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Category: Dr. Duke's Blog
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SPX closed up $3 at $2017 on reduced trading volume, and RUT lost one dollar to close at $1164. Today was the third consecutive close above $2000, which was where the last bounce higher stalled in mid-September. Just as important, each close has been moving steadily higher, but the markets are slowing. Trading in the S&P 500 stocks slowed dramatically today to 1.8 billion shares. Trading volume on the NYSE dropped off 21% and volume declined 26% on NASDAQ. Volatility continues to contract, with the VIX dropping off almost a full point to 16.2%.

So the market is slowing. Trading volume is declining and implied volatility is contracting. Good news or bad news? The beauty of options trading is that you don't really care; you have tools in your trading toolbox for any occasion. But let's consider the underlying economic drivers.

The panic about China pushing the whole globe into recession appears to have passed. Yes, China's economy is slowing, and that does affect the global economy, but we aren't heading into recession. After all, the last quarterly GDP number here in the states was +3.9%. But we are not in the booming economic spurt that has historically been typical of recoveries from past recessions. Despite all of the pronouncements from the politicians, this remains a weak economy. That is why the FOMC has been so hesitant to raise interest rates. They don't want to squash what meager progress we are seeing.

Our November iron condor position on RUT at 960/970 and 1280/1290 continues to build gains with $121 per contract or +14% as of today's close. I will probably close this position soon since we now stand at about 85% of the maximum gain for this position. If we were to close the November trade today, we would be up 43% in the Flying With The Condorâ„¢ service for 2015.