on 12/29, $2103 on 12/1, and $2110 on 11/3. Contrary to much of the hoopla in the financial press, SPX has barely reached the late December highs and appears to be losing its momentum. Thus far in this earnings season, earnings declines from year over year comparisons have been ignored. Bad news is good news. I don't see economic data worthy of recession fears, but I don't see booming economic data either.

Trading volume was modestly higher today, surprising for an option expiration Friday. Trading in the S&P 500 came in at 2.1 billion shares, remaining well off the 50 dma. Trading volume rose 4% on the NYSE and rose 2% on NASDAQ.

Volatility was largely unchanged with the VIX at 13.6% (down a tenth of a point).

The Empire manufacturing survey moved up in April to 9.6 from last month's 0.6. Industrial production continued to decline in March, down 0.6%, after declining 0.6% in February. Capacity utilization declined a bit to 74.8% for March, down from 75.3% in February.

SPX settled at $2083.83 today. RUT still had not posted its settlement price as I write this blog. You may download a spreadsheet of SPX and RUT settlement prices in the downloads section of my web site.

Data point for defunct bureaucracies: A friend of mine appealed a mistake in her property tax assessment and the tax assessor said she would have to wait for her refund until the next installment of taxes are paid in June because they are out of money...

I am going to mow the lawn for the first time this season this weekend. I know, I know. You've been mowing for a month already. We can't afford to grow grass here in Illinois.

J.P. Morgan reported lower earnings this morning, but the picture wasn't as bad as analysts expected, so JPM traded higher and led the market higher. Analysts have been predicting lower earnings for the first quarter for the past several weeks, and JPM seemed to deliver on that prediction. But the bulls are determined to see the glass half full, so bad news became good news.

SPX gained $21 to close at $2081. RUT also traded higher, with a close at $1130, up $24. The VIX dropped a full point to 13.9%. Trading volume was up slightly with 2.5 billion shares of the S&P 500 stocks trading today, but remains below the 50 dma at 2.6B.

The Producer Price Index (PPI) reported a slight decline (-0.1%) for March, close to last month's -0.2%. Retail sales declined 0.3% in March. One of the mysteries of lower gas prices has been how little of that bonus has shown up in retail sales. Perhaps consumers are saving money for a rainy day?

Earnings reports for the banks continue tomorrow with several notable names including Bank of America and Wells Fargo. CitiGroup follows on Friday. Will the market continue to shrug off declining earnings and mediocre economic data? Maybe this is the bull market "climbing the wall of worry?"

The markets opened lower this morning but then bounced higher with SPX tacking on twenty dollars to close at $2062. RUT gained $11 to $1106. Volatility retreated with the VIX closing down 1.4 points to 14.9%. Trading volume popped higher with 2.4 billion shares of the S&P 500 companies trading. Trading volume on the NYSE rose 19% and volume rose 15% on NASDAQ.

No significant economic data was reported today. The Fed's beige book (minutes from the last meeting) will be issued tomorrow afternoon. Those minutes could be market moving, depending on the recorded discussions. Analysts are looking for clues for the timing of the next interest rate hike.

Even with today's large move, the trend of SPX remains sideways. A break above $2075 would be necessary to start to take the bulls' case seriously. I fail to see the economic data to make the case for a strong bull market. But the market could trade higher on the back of the Fed. That is why the beige book release is potentially significant.

J. P. Morgan reports earnings tomorrow morning. That could set the tone for the market opening tomorrow, but then the beige book takes over in the afternoon.