It is hard to believe that this is the same market that gained 12% just last month. SPX closed down $29 today at $2046. RUT also closed down, with a 23 point loss to $1155. Volatility jumped over two points with the VIX at 18.4%. Trading volume was up across the board with 2.5 billion shares of the S&P 500 stocks trading (up to the 50 dma). Trading volume rose 9% on the NYSE and increased 7% on NASDAQ.
Initial unemployment claims were flat with last week at 276k. Continuing unemployment claims increased by five thousand to 2.174 million. This was the only significant economic data reported today, so what sparked this push lower? Some analysts cited sliding oil prices. Others are worrying about the FOMC raising interest rates in December. I also read about an IMF (International Monetary Fund) report that apparently speculated about an extended period of low global economic growth. The concern about interest rates appears to be more widespread, but I'm not sure why. Past history doesn't support the idea of the market tanking when the Fed raises rates, and certainly not after a quarter or half point rise in rates, which is probably what we will see in December. The bottom line is that I'm not sure what changed to turn this market on its head. I was surprised at the strength of the rise in October and now I am surprised by what is becoming a significant down draft. Perhaps I am being too honest here, but predicting this market's turns appears to be beyond my abilities.
SPX and RUT both closed at their lows for the day - a worrisome sign. RUT landed on the 50 dma. We'll see if that acts as support. The area on RUT from $1140 to $1170 was a congestion area for RUT in October; perhaps it will hold as support if the 50 dma is broken.
My December iron condor on SPX in the Flying With The Condor™ service is delta neutral at this point (less than $1 per contract), but we have rolled spreads twice and hedged once, so that has diminished our potential gains. We stand at -13% on this position. Unless this downturn gets truly ugly, we should be OK since our put spreads are about $100 OTM.
We'll see what tomorrow brings...